What Do You Need to Know about Tax Receipts If You're New to Business?
If you're new to business, you may be thinking about your tax obligations and looking forward with some trepidation. You know that you need to account for your income and expenditure and that you can apply certain outgoings to reduce your overall tax obligation. Yet what kind of evidence do you need in support, and is it always necessary to provide tax receipts?
In basic terms, the Australian Tax Office allows a business (whether sole trader, partnership or corporation) to use certain expenditures to reduce the amount they might otherwise pay in taxes. These expenditures need to be directly related to the function of the business, although it is possible to prorate some builds if they also apply to some personal outlay.
It's always best to retain a receipt to show that the item in question was business-related. Therefore, the entity providing the product or service must also provide documentation that includes certain data. For example, it should give the supplier's name, the date that the expense was incurred and the amount you paid. It should detail the services or goods and contain the supplier's tax number.
Checking the Receipts
Many people will simply accept the receipt following a transaction and file it without any further action. However, it's a good idea to take a look at the document as soon as you receive it, and if you notice any errors, get the vendor to issue you a new one. Otherwise, the ATO may disallow it at some stage in the future if they carry out a tax audit.
Treating Business and Personal Expenditure
If a receipt relates to both business and personal expenditure, you will need to do the calculations and provide supporting information for future reference. Where at all possible, ask the vendor to provide you with two separate invoices, one for business and the other for personal.
Using the Lump Sum Deduction
It's not always a disaster if you cannot provide a receipt for a particular transaction at some stage. After all, the tax authority does allow you to write off expenses up to a given amount (typically $300) as a lump sum in any given year.
Getting Further Advice
As you may be new to this type of accounting, it's always best to bring in the experts for help. Reach out to a tax accountant, and they'll ensure you do everything you need to.