Record Keeping is King
From an income tax standpoint, it’s in your interests to keep good records of your transactions and activities. Keeping good records is not only required by law, but it makes your accountant’s job easier – this can result in both decreased fees (an accountant will take less time in preparing returns etc.) and increased deductions (claims cannot be made without having the required records). Aside from this, by keeping good income tax records:
- You can demonstrate your financial position – this is particularly important where a business wishes to obtain finance from banks, or the business is being sold
- You can better monitor the overall health of your business, especially its true cash position, and
- You can more easily complete paperwork, including Activity Statements.
The ATO last year issued contemporary guidance – in the form of Taxation Ruling TR 2018/2 – which deals with electronic records. This is welcome, as the ATO’s previous ruling was issued some 23 years ago and carries reference to cheque butts and receipt books!
You should also utilize the ATO’s Record Keeping Evaluation Tool. After asking you a series of questions, the tool culminates in a report which details to you how well your business is keeping records. Suggestions for improvement are also made if appropriate.