Withholding Tax Process for Invoices

There is a mechanism in TASS.web for handling suppliers who fall under the Withholding Tax provisions. The steps are as follows:

• Edit the supplier record (Finance | Accounts Payable | Supplier Information | Suppliers) for each supplier subject to Withholding Tax. On the General tab, on the lower right side, put a tick in the 'Withholding Tax' tick box.

• For each supplier with this box ticked, when the supplier code is entered in a new invoice, the following message will be displayed:
  'This supplier is flagged for Withholding Tax. If you intend to deduct 'No ABN Withholding Tax' from this invoice, you should use the special 'No ABN Withholding' tax code then enter a Credit for the amount of the tax withholding.'

• Update your BAS Parameters – on the GST Setups tab at Finance > General Ledger > BAS Processing > BAS Parameters, click the Edit button and ensure that you highlight Withholding Tax (WHT) for both Tax Codes for...Capital Purchases - G10 and Tax Codes for...Non-capital Purchases - G11 in addition to the other tax codes you have highlighted in these areas.
  Click Save if you have made any changes.

• On your system you should have a tax code WHT (or equivalent) for Withholding Tax to use in this situation) – see the Tax Codes tab at Finance > Accounts Payable > Setup Information > Accounts Payable Setup. This tax code should have its Tax Percentage set to zero. It should use Calculation Method W (no ABN withholding tax).
  Both the distribution(s) on the invoice and the credit should use this Tax Code. The invoice and the credit should have the tax amount set to zero (it should default to zero when the distribution is edited and the Tax Code WHT is entered).

NOTE: In the setup of the WHT Tax Code, the General Ledger Account is specified in the Withholding Tax Account field (it is a mandatory field for this code as it uses Calculation Method W). This General Ledger Account specified may or may not have been maintained to be the one currently used for Withholding Tax on your system.
Check and update if necessary.

• The credit entered for the Withholding Amount should be manually distributed to the correct General Ledger Tax Account for Withholding Tax. This means you will need to edit the automatic distribution line(s) produced on the credit to change:

  • the GL Account field to put in the correct account for Withholding Tax

  • The Tax Code field to change it to WHT (or your system equivalent)

  • The Tax Amount field (if it has not defaulted to 0.00)

Once the credit is entered and applied to the invoice it will ensure only the balance of the invoice is payable to the supplier.

• After the credit is entered, the amount will appear at item W4 on the BAS Preparation and will be included in Item 4 in the summary.
  This method will allow you to account for Suppliers who are subject to Withholding Tax.

NOTE: If Tax Code WHT or equivalent is used in Accounts Payable and an amount is put in the Tax Amount field, it will distribute tax to the default tax account (specified on the Parameters tab at Finance > Accounts Payable > Setup Information >Accounts Payable Setup). It will not distribute to the account specified in the setup of the WHT Tax Code. A zero amount should be put in the Tax Amount field where ABN Withholding Tax applies.