Records you need to keep

I asked the question this week “What are some things you wish you knew about bookkeeping in your business when starting up, or if new to business the things you want to know?”   I got a great response and I thought I would address some of these in a series of blog posts, so here is the first instalment.  The most popular response was what records to keep and for how long, so that’s where I’ll start.

The Australian Taxation Office (ATO) advises that by law your records must explain all transactions, be in writing (electronic or paper), be in English (or a form that can be easily converted) must be kept for 5 years, but there are circumstances that you will need to keep records for longer.  The records you keep are what you use to help prepare your business activity statement (BAS), annual income tax return and to meet other tax obligations.  Listed below are the records you need to keep:

• Income and sales records – this is a record of all income and sales transactions, including tax invoices, receipt books, cash register tapes and records of cash sales.
• Expense and purchase records – this is a record of all expenses, including cash purchases. These records include receipts, tax invoices, cheque book receipts, credit card vouchers and diaries to record small cash expenses.
• Year-end records – these include lists of creditors (suppliers you owe money to) or debtors (customers that owe you money), expenses you incur buying, maintaining, repairing and selling business assets or stock.
• Bank records – banking records can include things like deposit slips, cheque butts or payment records, bank and credit card statements and loan or lease agreements. If you are a sole trader it is recommended to keep your business and personal records separately to make your records easier to manage, whilst partnerships, companies and trusts separate bank accounts are mandatory.

Other records you may need to keep:

• Goods and services tax records – if you are registered for GST
• Fuel tax records – if eligible to claim fuel tax credits your records must show the fuel purchased, used the fuel in your business and apply the correct rate when calculating how much you can claim
• Employee and contractor records – if you have workers you will need to keep records tax file number (TFN) declarations, wages, allowances and other payments you make to them, tax you withhold from payments you make to them, contributions to their superannuation, fringe benefits (FBT) you provided and contracts

There is plenty of resources out there to assist you like Business South West or the ATO’s Record Keeping Evaluation Tool and I am always happy to do a Free Health Check on your existing business.