Income and expenses for tax returns
Your tax return will show whether you have made a tax profit or a loss and will determine how much tax you should pay.
You need to keep comprehensive records explaining all transactions that relate to your tax affairs. This will help you complete and lodge your tax returns each year.
Keeping good records also ensures you are meeting your reporting obligations.
Records you need for your tax return
Your business records must contain enough information to calculate the income, expense and other amounts you must report in your tax return.
You will need to keep records of your transactions; cash, online, EFTPOS, bank statements, credit or debit card, covering:
- gross earnings or proceeds from your business including
- income earned from the sharing economy
- other money received such as
- foreign income
- personal services income
- payments outside of ordinary business activities
- government payments
- commissions, investment earnings, gratuities and compensation payments
- expenses you will claim as a deduction such as
- business travel expenses
- motor vehicle expenses
- salary, wages and super
- repairs, maintenance and replacement expenses
- home office expenses for a home-based business
- other operating expenses
- capital assets and expenses
We may review your tax return and ask for copies of your records to check the information provided. If we are unable to verify these claims, we may adjust your return. We will contact you before this occurs.
Keeping your tax return records up to date
It is easier for you to lodge your tax return if you update your records regularly. We recommend you use the following practices to help:
- Reconcile daily sales to ensure all sales are accounted for.
- Keep specific records showing when you use business purchases for private purposes or make cash payments and drawings. This will ensure your business finances can be easily separated from your personal finances.
- If you use a bookkeeper or a registered agent, regularly summarise your expenses. This may reduce the time it takes them to prepare your tax return or activity statements.
There are commercial business accounting packages which can automatically update and summarise your income and expenses records for you. Alternatively, you can do it manually by keeping a record of cash book totals for the period.
Use our record keeping evaluation tool to evaluate how well you are keeping business records.