Q: My client, a payroll service provider, has collected Workcover fees from clients but hasn't received the assessment for the 2016 year yet.
- How should we handle the Workcover fees collected by June 30, 2016?
They've invoiced clients and the money received is recorded as income. But they owe Workcover payments later in 2016/17, which will likely be similar to what they've collected. However, the exact amount isn't known until assessed.
The Workcover fees collected from clients should be seen as a liability, not income, in the records.
- If it's treated as a liability, what about the GST on the Workcover fees collected? (The client reports GST on a cash basis)
A: The fees shouldn't be counted as income but as a liability since they're owed to Workcover. Even though the clients have paid, the GST should be reported when the money is received (by June 30, 2016). Input credits related to this can be claimed later when appropriate.
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