Tax Glossary

Note: GST is referred to as the Goods and Serviced Tax. The terminology may be different, depending on your country e.g. in the UK, this is referred to as Value-Added Tax (VAT). 

What is the difference between GST Liability and GST Payable in the Castaway balance sheet?

GST Liability: the amount of GST accrued at the end of the month.  This amount is not yet owing to the Tax Office because no BAS/GST Lodgment has occurred.  GST collected on sales increases this figure, GST paid on expenses and fixed asset purchases reduce it.  The figure is also reduced when a BAS/GST lodgment is recognized (which transfers the GST Lodgment balance across to GST Payable).

GST Payable: the amount of GST that is owed to the Tax Office/revenue authorities at the end of the month.  New GST Lodgments increase this balance, and payments to the Tax Office reduce it

Examples

Monthly GST Lodgments:  A forecast with the GST Lodgment Schedule set to 'Monthly' will show 0 in the GST Liability every month, as GST is never accrued.  GST Payable will have a balance each month because each GST Lodgment is paid 1 or 2 months after the end of the month 

Quarterly GST Lodgments: A forecast with the GST Lodgment Schedule set to 'Quarterly' will show an accrued amount in the GST Liability in July and August.  In September, the BAS is lodged, so the GST Liability will fall to 0.  Conversely, there will be 0 GST Payable in July and August, but a balance will appear for September.

What is the difference between Income Tax Provision, Income Tax Payable and Income Tax Finalisation in the Castaway balance sheet?

Income Tax Provision: The current liability for the estimated amount of income tax which is assessable on the taxable income of the reporting entity for the current and prior reporting periods (to the extent that such tax has not been already paid).

This amount is not yet owed to the Tax Office because no activity statement (BAS or IAS) has been lodged.

An increase in assessable income increases this figure, an increase in allowable deductions reduces it.  The figure is also reduced when a BAS/IAS lodgment is recognized. When lodged, the Tax Lodgment balance is transferred across to the Tax Payable balance.

Income Tax Payable: The amount of income tax calculated on the taxable income of a reporting entity for the reporting period that is owing to the Tax Office/relevant revenue authorities at the end of the month. 

Any New Tax Lodgments increase this balance, while payments to the Tax Office reduce it.

Income Tax Finalization: The balance of outstanding Income Tax that is payable or refundable at the end of the financial year.