After an Activity Statement is lodged and paid, the final step is to ensure that the balance of the ATO - ICA account in Xero matches the balance of the ATO Integrated Client Account.

The Integrated Client Account is the account the ATO uses to track all lodgements of a Business' Activity Statements.

If the Business is up to date with all lodgement and payments then the balance of the Integrated Client Account should be $0.00. However, if the Business is currently on a payment plan, then the balance of the ATO - ICA account in Xero should be the same as the outstanding balance from the ATO Statement.

As well as Activity Statements' lodgements and payments there are a number of other transactions that may be included in the Integrated Client Account. These are:

General Interest Charges or Late Lodgement Penalties;
General Interest Charges or Late Lodgement Penalty Remissions;
Transfers to and from other ATO accounts (i.e. the Income Tax Account);
Activity Statement revisions.

All additional transaction types will impact the balance of the Integrated Client Account and should replicate in Xero accordingly.

It is also important to understand that based on the way we process Activity Statement and reconcile liabilities we aim at reconciling the Integrated Client Account as of the current date of reconciliation, the only time we aim at reconciling the ATO - ICA account with the balance of the ATO statement at a specific point in time is at 30th June. This is part of our EOFY reconciliation process.

It's virtually impossible for us to reconcile the Integrated Client Account at any other specific point of time, as in Xero we record all Activity Statement transactions on the last day of the lodgement period, whereas the ATO records them in their Account on the actual lodgement date.

Download the Integrated Client Account Statement from Online Services

The first step is to download the current Statement of the Integrated Client Account from Online Services for Business (for Business Owners) or Online Services for Agents (for Tax Agents).

Check the balance of your ATO-ICA account in Xero

Your ATO-ICA Account should appear on your Accounts Watchlist.
Check the YTD balance

è Option 1 - All your Lodgements and Payments are up to date
The YTD balance should be 0.00

è Option 2 - Your Business is currently on a payment plan
The YTD balance should match the current outstanding balance on the ATO Statement

Reconcile the Integrated Client Account

If the YTD Balance of the ATO ICA Account in Xero does not match the balance on the ATO Statement you will need to reconcile the ATO Statement with the ATO ICA transaction list: add any transaction on the Statement missing in Xero and remove any transaction posted in the ICA Account that is not in the Statement from Xero.

In principle, this is the same as manually reconciling a bank account.

Some of the most common transactions you will need to add to Xero are:

Run the ATO - ICA Report in Xero

Go to Accounting > Reports
Select the [Custom] Tab
Open the Custom Report: EOFY - ATO ICA Account Reconciliation

è The Report: EOFY - ATO ICA Account Reconciliation
Click on [Update]
Export the report to PDF

Add Interest Charges and Late Lodgement Penalties

If the ATO charges any General Interest due to the payment plan or charges late lodgement penalties.

è The ATO Statement

Go to Accounting > Manual Journals
Click on [New Journal]

è The New Manual Journal screen opens
Select/Enter the following details
- Narration > Type: GIC from (enter the date period from the ATO Statement)
- Date > Type the date from the Statement
- Amounts are > select No Tax
- Line 1: Accounts > Select the account: ATO - ICA (805) and post the total value of the interest charges in the Credit column
- Line 2: Accounts > Select the account: Taxes - GIC & Late Payment Fees (5##) and post the value of the interest charges in the Debit column
Click on [Post]

Add Interest Remissions or Late Lodgement Penalties Reversals

If the ATO remits any interest or reverses any late lodgement fees in the ATO Statement.

è The ATO Statement

Go to Accounting > Manual Journals
Click on [New Journal]

è The New Manual Journal screen opens
Select/Enter the following details
- Narration > Type: GIC Remission from (enter the date period from the ATO Statement)
- Date > Type the date from the Statement
- Amounts are > select No Tax
- Line 1: Accounts > Select the account: ATO - ICA (805) and post the total value of the interest remission in the Debit column
- Line 2: Accounts > Select the account: Taxes - GIC & Late Payment Fees (5##) and post the value of the interest remission in the Credit column
Click on [Post]

Transfer from other ATO Accounts

If the Tax Advisor has transferred any Credits from other ATO Accounts (i.e. Income Tax Account), this transaction will show in the ATO Statement.

è The ATO Statement

Go to Accounting > Manual Journals
Click on [New Journal]

è The New Manual Journal screen opens
Select/Enter the following details
- Narration > Type: Transfer from the Income Tax Account
- Date > Type the date from the Statement
- Amounts are > select No Tax
- Line 1: Accounts > Select the account: ATO - ICA (805) and post the total value of the transfer in the Debit column
- Line 2: Accounts > Select the account: ATO - Taxation (806) and post the value of the transfer in the Credit column
Click on [Post]

Finalise the Reconciliation

Once you have added all missing transactions from the Statement and removed the incorrect transactions posted into the ICA Account, the YTD Balance of the ATO - ICA Account in Xero and the Balance from the Statement should reconcile.

è The Xero Accounts Watchlist

è The ATO Statement

Conducting Spot Check Reconciliations

In some instances, it may be very challenging to reconcile the Integrated Client Account. This often happens with businesses that make multiple payments to the ATO accounts, have numerous revisions of their Activity Statements, multiple interest charges, remissions and transfers to and from other ATO accounts.

In this case, it may be useful to try a spot-check reconciliation. A spot-check reconciliation allows you to identify in what specific financial year and what tax or charge type, the discrepancy may be. It is possible to do 'spot-checks' reconciliation with all tax liabilities except for GST and General Interest Charges.

What possible discrepancy could you come across when reconciling an Integrated Client Account:

Revisions of Activity Statements in previous periods (or even Financial Years) processed by the Accountant when doing an End of Financial Year reconciliation;
Incorrect lodgements values of different taxes (for example 1A of an Activity Statement in the ATO was $696 and in the Activity Statement transaction in Xero was recorded as $969);
General Interest charges or remissions missed in Xero;

Run a Tax Summary Report from Online Services

The Tax Summary provides a breakdown of the total of the different liabilities, interest charges and remissions charged in the Integrated Client Account in a specific year.

Log into Online Services for Agents using your username, password and MyGovID
Click on [View client list] and open the Client's Business

è The Client's screen opens
Click on [Accounts and payments] > Accounts Summary

è The Accounts Summary screen opens displaying the ATO Accounts relevant to your Business
To download the Tax Summary, click on the Activity Statement Account

è The Integrated Client Account Statement opens on the screen
Click on tax type summary

è The Tax type summary screen opens
Select the Financial Year then click on [Print-friendly version] and print the Tax Summary as a PDF
In Xero go to Accounting > Reports > Custom Reports
Run the report: EOFY ICA Spot-Check Tax Liabilities Reconciliation

è The Custom Report opens on the screen
Change the Date Range of the report to match the Financial Year selected in the Tax Summary
Compare the values of the Tax Liabilities in the report with the total of the same tax liabilities in the ATO Tax summary summary
If all the tax liabilities values match, do a "spot-check" on the General Interest Charges
From the Custom Reports, run the Custom Report: EOFY ICA Spot-Check GIC Reconciliation

è The Custom Report opens on the screen
Change the Date Range of the report to match the Financial Year selected in the Tax Summary
Compare the total GIC posted against the ATO - ICA account with the difference between the Net assessable Interest Income and net assessable expense from the Tax Summary report.
If the two values are the same all GIC interest and remissions have been entered for the Financial Year. In this instance, the discrepancy may be related to Internal ATO transfers and/or previous Financial Years