Over the years I've noticed in systems handling GST, rounding can be an issue. I've created a short video which illustrates the problem of rounding.
As an example, if you take the price of $1.04, this breaks down to the GST amount of 9 cents and the amount without GST is 95 cents. However if we add GST to the price of 95 cents, we don't end up with $1.04, we end up with $1.05. The reason for this is when we calculate GST based on 95 cents, we get a GST amount of 9.5 cents. Since we can't have half cents, we need to round the cents up to 10 cents. This gives us a GST inclusive price of $1.05.
This example illustrates that not all prices directly calculate to be the same in both directions. That is, adding GST to a price and determining the GST of a GST inclusive price do not all end up with the same amounts.
Next time when you're entering a purchase into your system and the cents don't quite match up, at least now you'll know why.
To help those that need to work with GST I've created a couple of calculators to assist. The first is a calculator which enables you to determine the GST amount from a price that includes GST. This calculator is located at www.AustralianGSTCalculator.com.au. The second calculator enables you to add GST to a price which does not include GST, to give you the GST inclusive price. This calculator can be found at www.AustralianGSTCalculator.com.au/add-gst.php.
I hope you find the calculators useful.
Kelvin Eldridge
www.AustralianGSTCalculator.com.au
As an example, if you take the price of $1.04, this breaks down to the GST amount of 9 cents and the amount without GST is 95 cents. However if we add GST to the price of 95 cents, we don't end up with $1.04, we end up with $1.05. The reason for this is when we calculate GST based on 95 cents, we get a GST amount of 9.5 cents. Since we can't have half cents, we need to round the cents up to 10 cents. This gives us a GST inclusive price of $1.05.
This example illustrates that not all prices directly calculate to be the same in both directions. That is, adding GST to a price and determining the GST of a GST inclusive price do not all end up with the same amounts.
Next time when you're entering a purchase into your system and the cents don't quite match up, at least now you'll know why.
To help those that need to work with GST I've created a couple of calculators to assist. The first is a calculator which enables you to determine the GST amount from a price that includes GST. This calculator is located at www.AustralianGSTCalculator.com.au. The second calculator enables you to add GST to a price which does not include GST, to give you the GST inclusive price. This calculator can be found at www.AustralianGSTCalculator.com.au/add-gst.php.
I hope you find the calculators useful.
Kelvin Eldridge
www.AustralianGSTCalculator.com.au
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