Add a tax rate

Add your own tax rate if your organisation needs more options than Xero's default rates. Your tax rates can apply to sales, purchases, or both.

Add a new tax rate

  1. On the Settings menu, select General Settings.
  2. Under the Organisation heading, click Tax Rates.
  3. Enter a display name and select the tax type.
  4. Add the tax components.
  5. Click Save.

Tax rate display name

The name identifies the tax rate in the chart of accounts and on your transactions. It's only shown within Xero. It doesn't appear on your invoices, quotes, or other documents you send outside Xero.

Include the rate's percentage in the name to help identify it.

Image showing the display name for a new tax rate.

Tax type

The tax type determines how the GST portion of transactions using this rate is included in your GST Calculation Worksheet.

The available tax types are:

  • Sales
  • Purchases
  • GST Free Sales
  • Exempt Income
  • BAS Excluded
  • GST Free Expenses

Tax components

A tax component is a percentage rate applied to an item when you use the tax rate. Tax rates for Australia will normally have only one component.

Image showing component in tax rate.

  • You can include up to 6 components in a tax rate.
  • Your customers and suppliers will only see the total rate on the invoice, purchase order, credit note or other transaction. They won't see the individual components making up the rate.
  • You can use the same component for both sales and purchases tax rates.
  • Australian tax reporting doesn't require a breakdown beyond the overall tax rate. Even if you use multiple components, it is only the overall rate that is displayed on transactions and shown on your GST Calculation Worksheet or activity statement in Xero.
  • If you have more than one component, any one of the components can be a compound rate. Including a compound rate means the 'effective tax rate' is higher than the nominal rate. The effective tax rate is used to calculate the tax on a line item.

    Image showing multiple components with compound component.

  • If you are entering transactions that use a different tax rate for each line, you will see each tax rate and amount listed separately before the transaction total.

    Image showing different tax rates.

You might also be interested in