GST on Service Fee for non-standard RCTI

Help! We are a small business. We have a locum who has changed their contract after STP2 to be a (non-standard) RCTI. We agreed to an arrangement which apparently happens at their other place of employment.

We do a Word RCTI and just put the final amount in to Reckon Accounts Desktop with a Cheque.

This is how it works:

1. Locum earnings for business $XX

2. Less a percentage Service fee for business providing staff, equipment and materials $YY

3. Less GST on Service fee 10%

4. Final amount due to be paid is a Cheque to the locum

For example:

Earnings = $100

Service Fee = $60

GST on Service Fee = $6

Locum payment = $100 - $60 - $6 = $34

We unfortunately did not think this through.

BAS is now due and we cannot work out how to get the GST into the system.

For all payments the Locum’s Cheque has been written to match off against the bank download.

We have read all the articles on RCTI/Reckon issues. None seem to be in this situation where we create an RCTI and have GST on a Service Fee that we pay to the ATO – this needs to appear in the BAS.

Any help will be much appreciated.

Accepted answers

Acctd4

Hi @Anne G

Mixing income & expenses on a sales or expense form will cause issues with reporting as the 2 have different (opposing) tax codes.

The process is to enter the locum earnings via Sales Receipts depositing to the Locum Clearing account. Out of these funds, you then enter Write Cheques for the Facility Fees.

The negative balance left over in the Clearing account will match the net RCTI amount payable to the locum from your actual bank account. You can either:

Transfer these amounts using Transfer Funds or
Enter Write Cheques

... out of your bank account posting back to the clearing account (Chq is my preferred option as it allows for more detail)

This allows:

Recording of both the full income & full expense
Allocation of the correct tax codes (GST/FRE v NCG/NCF)
Correct matching of the exact net payment amounts
Correct reporting for both, in all your tax reports & also for auto populating the labels on the in-program BAS

😬

All comments

Kris_Williams

The cheque should be Posted to the normal expense account of $100, and minus the service fee (an income account) of $66 with GST tax code.

You mention STP2. Has this been entered as wages in the past?

Acctd4

Hi @Anne G

You will need to use a clearing account to record this correctly. This is a “dummy” bank account that you receive funds “in” to & make payments “out” of, in order to reflect all the total income, expenses & relevant GST components.

Feel free to email me direct if you need assistance with this ☺️

Anne G

Hi Chris & Shaz, thanks so much for your suggestions. Neither was suitable as we could not get the GST to appear on the BAS, but we finally managed to get it to work. I was trying to 'de-identify' so did not put all information in. We are actually a small dental surgery & all patient fees come in via the dental software. All suppliers paid via credit card or directly through bank. Once a month summary of daily payments is manually entered into Reckon as an invoice to the Practice, as are supplier invoices. Matched off with bank downloads. Locums are paid via bank as well.

What we did was to subtract the locum's Facility Fee for that particular day from the total of fees & then enter a new line with a GST Facility Fee. The total then matched & the GST appeared on the BAS.

Sometimes it is very tricky when not doing it officially through Reckon! Although Payroll is.....

Once again, thanks for taking the time to help.

Cheers Anne

Acctd4

Hi @Anne G

Mixing income & expenses on a sales or expense form will cause issues with reporting as the 2 have different (opposing) tax codes.

The process is to enter the locum earnings via Sales Receipts depositing to the Locum Clearing account. Out of these funds, you then enter Write Cheques for the Facility Fees.

The negative balance left over in the Clearing account will match the net RCTI amount payable to the locum from your actual bank account. You can either:

Transfer these amounts using Transfer Funds or
Enter Write Cheques

... out of your bank account posting back to the clearing account (Chq is my preferred option as it allows for more detail)

This allows:

Recording of both the full income & full expense
Allocation of the correct tax codes (GST/FRE v NCG/NCF)
Correct matching of the exact net payment amounts
Correct reporting for both, in all your tax reports & also for auto populating the labels on the in-program BAS

😬

Anne G

Hi Shaz, ok, I think I understand this......

Will experiment.

Thanks for the time spent. It is very tricky sorting these sort of issues. I have sat through many training sessions but my background is IT!! Retired & then went to work as a dental receptionist & book keeper for my beloved..... Have been trying to 'clean up' a lot of past mistakes.

Acctd4

When I worked in a Mortgage Broking business, the Brokers would receive commissions that we needed to create & send RCTIs to them for.

As we also needed to record & track these individual commissions coming in, I set up a way of achieving this using a variation of my previously-detailed process, but with POs also.

However, in your scenario, I don't think you'll need to do that as the basic set up above should be sufficient.

If you need any assistance with it, feel free to shoot me an email 😊