Setting up Income tax

Income Tax is one of the inbuilt elements in Castaway designed to record:

• Income tax expense
• Income tax liability/provision
• Income tax lodgment (income tax payable) and payment/refunds
• Income tax finalisation balance and payment/refund

Being an inbuilt item means there is no need to create your own Income Tax Expense element or Income Tax Liability/Asset in your Chart of Accounts as this inbuilt element was designed to handle the income tax-related transactions of your model. Navigate to Forecast > Element Settings > scroll to the bottom of your Profit and Loss section to find the Income Tax element.

This element includes a range of flexible settings to help you model the calculation and payment of your Income/Company tax

Setting up the Income tax in Castaway involves 4 steps:

1. Set the income tax method
2. Set the lodgment and payment timings
3. Set the rules for calculation, recouping, refund and reporting
4. Set the taxable setting for each element

1. Set the income tax method

Select the applicable method from the following options:

• Taxable Income: Calculate the tax expense for the entire forecast based on a fixed rate
• Exempt: Use when no income tax is to be calculated
• Manual Entry: Use to have manual control over income tax expense
• Taxable Income (Monthly rate): Allows you to use varied tax rates to calculate the tax for each forecast period.

2. Set the lodgment and payment timings

Choose between:

• Enter tax lodgment - Enter the tax lodgment manually
• % of operating revenue - Calculate the tax based on the fixed rate selected for operating revenue
• Fixed installment – Select this if you pay tax by a fixed installment. The fixed installment value, the number of installment cycles and the Cycle End Month can be adjusted under the lodgment tab
• % of projected tax expense – Calculate the tax lodgment based on the projected tax expense for the year

Tax finalisation which calculates the amount of outstanding tax liability at the end of the financial year can be separately set up for payment via the Tax finalisation month setting under the Lodgment tab.

3. Set the rules for calculation, recouping, refund and reporting

Calculation Rules

• On positive values only – Calculate the tax expense on positive values (only when there is a gain)
• On all monthly values - Calculate the tax expense on all monthly values regardless if there is a gain or loss in the period.

Recoup opening tax losses

If you have any tax losses that need to recoup against future tax payments, you can set this option to yes to offset the prior tax losses against future tax payments

Allow negative payments

• Yes – It allows a negative payment which acts as a tax refund
• No – Will not allow a negative payment or tax refund

Tax payable reporting

Select the tax payable reporting to list as either an Asset, Liability or by Sign in your Balance Sheet report.

4. Set the taxable setting for each element

The tax settings will apply to all elements that drive any income and expense. The list of elements that will contribute to the tax calculation (if tax rates are applied) is as follow:

1. Sales
2. Costs
3. Inventory
4. Wages
5. Fixed Assets (Tangible)
6. Fixed Assets (Intangible)
7. Loan
8. Investment
9. Provisions
10. Other A/L
11. Trade finance

If you identify any elements that need to be exempted from tax, you can:

1. Use the Element Groups to tick the tax exemption box for multiple elements from one screen, or
2. Go into the Element Properties screen of each element one by one

For more clarification on tax terms in Castaway please refer to our Tax Glossary.