Got your record keeping nailed? We detail what's up so you'll be your accountants favourite client come tax time.
Just like that we’re over halfway through the 2018/2019 financial year!
If you haven’t already, you still have time to get yourself into some good habits. Come tax season you’ll be your accountant's favourite client and we can get your tax return done as efficiently as possible. Let’s take a look at some key concerns for individuals when it comes to keeping your records in check!
Any individual receiving salary/wage income can claim a minimum of $300 in reasonable deductions for the year without having to substantiate it. However, the moment your deductions total over $300 you’ll be required to back up every single claim. So, how do you cover yourself?
Firstly, in order to claim a deduction you must meet the following conditions:
- The money was spent by you and was not reimbursed
- The expense must directly relate to your work
- You must have a record to prove it.
Receipts, Receipts, Receipts
This doesn’t mean a shoebox full of scrunched up and faded merchant copies…we honestly couldn’t think of anything worse. Instead, get with the times and go electronic! Here at illumin8 we love the cloud and you should too. The ATO will accept digital receipts as proof so long as they are readable, an original copy and have all the required information.
Here’s what our dream receipt consists of (actually, ATO says it must show):
- Name or business name of supplier
- Amount of the expense – written in the currency in which it was incurred.
- Nature of the goods/services
- Day the expense was incurred
- Day it is made out
During the year it’s as easy as spend, snap (a photo of your invoice - See Receipt Bank) and save! Store any images of receipts in a folder ready for tax time and remember to back up whatever device you’re using so that you can hold onto the evidence for the required 5 years.
Some common deductions to keep records of during the year include:
- Uniform or protective clothing
- Motor vehicle expenses – if you use your own car for work related travel check out “The Deal with Motor Vehicle Deductions” for more detail
- Mobile phone & internet – a percentage of your bill can be claimed as work use.
- Donations – anything over $2 has the potential to be deductible.
Side Note: Receipt Bank Will Change Your Life
Running your own business is hard enough without having to keep track of all your expenses, receipts and invoices. That's why we use Receipt Bank to make tracking our spending as simple as possible. That means no more storing shoeboxes full of receipts, no more lost items! Using Receipt Bank makes it effortless to send us the information we need to help you stay compliant and profitable.
Rental Properties
If you have any investment properties, be mindful that the more details we have the better. Often people may provide a figure for expenditure related to the property for the year but no detail as to what it was for exactly. To keep things simple, try and remember to hold onto the following:
- Rental income statements
- Invoices for any expenses related to the property – especially those for any repairs or maintenance.
- Invoices for any capital purchases so that we can depreciate them over time.
Sole Traders
When you’re running a business, the best way to keep track of all your ins and outs is by using a software package like our trusty favourite – Xero! Seriously…save yourself the time and hassle of having to create your own business summary. In saying that though, if you happen to be a wizard with spreadsheets, go for it! There’s nothing quite like receiving a beautifully detailed business spreadsheet from a client which has perfectly categorised expenses.
So, maybe organisation or spreadsheets aren’t your forte – don’t stress! There are tools available which can make record keeping a breeze.
ATO App & myDeductions
For those without an accounting software package, you may find your answer to record keeping within the app store. The ATO has developed their very own app (available on both Apple and Android platforms) which has an inbuilt tool called ‘myDeductions’. This helps individuals keep track of, you guessed it - their deductions! It also has the bonus of being able to record income for sole traders so you can throw those old school spreadsheets out the window.
This tool is great for people on the go, includes handy functions for tracking travel and even stores photos of your receipts to support your claims. Come tax time, the data can be directly shared via email from the app so your accountant receives all the information and supporting documents at once!
One thing to remember if using the app – you MUST remember to backup regularly to the cloud (for Apple users) or to Google Drive (for Android users) as the data is only stored on your device.
Ideally, if you stay up to date on all the little things the only documents you’ll need to track down at the end of the financial year are your PAYG Payment Summary and any annual statements (eg. private health insurance). Too. Easy!
Need more clarification as to what you should be keeping or the best way to keep your records in check? Give us a call!
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