Capital Aquisition - Motor Vehicle on HP

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Topic:  Capital Acquisition - Motor Vehicle on Hire Purchase (HP)

 

 

The following is a suggested way of handling the purchase of a motor vehicle on a HP agreement and subject to GST.

 

Where a motor vehicle is purchased on HP and you need to account for the full GST amount at the date of purchase:

 

1.Post an Invoice to the appropriate Supplier for the cost of the motor vehicle including GST to the Motor Vehicle Asset account.  Type G10 into the "Comments" so that the amount is reported against G10 on the BAS.  If there are other costs which do not attract GST then these should be posted separately and coded to the appropriate Cost Centre and GL account.  G14 will be required in the "Comments" box on the non-GST invoice so that it will be correctly reported on the BAS.

 

2.Post a negative invoice for the total cost (including GST) of the motor vehicle, the GST field should be zero.  This negative invoice would be posted to a Liability account for the HP.

 

3.Pay the positive invoice and negative invoice separately, but with the same Reference.  (Net balance is zero).

 

4.Go to the Bank Reconciliation screen and tick off the "Payment" and the "Receipt" in the right hand side of the screen, as these two amounts cancel each other out and do not affect the actual bank balance.

 

The effect of the above is that you have accounted for the loan liability of the vehicle, and accounted for the GST on the initial purchase.

 

The repayments will then be invoiced to the liability account and interest invoiced to the Interest Expense account, if appropriate.  Please consult with your accountant on the appropriate accounts for your particular situation.

 

Example postings:

 

Invoice for Motor Vehicle purchase $22,000 (incl GST of $2,000) (GL Asset Account 1.XXXX)

Invoice for HP Borrowing costs $192  (GL Asset Account 1.XXXX) G14 in "Comments"

Invoice for Unexpired Interest $131 (GL Liability Account 2.XXXX) G14 in "Comments"

Invoice for Insurance expense $550 (incl GST of $50) (GL Expense Account 4.XXXX)

 

Negative Invoice to HP Finance ($22873) with no GST amount recorded (GL Liability Account 2.XXXX)

 

Then Pay off the invoices against each other so that you update the Negative invoice as one payment and all the other invoices as another payment whilst using the same reference on both payments.  Tick off both payments against each other in the Bank Reconciliation screen so that they have nil affect.

 

 

Motor Vehicle Trade-ins

 

With a trade-in on a motor vehicle purchase a Claim and Receipt has to be posted to account for the income against the purchase of the new motor vehicle.  This will account for the GST on the trade-in of the vehicle as well.  The Receipt will offset the Negative invoice to the liability account (refer following example).

 

Details:  Car Purchase Price $22,000 and Trade-in $5,500

 

Example postings:

 

Claim for $5,500 including GST (GL Acc 1.XXXX or 7.XXXX)

Receipt for $5,500

Invoice for $22,000 incl GST (GL Acc1.XXXX)

Negative Invoice to HP Finance of $16,500 with zero GST amount (GL Acc 2.XXX)

 

 

The transactions described in this document are meant to be simplified examples and the circumstances may differ from one case to another.  Therefore please consult with your Tax Accountant and the ATO on all facets of your recording and reporting responsibilities.

 

 

End of document