This article helps to understand what Fit to Tax function is and how to match them when they appear in the Match Transaction Screen. This functionality allows you to match a business event to a cash event when the difference relates to withholding tax.
For the Fit To Tax button to appear the following conditions will need to be met:
- Income event relates to a foreign investment
- Income received in an Australian bank account
- The amount is within 50 cents of the amount after either 15% or 30% withholding tax has been deducted
Once the income is generated select the cash and business event and Fit To Cash will appear next to the clear button if the difference is 50 cents or less and the withholding is 15% or 30%.
The business event will be automatically adjusted the withholding tax. To enlarge the image below right click the image and select 'Open image in new tab':
Example: Using the Fit to Tax function
Scenario
The fund received foreign income for Apple Inc. on 11/08/2022. The trade value is 146.29 AUD and the foreign tax credits are showing as 21.94 AUD, which is 15% of the trade value.
Example
Navigate to Fund Level > Transactions > Match Transactions
On the match transaction screen, it shows the cash received amount of $102.40 and the security foreign income event amount of $124.35. The difference of 21.95 is around 15% of the trade value, which means for this investment, the withholding tax is 30%.
- To match the transactions, tick the boxes found next to them
- Click on Fit to Tax
Once you click the Fit to Tax button, the business event will be automatically adjusted the withholding tax and this match will be automatically approved, and be removed from the Match Transactions screen.
If we click on this foreign income business event again, we can see the foreign tax credits are doubled up and are currently showing as 43.89 AUD.
What's Next?
Learn how to process Fit to Date