Change your tax basis in Xero

Change your organization's sales tax basis in Xero, in consultation with your advisor. You can change between accruals basis, cash basis and no tax.

Consult with your accountant or bookkeeper to make sure you understand the implications of changing your tax basis, and that you are still accurately reporting to your tax authority.

Some implications of changing your tax basis in Xero

  • Xero generates sales tax reports using the tax basis in place at the time it generates the report. This may be different from the tax basis in place during the report period.
  • Depending on the way you change your tax basis, Xero might duplicate or exclude sales tax entries from a previous report period.
  • After you change your tax basis, you or your advisor may need to enter manual journals in your sales tax account to ensure your sales tax reports are correct.

Before you start

  • In consultation with your advisor, contact your tax authority to see if you can change your tax basis, and when you can make the change.
  • Check all transactions in Xero are correct and complete to the end of the last tax period before the planned change.
  • Run and publish all sales tax reports with the current tax basis.
  • Set or change the lock date to the end of the sales tax period before the planned change.

Change tax basis in Xero

  1. In the Settings menu, select General Settings.
  2. Under the Organization heading, click Financial Settings.
  3. In the Tax Basis field, select the method you are changing to.
  4. Click Save.

Check sales tax reports after changing tax basis in Xero

Review your sales tax reports for the periods after the change with your advisor to make sure all tax is correctly accounted for. Check:

  • The reports include all entries.
  • Entries already reported aren't repeated.
  • If you changed from cash basis to accrual basis, the sales tax reports may not include payment of unpaid invoices and bills raised before the change. You'll need to add an adjustment on your sales tax return to include these payments.
  • If you changed from accrual basis to cash basis, the sales tax reports may include payment of unpaid invoices and bills raised before the change. You'll need to add an adjustment on your sales tax return for these duplicates.