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Xero Tax Code Changes

Xero has decided to change some of their tax codes. This will happen in a new release in late March 2013. Two codes are being dumped and 3 new codes are being introduced.

Xero


Xero are dumping 2 tax codes – “GST Exempt” and “No GST” in late March. Replacing these will be 3 new codes: “BAS Excluded”, “GST Free Expenses” and “GST Free Capital”.

What do these new codes mean?

BAS Excluded:

For any transactions you don’t want to include on the BAS e.g. personal drawings or non-deductible entertainment  – used to be GST Exempt and/or No GST

GST Free Expenses:

Transactions that are GST free e.g. Bank Fees, donations, GST free foods etc. – used to be No GST

GST Free Capital:

Capital acquisitions that are GST free e.g. Computer bought overseas

The new tax codes will also be reflected differently on the Activity Statement. Here’s how:

  • GST Free Expense transactions will be in cells G11 and G14 on the calculation worksheet.
  • BAS Excluded transactions will not be on the Activity Statement.
  • GST Free Capital will be in cells G10 and G15 on the calculation worksheet.

Xero will automatically “map” the new codes to the old codes – you won’t have to do anything. For users who changed the name of the old codes, there may be some issues and Xero are going to contact those users individually when the time comes to ensure the change over occurs smoothly.

Here is a table (from Xero) explaining how the mapping will work:

Account Type Your current rate New rate
Any GST Exempt BAS Excluded
Bank, Credit, Paypal No GST BAS Excluded
Bal Sheet/System No GST BAS Excluded
Expense Accounts No GST GST Free Expenses
Other Accounts No GST BAS Excluded

Even though the changes will occur behind the scenes, Xero recommends that you check your chart of accounts after the update to make sure nothing has gone wrong.

As an added bonus, you will be able create your own GST free and BAS Excluded codes and rates after this next update – useful if you have specific requirements for your business not covered by standard Xero.

It’s important to note that historical transactions using codes, GST Exempt and No GST won’t be changed. Only transactions raised after the update or those which haven’t yet been “approved” will show the new tax codes. Again, check any transactions you have raised as repeating invoices or as drafts after the update to ensure they are correct.

Xero doesn’t expect any problems with this update, but if you experience any issues you should contact Xero support or go to:

help.xero.com and/or community.xero.com

There is also a new short video by Xero explaining the above:

Tax rate changes (AU) from Xero on Vimeo.

Of course if your bookkeeper is looking after your Xero account for you, ask him/her for help if needed. It would be a good idea to ask your bookkeeper to check over the chart of accounts for you after the update – just in case the gremlins have come to visit!