Record keeping for Businesses
Keeping good records is indisputably important for people in business. Maintaining good records of your transactions and tax invoices will help you to manage your cash flow and make sound business decisions.
It will also make it easier for you to meet your compliance obligations, and potentially save you time and money in the future.
Reason to keep good records: There are a number of reasons why you should keep good records of all your business transactions. Good record keeping:
- makes it easier for you to meet your compliance obligations
- makes it easier for you to understand how your business is really performing
- assist you making effective business decisions, such as cost management, cashflow management, capital injection and/or perhaps selling your business.
Keeping record of income and expenses with supporting documents (receipts, contract, bank statements etc.) is a legal requirement. By law you must keep business records for at least five years, either on paper or electronically. They must be in English or in a form that can easily be converted.
If you don’t keep the right tax records, you can incur penalties. Poor record keeping is also one of the main reasons many small businesses fail. According to Australian Bureau of Statistics data on average 44 small businesses shut their business every day in Australia.
Record Keeping for Business
Income Tax & BAS records: You must keep records of all your sales (including CASH sales) and expenses to prepare your business activity statements (BAS) and annual income tax return, and to meet other tax obligations. You also need to keep bank records.
Records of all business expenses, including cash purchases. Records could include receipts, invoices including tax invoices, cheque book receipts, credit card vouchers and diaries to record small cash expenses. Records showing how you worked out any private use of something you purchased.
To be eligible to claim GST on purchases, you must need to have tax invoices from your suppliers which clearly state GST component of the purchase.
Year-end records: These include lists of debtors & creditors, Depreciation schedule, stocktake sheets (inventory on hand) and capital gains tax records.
Goods and services tax (GST) records: The main GST records you need to keep are tax invoices from your suppliers. Remember, you must need a tax invoice to claim GST credits. You must keep any other document that records any adjustments, a decision or a calculation made for GST purposes.
Employees and contractors records: If you have employees or contractors, you will need to keep:
- tax file number (TFN) declaration forms or withholding declaration forms
- records of wages, allowances and other payments you make to them
- superannuation records, including payments you make and records that show you have met your superannuation obligations
- records of fringe benefits you provided
- copies of any contracts you have with contractors.
Fuel tax records: If you intend to claim fuel tax credits for your business, you must keep records that show that you:
- acquired the fuel
- used the fuel in your business
- applied the correct rate when calculating how much you could claim.
You must also keep records that show your business is carrying on activities that are eligible for fuel tax credits. If you are claiming fuel tax credits of $300 or less in a financial year, you do not have to keep records of fuel purchases.
Other records you may need to keep: As well as general records, you may also need to keep other records depending on your tax obligations or the type of your business transactions. To help you work out the record keeping needs for your business contact ATO or a tax professional
By law you must keep these records for at least five years, either on paper or electronically. They must be in English or in a form that can easily be converted.
Free ATO assistance:
To make it as easy as possible for you to comply with your tax obligations, the ATO can arrange an assistance visit. Visits are confidential and conducted by tax officers at your place of business or preferred location. A tax officer can work through any issues you may have and discuss specific tax information of interest to you.
A visit can take any time between half an hour to a full day. It all depends on what you need.
Information you share with ATO during a visit will not be told to anyone else, not even other people in the ATO.
To arrange a visit:
- phone 13 28 66 between 8.00am and 6.00pm, Monday to Friday
- online booking form at www.ato.gov.au/assistancevisit
Using an Accountant
Using professional help is always advised; you may want to get a registered tax or BAS agent to help you with your tax obligations.
It’s important to choose a registered tax or BAS agent. Using a registered agent means they are qualified and experienced with tax. Only a registered agent can legally charge you a fee.
You can check that your agent is registered by looking at the Tax Practitioners Board’s agent register on www.tpb.gov.au or by calling 1300 362 829.