Article by Simon Lenthen, Business Advisor, Western Sydney Business Centre
Some small businesses are not bookkeeping savvy. For those who are, you might wish to skip down to the third paragraph and start reading from there. For those who aren’t, here’s a quick guide to help get your business ready for tax, beyond shoving your receipts in a box and giving them to an accountant. If you’re doing that, then you’re paying a lot for a service that can be done cheaper, possibly for nothing, if you know what you’re doing.
The first thing you want to know is that the receipts you gather reflect the financial portion of your business and it is the basis on which tax is calculated. You could shove your receipts in a box but before you do, consider entering them onto a spreadsheet where you can create transaction categories. If you’re not computer savvy, purchase a cashbook from a stationery store and use that. In a cash book, the rows represent the transaction and the columns, the category. The categories should reflect those parts of the business you want to know about, including purchases, utilities, wages and so on. You might want to consider the following categories – Motor Vehicle, Travel Expenses, Wages Expenses, Office Expenses, Purchases and Depreciation.
Theoretically, you should be spending 1/5 of your working week working on the business which includes bookkeeping. If you don’t have the time to do this, consider getting a bookkeeper. They can transcribe the receipts, cashbook or spreadsheet into an accountant-friendly program for half the cost of an accountant. If you do it yourself, it will be even cheaper. Even better, sole traders can use online accounting software that is Standard Business Reporting (SBR) ready. SBR software can talk to the Australian Tax Office without having to prepare hand-written Business or Income Activity Statements. In addition, sole traders can use My.Gov to submit their tax and other business statements.
For more details, consult the Australian Tax Office or contact your local business advisor at the Western Sydney Business Centre for fully subsidised business advice.