Understanding Deferred GST: What You Need to Know and how to handle it in Business Central

 If you're a business owner in Australia, you've likely come across the term "Deferred GST" in your financial reporting. Deferred GST is an accounting concept that relates to Goods and Services Tax (GST) payments, and it can have a significant impact on your cash flow and financial statements. In this post, we'll take a closer look at Deferred GST, what it is, and how it works.

What is Deferred GST?

Deferred GST is the amount of GST that a business has collected on sales but has not yet paid to the Australian Taxation Office (ATO). The ATO requires businesses to report GST on a quarterly basis through a Business Activity Statement (BAS). However, there are situations where businesses are allowed to defer the payment of GST until a later date.

For example, if a business purchases goods or services on credit and doesn't pay for them until a later date, the GST on those purchases can be deferred until the payment is made. This is because the business hasn't received the input tax credit for the GST paid on those purchases yet, so it wouldn't be fair to require them to pay the GST on their sales before they've received the credit.

How does Deferred GST affect financial reporting?

Deferred GST can have a significant impact on a business's financial reporting. Let's take a look at an example:

Suppose a business has made sales of $30,000 and purchases of $35,000 for a particular quarter. The GST rate is 10%, so the GST on sales would be $3,000, and the GST on purchases would be $3,500. If the business paid for all its purchases in that quarter, the BAS would look like this:

Total Sales: $30,000

GST on Sales: $3,000

Total Purchases: $35,000

GST on Purchases: $3,500

Amount the ATO owes us: $500

However, let's say the business has deferred the payment of GST on $2,000 worth of purchases until the next quarter. In this case, the BAS would look like this:

Total Sales: $30,000

GST on Sales: $3,000

Total Purchases: $35,000

GST on Purchases: $1,500

Deferred GST: $500

Amounts owing to the ATO: $500

The Deferred GST amount is included in both the Total Purchases (Amount the ATO owes us) and Amounts owing to the ATO. This is done to adjust the payment for the fact that the deferred GST hasn't been paid yet. If the Deferred GST wasn't taken into account as owing, there would have been a $500 refund ($3,000 - $3,500). So, when you add the unpaid Deferred GST ($500), there will be a payment of $0.


How is Deferred GST accounted for in Business Central?

1. General Journal to process the Deferred GST recognition.

                      

After the above Journal is posted, below is the result for the relevant GL accounts in the Char of Accounts.




2. GST Statement Mapping: After the Deferred GST recognition journal is posted, the Deferred GST amount will be auto-calculated and included in the GST Statement based on this mapping. The Deferred GST amount will be included in the GST settlement calculation.



3. GST Settlement from GST Statement.



4. Make the bank payment to settle the GST liability. 



Hope you find it helpful.

#Dynamics365

#BusinessCentral

#MicrosoftDynamics

#ERP

#BusinessManagement

#CloudComputing

#Productivity

#SmallBusiness

#SMB

#CloudERP

#ITtransferlounge



Comments

Post a Comment

Popular posts from this blog

Mastering Bank Deposits in Dynamics 365 Business Central

Image
In today's business landscape, efficiency and accuracy in financial processes are crucial for successful operations. One critical aspect is bank reconciliation, which can be simplified by ensuring that there is only one bank ledger entry per deposit. In this article, we will demonstrate the proper steps to create a bank deposit in Dynamics 365 Business Central that meets this essential requirement. Step 1: Create a New Bank Deposit To begin, navigate to the "Bank Deposits" page in Dynamics 365 Business Central and create a new bank deposit. This is the foundation of the entire process, as all subsequent actions will be associated with this deposit. Next, you need to add lines for each customer payment within the bank deposit. Since bank deposits may include several customer checks, each check represents a payment for one or more customer invoices. By adding lines for each payment, you establish a clear record of the funds to be deposited. Step 2: Apply Entries Once you ha
Read more

Ace the MB-800 Exam: Tips and Strategies for Success

 The Microsoft Dynamics Business Central MB-800 exam is a certification exam that tests your knowledge and skills in Business Central. Achieving certification in Business Central can help you advance your career and demonstrate your expertise in this software. If you are preparing to take the MB-800 exam, here are some tips and strategies that can help you succeed: Familiarize yourself with the exam format and content:   The MB-800 exam consists of 40-60 multiple-choice and case study questions and covers a range of topics. It is important to understand the exam format and content in order to prepare effectively. Here is the link to download MB-800 Study Guide to review the exam objectives.  Exam MB-800: Microsoft Dynamics 365 Business Central Functional Consultant - Certifications | Microsoft Learn .  Use study materials and resources: There are a variety of study materials and resources available to help you prepare for the MB-800 exam. These can include books, online courses, pract
Read more

Empowering Your Business with Custom Report Layouts in Business Central

Image
  In today's fast-paced business world, having well-designed and professional reports is crucial for success. That's where the Standard Reports in Business Central come into play. But what if you need to make modifications to these reports to align them with your company's unique needs and requirements? T he good news is that you can tailor the layout to meet your specific needs, without relying on technical expertise or the need for extensive programming or coding knowledge. Let's take a quick tour of how to utilize this fantastic feature in Business Central: Step 1: To modify a report layout, the first step involves exporting the existing layout as a file to a location on your computer or network. Step 2: Export the existing report layout to your computer or network, giving you the freedom to explore and modify it at your convenience. Step 3: Open the exported layout in MS word, click on the “XML Mapping Pane” under the Developer tab to open the XML Mapping.  
Read more