Company income tax PAYG instalments

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Our company has in prior years been in a tax loss position and has only recently been using up these tax losses. From the Jun Qtr 2015 the ATO started charging us PAYG instalments even though we had not yet had any income tax expense due to the prior years tax losses. I would appreciate anyone telling me how I should be processing these in Reckon?
Should these PAYG payments be going to "Tax Payable"(which means it puts it in a debit position)?
Or should I be setting up new accounts, and if so, what should I be setting up? I am currently using Reckon Accounts Hosted Edition 2015. Thanks!
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Kathy Komadina

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Posted 3 years ago

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Michael Macleod

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If you believe that you will still be in tax loss situation for the next year or two, ie you will still have a Tax loss amount then you can use a variation code on yiour BAS to zero the PAYG instalments,. If you are paying the instalments you should st up a provision for income taxes account to which you debit the PAYG instalments and then when your tax is calculated at the end of the year the account is credited with that amount and debited to Income tax expense. The balance on the account is whats due to from the ATO in respect of your income taxesor due to and should agree's with the ATO's income ta account for your company.

Michael Macleod


 

(Edited)
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John G, Information Support Analyst

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Hi Kathy,

Welcome to the Reckon Community.

The Tax Payable account is geared towards handling GST on sales and purchases, and its best to leave it for that purpose, as its balances get used in other GST reports and BAS lodgements.  All other taxes (PAYGI, Company Tax, ABN withhelds, PAYGW, etc) should be treated as expense/liability accounts.  

Hope this helps.

regards,
John
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Kathy Komadina

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Thanks Michael and John - very helpful answers! John - my Reckon accounts seems to use "GST Payable" which handles all the GST on sales and purchases, so maybe it has been set up differently? The "Tax Payable" does not seem to be linked to anything so I think I will use this for the company tax. Thank you both for your help!
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Reckon FAQs, Employee

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Hi Kathy,

Tax Payable is a liability account whereas your company tax is an expense to the business.  Please consider Michael's comments.

I would avoid using Tax Payable.   

regards,
John.
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Kathy Komadina

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Thanks John - yes I have been guided by both your comments and Michael's comments. I have an "Income Tax Expense" account and "Tax Payable" being the liability account. Using Michael's comments I will be debiting "Tax Payable" for the PAYG instalments paid during the year. At the end of the year when the income tax is calculated I will debit "Income tax expense" and credit "Tax payable". I hope that sounds right?
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Michael Macleod

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I would call the Tax Payable Account "Provision for Income Tax" or "Income Tax  Payable" so that it is clear that it is Income Tax and not associated with anything related to GST

Michael

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Kathy Komadina

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Thanks Michael - I will do as you suggest.