Keeping good records requires more than just knowing which records to keep and for how long. It also includes setting up systems and maintaining records in a way that makes it easier for you to monitor the progress of your business to track business is improvement, which items are selling and changes that are required – knowing how best to keep records can be the difference between the failure and success of your business.
Why keep records?
• The most important reason for keeping good records is that it’s a legal requirement for you to do so.
• To prepare accurate financial statements and for bookkeeping purposes.
• To identify source of receipts and invoices of money received and spent, to identify business from non-business receipts and taxable from nontaxable income.
• To keep track of deductible expenses – record them as they occur.
• To prepare tax returns – making it easier for you or your accountant to complete your business’s annual return. Records must support the income, expenses and credits you report on your tax returns.
• To monitor the financial situation of your fund to assist you making sound investment decisions.
What kind of records should you keep?
The type of records you keep depends on the type of business you are involved in. It is always best to set up books using an accounting method that clearly shows your income for your selected tax year. If you are involved in more than one business, it is best to keep completely separate records for each business.
Lost or Destroyed records?
When a natural disaster occurs, tax and other records may be lost, damaged or destroyed. You may need to get copies of your tax records. The Australian Tax Office (ATO) can re-issue or supply copies of tax documents, such as:
• income tax returns
• activity statements
• notices of assessment.
After proof of identity has been established, the ATO will reissue tax documents and other information they have for you such as:
• your tax file number
• tax returns
• activity statements
• notices of assessment.
For proof of identity, information required:
• date of birth
• address details
• bank account details
• tax records not damaged or destroyed.
Your tax agent, financial institutions, employers and parties with whom you hold trading accounts should be able to provide you with copies of records you need for tax purposes. If there is a charge for obtaining these records, then you can claim the expense as a cost of managing your tax affairs.
The ATO will generally give you or your tax agent extra time to lodge your tax return or activity statements and to get your financial records from banks, employers, suppliers and purchasers. Even if it does prove impossible to reconstruct records or obtain the original documents, the ATO can accept a “reasonable estimate” without substantiation.
If you need assistance in reconstructing your records or bookkeeping needs, it is important that you seek the help of a professional. Here at The Quinn Group our experienced team of accountants and bookkeepers can assist you with organising your financial records. For this or for any other accounting issues submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.
