This article will explain what is Notional Input Tax Credits (NITC) / how to setup NITC / how does it work and if you want to claim NITC early in Blackpurl
For an overview of how Blackpurl deals with NITC, please review this article - Overview - How Blackpurl handles the Notional Input Tax Credit (NITC) on Units in Australia
The conversation regarding NITC usually begins as part of the Activation process and your Activation Specialist will discuss what your options are
Please note that Blackpurl does not advocate for or against NITC but what we have done is provided our Australian Dealerships with the relevant options
What is NITC
Notional Input Tax Credits (NITC) is when the Dealership elects not to claim the Input Tax Credit for a Unit on their Business Activity Statement (BAS) until the Unit has actually sold
Please ensure that you discuss your Dealership's requirements with your Accountant
It is ok if your Dealership / Accountant does not elect to do NITC - we have other Australian Dealerships on Blackpurl that don't and no further action is required by you
But for our Australian Dealerships that do elect to have NITC, the rest of this article is for you
How to Setup NITC in Blackpurl
Blackpurl is setup to give the Dealership the ability to account for NITC in Blackpurl in two scenarios:
- Accounting for NITC when stocking in a Unit through Unit Ordering > Unit Receiving
- Accounting for NITC for Trade in Units when they are stocked through Customer Order > Unit Deals - Trade In
In both these instances, the Dealership will need to set up the NITC settings:
- From the Blackpurl Header > click on Other Tools
and then select 
- Go to Settings tab > Accrued Tax Controls - Accrue Input Tax until Units are sold (NITC) and move toggle to enable
- Once it is enabled, you will be required to fill in further details
Accrue sales tax until units are sold (NITC)
- this is to have NITC logic enabled
Enable tax accrual on order units by default
- change the toggle to enabled if you want the NITC logic to be default on all order units
Notional input tax category
- what category do you want to use for the Notional Input Tax
- We would recommend that you setup a new tax category for your NITC and assign the General Ledger
where you want the tax to hold / wait until the units are sold - a clearing account as such
- what tax category do you want to use for the Sales Tax Liability
Purchase tax liability category
- what tax category do you want to use for the Purchase Tax Liability
Notional input tax expense category
- what tax category do you want to use for the Notional Input Tax Expense
How does it work
Accounting for NITC when stocking in a Unit through Unit Ordering
If the Dealership elects to Accrue purchase tax until the unit is sold when processing a Unit Order, the user will need to ensure that the relevant toggle is YES
- Confirm the relevant tax etc when processing the Unit Receiving
- Basically, the relevant tax will be held in the General Ledger assigned to the NITC Tax Category until the unit is sold
- Once the unit is sold, the tax can now be claimed and the General Ledger assigned to the NITC Tax Category will be cleared
Accounting for NITC for trade-in units when they are stocked through Customer Order > Unit Deal
When the Trade-in is added to a Customer Order > Unit Deal and subsequently stocked, the Dealership can elect to not claim the Input Tax Credit on the Trade-In until the Trade In has actually sold
When stocking in the Trade-In from a Customer Order Unit Deal, the relevant tax will be held in the General Ledger assigned to your NITC Tax Category account until the unit is sold
Once the unit is sold, the tax can be claimed and the General Ledger assigned to NITC Tax Category will be cleared to the Tax liability account
The original trade-in value then the difference in tax will be allocated to General Ledger assigned to the Notional input tax expense category.
What if the Dealership wants to claim the NITC before the Unit is sold
There may be different scenarios that the Dealership may want to claim the NITC before the unit is sold.
Blackpurl will allow you to record that the Dealership wants to manually claim the NITC before the unit is sold and then automatically do the relevant journals in your Accounting Package to allow the claiming of the relevant tax on the Business Activity Statement (BAS)
- Navigate to the relevant Unit Record for the unit that you want to claim the NITC before it has been sold
- On the Unit Record it will show you the amount that is currently being withheld as NITC
- If you wish to manually claim the NITC prior to the unit being sold on the Unit Record > Price & Cost Tracking section - Click ACTION > Manually Claim NITC
- User will be asked to confirm > Click on YES
- The Unit Record will now indicate that the NITC will now be claimed
- This will automatically cause a journal to go across to your Accounting Package so that you are now claiming the NITC on your Business Activity Statement (BAS)
No further action in the Accounting package is required by the Dealership - as the journal will move the NITC amount from the NITC clearing General Ledger account over to the relevant GST on your Business Activity Statement (BAS)