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  • #984075
    flyer
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    I completed a work for a client few months before 1 July but the client has been paying me in instalments and has only recently completed paying the entire balance. They never asked for an invoice and would just put money directly into my bank account. Now they are requesting an invoice. Should I invoice them with a date prior to 1 July as the work was completed before 1 July?

    In the invoice, do I also need to state there is no outstanding amount? Since they used to pay me in instalments, do I need to put down the date of each instalment or I don’t need to go into that much detail?

    #1145711
    Past-Member
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    If they finished paying before 1 July, then the invoice can be 30 June and show paid in full because they already paid then. If they paid after 1 July, then that can be a separate paid invoice. ie one for prior to 30 June, one for after.

    I would have been issuing paid invoices for every payment received. Usually called progressive invoices/payments.
    In this case you should at least have a line including date for each payment received and the total amount at the bottom.

    I am not an accountant, so if you are not sure, please check with your accountant.

    Cheers.

    #1145712
    Jason@Plumsale
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    I would suggest itemising the payments on the invoice, with the balance as $0, since these are what should reconcile with your bank account. If you are registered for GST, the GST payable is based on the date the payments are made not the invoice date.

    #1145713
    James
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    As I understand it, GST can be payable on your invoice due date or when the cash is received. It depends on whether you are registered as Cash or Accruals accounting with the ATO.

    #1145714
    Jason@Plumsale
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    James Rayers, post: 166970 wrote:
    As I understand it, GST can be payable on your invoice due date or when the cash is received. It depends on whether you are registered as Cash or Accruals accounting with the ATO.

    James you are right, Most solo businesses would be cash basis though. An assumption I probably should not make.

    #1145715
    James
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    Jason@Plumsale, post: 166994 wrote:
    James you are right, Most solo businesses would be cash basis though. An assumption I probably should not make.

    Completely agree that most would initially go for cash – that includes me. Just wanted to make sure nobody got confused given we are only a few days away from Q4 GST pay-ups.

    #1145716
    Blackshaw Bookkeeping
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    Flyer

    This would also affect your bookkeeping depending on how you have been recording the payments received in your accounting system.

    If you are using an computerised accounting system, I would suggest that you should enter the invoice at the date that it was incurred (ie. back a few months) – especially if it does not go back into the previous quarter for BAS purposes too.

    You would have been having to receipt the payments somehow, and if you did not have an invoice created, you would have had to put these payments as ‘deposits paid’. Otherwise, as seperate individual invoices for each payment received.

    In my opinion, if the client knew the total amount from the time he/she paid the instalments (ie. the work was finalised at that time and they were just essentially making layby payments), then the invoice should be backdated for the total amount.

    In your system, you would then receipt each individual payment made off the invoice, and show a remaining balance of 0.00.

    The other factor to check with your client is whether they are on an accruals or cash basis. If they are on an accruals basis, and the invoice will pre-date into the previous BAS period (either monthly or quarterly depending what their lodgement basis is) then this will affect their BAS figures.

    Otherwise, if they are on cash basis, this will not affect their reporting anyway – they will just need to be able to receipt the payments off against the invoice.

    Natalie Blackshaw
    Blackshaw Bookkeeping Services
    0402 537 723

    #1145717
    flyer
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    KarenC, post: 166958 wrote:
    If they finished paying before 1 July, then the invoice can be 30 June and show paid in full because they already paid then. If they paid after 1 July, then that can be a separate paid invoice. ie one for prior to 30 June, one for after.

    I would have been issuing paid invoices for every payment received. Usually called progressive invoices/payments.
    In this case you should at least have a line including date for each payment received and the total amount at the bottom.

    I am not an accountant, so if you are not sure, please check with your accountant.

    Cheers.

    Thanks for your reply, Karen. There is something I wanted to clarify. Hope you can help.

    I am thinking of issuing 2 separate invoices. One for payments made prior to 1 July and the other for payments made after 1 July. Is that ok or is there going to be issues doing that?

    For example the total amount to be paid is $3000 and they paid $2500 before 1 July and the remaining $500 after 1 July. So does that mean in invoice 1, I put all the payment dates and the total balance of $500. In invoice 2, the amount payable as $500, the payment dates and the balance of $0? It may sound obvious.. since I’ve never backdated invoices, I’m a bit concerned.

    I currently don’t charge GST, so if there are issues related to it, I guess I don’t have to worry about it.

    #1145718
    James Millar
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    Just to clarify one other item here. You need to distinguish between your GST accounting basis and your income tax accounting basis.

    While most businesses here would be eligible for GST cash basis accounting the same cannot be said for income tax. There is no comparable exemption in the tax law that allows small businesses to account for income tax on a cash basis so you need to include closing debtors and creditors in the calcs. (there was an exemption for entities that elected prior to 30 June 2005 but any new business since then misses out).

    Just worth mentioning.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1145719
    Past-Member
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    As I said, I am not an accountant. But if it was me, yes I would have invoice 1 with all payments listed and total prior to 30 June dated 30June so that it can be declared in your 2012-13 tax. It probably would have been better if you made out a series of paid invoice/receipts for each payment at the applicable dates. And then a new invoice for 2013-14 for the $500.

    Really you are issuing a Invoice Receipt for the prior payments as you should have at the time so it’s not really backdating.

    Next time, issue progressive Invoice/Receipt payments as you go along. It’s much easier to do it on the day it occurs than later.

    If there is an accountant reading, perhaps they can suggest?

    #1145720
    James Millar
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    The tax law requires that if you have derived income during a financial year then it is assessable for that period. Contractually, if the works / job have been completed then it’s likely you have a “recoverable” debt pursuant to a typical contract (formal or otherwise). In some respects under the tax law, issuing the invoice is an administrative formality rather than the true depiction of when the income was / is “derived”.

    Issuing invoices on dates after the completion works (particularly if it appears to be engineered to produce better tax outcomes – eg 30 June invoices into the following July) does not change the way the ATO may view it in terms of timing of taxation.

    There is a difference between an invoice and a statement of account. The first represent income as per the terms of the contract (and should be used for income tax calculations for most businesses). The second represents payment of that income and any balance. Issuing multiple invoices to match the progress payments would not satisfy the ATO with regard to pushing income forward. If there is a proper audit and they reviewed / investigated the terms of the contract (informal or formal) then they may determine that the work was done before 30 June, was recoverable at that time and therefore was derived in that year.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
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