When it comes to performing bank reconciliations on Xero, many of us struggle to understand the different tax rates.
Firstly, Are You Registered for GST and Do You Need to Be?
Here’s a link to the ATO website that you can use to determine if you need to be registered: https://www.ato.gov.au/business/gst/registering-for-gst/
If you are already registered, you should be keeping track of the GST collected from the sale of goods/services and the GST paid on expenses.
GST on Income
If you are registered for GST, you should be including GST on the sale of your goods and services unless they fall under the category of GST-free or Input Taxed.
When performing the reconciliations, check that you have selected the correct tax rate:
GST on Expenses
The best way to tell if you have paid for GST on any of your purchases/expenses is by checking your receipts. If GST has been charged, you must account for it by selecting the right tax rate.
This leaves us with the big question: What do all the different tax rates mean?
Here’s a quick summary with examples of what each tax rate means:
*Note that this is only meant to be a guide when completing your reconciliations on Xero. Always refer to the ATO website for up to date details on GST, how it works and whether you should be registered.