ATO income tax refund allocation

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  • Updated 2 weeks ago
Hello,

I am looking for how to allocate an ATO income tax refund. Not GST. Not PAYG
I am usig Reckon Accounts Hosted 2019R2.

I started to use - Manage tax, receive tax refund, received from ATO, the from account is the question. Would this be Income tax payable "Other current liability"

Then do I need to allocate where the cash back goes too?

Thanks Marti
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Marti Jauquet

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Posted 2 weeks ago

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Kris Williams

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I would do a make deposit, from ATO, and use a Provision for Income Tax account if you have one. If not, yes Other Current Liability will be ok, accountant may change it if he needs to. The way you are talking about would probably work too I have just used this procedure for so many years I don’t change
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Marti Jauquet

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Thanks Kris,

I did not have Provision for Income Tax account.
I ended up creating new "Income" account. called it ATO refund
Because it really is not a liability.

Thanks again
Marti

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Kris Williams

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No definitely not income as Linda stated  Read her in-depth answer
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Linda Putland, Accredited Partner

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Hi Marti - the answer depends on some other factors...

1.  what is your business structure?  sole trader, partnership, company?
2.  If not any of the above refunds - it may be a personal income tax refund that has been received into the business bank account?

Definitely dont use any of the manage tax options - they relate to GST, not income tax.

Definitely dont use an income account - a refund from the ATO is never income.

Sole trader - the refund is make Deposit and goes to your drawings account (either a general one you use, or a specific one for income tax refunds) - this type of account is always Equity

Partnership - the refund is a make Deposit and goes to either a joint drawings account or a specific one for income tax refunds - this type of account is always Equity

Company - the refund is a make Deposit and goes to a liability account such as Kris has suggested.  It is really a liability (only its a negative one in this instance as its a refund of amounts previously paid) - the liability account for provision for Income tax would have received payments by the company to the ATO which have been in excess of the liability that was owing.

Personal Income tax - then use one of the sole trader and partnership options.

Hope this makes sense?

Oh and the Make Deposit would be a deposit to the account that actually received the refund.  :)
(Edited)
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Marti Jauquet

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Thank you Linda,
Your response is very informative and much appreciated.
The 2nd part to my original question is, do I need to allocate where the "cash back" goes too?
When using the Record deposit function, at the lower section of the window it asks this.

Thanks Marti
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Kris Williams

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The cash flow boost goes to an Other Income account called Cash Flow Boost, it does not go onto your BAS and is tax free which is why it should be and Other Income account not just Income
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Marti Jauquet

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Hello Kris,
I am asking about this. See picture
Do I need to allocate where the "cash back" goes. Or leave it blank

Thanks Marti



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Kris Williams

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I have just looked at this particular window, and you can ignore that section, the top half shows the bank you’ve deposited to and the income tax account