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Business Tax Tips – Keeping Records and Receipts for Business Expenses

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Business Tax Tips – Keeping Records and Receipts for Business Expenses

Keeping Records and Receipts for Business Expenses

The ATO (Australian Tax Office) gives good instructions on keeping records and receipts for Business Expenses.

At 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:

  • automatically tally amounts and provide ready-made reports;
  • produce invoices, summaries and reports for GST and income tax purposes;
  • keep up with the latest tax rates, tax laws and rulings;
  • report certain information to us online;
  • save on physical storage space;
  • 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.

Record keeping

Generally, for tax purposes, you must keep your records in an accessible form (either printed or electronic) for five years.

Basic records tells us

Some of the basic records you may need to keep are:

  • governing documents (for example, constitution, rules, trust deed);
  • financial reports (for example, financial statements, annual budgets, reconciliations, audit reports, accounts payable and accounts receivable);
  • cash book records of daily receipts and payments;
  • tax invoices and income tax records, such as debtors and creditors lists, stocktake records and motor vehicle expenses;
  • records relating to employees (for example, TFN declarations, pay as you go (PAYG) withholding, superannuation and fringe benefits provided);
  • records of payments withheld from suppliers who do not quote an Australian business number (ABN);
  • banking records (for example, bank statements, deposit books, cheque books, bank reconciliation);
  • grant documentation (for example, when funding will be received, when acquittals need to be made, application deadlines);
  • registration, certificates and accompanying documents to regulators (for example, ATO, Australian Charities and Not-for-profits Commission, and state regulators);
  • contracts and agreements (for example, cleaning, maintenance and insurance contracts, finance or lease agreements);
  • copies of reviews of entitlement to tax concessions;
  • records to help prepare tax statements and returns.

And also further down that page –

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.

(NOTE – The only thing is this is under the Non-Profit section!)

In the Business Section we read –

Allowable deductions

Most expenses you incur in running your business are tax deductible. You claim these deductions in the annual tax return for your business or, if you’re a sole trader, in your personal tax return.

What you can claim

You can only claim expenses that are directly related to earning your assessable income.

If you make a purchase or use an asset for both business and private purposes, you can only claim a deduction for the business portion of the expense. If you use an item in your business for only part of a year, you may need to restrict your claim to the period it was used for the business.

What you cannot claim

You can’t claim a deduction for the goods and services tax (GST) component of a purchase if you can claim it as a GST credit on your business activity statement. You also can’t claim:

  • private or domestic expenses, such as childcare fees or clothes for your family;
  • expenses relating to income that is not taxable, such as money you earn from a hobby;
  • expenses that are specifically non-deductible, such as entertainment and parking fines.

Expenses you can claim in the year you incur them

Working or operating expenses you incur in the everyday running of your business – such as office stationery, renting office premises, and salaries or wages – are called revenue expenses.

You can generally claim a deduction for most revenue expenses in the same income year you incur them, including:

  • advertising and sponsorship costs;
  • bad debts;
  • bank fees and charges;
  • business motor vehicle expenses (see Motor vehicle expenses);
  • business travel expenses (see Business travel expenses);
  • clothing expenses (corporate wardrobes and uniforms, and occupation-specific and protective clothing);
  • depreciating assets that cost less than $1,000 if you are a small business (between 1 July 2012 and 31 December 2013, the threshold was $6,500) (see Depreciating assets);
  • education, technical or professional qualification expenses;
  • electricity expenses;
  • fringe benefits – the cost of any fringe benefit provided and the fringe benefits tax on the benefit;
  • home office expenses when your home is used as a business premises (see Running your business from home);
  • insurance premiums, including accident or disability, fire, burglary, professional indemnity, public risk, motor vehicle loss of profits insurance, or workers’ compensation;
  • interest on money borrowed for income tax obligations, employer super contributions, or late payment or lodgment of tax – or to produce assessable income or purchase income-producing assets;
  • land tax on business premises;
  • legal expenses, such as those incurred defending future earnings, borrowing money, discharging a mortgage or obtaining tax advice;
  • losses from a previous year (see Claiming tax losses);
  • luxury car lease expenses;
  • stationery expenses;
  • costs for running a commercial website, such as site maintenance, content updates and internet service provider fees;
  • parking fees;
  • public relations expenses;
  • phone expenses;
  • rates on business premises;
  • registered tax agent and accountant fees;
  • renting or leasing a business premises;
  • repairing and maintaining income-producing property (see Repairs, maintenance and replacement expenses);
  • salaries, wages, bonuses or allowances (see Salary, wages and super);
  • small-value items costing $100 or less;
  • subscription costs for business or professional journals, information services, newspapers and magazines;
  • costs for sunglasses, sunhats and sunscreen when your business activities require outdoor work;
  • super contributions for employees, and some contractors paid primarily for their labour (see Salary, wages and super);
  • tax-related expenses, such as –

– having a bookkeeper prepare your business records

– preparing and lodging tax returns and business activity statements

– objecting to or appealing against your assessment

– attending an ATO audit

– obtaining tax advice about your business

  • tender costs, even if the tender is unsuccessful
  • trading stock, including delivery charges
  • transport and freight expenses
  • travel expenses for relocating employees
  • union dues and periodical subscription fees to trade, business or professional associations
  • water expenses on business premises.

Are Receipts Under $75 required to KEPT??

According to the ACCC (Australian Competition and Consumer Commission)

Businesses must always give you a receipt or proof of purchase for anything over $75. If they don’t, ask for one. You also have the right to request a receipt for anything under $75 and the receipt must be given within seven days of asking.

A receipt or proof of purchase must include the:

  • supplier’s name and ABN or ACN;
  • date of supply;
  • product or service;
  • price.

In Summary –

So the ATO doesn’t mention under $75 receipts for business, only for Non-Profits,

and the ACCC says over $75 a receipt is Required!

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

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Author: accountkeepingplus

Administration, bookkeeping and compliance for small business, Training, trouble-shooting, or we can do the books and payroll for you! Self Managed Superannuation Fund Service Provider, free support MYOB Certified Consultant, Reckon/QuickBooks Professional Partner.

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