One of the things that often comes up is treatment of insurance premiums and the GST component of these ...
If the insurance is paid outright, then the GST should be as specified on the original invoice/policy documents, no problems.
If the insurance is financed over 12 months, it's a little trickier. Technically you can/should record the original financed amount as a PrePaid expense, claiming the GST on the insurance premium amount upfront, + recognise the finance charges then reducing / recognising a component of this each month - reducing the PrePaid expense, recognising the insurance expense , the reducing finance component etc ... we do this in some business for bigger financing like vehicles.
Here's the simpler version we're going to do ...
Setup a Repeating Bill for each of the 12 months of the financing period (this will match to the amounts that are withdrawn from the bank account).
The Repeating Bill has 2 line items:
- Insurance - GST Component .. Grossed up amount for the GST calculated as follows:
- Amount = <GST on original invoice>/12 (months) / .1 (GST)
- Example: If the total amount of GST on the original insurance tax invoice is $93.50, then you would have an amount of $93.50/12/.1 = $77.92
- This is entered with GST on Expenses so you have $7.79 GST / month
- Insurance - Non GST component - the balance of the monthly payment, calculated as follows.
- Amount = <Monthly instalment> - <amount above incl GST>
- This is entered as GST Free expense