> ## Documentation Index
> Fetch the complete documentation index at: https://docs.ai2fin.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Tax treatment — the GST and VAT code on every category and transaction
> What each tax treatment code means, why it is separate from deductibility, how Fin picks one per transaction, and how it feeds your statement and assets.
## What problem does tax treatment solve?
One business bank account mixes three kinds of line that all look alike: a bank fee with no GST in its price, a few dollars of interest received, and a laptop. Each one lands on a different label of the activity statement or VAT return, and the amount of tax recorded on the line cannot tell them apart, because a zero can mean tax-free, exempt, input-taxed or outside the system altogether, and those are different labels.
The **tax treatment** is one code on a category or a transaction that says what kind of supply it is. It decides whether tax is inside the price, whether the credit is claimable, and which box the amount feeds. Accounting platforms call the same thing a tax rate, tax code or GST code. Fin keeps it as a single column so the [activity statement](/features/tax-export) is drafted with a source beside every figure, and so a capital purchase is recognised the moment you mark it, which is what opens the door to the [asset register](/features/asset-register).
Categories → the Tax treatment column. Override any single transaction from All Transactions.
## What does each treatment code mean?
The codes are the same in every country. Your country's plugin translates each one into its own vocabulary and the official boxes it feeds, which is what you see in the picker; the generic meaning is below.
### Sales
| Code | Plain meaning | Tax in price | Credits on related purchases |
| ------------------ | ------------------------------------------------------------------------------------------------------------------------ | ------------ | ---------------------------- |
| `SALE_STANDARD` | A taxable sale at the standard rate. | Yes | Claimable |
| `SALE_REDUCED` | A sale taxed at a reduced rate (used where the country has one). | Yes, reduced | Claimable |
| `SALE_ZERO_RATED` | No tax charged: exports and other zero-rated supplies. | No | Claimable |
| `SALE_EXEMPT` | A domestic sale with no tax charged where your credits are still allowed. In Australia this is GST-free income. | No | Claimable |
| `SALE_INPUT_TAXED` | No tax charged **and** credits on related purchases are denied: interest and other financial supplies, residential rent. | No | Denied |
### Purchases
| Code | Plain meaning | Tax in price | Credit |
| ------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | --------- |
| `PURCHASE_STANDARD` | An ordinary purchase with tax in the price. | Yes | Claimable |
| `PURCHASE_CAPITAL` | A capital (asset) purchase with tax in the price. | Yes | Claimable |
| `PURCHASE_REDUCED` | A purchase taxed at a reduced rate. | Yes, reduced | Claimable |
| `PURCHASE_NO_TAX` | A purchase with no tax in the price: zero-rated or exempt goods, unregistered suppliers, government fees and charges, bank fees. | No | None |
| `PURCHASE_CAPITAL_NO_TAX` | A capital purchase with no tax in the price. | No | None |
| `PURCHASE_INPUT_TAXED` | A purchase that relates to making exempt or input-taxed sales, so the credit is denied. | Yes | Denied |
| `PURCHASE_PRIVATE` | The private-use portion, or a purchase that is not income-tax deductible (entertainment, fines). | Yes | Denied |
| `PURCHASE_REVERSE_CHARGE` | Imported services where you account for the tax yourself, reported as both output and input tax. The tax sits on top of the price rather than inside it. | Self-assessed | Claimable |
| `PURCHASE_IMPORT` | Goods imported with tax paid (or deferred) at the border. | Yes | Claimable |
### Payroll and out of scope
| Code | Plain meaning |
| -------------- | -------------------------------------------------------------------------------------------------------------------------------------- |
| `WAGES` | Gross salary and wages. Never a purchase for indirect tax; feeds the wages label where the statement has one. |
| `WITHHOLDING` | Tax withheld from wages or from a contractor who did not quote a tax number. |
| `OUT_OF_SCOPE` | Not a supply at all: transfers between your own accounts, loan principal, owner drawings, the tax payment itself. Appears on no label. |
In Australia the picker shows these as **GST on Income** (G1, 1A), **GST-Free Income** (G1, G3), **Input Taxed Income** (G1, G4), **GST on Expenses** (G11, 1B), **GST on Capital** (G10, 1B), **GST-Free Expenses** (G11, G14), **Private / Non-deductible** (G11, G15), **BAS Excluded** and so on. In the United Kingdom the same codes read as standard, reduced, zero-rated and exempt against Boxes 1, 4, 6 and 7; in New Zealand they map to the GST return's Box 5 and Box 11. The code underneath is the same.
## Why is treatment separate from "is it deductible"?
They answer two different taxes. Deductibility is an income-tax question: does this expense reduce your taxable income, and by what business-use share? Treatment is an indirect-tax question: is there GST or VAT in this price, can you claim it back, and where does the amount go on the return?
The two disagree all the time. A bank fee is fully deductible and has no GST in its price. A client lunch has GST in its price and is not deductible, so its credit is denied. A laptop used 70% for work is a capital purchase whose whole GST credit is claimed this quarter, while the deduction for its cost is spread over years and trimmed to the business share. Fin therefore keeps deductibility, business-use percentage and treatment as three separate settings, and the [Profit and Loss](/features/reports#profit-and-loss) shows the deductible share beside the full amount rather than collapsing them.
## How does Fin decide which treatment a transaction has?
Every transaction resolves to exactly one code, with this precedence:
A treatment you set on the transaction itself always wins. You chose it for this exact line.
If you have marked the transaction's expense type as personal, it does not participate in the return, even if its category carries a business default. You said this line is private.
Otherwise the category's default applies to every transaction in it. This is where most of the work happens: set **Bank Fees** to a no-tax purchase, **Interest** to input-taxed income and **Equipment** to capital, and the whole feed sorts itself.
Only when neither the transaction nor its category has a treatment does Fin fall back to reading the transaction's type and recorded tax the way it did before the treatment column existed. Transfers become out of scope; payroll becomes wages; a capital-expense type becomes a capital purchase; everything else becomes a standard purchase or sale, with the no-tax variant where no tax was recorded. The picker shows this state as **Inferred**.
A treatment you have set is never second-guessed from the tax amount recorded on the line. "No GST recorded" is not evidence of "GST-free": interest and residential rent carry no GST and are input-taxed, and a GST-free purchase whose old snapshot still shows a tax figure stays GST-free on the statement. Inference from the recorded tax only ever runs for lines that nobody has classified.
The auto-populate step on the activity statement reports how many lines rested on inference versus an explicit treatment, so you can see how much of a period is classified and tag the categories that are still guessing.
## How do you set a treatment?
### On a category
Open **Categories** and use the **Tax treatment** column. The picker is grouped by side (sales, purchases, payroll, not reported), and each option shows your country's label with the boxes it feeds underneath, with the authority's one-liner and a link in the tooltip. Leaving it on **Inferred** means Fin reads each transaction's tax to place it until you choose.
The **Suggest treatments** button proposes a treatment for each category from its name and the transactions in it, with a reason beside every row. Nothing is written until you tick the rows you agree with and press Apply.
### On a transaction
Open the transaction on **All Transactions** and set **Treatment on your statement** in the tax editor. Left on Inferred, Fin places the line from its tax status and its category; choosing a code makes this one line explicit without touching the category. Setting a capital code here also sets the transaction's type to capital expense, and the reverse, so the two never disagree; sending both in one edit stores exactly what you chose.
## How does a treatment flow into your activity statement?
When the statement for a period is auto-populated, each line is placed by its resolved treatment: sales at the standard rate feed the sales and output-tax labels, no-tax purchases feed the purchases label and the no-tax note beside it, input-taxed income feeds its own label and denies credits on related purchases, reverse-charge services land on both the output and input side, and out-of-scope lines appear nowhere. Purchases are weighted by business-use percentage, and the private share of a partly-business line lands on the private label rather than being dropped.
Where a treatment says tax applies but the line has no recorded tax figure, the tax is derived from the gross amount at the rate in force on the transaction date and the line is counted as estimated, so the statement can say so. Where a treatment says no tax applies, the line contributes no tax whatever a stale snapshot says.
## How does a capital treatment reach the asset register?
`PURCHASE_CAPITAL` and `PURCHASE_CAPITAL_NO_TAX` are the two codes that mean "an asset". The moment a purchase resolves to one of them, whether you set it on the line, on the category, or through the capital-expense type, two things happen:
1. On the statement, the amount goes to the capital purchases label for the quarter, and its credit is claimed in full there. The GST or VAT side does not wait for depreciation.
2. Beside the transaction, Fin offers to add it to the [asset register](/features/asset-register#how-does-a-purchase-become-an-asset), with the purchase already filled in. Decline it with **Not an asset** and the offer is gone for good; leave it and the purchase waits in the **Not yet registered** panel on the register.
Changing a capital code back to a standard purchase moves the type back with it and takes the line off the capital label. An asset already on the register stays there, because the register is your record and Fin does not delete from it on a reclassification.
## FAQs
### Interest on my business account has no GST. Is it GST-free?
No. It is input-taxed income, which carries no GST on the sale and also denies credits on the purchases that relate to it. GST-free and input-taxed both show zero tax, but they go to different labels. Set the Interest category to the input-taxed income treatment so the statement places it correctly.
### What should a bank fee be?
A purchase with no tax in the price (`PURCHASE_NO_TAX`, shown as GST-Free Expenses in Australia). There is nothing to claim on it, however it is labelled, and it is still fully deductible for income tax, which is a separate setting.
### Do I have to set a treatment on every transaction?
No. Set it on categories and let the precedence do the work; override a single transaction only when it differs from its category. Transactions nobody has classified fall back to inference, and the statement tells you how many of those there were.
### What happens to a transaction I mark personal in a business category?
It drops out of the return. The personal flag sits above the category default, so a category's business treatment never turns a private line into a business purchase. Only a treatment set on that exact transaction would override it.
### Where do wages go?
Wages are not a purchase for GST or VAT and never feed a purchases label. The `WAGES` and `WITHHOLDING` codes feed the wages and withholding labels where your country's statement carries them, and nothing otherwise.
***
Next: [Asset register](/features/asset-register) for what happens after a purchase becomes capital, and [Reports](/features/reports) for the schedule, TPAR and Profit and Loss that read from these settings.