Many Australian business owners often underestimate the importance of keeping their records up-to-date and accurate. As a result, tax season can be a stressful time for them, as they are forced to manage their records at the last minute, which adds to the pressure. To avoid the hassle of scrambling to find and manage records at the last minute, it’s crucial to keep track of your business records from the start. It’s a good idea to get help from a small business bookkeeper to manage your records so you can lodge your tax return on time.
When do you need to keep records?
You must keep and maintain records of all financial transactions, which include transactions related to your superannuation, tax, and registration as you start, operate, sell, change or close your business. This may include:
- Any document outlining your business’s expenses and earnings
- Any document with details of any choice, election, estimate, or calculation made for your business’s super and tax affairs, including how the estimate, calculation or determination was made.
To meet your record-keeping obligations and avoid common mistakes, make sure you know what records your business needs and incorporate accurate and complete record-keeping into your daily activities. As your business changes or grows, you may need to reassess what records you must keep. Failing to comply with these record-keeping requirements can have serious legal and financial consequences for your business.
Simple Steps to Follow for Good Record-Keeping Habits
These rules apply to most of the records your business needs to keep for tax, superannuation, and registration purposes. They are based on the law and the ATO’s guidance:
- Keep all important records – You must keep records related to starting, running, changing, selling, or closing your business if they are relevant to your tax or super. You can also get help from a reliable bookkeeper in Melbourne to keep all important records.
- Separate business and personal use – If an expense is partly for personal use, clearly show which part is for the business.
- Don’t change records – Records must stay accurate and unchanged. You must store them in a way that protects them from being changed or damaged. The ATO may check that you have proper protections in place.
- Be able to recreate data – If your record-keeping system changes, you must still be able to recreate the original records.
- Keep records for at least 5 years – In most cases, you must keep records for 5 years from the date they were created or when the related transaction happened. Some records have different rules:
- FBT records – Keep them for 5 years from the date you lodge the FBT return.
- Employee super contributions – Keep them for 5 years from the date of contribution.
- Super fund choice records – Keep them for 5 years from when the employee starts or when they choose/change their fund.
Some records must be kept longer, especially if they are needed for reviews or assessments. Also, keep records of how you routinely destroy digital records.
- Show records – You have to show the records if asked by the ATO.
- Maintain information regarding your record-keeping system to let the ATO check if it meets the record-keeping requirements.
- Ensure the information includes the required details to meet your super, tax, and employer obligations.
- If you are using a digital system to record data:
- Use an encryption system.
- Use passwords to protect your data.
- Ensure your data is indexed or identifiable as you keep it. The ATO may need to extract data and use the text-search system to look at it.
- Make sure to keep records in English or able to be translated into English.
Once you have accurate records, you can hand over these records to the tax accountants so they can use these records for tax lodgment. You can also get in touch with the best accountant in Melbourne for tax matters.
Conclusion
There are times when you need to keep your business records organised and accurate. Many owners find it hard to track all financial transactions. This is where reliable bookkeeping services are helpful. With bookkeeping solutions, you can keep your business records in order.