Receipts: Why you need them for tax time
As a small business owner, keeping track of all your expenses and income is important. Keeping receipts is a vital part of this process, as it assists with determining your GST balances, and it's the critical record required by the Australian Tax Office (ATO) when filing tax returns. Let's look at why keeping receipts is so essential for small businesses in Australia.
Keeping your receipts is essential when it comes to filing your taxes correctly. The ATO requires businesses to keep accurate records of their income and expenses for five years, including any receipts from suppliers or customers. These records are necessary for the ATO to audit your business, or else you could be subject to penalties from the ATO if your small business does not keep these records.
Receipts also help you stay on top of your bookkeeping and accounting processes. Having all your receipts on hand makes it easy to review them when doing GST reconciliation or generating financial reports. This makes it easier to ensure that everything matches up properly and is accounted for correctly. It also means that any discrepancies that arise later down the line can quickly be corrected before they become a significant issue.
For businesses, having your receipts will allow you to:
- Claim input tax credits: If your business is registered for the Goods and Services Tax (GST), you can claim input tax credits for the GST paid on purchases made for your business. To claim input tax credits, you must keep records of the GST paid on your purchases, including receipts and invoices.
- Claim eligible deductions: If you incurred expenses while running your business, you can claim deductions for these expenses on your tax return. Receipts prove that the expenses were incurred and are related to your business. The receipt will also have the correct GST applied for tracking purposes.
Keeping receipts also allows you to monitor the costs associated with running your business. By reviewing past purchases regularly, you can spot areas where there are opportunities to cut costs in the future. This helps ensure that your business remains profitable and complies with tax regulations.
There are a few different ways to keep receipts:
- Use a digital app: Different apps allow you to take a picture of your receipt and store it electronically. This is a convenient way to keep track of your receipts and can be helpful if you need to access them while you're on the go.
- Scan your receipts: You can use a scanner or take photos of your receipts and save them as PDFs or images on your computer or in the cloud.
- Keep them in a shoebox: If you prefer to keep a physical copy of your receipts, you could keep them in a shoebox, folder or binder. You can create different sections for receipts, such as tools, clothing, or utility bills.
- Keep them in your wallet: If you don't want to carry around a folder, you can keep your receipts in your wallet. Just be wary that over time some may fade, and you could run out of room depending on how many expenses you incur.
If you want the convenience of having all your receipts digitally stored and categorised automatically, then using Thriday could be the best option. Thriday is an all-in-one financial management platform that automates banking, accounting and tax for small businesses. With Thriday, you can open multiple business bank accounts* and use a Visa Debit card* to track all your expenses. From there, you need to take a photo, upload or forward receipts to your unique Thriday mailbox. Thriday will automatically reconcile the receipt and any GST credits and update your estimated tax position in real time. It's very handy, meaning your receipts are stored securely and digitally in one place. You can try Thriday for free now.
As a small business owner in Australia, keeping accurate records of all your transactions, including receipts, is an absolute must for staying compliant with the ATO and monitoring the cost of running your company. Monitoring your expenses, tracking GST and keeping your receipts can also help you remain profitable over time. With all this information, managing finances becomes much more straightforward - so make sure that receipts stay at the top of your financial 'to-do' list.