If you are asked to substantiate your claims, you will need to secure some essential documents such as contracts, invoices and receipts. This is why if you have already developed a habit of stashing receipts away in a shoebox, it is about time you give importance to this piece of paper because they play a crucial role during tax time. It is not enough that you hoard receipts because you need to organise them so you can prevent tax-related problems in case you are going to be audited by ATO. This means you should know the records you need to keep. Instead of keeping all receipts, focus on the ones that can be deducted on your taxes.
1. Gain a better understanding of the broad categories of receipts
Organising your receipts starts with obtaining a better understanding of the categories of receipts. Some categories may include receipts for minor purchases, receipts for major purchases, receipts for improvements and repairs and receipts for backing up deductions. It will be much easier to organise receipts if you understand each category.
2. Monitor your documents on a weekly basis
Make it a habit to file your tax documents and receipts regularly so you they do not accumulate. It will also be easy for you to identify what the receipt signifies especially if you are handling financial matters. When you keep track of your receipts on a weekly basis, you will be able to declutter plenty of old receipts.
3. Create a filing system for minor receipts
You will need to create a filing system so you can collect receipts as you receive them. Receipts for groceries or gas fall under the category of receipts for minor purchases and these are only kept over a short period of time. If you do not create a filing system, these receipts will have a tendency to pile up. Go through the receipts you have collected on a weekly basis so you will know which ones have to be discarded.
4. Scan receipts for future audit
As much as possible, keep receipts at least six years so you have your documents to present if ATO audits your business. If you are keeping your receipts on your database, make sure you keep a back-up because hard drive crashing is unavoidable. These receipts are important when ATO makes an audit because if they see any discrepancy on the report, any excuses you make will not hold water.
The following information must be indicated on the receipt:
• Supplier name
• Australian business number (ABN) of your supplier
• Amount of your purchases or expenses
• Nature of the services or goods purchased or the expenses incurred
• Date the expenses was incurred
• Date of the document