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dan21
Level 1

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

 
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Best answer March 12, 2019

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IntuitChris
Intuit

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hey Dan 

This guide made by accounting firm Richards Financial Services explains the differences between each tax code - http://www.richards.net.au/site/wp-content/uploads/2_GST-Codes-in-QuickBooks.pdf 

"Sometimes people get confused between when to use GST-free (0%) and when to use the Out of Scope code. The distinction between the two codes is that transactions which are coded GST-free (0%) are reported on your Business Activity Statement, whereas transactions coded Out of Scope are not. Use Out of Scope as the Tax Code for any transactions you allocate to an asset, liability or equity account — such as tax payments, loan settlements, private drawings or transfers between bank accounts. (The only exception is when you purchase new capital items, in which case you need to use the GST on Capital code, as explained in the table above.) Also, use Out of Scope as the Tax Code for all wages and superannuation payments. (Although you do report wages on your Business Activity Statement, they appear separately from other expenses.)" 

Hope this helps!

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16 Comments 16
IntuitChris
Intuit

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hey Dan 

This guide made by accounting firm Richards Financial Services explains the differences between each tax code - http://www.richards.net.au/site/wp-content/uploads/2_GST-Codes-in-QuickBooks.pdf 

"Sometimes people get confused between when to use GST-free (0%) and when to use the Out of Scope code. The distinction between the two codes is that transactions which are coded GST-free (0%) are reported on your Business Activity Statement, whereas transactions coded Out of Scope are not. Use Out of Scope as the Tax Code for any transactions you allocate to an asset, liability or equity account — such as tax payments, loan settlements, private drawings or transfers between bank accounts. (The only exception is when you purchase new capital items, in which case you need to use the GST on Capital code, as explained in the table above.) Also, use Out of Scope as the Tax Code for all wages and superannuation payments. (Although you do report wages on your Business Activity Statement, they appear separately from other expenses.)" 

Hope this helps!

Keti14
Level 1

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hey Chris

 

The link you have posted above seems to be an old form from 2015? I cant find alot of the tax codes mentioned on the form on my end. 

 

Anyhow, would you be so kind as to clarify some information for me. I was instructed by the Quickbooks team to use "out of scope 0% purchases" on expenses that i have not been charged GST or i am not claiming GST on. For example i have a few suppliers that do not charge me GST. 

Is this the right code to use in this case? (Not being charged GST/or not claiming GST on an expense) 

 

Thanks

Kathy 

Anonymous
Not applicable

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hello, Keti14.


The sorting you’ve done in your item list won’t reflect the item line-up when selecting items in invoice/Sales order. Selecting an item when creating a sales transaction would always follow the system’s default line-up. Which is the following:


1.    Service
2.    Inventory Part
3.    Inventory Assembly 
4.    Non-inventory Part
5.    Other charge 
6.    Subtotal
7.    Group
8.    Discount  
9.    Payment 
10.    Sales Tax item
11.    Sales tax group


This is the reason why Flour is showing first. Currently, altering this line-up is unavailable. As a workaround, you can directly type in the item name when creating a sales transaction instead of selecting it from the list.


I’ll make sure to take note of your sorting preference and share it to our engineers for future updates. 


Visit us again if you have other questions. 
 

Anonymous
Not applicable

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?


Hello, Keti14.


Yes, Out of cope (0%) is the right code when GST is not payable and you’re not claiming GST credits for purchases relating to these transactions. These are also not included in BAS return. 


You’re always welcome to visit us again if you need anything else while working with QuickBooks. 
 

roxanna
Level 1

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hey Chris, I see you mentioned to use Out of Scope as the Tax Code for all wages and superannuation payments. Why is that?
Shouldn't we just use BAS w1 & BAS w2?

Rose-A
Moderator

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hi, roxanna.

I'd like to share some information regarding tax codes and BAS via QuickBooks Online.

 

W1 and W2 codes are automatically applied by KeyPay and imported to QuickBooks the moment we run and finalise payroll. No need for us to manually select tax codes for this.

 

For more details, check out these recommended articles:

 

Also, you may find these articles helpful:

 

For account discussion, feel free to reach out to our QuickBooks Online Support.

 

  1. Sign in to your QuickBooks Online Company.
  2. Click (?) Help at the upper right corner.
  3. Select Contact US on the pop-up.
  4. Enter a brief description of your concern then hit Continue.
  5. Click Get a callback.
  6. Enter your contact information.
  7. Select Call me.

Ping me out if you need more information concerning tax codes and BAS in QuickBooks. Have a good one.

The Happy Collective
Level 1

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

I have a unique case and have no idea how to work this.

I have been using self employed till this point and had a workaround in this software but i dont know how to do this with normal QB online.

 

Income is received in sum amounts in the transaction list. There is no GST received on these amounts but we later receive the 10% GST in a separate transaction for the total amount received each quarter.

So, to give an example. Income is received 3 times over the quarter lets say 10k, 10k, 10k = 30K total.

 

Then, at the end of the quarter we invoice the company for the GST required (3K as above example). 

 

How do i categorise ?

1) the initial income payments in terms of tax.

2) the GST that we then later receive. 

 

Thanks so much. 

rashmid379
Community Leader

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Test

rgrf42
Level 2

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

The link in this article doen't work.

Can you update or correct it?

 

Thanks

GlinetteC
Moderator

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hi there, rgrf42.

 

Thanks for reaching out here in the Community. I've checked the links and it seems working on my end.

 

I'm still adding these articles you can check about GST in QuickBooks Online:

If you have any other QuickBooks related concerns, please feel free to post them here.

HPark
Level 2

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Are you receiving deposits against a future invoice or are you issuing invoices for 10K(without HST). You can receive as a "trust" deposit to your balance sheet as a liability account to that client. It then creates a credit, so when you issue the 30K invoice plus the GST you are talking about, you can apply the 30K already received to the invoice and the remainder of the invoice will be for the GST the customer owes at that point. If you are issuing invoices, you have to claim the GST in each instance at that moment in time. You must follow GAAP compliance and CRA rules for GST/HST account recognition

stopp
Level 1

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

What about Medical, Psychologists~ Out of Scope or GST Free? 

Intuit Zac
Content Creator

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hi Stopp, 

 

Thank you for reaching out. 

 

For the GST code selection, it is best to consult with an accounting professional. You can find QuickBooks Online Certified accountants and bookkeepers in your area by clicking on the link below:

 

Find an accounting advisor near you

 

Thank you and please let us know if you have any questions. 

HPark
Level 2

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Medical would likely not be Out of Scope, dependent on the circumstances, but hard to know the full scope without more details of the situation you are asking for. For example, payroll is Out of Scope because it will never be taxed, some medical is taxed and some is not. Use GST/HST Exempt and allocate to a non-tax service income account to ensure you separate what is and isn't taxable in case of audit purposes.

Monali
Level 2

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Hello,

 

I find your suggestions so helpful. would you clarify if my client has residential rental property, would he be able to claim taxes or not? if not, should i put( 0%)zero-rated tax code for any expenses or income he has or Out of scope?

 

Cheers,

Monali

HPark
Level 2

What is the difference between 'Out of scope (Purchases)' and 'GST-Free non capital (Purchases)? And which should i use when entering purchases that are GST free?

Residential rental is generally tax exempt because the income is usually less than 30,000 per year. I suggest using Exempt for any taxes you are unsure of and then it will be on the HST report and you can review. I suggest contacting your accountant for the area you live in.