Pay a supplier who has no ABN

If you pay on a supplier's invoice that doesn't quote an Australian business number (ABN), you may need to withhold some of the payment. The amount withheld is called no ABN withholding tax.

Let's say you need to pay a consultant 1000 for a job and you're required to deduct 49% no ABN withholding tax.

  1. Create a No ABN Withholding Tax current liability account in your chart of accounts.
  2. Add a bill for the expense:
    • Record 1000 in the appropriate expense account on the first line.
    • On the second line, record 490 as a negative amount to your new liability account.
  3. Enter second line in bills as a negative amount.

  4. Report the no ABN withholding tax to the ATO and your supplier. When you pay the 490 withholding tax to your tax authority, code the payment in your bank reconciliation to the No ABN Withholding Tax liability account. This clears out the liability.

    Image showing payment to ATO on bank rec.

Xero doesn't include the withheld amount in any ATO report or activity statement. You need to include the amount manually.

Please contact your accountant or the ATO if you're unsure about how to account for the tax deducted to the ATO.