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What financial transactional documentation should I be keeping?

 

To ensure that you meet your financial and tax reporting and evidence obligations, you should always ensure that every financial transaction has a supporting document.

So for example, for anything that you buy, you must have an invoice and where GST is included, then a tax invoice.  This document provides you, as well as your bookkeeper, accountant and the ATO assurance that the expense is a legitimate financial transaction for your business and that, if applicable, the correct amount of GST was accounted for.

 

PLEASE NOTE, a credit card machine docket or a bank confirmation that payment has been made is not an invoice.  This is purely a proof of payment.  When paying, you still need to ask for an invoice or sales receipt from the person you are making the purchase from.

For any money that you receive from a customer, you should have either a sales invoice or some kind of written agreement that they will be making an upfront payment to you (eg a deposit).  Again, these kinds of documents provide assurance for all parties that the amount of money received by your business is for legitimate business transactions, that the GST was again accounted for correctly, provides evidence of how much is owed to you if the customer has not paid you all that is owing, etc.  If applicable, any contracts that you have entered into with your customers or purchase orders received from your customers must also be kept as well.

For tax purposes, these types of documents will also ensure that your tax obligations are correct and that you do not end up over-paying or under-paying tax.

 

The documents must be kept for at least 5 years from the date that the tax return is lodged to which the particular transactions pertain.  So for example, if you bought a car on 1 Feb 21, this transaction will impact your 30 Jun 21 tax return.  However, if the tax return is only lodged on 31 Dec 21 by your tax agent, then the bill for the car purchase needs to be kept until at least 31 Dec 26.

The documents can be kept as "soft copy" (ie they do not need to be in paper format), but, it is critical that all pages of the document are copied for "soft copy" purposes before the paper format can be destroyed.  So for example, if you enter into a contract with your customer (even if it is your standard every day customer contract that you sign with all your customers), then you need to have a soft copy of every single page of the contract, not just the front page and the signature page.  Another reason for this is to ensure that if there is ever a dispute between you and the customer, that you have every single clause and condition of the contract.

At Expert Bookkeeping and Accounting Services, as experienced bookkeepers and accountants, we can assist you with setting up an easy to use “filing system” for your bookkeeping and accounting supporting documentation that will reduce time and effort for you but still ensure that you are fully compliant with your bookkeeping and accounting reporting and tax obligations.