Tax Adjustment incorrectly added to sub-total

Hi all,

I’m trying to enter a supplier invoice which has been created with its tax amount calculated from the subtotal and have run into the ever common 0.01 rounding issue. After reading a few threads it seems the best way to solve this is to add a line item set with a 100% tax to correct the tax amount (if there’s a better way, please let me know). Guide 8901 says this method will create a line item which doesn’t get added into the subtotal, however for me it is, and this results in the invoice entry not matching the real invoice.

Is this just an issue caused by the graphical representation (via the theme) not showing the 100% tax as it’s technically a different tax item which isn’t included in the theme?

If I assign the the tax adjustment line item to “Tax Payable” as with all other GST, will a similar issue arise in the future when reporting GST?

Thanks for any help!

The Guide seems to be in error. I suspect this change in program behavior occurred when tax liability accounts became ordinary accounts rather than the original, default Tax payable account.

I do not see that as an issue. The total matches the invoice. And the amount credited to Tax payable matches the invoice, but is split between the two tax codes (10% and 100%). No supplier is ever going to see the purchase invoice. So the slightly confusing presentation should not matter. If the 100% tax amount were to be shown in the totals section, that would give the impression that it was to be added, although it is already included in the subtotal. There really is not an elegant solution to the problem of matching invoices when one is created by summing line-item amounts and the other (your supplier’s, evidently) by applying tax to a summed subtotal.

No, although the effect is somewhat similar. It actually results from the 100% tax code line being posted directly and entirely to the tax liability account rather than being multiplied by a percentage and added to the GST 10% total for the purchase invoice.

That will depend on how you file your tax return. The total tax is properly reported on the Tax Summary. As I mentioned above, though, it is split between the two tax codes, so you will have to adjust the GST 10% number to include the GST 100% amount. If you rely on a built-in worksheet, though, I think this will be overlooked, because the tax code you created was unknown when the worksheet was created.

Now that I re-re-read that page and the post which directed me there (curiously, one of yours, Tut (1646/16)) I think it’s just a wording issue in the guide. My interpretation here also seems to have affected how you just interpreted it, too, as you actually explained it clearly in that linked post from 2018 :stuck_out_tongue: . What I now understand it’s saying is that it isn’t added after the subtotal like a regular tax component is. Thanks for helping clear that up!

Everything else you’ve just explained also makes sense, and is how I suspected it works, cheers.

I’ll have to weight up making sure I have a proper worksheet set up, or just going the other route suggested by lubos somewhere, which is manually translating the line items to be tax inclusive upon entry (or using something like (lineTotal / numUnits * 1.1) in the unit price).

You are right. It did. That is what comes from never having to use a particular feature in a real business. Nevertheless, even though the Guide is technically correct, I still think it can be confusing (witness your own experience). So I will initiate a change to eliminate the ambiguity.

I suggest you check the rounding requirements of your tax authority and do what is necessary to comply with that.

For example, in Australia the ATO specifies how rounding must be done at the line item and invoice level when calculating GST. Both suppliers and customers must comply with these requirements. However the specifications allow a some flexibility in internal precision used in accounting software and as a result the supplier a customers calculated GST does not have to be the same as long as both comply with ATO requirements.

See Tax calculation incorrect

Yeah, I think I had already read about that allowance for small discrepancy from another thread, but thanks for sharing here.
Unfortunately OCD is more strict than the ATO.