OK, now you have decided that Xero is the right accounting platform for you. What’s next?
  1. Setting up Xero Accounting System
It’s easy to setup Xero. Heck, it is so easy, even you can do it yourself. With Xero Help Centre, you’ll be able to hit the ground running with Xero in less than 10 minutes. (provided you have everything they need at your arms reach).

For more detailed step-by-step, you can refer HERE.

  1. GST Tax Code
The default tax names and their rates set up in Xero are:

Name

Tax Rate

Tax Exempt 0%
Tax on Purchases 0%
Tax on Sales 0%
Sales Tax on Imports 0%

 

Xero has its own default Tax Rates meant for VAT (Value Added Tax) also known as GST (Goods &  Service Tax) for the rest of the world. We need to map them out based on Kastam’s codes. What does ‘map’ means? It means that you need to set your GST items in Xero and sync it with SmartTax so that SmartTax will recognise which data to pull and generate your GST report. We’ve also talked about doing your mapping from SmartTax interface in our previous post (click).

 

screenshot

 

To get to the Tax Rates screen go to Settings > General Settings > Tax Rates.

 

settings - tax new fields-d2d7dac2

 

To add the above tax codes, go to ‘New Tax Rates’. Under ‘Tax Rate Display Name’ column, fill up the above GST Tax Code. Under ‘Tax Component’ field, you need to put ‘Tax Input’ (for all purchase related items) or Tax Output (for all sales related items). Define each item at 0% or 6% as shown below:

 

screenshot3

 

or this:

 

screenshot2

 

  1. Use SmartTax (goes without sayin!)

 

With SmartTax automatically synchronize with Xero, your accounting data is updated in real time! With readily TAP file format and GAF file, you can be sure that your GST return is timely submitted.

 

[Additional info from Xero Help Page]
 How and where are tax rates used?
 Each line item you enter in Xero (examples are sales invoices to customers, bills received from suppliers, bank transactions to record money spent or received, manual journals or expense claims) has a tax component.
 Invoice
settings - tax pick on inv-5d26d683
  • All tax recorded in Xero is reported on in the Sales Tax Report so that at anytime you can see how much tax you’ve charged or paid – depending on how you set up your Tax Rates, this report will be for single tax rates or each component that makes up a tax rate.
  • The basic tax rates provided by default are a sales tax rate for purchases, for sales and for items that attract no tax.
  • The default rates are all set to 0% by default and at the very least you can change this percentage to match the rate required by your country for sales and purchases.
  • The ‘Accounts using this Tax Rate’ column refers to the accounts in your Chart of Accounts that will use these rates by default. This means that whenever you ‘code’ a transaction to a particular account, for example, Sales, a preset tax rate will be applied automatically. Click on the number of accounts using a tax rate to see all the accounts in the Chart of Accounts that are using that rate. The padlock icon shows on locked tax rates, which can’t be deleted. A locked rate will be currently in use in your organisation, either as a default rate on one of your accounts, or on a repeating invoice or bill.
  • If you don’t want to use the default Tax Rates you can enter your own and if appropriate, make these rates the default for particular accounts in your Chart of Accounts. You can use any Tax Rate on any invoice, bill or transaction regardless of whether it is the default rate on an account.
  • The only tax rates that you can’t change or delete are:
    • Tax Exempt rate which is used by the Xero System accounts
    • Sales Tax on Imports which is a special rate used for reporting sales tax that you want to record as being fully refundable. You can see all transactions for a period broken down by tax rate on the Sales Tax Audit report.
  • In the Chart of Accounts you can choose if you want your tax rates to be the default tax rate on certain accounts so that that amount of tax is calculated on a transaction whenever the account is used.
  • If you want to import a Chart of Accounts from a CSV file, you need to make sure you have all the tax rates you want to use set up before using them in the file you import. If the tax rates on an imported file cannot be found in Xero, they’ll default to ‘Tax Exempt (0%)’. You can update the rates on accounts later in the Chart of Accounts when you’ve set up the required tax rate.