A Contra/Barter transaction is where two organisations agree to provide goods or services to each other for pre-agreed values. There is exchange of goods or services for other goods or services without using money. Your tax authority may require these organisations to issue invoices so that income and expense is declared in tax returns and remittances properly, even though a payment may not occur. Consult with your taxation advisor regarding your particular circumstances.
Here is a general example:
- Enter a sale for goods or services you have provided for $750.
- Enter a purchase for goods or services you have received for $1000.
- Create a clearing account called Asset:Contra Clearing.
- Apply a $750 payment to the Sale using the Asset: Contra Clearing account.
- Apply a $750 payment to the Purchase using the Asset: Contra Clearing account. The payment date would usually be in the same tax period to ensure the receipt and payment go in and out of the Asset: Contra Clearing Account at the same time. Money wouldn’t usually change hands between the two organisations on the $750 portion.
- Apply a $250 payment to the Purchase using your normal Bank Account where you make payments from (for example).
What if the Contra amounts are exactly the same?
When the amounts are the same, just apply the full payment amount to the “Asset: Contra Clearing” account for both the Sale and the Purchase and they will net out. If they are not in the same reporting period, you may not be able to enter into a contra transaction.
What payment dates do I use?
The payment dates usually relate to the dates of supply of goods or services. The ATO has strict rules regarding Contra transactions. These may be similar or overlap with Transfer Pricing areas of taxation laws and regulations. See your Tax Accountant for your specific circumstances.