The tax year has barely started but smart businesses stay on top of their taxes all year round. Getting things right now—and through the rest of the year—will pay dividends at the end of the tax year. You’ll have all the paperwork to know exactly what your retail business can claim and if, heaven forbid, the taxman raises queries, you’ll know you’re on firm ground with all your claims.

The golden rule to staying out of trouble with the ATO is to keep records. Even if you’ve done everything by the book, if you don’t have documentation to support your position if the ATO asks questions, you could find yourself stuck with an additional tax bill, plus penalties and interest.

So, what records should your retail business keep?

Income and sales records

Details of all your sales, including invoices and sales ledgers.

TIP: The ATO really doesn’t like cash businesses and is devoting additional resources to auditing many of them. So, if your business runs on a cash-only basis, it has never been more important to ensure that you correctly record every sale and have the substantiation (till rolls, etc.) to prove it.

The ATO benchmarks many businesses against their peers and has sophisticated technology that can identify those reporting unusually low turnover. They can also reconstruct what your turnover should be based on your purchases.

Expense or purchase records

Records of all your business expenses such as retail stock, materials, motor vehicle costs (fuel, servicing and repairs), work-specific clothing, etc. including cash purchases. Records could include receipts, invoices, credit card vouchers and diaries to record small cash expenses.

Records of any assets purchased for use in the business, such as properties, shop fitouts, security systems, cash registers, plant, office equipment or motor vehicles, including the dates of acquisition and cost.

If you purchased something that is partly for private use and partly for business use, you’ll need to keep a record showing how you worked out any private use for that item. For example, if you purchase a mobile phone that costs $500 (exclusive of GST) and is used 90 per cent in the business and 10 per cent privately, you can only claim a tax deduction on $450 (being 90 per cent of the costs).

Wages records

Details of who you paid wages to, how much and when

TIP: The ATO is scrutinising businesses that fail to pay employer superannuation contributions on behalf of their staff. Remember, you must pay Superannuation Guarantee (SG) on behalf of all employees at the current rate of 9.5 per cent of the amount they earn from their ordinary hours of work. Payments must be made on behalf of all employees (including temporary or casual staff) who are over 18 years of age and earn more than $450 (before tax) per month.

Year-end records

These include lists of people whom you owe money to (creditors) and lists of people who owe you money (debtors).

You’ll also need worksheets to calculate the decreasing value of your assets (such as fixtures and fittings, motor vehicles, computer equipment and tools).  These are called ‘depreciating assets’.

Bank records

Documents you receive from the bank such as bank and credit card statements and loan documents.

Goods and services tax (GST) records

The main GST records you need to keep are tax invoices from your suppliers. You need a tax invoice to claim GST credits.

TIP: Allow time each week to keep your records up to date. This helps when it’s time to do your tax as all the information will be organised and you won’t be overwhelmed with paperwork. This frees up time to focus on making money, instead of doing the books. Alternatively, look to use a third-party bookkeeping service.

All records must be in English. You must keep your records for at least five years, either in paper form or electronically. As paper invoices and receipts tend to fade, electronic copies are recommended.

Mark Chapman is director of tax communications at tax accounting group H&R Block.


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