The invoice tax
total isn’t exactly 10% of the invoice base total. Why?
This isn’t a mistake of the software but a common
misconception between what users expect to see on an invoice and what software
systems prefer to do when exchanging data. TransVirtual calculates Tax (GST) in
the following way:
- Tax
(GST) is calculated on each individual price before it’s added to an
invoice.
- Each
of these Tax (GST) amounts is rounded to the nearest whole cent.
- The
Invoice Tax Total (GST) is calculated as the sum of the individual item
tax (GST).
- Due
to the rounding, the Tax Total (GST) will likely not be an exact 10% of
the Invoice Base Total.
The
more items on an invoice, the greater the impact of this rounding and the
greater the potential difference in the totals.
The ‘Total Invoice Rule’ is the one most commonly used when
manually calculating tax and the simplest one that most users will be familiar
with.
The ‘Taxable Supply Rule’ is normally the expected method of
calculating tax when transferring data between computer systems. It’s included
as a feature of mainstream accounting packages such as Xero, MYOB and
QuickBooks/Reckon.
TransVirtual calculates taxes based on the ‘Taxable Supply
Rule’. If you are sending data to a 3rd party software system this
will most often be their preferred method. Tax is calculated dynamically as
each item is priced and added to an invoice with the Tax Total updated
accordingly.
If after all of that you still want to use the ‘Total
Invoice Rule’ there is an option to apply tax (GST) by using a levy in
TransVirtual to apply a 10% charge against the base total. Be aware that this
will only be applied once the invoice is closed and the base total is known.