You know tax time is here when you get a nudge from your accountant or the ATO reminding you to pull all your records together. If you have been on your game throughout the year, you may have everything you need but more often than not, you’ll have a pile of paperwork, some of it relevant, some of it not. You’ll suddenly also remember the things you purchased where the receipt is lost or went into the bin. It can be tempting to throw in the towel and with it, any potential deductions. If this scenario sounds familiar, you are not alone. When it comes to keeping records, most individuals and small Australian businesses are in the same boat.
Having organised tax records can help you get better returns. Refunds aside, the ATO is cracking down on dodgy deductions so if you plan to claim it, you need to be able to prove it. Here are a few tips to help you ditch the shoebox and get your records in order:
When it comes to keeping records for your tax return, there’s a general misconception that it all boils down to parking and petrol receipts. In fact, there’s a lot more you need to keep on file for tax time.
Start with all the payments you’ve received – salary, interests, dividends and any rental income earned from an investment property. In addition to income, you’ll also need to keep track of your expenses. This includes anything you purchased to help you earn an income. This could be an occupation-specific uniform or a repair made for an investment property. If you bought or sold an asset such as a home, shares or a car – hold on to the paperwork for these too. To offset your income, keep records of your donations or contributions over $2 to a charitable organisation.
As a rule of thumb, if you’re unsure whether you need to keep it or if you can claim it, hold onto it and let your tax professional make that call. Assumptions can cost you, and with the ATO watching – it’s not worth the risk.
Australians lose millions in unclaimed tax deductions every year. Whether you don’t remember what you bought or you don’t have a system in place, your lack of records could be costing you.
Systems don’t need to be expensive or complicated. Simple colour-coded manila folders, a concertina file or even large envelopes can do the trick. Putting receipts away correctly the first time will save you hours when tax time ticks over. Start by keeping things organised in financial years. Alternatively, depending on how complicated your tax return is, you could consider keeping quarterly or monthly records. Make sure you and your accountant can easily understand the filing system.
The problem with paper records is once they’re gone, they’re gone. Paper receipts fade and accidents happen. The best way to store receipts these days is electronically. Take a photo and keep it on your phone or laptop or get an app to keep all your receipts in the cloud. The ATO accepts that a photo of a receipt is just as good as the paper original.
So, always make sure you keep another record. ‘The dog ate my receipt’ isn’t going to save you from an ATO audit. Don’t forget the ATO requires you to keep receipts for a minimum of five years.
If you paid using a bank or credit card and the transaction is listed on your statement, then according to the ATO, that may be adequate proof. Whether that's your mobile phone, parking or relevant online subscriptions, it pays to go through your statements and keep tabs on your expenses.
To help keep regular records, there are plenty of apps on the market that can assist you in gathering, managing and storing your receipts and invoices from your phone. If you do opt for digital records, always keep a backup of the files online, especially if you’re relying on photos of receipts from your phone.
Remember, you’ve got until the 31st of October to lodge your tax return unless you use a tax agent, in which case the deadline can be extended, possibly to as late as 15 May next year.
If you haven’t already lodged your return, make an appointment with one of our tax professionals today. Our maximum refund guarantee means we leave no stone unturned to give you the tax return you deserve.
Updated 8 April 2020
Our H&R Block accountants are now working online. Book an appointment with an expert.