Tax Parameters

Process Sales or Services Tax

If your company does not have to account for GST (e.g. you are in a GST free industry), untick this option.

Even with this operation turned off, CAPITAL will still track tax charges that you may receive on purchase orders or stock receipts.

GST Tax Settings

GST Inputs Clearing Account

If your organisation manages GST, you must specify a GST inputs clearing account code here. Click on the button to view a list of expense codes or your general ledger's chart of accounts (if the general ledger has been activated).

If you are using the standard CAPITAL expense or general ledger codes, then the default entry for the GST clearing account is 40300, "GST Inputs Clearing", debit type, balance sheet.

GST Sales/Payable Account

If your organisation manages GST, you must specify a GST sales (supplies) payable account code here. Click on the button to view a list of expense codes or your general ledger's chart of accounts (if the general ledger has been activated).

If you are using the standard CAPITAL expense or general ledger codes, then the default entry for the GST Sales\Payable account is 40350, "GST Sales/Payable Account", credit type, balance sheet.

All GST charges related to the sale and supply of goods and services are assigned to this account. Tax department invoices for payment of GST should also be assigned to this account code.

Exclude Tax from Sale Margins

This option allows you to exclude the tax component of a sale from the profit margin percentage display, on sales reports and related reports. This option affects the display of the percentage calculation only. The tax component is still treated as part of the "cost" of the sale item in the case of sales tax, and is always excluded for GST.

For example, if the sale value was $100 and the ex tax price was $75, then the profit margin (excluding any taxes) would be 25% (The sale total less the cost = profit, divided by the sale amount).

If this option was unticked and the sales tax component was $10, then the cost would be treated as $75 + $10 for a total cost of $85. The margin would then be shown as $110 - $85 / $110 or only 22.7%.

For customer purchase history reports you must explicitly indicate that tax is to be excluded from the report in order to get a margin calculation based on ex tax costs and sales. However, this does not apply to GST. The GST component of the sales item is normally, and by default, excluded from the cost of sale calculation.

This option is primarily included for backward compatibility with earlier versions of CAPITAL. Newer reports which include ex and inclusive tax reporting options do not require and therefore do not support this setting.

GST on Freight Charges

If your organisation manages GST and you require that GST calculations include the freight charges on transactions, then specify the GST tax rate to apply to freight charges here. This parameter is normally set to your standard GST tax rate code.

Default Tax Rate on Non-Stock Lines

Enter a tax rate code here when applicable. This is the tax rate that should apply to goods, charges or services that are not assigned a product code or have been assigned a product code but not a tax code.

If you are accounting for GST and you are not in a GST free industry segment, you should specify the GST tax rate code here. Otherwise, if no tax rate is assigned, no tax rate is assumed.

Default Tax/Duty on Hired Stock

If a tax rate is specified here, this overrides the default tax rate for a stock item when entered through the Hire Manager. This is useful if the tax applicable to hiring is different from the tax applicable to sales.

You may also specify a default tax/duty rate for a group of goods through Stock Group entry in CAPITAL. The rate assigned to a stock group (if specified) overrides this setting.

Calculate Tax on Lay-by Payments

By default this field is unticked. This setting may not be appropriate for your business. You should discuss the matter with your accountant before deciding on an appropriate setting.

Tax Rate on Lay-by Payments

If you use the lay-by or cash order system you must specify the rate of tax (GST) that is applied to each full or part payment transaction. The tax rate specified must be an inclusive tax rate. (Inclusive tax rates have their "Add to Total" setting set to "No".)

If you are not calculating tax on lay-by or cash order payments, but rather the initial sale, then you do not need to assign a tax rate to this field and the rest of the information relating to this parameter does not apply to you.

See Issues Relating to Lay-bys for more information on controlling whether tax is applied to the initial lay-by or sales order, or each part payment.

This tax rate is always used to estimate the tax component of a sale (and hence the actual cost) on CAPITAL's sales analysis reporting.

When using the lay-by or cash order system you MUST use inclusive tax rate codes. (An inclusive tax rate is where tax is contained in the retail price, rather than being added to it.)

Tax Rate on Customer Entries

This is the tax rate that is assigned to Customer Entry summary transactions. When a summary transaction is entered via Customer Entries, CAPITAL will assign the transaction this tax rate code. If you define a tax rate here, the tax rate must be an inclusive type. See Customer Entries & GST

Tax Rate on Customer Discounts

This is the tax rate that is assigned to early settlement discount transactions created via Customer Entries. CAPITAL will assign the transaction this tax rate code. If you define a tax rate here, the tax rate must be an inclusive type.

If you will be issuing early settlement discounts it is strongly recommended that you create a tax rate code for these types of transactions in order to keep them easily separated from other types of tax charges and tax rates.

Settlement discount transactions calculate tax credits based on the percentage adjustment of the invoice being allocated. For example, if a 2.5% discount is issued to an invoice, 2.5% of the tax amount is also credited. This amount will not necessarily correspond to the tax percentage of the tax rate. For more information on this topic see: Settlement Discounts.

Sales Tax Settings (Not Applicable To GST)

Treat Inclusive Tax as a Cost

This option is normally ticked. In CAPITAL, taxes are treated as forming part of the total cost of a sales item. For example, if a product cost $5 and the tax was $1 then the total cost, according to your sales report, would be $6. This would be irrespective of whether the $1 tax was added to the sales total, or was already included within the sale price. (Taxes that are included within the item price are referred to as "inclusive" tax amounts.)

Under special circumstances you may not wish to show the inclusive tax amount as forming part of the stock item cost. If this is the case, then this option should be unticked. This option does not apply if your organisation processes GST.

Proportion Stock Kit Tax

Stock kits with "compound" tax rates determine their own tax rates based on the tax rates of the components that make up the kit.

If the sale price of the kit is changed, the tax payable proportion is also changed to automatically reflect the adjustment. For example, if the sales tax of a particular component is $1.00 and the kit is sold for half price, the tax payable on that component will be scaled to 50 cents.

Untick this option if you don't want CAPITAL to perform automatic tax amount proportioning. For Australian GST processing this option is normally left unticked.

Disabling proportioning may be useful when the tax amount of a kit is always fixed. For example, a stock kit may be made up of various taxable components at set tax rates plus a more flexible non-taxable component. Unticking this option would not cause any adjustment of the sell price to alter the tax calculated on the kit.

The status of this option determines how tax calculations are performed in CAPITAL and also effects the calculations performed in the tax report. If this option is changed and prior transactions exist in the system entered under the original setting, then the tax reporting system may consider those earlier transaction tax values to be "in error". Therefore, if this setting needs to be changed, it should only be done at the end of a particular reporting period. For example, the end of the month.

Note: You cannot specify the tax base for stock kit compound tax calculations. The individual sell prices of the components is always treated as the base. In other words, the basis of the tax calculation is always the standard sell price ex tax for kit components. While you may still customise the tax calculations of components, doing so may produce a tax report that (while correct) will not seem to tally. This is because the TAXABLE AMOUNT column on the tax report will list the sell price ex tax, even though this may not be what tax is being calculated on. It is therefore not recommended that you assign tax rates that have non-standard tax formulas (i.e., formulas that do not look like: I *.11 etc.) for kit components.

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