Record keeping: Tax basics for small business

Good records are the foundation of a good
business, so it is a good idea to have a suitable record keeping system ready to go from day
one. You can keep your records electronically or on paper. Setting up electronic records when you start
can save you time later when you lodge your activity statements or prepare your tax return.
They automatically total amounts, allow you to print invoices and provide summary details
for your activity statements and tax returns. A variety of electronic record keeping packages
are available. Some software allows you to lodge your activity statement and certain
forms directly from your software to the ATO. These are called Standard Business Reporting
– or SBR-enabled software. To lodge online, you will need an AUSkey. To find out more
about SBR, visit, or You’ll need to keep records of all your sales
and expenses to prepare your activity statements, annual tax returns and to meet other tax obligations.
Generally, records you need to keep include: Income and sales records of all sales and
barter transactions – for example, invoices, receipt books, cash register tapes and records
of cash sales. You’ll also need to keep records of all business
expenses, including cash purchases. Records could include receipts, invoices, cheque butts,
credit card vouchers and diaries to record petty cash expenses. And you should keep all bank records, such
as bank statements and loan documents. Other records you need to keep include details
of what assets you buy and what you spend on those assets. An asset register can help
you keep track of these expenses. You’ll also need to keep copies of contracts
and franchise or other agreements. As well as year-end records, including lists
of creditors or debtors and worksheets for depreciating assets. For certain work, car and business travel
expenses, it’s not always possible to get a receipt. But you can still claim the expenses
as deductions as long as you record the details of these expenses in a diary or logbook. The main GST records you need to keep are
tax invoices and adjustment notes. If you’re registered for GST, you need a tax invoice
to claim GST credits included in the price of any good or service you buy for your business
that cost more than a certain amount. Any tax invoices you issue to your customers
or receive from your suppliers must contain certain information to be valid. It must show the date the document is issued
and it must contain the supplier’s name and ABN, as well as a brief description of what
is sold, including the quantity and the price of what is sold. It must also show the extent to which each
sale is a taxable sale – this can be shown separately or as a statement such as ‘total
price includes GST’. To work out your fuel tax credits and to support
your claims, you need to keep records showing the date you acquired the fuel, the quantity
and type of fuel you acquired and the business activity you used it in. You should keep records from the start of
your business activity so you are ready to calculate and claim your fuel tax credits. For employees, you need to keep records of
wages, allowances and other payments you made to them. As well as superannuation guarantee records,
including payments you made and records that show you have met your choice of super fund
obligations. You also need to keep records of Fringe Benefits
Tax calculations, worksheets, declarations, elections and supporting details, as well
as copies of TFN declarations or withholding declarations. You may have to keep logbooks, lease or loan
documents or yearly odometer readings for motor vehicles you use in your business. I’ve got a good tip for you. I found a free
record keeping evaluation tool on the ATO’s website. It’s this great interactive software
program that helps me understand what records I need to keep and helps me decide whether
my record keeping needs improving or not. It provides a list of records tailored specifically
for my business, a report on how well the business is keeping its records and suggested
improvements where appropriate. And it’s completely anonymous; the ATO can’t
access the information I enter in the tool. You must keep written records in English.
If you keep electronic records on your computer, they must be in a form that you can easily
access and convert into written English. You must keep any account books, records or
documents related to preparing your tax return for at least five years after they are prepared,
obtained or the transaction is completed, whichever occurs last.

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