In Australia, the penalties for a business not keeping the required records can range from a few Australian dollar fines to business closure, depending on the scale of breach and the country region. According to the FWO, inaccurate record keeping is a major concern: some two – thirds of the court cases it instigated last financial year were a direct result of such breaches.
Aside the penalties involved, there are many benefits to keeping good records. Keeping adequate business records can help you keep track of your business’ health, so you are able to make good business decisions. It can help your tax and superannuation obligations, manage your cash flow, or even demonstrate your financial position to banks or other lenders.
In Australia, you can even choose to keep your records electronically or in paper form. The ATO advice businesses to use electronic record keeping if possible, especially since they are progressively moving towards electronic reporting for tax and super obligations.
Note that keeping your records electronically should make some tasks easier and also save you time once you have your system set up. Meanwhile, if you keep your records electronically, there is no need to also keep paper copies unless a particular law or regulation requires a paper copy.
The ATO accepts images of business paper records saved on an electronic storage medium, as long as the electronic copies are a true and clear reproduction of the original paper records and meet their record – keeping requirements.
Note that once you have saved an image of your original paper records, you don’t have to keep the paper version. But irrespective of what you choose, just make sure you store your records in a secure place. Back up your records and, if possible, have a secure off – site storage location, which may include cloud storage.
Also note that your records are expected to be on a computer or device that you have access to (including all passwords), backed up in case of computer failure, and also allows you to control the information that is processed, entered and sent. In general, you need to keep most records for five years. Starting from when you prepared or obtained the records, or completed the transactions (or acts they relate to).
In Australia, note there are some situations where you will be expected to keep records for longer than five years; example, if your business owns capital assets that are subject to capital gains tax. The Australian Securities & Investments Commission (ASIC) on its part requires companies to keep records for seven years.
Table of Content
Business Records You Must Keep in Australia
In Australia, the records you are expected to keep include the following:
Income Tax and GST
- Sales records: sales invoices, including tax invoices, sales vouchers or receipts, cash register tapes, credit card statements, bank deposit books and account statements.
- Purchase/ expense records: purchase/ expense invoices (including tax invoices), purchase/ expense receipts (which include an ABN), cheque butts and bank account statements, credit card statements, records showing how you worked out any private, use of something you purchased.
- Year – end income tax records: motor vehicle expenses, debtors and creditors’ lists, stocktake sheets, depreciation schedules, capital gains tax records.
Payments to Employees
- Tax file number declarations and withholding declarations
- withholding variation notices
- worker payment records
- PAYG payment summaries
- annual reports n super records
- Records of any fringe benefits provided.
PAYG Withholding for Business Payments
- records of amounts withheld from payments where no ABN was quoted
- a copy of any PAYG withholding voluntary agreements
- records of voluntary agreement payments
- all PAYG payment summaries, including PAYG payment summary – employment termination payments
- PAYG payment summary – employment termination payments
- Annual reports.
Fuel Tax Credits
- records of fuel acquired
- records of eligible and ineligible fuel use
- records of claim calculations
- Records of any loss, sale or disposal of fuel.
Tips for Healthy Record Keeping
Here are some tips to keep you on top of your record keeping – and some traps to avoid.
- Get organised and stay organized
- Decide what record keeping system works best for you. Some people may prefer to keep paper records, while others find an electronic software package more efficient.
- Set up a good filing system for your paperwork. If you don’t record your transactions frequently, it is important to have a system for filing information that needs to be entered. A good filing system will help you follow up overdue debts and know when your accounts are due to be paid. This will help you manage your cash flow.
- Make sure your records can be understood by anyone, not just one person. Document how you keep your records, what your various records contain and where they are kept, and where you keep your back-up records.
- Obtain the required paperwork from suppliers and customers at the time of a transaction and record details as soon as possible – don’t leave it until later. You need paperwork to support your claims for tax deductions.
- Make sure your records contain enough information; for example, tax invoices with all the required information and cheque butts correctly filled out. It is a good idea to cross – reference records; for example, when you pay bills, write the invoice number on the cheque butt and the cheque number on the invoice. You can also add notes to paperwork that will remind you later of special circumstances.
- Get into the habit of entering transactions into your cash books or software program regularly to keep your files up to date. You may choose to do this daily, weekly or monthly – but remember, the longer you leave it, the more difficult it is to catch up. Never leave record keeping until the end of the year.
- Make sure you enter transactions correctly into your cash books – mistakes can be costly.
- Don’t mix up personal and business paperwork; for example, by using business bank accounts and credit cards for personal transactions and vice versa.
- Ask for help before things get out of control. You may want to engage a bookkeeper to set up your books or set up a software program. Remember, these costs are generally a tax deduction for your business.
It is important to understand your record – keeping obligations and to plan properly and know what is involved. Have it in mind that accurate and complete record keeping will help you meet your tax, super and employer obligations.
Howbeit, the very first step is choosing your business record keeping system. It can be digital or manual but unless you have simple business affairs, an electronic system may be more beneficial and it’s what we recommend where possible.