Tax Codes

MoneyWorks has a built-in table of tax codes and rates. These tax codes are associated with Accounts or Names, and the corresponding rate is used to calculate the GST or sales tax whenever a transaction is entered. You can modify the standard codes (except *) if you wish, or add new codes for special situations (e.g. special rates for rest homes, out of state sales, beverage and accommodation taxes etc).

Note:  The "*" tax code is used for accounts that are outside the tax system (such as bank accounts). If you use it on other accounts you will not be able to override it when entering a transaction involving those accounts.

To see the tax table:

  1. Choose Show>Tax Rates

The Tax Rates table will be displayed:

Note: You can only modify tax codes if you are the only user on the system. If there is more than one user, the Modify button will show as View.

Adding a New Tax Code

  1. Click the New toolbar button or press Ctrl-N/⌘-N

The Tax Code entry window will be displayed.

  1. Type the code that will identify the new rate into the Code field

This can be up to five characters long, and must not be already in use.

  1. Type a brief description of the rate in the Name field
  1. Set the Tax Type

A tax can be either GST or VAT1, a Sales Tax or a Composite Tax (a combination of other taxes).

New tax rates need to be associated with accounts specifically set up to deal with the tax. Unless you have set up additional GST/TAX accounts in your Chart of Accounts you will only have access to the two standard system accounts that MoneyWorks automatically sets up.

  1. Enter the Tax control account codes for the accounts that handle incoming and (if required) outgoing Tax into the Tax Paid Account and Tax Received Account fields

Simply tabbing through the fields will automatically insert the default codes. If more than one code is available, tabbing through the fields will display the Account Choices list.

  1. Enter the tax rate into the Rate 2 field

Unless you know details of a change to the tax rate, leave the Changeover and Rate 1 fields as they are.

If the rate is for 100% Tax

You will normally never come across 100% Tax transactions unless you are an importer. In this case you may get a bill for Tax from Customs.

  1. Set the All GST/TAX radio button if this rate represents 100% GST
  1. Click OK to accept these entries

Clicking Cancel will put the dialog box away without storing any of the changes that you have made.

Composite Taxes

The Composite Tax option allows you to specify a tax that is calculated from other predefined taxes2.

To include a tax in the calculation:

  1. Click the New icon

A new line will be added

  1. Enter the code of the tax to include in the Code field

The name and rate will be displayed. Note that this must not be the code for another composite tax.

  1. If the tax is multiplicative (i.e. is also levied on the previous taxes in the composite tax calculation, such as QST in Quebec, or PST in PEI), set the Mult check box

If this is not set, the taxes will be simply added, i.e. each tax is calculated on the Net amount.

  1. To delete a tax from the calculation, click the Trash icon

When a composite tax is used in a transaction, an additional (hidden) detail line is added for each component tax used (unless the tax is a Sales Tax and has been “expensed” as part of a purchase).

There are some rules and restrictions for composite taxes:

  • If a tax is based on a GST/VAT tax, these must be the first taxes in the calculation. For example, GST + PST is allowed, but PST + GST is not;
  • A maximum of two GST/VAT taxes can be used in a composite tax;
  • Composite taxes cannot be modified once they have been used. You can change the rate of the components, but not the structure itself;
  • Composite taxes are calculated strictly top-down. Thus:

is calculated as (G1 + G2) * CTY, and not as G1 + (G2 * CTY).

Note: MoneyWorks Express and MoneyWorks Gold let you create your own forms (invoices, statements etc). Special fields are available in your invoice design to isolate the GST and PST amounts:

  • For the GST content on a transaction line use detail.tax1amt
  • For the balance of the tax content on a transaction line use detail.tax2amt

Changing a Tax Rate

MoneyWorks allows you to enter the details of a change to the Tax rates at any time and uses a specific change-over date to determine which rate to apply to particular transactions. Transactions dated before the changeover date will attract the Rate 1 rate, while those on or after that date will attract the Rate 2 rate.

If the tax rates change, you will need to alter the tax rate table.

  1. Choose Show>Tax Rates

The Tax Rates dialog box opens.

  1. As the current rate is stored in the Rate 2 field, you will need to move the current rate into the Rate 1 field
  1. Enter the date on which the rate changes into the Changeover field for the tax code
  1. Enter the new rate into the Rate 2 field

Repeat steps 2, 3 and 4 for all of the tax codes that need to be changed. If you only have the default tax codes, you only need to change the G tax code.

  1. Click OK to store the changes and close the dialog box

For example, the GST rate in New Zealand increased from 12.5% to 15% on 1st October 2010. This would be represented in the tax table as:

A subsequent change in the GST rate can be made by putting the current GST rate (still in the Rate 2 field after the previous change) into the Rate 1 field and adding the new change over details as before.

Note that a composite tax will respect the dates of rate changes in its components.

1  Not available in the US version

2  This replaces the “Two-Tier GST” option in versions of MoneyWorks prior to 5.2