This User Guide provides a list of common issues related to incorrect transactions posted directly to the GST Account. 

Understanding Troubleshooting

Troubleshooting is never a linear process. A User Guide will never provide the exact solution to a problem. Sometimes, a variance may relate to an individual discrepancy, others it could relate to the same issue across multiple transactions, and in some instances, it could be a combination of different problems.

A Troubleshooting User Guides can simply provide general guidance by quoting a series of examples of the common issues and their resolutions. Users should still apply their troubleshooting skills to audit the data, identify the issue (or issues) and apply the proper solution to fix each discrepancy. 

The key aspect of troubleshooting is untangling one issue at a time, never trying to fix all problems at once. Start by Identifying one issue and fixing it, then move to the next one. Never be alarmed if after resolving one discrepancy, the variance is even larger than before, if the solution applied to the issue is correct, then disregard the variance and move to the next problem. 

Dealing with Incorrect GST Transactions

The GST Account Transactions section of the GST Reconciliation report provides a list of all transactions posted directly to the GST Account. In Xero only two types of transactions should be posted directly to the GST Account: the transactions that clear the GST liabilities when the Activity Statement is lodged and Purchases of GST charged from Custom where the Tax Rate used is GST on Imports.

Any other transactions posted directly to the GST Account should be amended to come off this list. 

EOFY Adjustments

Accountants who have a limited understanding of how Xero works, often post their End of Financial Year GST adjustments directly to the GST Account. In this case, the adjustment posted to GST will need to be amended and be calculated from the relevant Tax Rate.

If you come across a large EOFY journal entry with multiple income and expense adjustments, you should request the Accountant to provide you with relevant working papers detailing how the total GST adjustment was calculated.  

In this example, the GST Account Transactions section lists an EOFY journal adjustment where $190.00 GST adjustment were posted directly to the GST Account.

è  The GST Reconciliation Report - GST Accounting Transactions

1. Click on the EOFY Adjustment transaction to open it
   
   è The Manual Journal screen opens
   
   
   
2. Review the journal entries and try to understand the reason for this adjustment. In this case, certain expenses during the year were posted to GST where they should have been BAS Excluded (Insurance Stamp Duty components and ASIC fees). Therefore, the Business overstated their GST Paid during the year. Although from a Debit vs Credit perspective this transaction is correct, it has been processed incorrectly in Xero. 
3. Click on [Journal Options] > Edit
   
   è The Edit Manual Journal screen opens
   
   
   
   
4. Amend the Journal entry as follows:
   • Amounts are > Cange to: Tax Inclusive
   • Debit AUD > Change the value of the expense adjustment to the Gross expense amount inclusive of GST (GST * 11)
5. Remove the GST Account from the Accounts line and re-enter the same expense accounts from the lines above
6. Change the Tax Rate to: GST on Expenses
7. In the Credit AUD column, enter the adjustment Gross Expense amounts as per the lines above
8. In the Subtotal section of the journal, make sure the GST Credit entry is the same as the amount originally posted directly to GST
9. Click on [Post]
   
   è The EOFY journal transaction will be removed from the GST Account Transactions list
   

Bad Debts Write Off Journals 

Bad Debts should never be written off as journals in Xero without going through Receivable first. If you come across a Bad Debt write off journal where Income and GST adjustments were used in the journal, the journal should be voided.

In this example, Bad Debts had been written off as an End of Financial Year journal adjustment, instead of going through Receivable.

è  The GST Reconciliation Report - GST Accounting Transactions

1. Click on the EOFY Adjustment transaction to open it
   
   è The Manual Journal screen opens
   
   
   
   
2. Review the journal, if it includes debit entries of Income and GST this journal needs to be voided. Also if the journal does not mention what invoices have been voided, you will need to request a list of invoice numbers to write off.  
3. Click on [Journal Options] > Void
   
   è The EOFY journal transaction is voided and will be removed from the GST Account Transactions list
   
   
4. You will then need to write off the correct invoices to Bad Debts through Receivable

GST on Import Transactions

If your Business imports goods from overseas, the GST Account Transactions section of the GST Reconciliation report should also include all GST on Imports transactions. It is important to check if the tax rate of these transactions has been changed to GST on Imports. Any GST on Import transactions posted with the default Tax Rate: BAS Excluded will not be deducted as part of the GST Paid in the Activity Statement. 
Note: you will need Adviser access in Xero to perform this check.

1. Go to Accounting > Find and recode
   
   è The Find and recode history screen opens
   
   
   
   
2. Click on [Find and recode]
   
   è The Find and recode screen opens
   
   
   
   
3. Add the following conditions:
   • Account > is GST
   • Tax Rate > is not GST on Imports
   • Contact > is not Australian Taxation Office
   • Date > is between the BAS Period you are reconciling
4. Click on [Search]
   
   è If all GST on Import transactions have been coded correctly to GST on Imports, this search should not return any results
   
   
5. If the Find and recode search finds any transactions, select the transactions on the screen
6. Click on Recode > Recode Source Transaction
   
   è The Recode Transactions pop-up screen opens
   
   
   
   
7. In Tax Rate select: GST on Imports and click on [Review]
   
   è The transactions will be recoded to the GST on Imports Tax Rate