The Australian tax system requires you to be responsible for working out how much you can claim on your tax returns. This means that you may need to show written proof for some claims.
In order to prepare an accurate tax return and to support your claims, be sure to keep careful records. By doing this along the way, you may be able to maximise your deductions by not forgetting some valid deductions, avoid penalties if ever audited and minimise the cost of doing your income tax return with your accountant.
While it may seem like a tedious task at times, a good records system allows you to make better use of your accountant’s time. The less time they have to sort through disorganised paperwork in a shoebox means more time working on the best tax return for you and ensuring you’re able to claim all your entitlements.
Where do you start?
While the types of records you need to keep depends on your personal and/or business circumstances – our number one tip is it’s better to keep too many records than not enough.
You should keep supporting documentation or written evidence in these main categories:
- Payments you have received e.g. salary, allowances, income from bank interest or rental properties, government benefits and pensions
- Expenses related to payments you receive e.g. when claiming car expenses you need use the cents per kilometre method or the logbook method
- When you have acquired or disposed of an asset, which might be subject to capital gains tax e.g. shares or real estate
- Gifts, donations and contributions (if they are tax deductible)
- Disability or aged care expenses e.g. receipts and documents to show medical expenses and payments to an approved residential aged care facility.
As a general rule, if your claim exceeds $300, you must have written evidence to prove the total amount. However, the $300 limit does not apply to claims for car, meal and travel allowances and more. Talk to your tax agent or accountant about how the rules apply in your situation. Generally, you must keep your written evidence for five years from the date you lodge your tax return.
Record keeping for business owners
Business owners will need to keep records to help them prepare their business activity statement (BAS) and annual income tax return. Here’s a list of some of the tax records business owners have to keep:
- income tax and GST: sales records, purchase/expense records, year-end income tax records
- banking records
- payments to employees and contractors
- PAYG withholding for business payments
- fuel tax credits.
For many small businesses, it may be a bit overwhelming with the amount of documentation you need to prepare for the tax man each year, but we can help with your regular bookkeeping! Talk to us about setting up the right account software to best suit your personal and business situation.
Seek advice from us about divorce by contacting divorce lawyers in manassas va today.