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Business Tax Tip – Business Record Keeping ATO – Requirements and what to keep and how long
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Published on Thursday, 14 November 2019 07:59
Business record keeping requirements for the ATO (Australian Tax Office) are given on their website and here we summarise the key instructions on essential business record keeping requirements and how long to keep, to be compliant.
At the ATO page - Record Keeping for Small Business it says -
By law your records must:
- explain all transactions
- be in writing (electronic or paper)
- be in English or in a form that can be easily converted
- be kept for five years (some records may need to be kept longer).
If you don't keep the right tax records, you can incur penalties.
How to keep records
You can keep invoicing, payment and other business transaction records electronically or on paper. The principles are the same for each, but keeping electronic records will make some tasks easier.
With the right electronic record-keeping software you can:
o automatically tally amounts and provide ready-made reports
o produce invoices, summaries and reports for GST and income tax purposes
o keep up with the latest tax rates, tax laws and rulings
o report certain information to us online
o save on physical storage space
o back up records in case of flood, fire or theft.
If you intend to use a bookkeeper or accountant, get their advice about the best system for you – choose a system you can understand and operate easily.
At page - Business Records you Need to Keep
You must keep records to help you prepare your business activity statements (BAS) and annual income tax return, and to meet other tax obligations. Below is a list of the records all businesses need to keep.
Income and sales records
Records of all income and sales transactions, including tax invoices, receipt books, cash register tapes and records of cash sales.
Expense or purchase records
Records of all business expenses, including cash purchases. Records could include receipts, tax invoices, cheque book receipts, credit card vouchers and diaries to record small cash expenses. If you bought something for your business, but sometimes use it for private use, you also need to keep records showing how you worked out how much of its use is private.
Year-end records
These include lists of creditors (people you owe money to) or debtors (people that owe you money). It also includes expenses you incur buying, maintaining, repairing and selling business assets or stock. You should keep worksheets to calculate the decreasing value of your assets (also called 'depreciating assets'), stocktake sheets and capital gains tax records.
Bank records
Your banking records can include things like deposit slips, cheque butts or payment records, bank and credit card statements, and loan or lease agreements.
Your business and personal expenses should be kept separate. Separate business bank accounts are mandatory for partnerships, companies and trusts. If you're a sole trader, a separate business bank account can also make your records easier to manage.
Other records you may need to keep
Depending on your tax obligations you may also need to keep other records. Some examples are listed below.
Goods and services tax (GST) records
If you are registered for GST, keep all tax invoices from your suppliers, which will help you claim GST credits. You must keep any other document that records adjustments, a decision or a calculation made for GST purposes. You report GST amounts and claim GST credits for purchases on your business activity statements (BAS).
(For other records you may need to keep, see more on that page)
Interestingly, in the Non-Profit section on records to keep, further down that page, there is a reference about invoices under $75 -
Invoices you receive
A tax invoice of more than $75 (excluding GST) must contain enough information to allow key information to be clearly determined, for example, your supplier’s ABN. Otherwise, you generally need to withhold 46.5% from your payment to the supplier.
If you receive a document from a supplier that is missing key information, you may still be able to treat the document as a tax invoice if the document makes clear that it is intended as a tax invoice and the missing information can be obtained from other documents issued by the supplier.
You cannot claim a GST credit in an activity statement unless you have a tax invoice. If you obtain a tax invoice later, you can claim the GST credit in the activity statement for the tax period in which you obtain the tax invoice.
Tax invoices are not required if the GST-exclusive value of the sale is $75 or less. However, you should have some documentary evidence to support all GST credit claims.
(The only thing is this is under the Non-Profit section)
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