Maintaining organised records will help you to meet your tax obligations and will be extremely helpful in the event that you get audited.
A good record keeping system can also help you to monitor and reflect on your cashflow, and can be a valuable tool when making business decisions.
Records must be kept in English or in a form that can be easily translated. While records may be kept on paper or electronically, it is advisable to lean towards electronic systems. Electronic record keeping systems can save you a significant amount of time and there is a far lower risk of losing track of important documents.
Small business owners are often surprised to discover that it is necessary to retain financial records for a full five years from when the tax return was lodged.
Furthermore, if you are involved in a dispute with the tax office then you may be required to retain records beyond the five year period.
Records that you must keep include
- income and sales records for the business. This may include cash register rolls, receipt books and records of all cash sales.
- Expense records for all purchases made by the business, including records of cash purchases.
- Records of any capital gains and/or losses
- GST records
- Bank records
- Information on employees and contractors including ABNs and TFNs.