Are you a tradie running your own business? Did you know it’s important to keep records of your finances? Good record keeping will help you stay on top of your tax and super, and track how your business is going.
You need to hang on to your records for five years, so the best way to store them is electronically with programs such as MYOB, Xero and Quickbooks – consider these your tools when it comes to good record keeping. These will allow you to develop reports, streamline your accounting and better track your sales and expenditure.
Your records need to show how much income you’ve earned and support your claims for expenses, such as tools, protective clothing and motor vehicle costs.
How to keep good records for your Taxable Payments Annual Report (TPAR)
Some businesses are required to report payments they make to contractors or subcontractors who provide them with services in their industry.
The Taxable Payments Annual Report, or TPAR, is due by the 28th of August each year, covering contractor payments for the previous financial year. Keeping good records will make it easier to complete your TPAR.
Check you are recording the right information for each contractor; name, address, ABN and total amount you paid them for the year. The details you need to report are generally on the invoices contractors give you; it’s the same information you need when claiming deductions for contractor expenses.
Start recording payments now to make reporting easier later. Come tax time, all the information you have entered throughout the year is easily accessible by you or your accountant and you won’t have to stay up night after night trying to catch up on paperwork – instead you can go get a drink with your mate and tell him how you’re all sorted for tax time!
And speaking of tax time, it’s tempting to draw up a long list of deductions to get as much out of your tax return as possible. But before you start making all those deductions, make sure you know which business deductions you’re actually eligible to claim so you don’t get caught out by the tax office.
There are three golden rules to remember when claiming deductions:
- The money must have been spent for your business – not a private expense
- If it is for a mix of business and private use, only claim the portion that is related to your business
- You must have records to prove it.
Here are some common business deductions:
- Motor vehicle expenses, including fuel and oil, repairs and services, insurance and registration
- Operating costs for running your business, including office rent, stationery, salary or wages
- Repairs and maintenance costs for machinery, tools or your premises (as long as these aren’t capital expenses).
Motor Vehicle Expenses
If you’re running your own business, it pays to know the vehicle expenses you can claim at tax time.
You can claim deductions for the cost of your vehicle’s fuel, oil, repairs, servicing, insurance and registration. Just make sure you’re only claiming the business part of your expenses, like travelling to and from work sites with heavy equipment, visiting clients or picking up materials for jobs.
Now, you can’t claim expenses for private use, like taking your ute on holidays or driving the kids to school.
You might need to prove how you worked out the business part of your expenses so, again, it’s important to keep good records. You should also hold on to your tax invoices registration papers and loan or lease papers related to your vehicle.
The ATO website has a page dedicated to what deductions tradies are able to claim. And if you need further assistance with your tax return, record keeping or advice on software to help you keep your records up-to-date, we are only too happy to help. Give us a call on 07 5444 1022 to make an appointment with a member of our friendly accountant team.
Rachel Cooper Senior Accountant
Rachel is a Senior Accountant and deals with all areas of taxation and accounting including partnerships, companies, trusts and self-managed superannuation funds. She also prepares business activity statements, business structures and entity establishments, capital gains and all ATO and ASIC related matters. Rachel also enjoys the satisfaction of individual income tax return preparations and consultations.