How to: Set Up Withholding Tax
Withholding tax (WHT) is the tax withheld by a company when it makes a payment to a vendor, in which the full amount owed to the vendor is reduced by the tax withheld. The withheld tax is then remitted to the Australian Taxation Office (ATO) when the next Business Activity Statement (BAS) is submitted.
If a supplier without an Australian Business Number (ABN) provides an invoice, a withholding tax amount must be withheld if the total amount of the invoice is more than the threshold amount.
To use withholding tax, you must set up the business posting groups and product posting groups for withholding tax so that the correct WHT calculations are made for each vendor.
Note
As a prerequisite, you need to set up source codes for WHT settlement in the Source Code Setup window.
The following procedure describes how to set up product posting groups for WHT, but the same steps also apply to setting up business posting groups for WHT.
To set up a product posting group for withholding tax
In the Search box, enter WHT Product Posting Group, and then choose the related link.
Fill in the fields as described in the following table.
Field Description Code
Specify the code for the product posting group. You can enter a maximum of 10 alphanumeric characters.
Description
Specify the description for the product posting group. You can enter a maximum of 50 alphanumeric characters.
Choose the OK button.
To set up posting for withholding tax
In the Search box, enter WHT Posting Setup, and then choose the related link.
Fill in the fields as described in the following table.
Field Description WHT Business Posting Group
Specifies the business posting group code for withholding tax.
WHT Product Posting Group
Specifies the product posting group code for withholding tax.
WHT Calculation Rule
Specifies the calculation rule for WHT, which is used with the amount specified in the WHT Minimum Invoice Amount field. This will help identify the transactions for which WHT will not be deducted.
For example, if you select the Less than option here and enter 100 in the WHT Minimum Invoice Amount field, then WHT will not be deducted for those transactions with an amount less than 100.
WHT Minimum Invoice Amount
Specifies the threshold amount that is below which WHT will not be deducted.
WHT %
Specifies the WHT rate. You must enter the rate without the percent sign.
Realized WHT Type
Specifies the mode of WHT calculation for purchases or sales of items.
Prepaid WHT Account Code
Specifies the general ledger account number to which sales WHT is to be posted.
Payable WHT Account Code
Specifies the general ledger account number to which purchase WHT is to be posted.
WHT Report
Specifies the withholding tax report type.
Bal. Prepaid Account Type
Specifies the type of balancing account for sales WHT transactions.
Bal. Prepaid Account No.
Specifies the account number or bank name for sales WHT transactions, based on the type selected in the Bal. Prepaid Account Type field.
Bal. Payable Account Type
Specifies the type of balancing account for purchase WHT transactions.
Bal. Payable Account No.
Specifies the account number or bank name for purchase WHT transactions. This is based on the type selected in the Bal. Payable Account Type field.
WHT Report Line No. Series
Specifies the number series for the WHT report line.
Revenue Type
Specifies the revenue type. For more information, see How to: Set Up Revenue Types for Withholding Tax.
Purch. WHT Adj. Account No.
Specifies the account number which to post purchase credit memo adjustments.
Sales WHT Adj. Account No.
Specifies the account number to post sales credit memo adjustments.
Sequence
Specifies the sequence in which the withholding tax posting setup information must be displayed in reports.
Choose the OK button.
See Also
Tasks
How to: Set Up Revenue Types for Withholding Tax
How to: View Withholding Tax Entries
How to: Calculate and Post Withholding Tax Settlements