Start your year fresh and be prepared for 2017! We suggest you keep thorough business records as you will have to provide accurate and complete records of your taxable business activity throughout the year. Not only might you miss out on claiming some expenses but you could face penalties if your records are not up to date.
Fortunately keeping good tax records can be easy if you come up with a system and stick with it.
What you must keep
When you make an entry, such as income, expenses and deductions on your tax return, you must have documentation to substantiate your claims.
This includes keeping:
- receipts for all claims – including statements and GST tax invoices
- interest statements
- summaries of earnings from each employer
- dividend statements
- a record of rental income and expenses
- purchase and sale agreements (for disposal of investment assets).
Remember, you must keep your records for seven years. These must be in English, unless you get approval from Inland Revenue (IR) to use another language.
Keeping good records
If good records are kept during the year, preparing your tax return will be a breeze. It doesn’t really matter what system you use – you can keep records using boxes, folders, computer software or cloud-based methods, as long as you can retrieve this information quickly and easily when you need to. Like most things in business, a little discipline and forward planning will go a long way.
Tip from Monteck Carter – Try to stay on top of your records by putting a recurring ‘records organisation appointment’ on your weekly or monthly calendar. During these appointments, organise receipts and documents either by date or by category, make copies of receipts and scan them, update entries into record keeping software, and make back-ups of all digital files. An hour or two spent each month organising your records could save you days of headaches at tax time or in the event of an audit.
What you can claim
You can claim expenses against your business income to reduce your tax bill. This is one of the advantages of keeping accurate records – you don’t want to miss out on any potential tax deductions.
Business expenses you may be able to claim include:
- vehicle expenses, transport costs and travel for business purposes
- rent paid on business premises
- depreciation on items such as computers and office furniture
- part of any household expenses – such as mortgage interest, telephone and electricity – if you work from a home office
- interest on borrowing money for the business
- some insurance premiums
- work-related journals and magazines
- membership of professional associations
- work-related mobile phones and charges
- work uniforms
- tax agent’s fees.
You might be tempted to save on fees by completing your own return, but a tax agent may have a better knowledge of what you can and can’t claim. Using Monteck Carters expertise may reduce your tax bill enough to cover their fees and still get you ahead.