So being a PTY LTD company in Australia, I have to pay a flat rate of 28.5% tax to the tax-man at the end of the financial period.
I’m looking to find a way that I can automatically send 28.5% of each invoice I receive funds from to a Tax Payable account to keep track of what I’m going to owe in tax at the end of the year. This is not to reflect on the customers invoice in any way and is purely a way for me to keep track of my own company finances at the end of the year.
I would have thought this is a basic functionality in keeping track of your business expenses and income?
Essentially…
Invoice is paid for by client
In the program I click Receive Money - Received in ‘Business Account’- Create
28.5% (or whatever the rate is in your country) of the money received is a liability that needs to appear as Tax Payable rather than the full 100% being reflected as available funds.
Ideas?
Or if this is already a thing can someone please explain how the heck you do it?
You pay that tax on profit not income - so unless you have minimal expenses any such allocation based on income could be excessive. If you want to make provision through out the year you could at the end of each month take up an adjusting accrual journal. To set this up you would:
Create a BS Current Liability account called Prov for Corporate Tax.
As you complete each month’s accounts you take up an estimate of the tax payable based on the profit.
So in month one you would take up 2,800 if the profit was 10,000 - Debit P&L and Credit BS Prov. For the subsequent months just amend that journal by changing the date and value to reflect the next month. At year end let that journal stand and start a new one in the next year.
