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Accounting for WET Tax with Cin7 and Xero

Last updated 18/01/2021

How to implement support for Australia's Wine Equalization Tax (WET) within Cin7 for Xero users.

Overview


The Wine Equalization Tax (WET) is a value-based tax collected when wine is bought or sold in Australia.

If you make wine, import wine into Australia or sell it wholesale, you'll have to account for WET. Currently, WET is a tax of 29% of the wholesale value of wine.

Within Cin7 this means that when creating a Purchase Order or Sales Order, an additional 29% should be added to the wholesale value of applicable items in the order. This additional amount must then be passed to the appropriate account in Xero.

So you don't have to remember to apply WET tax, you can assign this tax to specific products, or specific customers or suppliers, so that the tax is automatically applied for the correct products.

Note: WET Tax is not supported via Cin7's QuickBooks Online or QuickBooks Desktop integrations.

Setting up WET


WET support is enabled in the Settings page for each of the following Cin7 modules:

  • CRM:  Select "Yes" for Show WET Tax.
  • Products: Under Show Additional Fields In The Product Form, select "WET".
  • Purchase Order:  Select "Yes" for Show WET Tax.
  • Sales Order:  Select "Yes" for the Show WET Tax.

WET setup has to be done by the Cin7 team - so simply ask your onboarder or the support team to set up WET for you. This will include the following:

  • Adding WET to the POS (if required).
  • Adding WET options to your Xero account.
  • Adding WET reports to the Standard Report module.

Please note that these options will only be visible in Australian (AU) accounts.

Flagging WET Applicable Products


Once the above options have been defined, you will be able to flag products for which WET is applicable.

To do this:

  1. Find a product that is applicable for WET, and select the product name.
  2. Select the WET Tax checkbox.
  3. Select Save.

Assigning WET Calculation to Customers


Next, assign each applicable customer a WET option. There are two options:

WET on Retail Tax to be charged on retail sales of wine.
WET on Wholesale Tax to be charged on sales or purchases from/to wholesalers.

To assign these options to a customer:

  1. From the CRM module, find a contact and select their name.
  2. From the WET Tax drop-down, select either WET on Retail or WET on Wholesale.
  3. Select Save to save the contact details.

WET in Transactions


Once all the settings have been configured, WET support within Cin7 is enabled. You will notice that in each purchase order there is a field called WET Tax Status. When a contact is entered that has a WET option assigned to them, the field will automatically be populated with the rate assigned to the contact. If no WET option has been assigned, you can always manually enter the correct option.

You will be able to see what product has WET assigned from the WET column in the line item list.

There are three relevant scenarios:

WET on Purchases

For Purchase Orders, you will more commonly use use "WET on Wholesale".

When a product is entered that has WET Tax checked in its product details, WET Tax will be calculated for that item.

The total WET for a Purchase Order order will be shown in the Surcharge field at the bottom of the order.

WET on Wholesale Sales

For WET on wholesale sales:

  • WET Tax Status must be set to WET on Wholesale
  • Tax must be set to exclusive, and
  • WET is charged at 29% of the value of applicable goods.

The total WET for a Sales Order will be shown in the Surcharge field at the bottom of an order:

WET on Retail Sales

For WET on Retail Sales:

  • WET Tax Status should be set to WET on Retail
  • Tax must be set to inclusive, and
  • WET will represent 29% of the notional wholesale value of the applicable products, using the "half retail price method" (i.e. retail price x 0.5 x 0.29). See the Australian Tax Office Website for more information.

The total WET for a Sales Order will be shown in the Surcharge field at the bottom of an order:

WET on Retails Sales in the POS

WET can also be set up for the POS for retail sales only.

In order for WET to be applied in the POS the following criteria must be true:

  • The customer has been assigned WET Retail in the backend.
  • The product has been assigned WET.

WET will be calculated as above and will appear also appear in the Sales Order when ultimately synced to the backend.

WET and Xero


To prepare Xero to receive WET applicable transactions, you must first make sure you have a current liabilities account for WET. Next, add this account number to your Xero settings in Cin7.

  1. While logged in as an Administrator, select your username in the top right, then select Settings.
  2. From the Accounting Menu, select Xero Setup.
  3. Select Default Accounts.
  4. Add the number of your liability account to the WET Tax field.
  5. Select Finish.

Provided you have followed the above instructions above, when importing a Purchase Order the specified liability account will be debited. When importing a Sales Order to Xero, the specified liability account will be credited.

Reporting on WET


Finally, to get an overview of the Taxes being collected, you can view a report:

  1. From the left navigation click Admin and Reports, then Standard Reports.
  2. Select WET Tax (Invoice Date).

In this report, you will be able to see the total sales and total taxes collected.