No it is based on business activity.
Many small business started using an accounting program purely to meet VAT/GST reporting requirements. As such accounting software which fails to achieve accurate VAT/GST reporting would not be fit for purpose.
Agree, the tax payer must have ultimate say as only the tax payer knows if the requirement external to the account software have been meet.
I disagree the accounting software should have no say, as the software if intelligently designed will be able to predict the tax group or actual tax code in by far the majority of cases.
Also not true. Many jurisdictions require negative GST/VAT adjustments for specific transaction types.
See [Withdrawn] How to report EU sales made on or before 31 December 2020 for VAT - GOV.UK
Similarly in Australia the same is required as a business will typically not meet the associated GST requirements when a line item in a supply is arbitrarily changes between sale and purchase based on the sign of the amount.
Specifically a business obligations are different if a line item is recorded as a sale or purchase
GST Sales / Supplies
- you make the sale in the course or furtherance of a business (enterprise) you carry on
- Production of a “Tax invoice”
GST Purchases / aquisitions
- buy for use in your business
- Retain a “Tax invoice”
For example if I buy some equipment for my business at the hardware, and enter the cash transaction in Manager. I later return parts not needed to the hardware and get a refund. The shop assistant crosses the items off the original tax invoice. The returns must be entered as a negative purchase as I now no longer have a tax invoice for the returned items so can no longer legally claim a GST credit for them.
Similarly I buy building insurance. Later I revalue the building, and contact the insurance agent re the altered insurance requirement. The insurance company cancels the remaining term in the old insurance contract (and refunds the remaining insurance), invoices me for the remaining term at the new insurance rate. I must enter the refund as a negative purchase and the new invoice as a positive purchase. The refund is not a sale as my business does not have an insurance branch and I have not provided an insurance service to my insurance company.
Understanding this is more complex than the British reference above but the outcome is the same.
In Australia the following are all reported (not just the “Tax liability”). In addition G1 is used for JobKeeper so the distinction between sales and purchases matters
- G1 Total sales
- 1A GST on sales
- 1B GST on purchases
For users who commonly use this type of transaction, I agree Manager could provide enhanced functionality. A solution based on a side effect of cash transaction however is poor implementation. The solution should also work efficiently with invoices.
- That has been necessary under the old model / worksheet for several years for the opposite reason to your logic. A correction I have been doing.
- Other users have been entering entities as suppliers and customers, then creating a sales and purchase invoice for similar transactions. I see no reason a Manager enhancement should exclude them.
- This is exactly what you have recommended users with a work flow different to you should do