Keeping records safe is a must-do practice for every business owner. A well organised record keeping system will help you better manage your cash flow to make better business decisions. Having the ability to pull out the records immediately will make it easier for you to meet your tax obligations which could potentially save you money from administration dues and penalties.

For cash based businesses, record keeping becomes much more important. The ATO is targeting cash-businesses to ensure all income is being declared. Record keeping is a legal requirement, and these must be kept for at least five years, either on paper or electronically. There are penalties for failing to keep proper records.

Here are business records which you should keep

Income tax records – includes all you sales and expenses used to prepare your BAS and annual income tax return.

Income and sales records – includes records of all sales transactions of the business. This may come from invoices, tax invoices, receipt books, cash register tapes and records of cash sales.

Expense and purchase records – includes all records of payments or expenses made by the business. This may come from receipts, tax invoices, cheque book receipts, credit card vouchers and diaries detailing even the small cash expenses.

Year-end records – these records pertain to the list of creditors, debtors and worksheets to calculate the depreciation of your assets. Also involve stocktake sheets and capital gains tax records.

Others – depending on your industry, types of expense and other tax obligations, you may need to keep a record of the following:

  • GST records – this includes tax invoices from your suppliers. In addition, you must also keep document recording any adjustments, a decision or a calculation made for GST purposes.
  • Employee and contractors records – employees and contractors records must be kept including:
    • Their 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 your business plans to claim fuel tax credits, the following records must be kept:

  • What fuel was acquired
  • When was the fuel used
  • Applied the correct rate when calculating how much you could claim.
  • Proof that your business is doing activities that are eligible for fuel tax credits

You should allot a day or so each week to make sure your records are up-to-date. This way, you will have all your records on hand and avoid being overwhelmed when tax time comes.

If you need advice on how to setup a proper record keeping system and to assist you in calculating your future tax obligations, call your trusted PJT advisor on (07) 5413 9300.