Client is importing goods from overseas and selling in Australia, and wanted to check the correct recording of the transactions.
There is NO GST on the goods when bought from the supplier, but many items have GST charged on the calculated Australian value based on the exchange rate on the day.
Whether you use Purchases or Spend Money, the purchase or amount when spent will have NO GST. The Customs Agent invoice will have a large amount of GST and some other charges.
You need to use FRE on the purchase/payment of the goods in foreign land for the Australian amount the bank transfer calculated.
On the customs transaction, let’s say the GST is $1800, so with tax inclusive ticked off, on purchases account line do 10x the GST and type $18,000 use GST code, on second line, to purchases account do -18,000 with N-T code. There should be $1800 GST raised, but the amounts to purchase account will cancel each other out.
When you report GST, on the GST Summary Report, on the GST line, there will be $19,800 under Purchase Value with $1800 under tax paid. There will also be -$18,000 on the N-T Line and no GST. If you re-create the report by customise and showing tax EXCLUSIVE, the report will show $18,000 on both lines and they cancel each other out. There will be $18,000 on the FRE line, which in the correct amount to declare.
The lesson is you need to ADD the GST Purchase values on ALL FRE, GST and N-T lines to get the correct Purchase GST to declare at G11 on the BAS form.
There can be other ways to record – do you have another way? Tell Us!