How the GST Return works in Xero

See where Xero gets the figures for the GST Return from. Xero generates your GST Return in Xero according to Inland Revenue's requirements.

Talk to your accountant or bookkeeper about registering your organisation for GST, and how you should account for GST in Xero.

How does Xero calculate GST on the payments basis?

Xero's payments basis GST Return includes the following transactions if they have a GST component in the GST period:

  • Invoice payments received
  • Bills paid
  • Expense claims paid
  • Manual journals on the journal date where the checkbox Show journal on cash basis reports is selected.

    Image showing journal with checkbox selected.

  • Spend money transactions
  • Receive money transactions

How does Xero calculate GST on the invoice basis?

Xero's invoice basis GST Return includes the following transactions if they have a GST component in the GST period:

  • Invoices on the invoice date
  • Bills on the bill date
  • Expense claims on the reporting date (regardless of whether they've been paid)
  • Manual journals on the journal date
  • Spend money transactions
  • Receive money transactions

How does Xero calculate GST on transactions?

Tax Inclusive and Tax Exclusive transactions

When you select Tax Inclusive or Tax Exclusive on a transaction, and the transaction line has a GST component tax rate, Xero:

  • Calculates the GST portion and posts it to the GST system account
  • Includes the transaction in the Sales and Income or Purchases and Expenses total on your GST Return.

Image showing GST options on invoice.

No GST, or custom exempt tax rate

If you select the No GST tax rate, or a custom exempt tax rate, Xero:

  • Doesn't calculate GST on the transaction
  • Excludes the transaction from the Sales and Income or Purchases and Expenses total on your GST Return
  • Includes the transaction on your GST Audit Report

No Tax transactions

If you select No Tax for your transaction, Xero doesn't include the transaction in your GST Return but does include the transaction in your GST Audit Report. You can't edit the tax rate field in your transaction.

Image showing journal with no tax.

How does Xero populate the GST Return?

Xero uses only one GST account and only includes transactions from this account in the GST Return. On the default chart of accounts in Xero the GST account is the system account 820 - GST.

Image showing GST account in chart of accounts.

If you create your own GST account in the chart of accounts, Xero won't include it in the GST return. Add your own tax rate instead. Tax amounts from custom tax rates go to the GST account in Xero.

For the period and basis chosen for the GST Return, Xero includes all transactions with a GST component. Xero doesn't include journals to the GST account, or entire transactions using these tax rates:

  • No GST
  • Your own rates with the tax type Exempt Sales
  • Your own rates with the tax type Exempt Purchases
  • An overall setting of No Tax

Refer to these tables to find out which transactions Xero includes in the boxes in the GST Return:

Sales and income

Box on Xero's GST ReturnGST rate on sales and income
 No TaxNo GSTYour own rates: tax type Exempt Sales15% GST on IncomeZero Rated (revenue only)Your own rates: tax type Sales
5 - Total sales and income   Image showing green check mark.Image showing green check mark.Image showing green check mark.
6 - Zero-rated supplies    Image showing green check mark. 
Late claims   Image showing green check mark. Image showing green check mark.

Purchases and expenses

Box on Xero's GST ReturnGST rate on purchases and expenses
 No TaxNo GSTYour own rates: tax type Exempt Purchases15% GST on ExpensesYour own rates: tax type PurchasesGST on Imports
11 - Total purchases and expenses   Image showing green check mark.Image showing green check mark. 
GST on imports     Image showing green check mark.
Late claims   Image showing green check mark.Image showing green check mark.Image showing green check mark.

Creating manual journal entries to the GST account

Xero allows you to create manual journal entries directly to the GST account. However, Xero does not include journals to the GST account in your GST return. Consult your accountant or bookkeeper before creating any journal entries to the GST account.