In an example:
29% WET
10% GST
order value $100

Instead of $100 + 39% total tax = $139
Step 1: $100 + 29% = $129
Step 2: $129 + 10% = $141,90

Total tax rate = 39%
Effective tax rate = 41.9%

3-Step Setup

Step 1: Set up Xero Compound Tax for WET

1. In Xero select “Accounting” > Advanced > Tax Rates from Xero’s Header Menu

2. Select New Tax Rate

3. Add Tax Rate Display Name e.g “WET + GST”

4. Select “Sales” as Tax Type

5. Add the GST 10% Tax Component

6. Select “Add Component” & add the WET 29% Tax (18.9768% for Retail WET)

7. Select the “Compound” radio button for GST 10%

8. Note down the Effective Tax Rate

9. Save

Step 2: Import & Map Tax in Unleashed

1. In Unleashed select Integration > Integration Store > Xero > Manage your Data

2. Scroll down to Import Taxes & select “Import Now”

3.Select Settings > System > Taxes

4.Add a New Tax that matches the Effective Tax Rate in Xero:

1. 1. Fill out the “Tax Description/Name” field

   2. Fill out the “Tax Code” field

   3. add a Tax Rate that matches the Effective Tax Rate in Xero (e.g 41.9% in this example)

   4. Select the Sales Tax check box

   5. Select the “Accounting Tax” drop down field & select the matching Xero tax.

   6. Select Add

2.  

5. You’re now ready to send invoices to Xero with the new Compound Tax Rate

Step 3 (WHOLESALE): Split WET & GST in Xero via Journal

(see below for RETAIL)

1. In Xero select in the header menu “Accounting” > Reports > Account Transactions

2. Select the relevant Account & filter by the GST + WET (wholesale) Compound Tax

3. Note down the total revenue exclusive of GST & WET. Within the Xero reports this as shown as the “Running Balance”:

4. Apply Formula to find WET & GST:

Total Revenue exc. GST & WET x 0.29 = WET (wholesale)

E.g: $6,792 x 0.29 = $1,969.68

5. Create a Manual Journal Entry to Debit GST & Credit WET from the Revenue account into the WET Payable account.

1. 1. Select “Accounting” > Manual Journal Entry

   2. Select New Journal

   3. Add Naration e.g “To Split WET from GST”

   4. Add a Date & make sure amounts are Tax Exclusive

   5. Add a Debit line inclusive of 10% GST that is 10 x WET amount (Found in step 4). Account should be the Revenue account that we ran the report on in Step 3.
      
      Note: this will remove the WET from Xero's GST functionality
      
      E.g. $1,969.68 x 10 = $19,696.8
      
      

   6. Add a Credit line exclusive of GST to the same revenue account with the same amount as above (e.g. 19,696.8)
      
      Note: this puts the false revenue back into the account less the “GST” (WET pretending to be GST)
      
      

   7. Add another Credit line exclusive of GST to the WET Payable (current liability) account. This should result in a zero sum journal.
      
      

   8. Mark it as Paid & you’re done!

Note: At this stage you can find the GST by the following formula:

(Total Revenue exc. GST & WET + WET) x 0.1 = GST

This can be compared to the GST remaining in the account (via the Account Transactions report mentioned in step 1) to double check the remaining GST in the account is correct if you so choose.

Step 3 (RETAIL): Split WET & GST in Xero via Journal

1. In Xero select in the header menu “Accounting” > Reports > Account Transactions

2. Select the relevant Account & filter by the GST + WET (retail) Compound Tax

3. Note down the total revenue exclusive of GST & WET. Within the Xero reports this as shown as the “Running Balance”:

4. Apply Formula to find WET & GST:

Total Revenue exc. GST + WET x 0.189768 = WET (Retail)

E.g: $2,000 x 0.189768 = $379.536

5. Create a Manual Journal Entry to Debit GST & Credit WET from the Revenue account into the WET Payable account.

1. 1. Select “Accounting” > Manual Journal Entry

   2. Select New Journal

   3. Add Naration e.g “To Split WET from GST”

   4. Add a Date & make sure amounts are Tax Exclusive

   5. Add a Debit line inclusive of 10% GST that is 10 x WET amount (Found in step 4). Account should be the Revenue account that we ran the report on in Step 3.
      
      Note: this will remove the WET from Xero's GST functionality
      
      E.g. $379.536 x 10 = $3795.36
      
      
      

   6. Add a Credit line exclusive of GST to the same revenue account with the same amount as above (e.g 290).
      
      Note: this puts the false revenue back into the account less the “GST” (WET pretending to be GST)
      
      

   7. Add another Credit line exclusive of GST to the WET Payable (current liability) account. This should result in a zero sum journal.
      
      

   8. Mark it as Paid & you’re done!

Note: At this stage you can find the GST by the following formula:

(Total Revenue exc. GST & WET + WET) x 0.1 = GST

This can be compared to the GST remaining in the account (via the Account Transactions report mentioned in step 1) to double check the remaining GST in the account is correct if you so choose.