RECEIPTS & THEIR IMPORTANCE
A question that commonly comes up for us tax accountants is: do I need to keep the receipt? Often this is asked by clients who have bank statements or credit card statements, but don’t have the original receipts handy.
The annoying answer here is that it depends on the nature of the expense, the type of taxpayer you are and the level of detail provided on your bank or credit card statement.
So, what should you do? Our advice is, whether you’re a business or an individual taxpayer, is to keep both the receipt and the bank or credit card statement. That way you not only have proof of payment via your statement (i.e. you can prove you paid for it and not somebody else – no double-dipping!), but you can also clearly show what the expense related to in detail. A simple example of where the bank statement may not suffice is with fuel expenses – sure, the receipt shows the name of a petrol station, but who knows what else you purchased there asides from fuel? A receipt will show what relates to fuel and what doesn’t.
Bank and credit card statements are simple enough to keep track of. Simply get them sent to you electronically from your bank and then save them in a ‘tax’ folder in your email program. Too easy.
As for receipts, we recommend using technology to do the heavy lifting. There are apps available that allow you to simply take a photo of the receipt with your phone, enter a few details, and then you’re set. For individuals you could try the ATO app or one of the others running around the app store. For businesses there are a few options, but we recommend Receipt Bank as it communicates with Xero to save time on entering/matching expenses when it comes time to do your bookkeeping. They also offer the option of sending off your box of receipts to be entered into Xero or an Excel spreadsheet to save you the hassle. Winners all ’round.
Another common question is: how long do I need to keep the records for? Again, the answer depends, as follows:
- businesses – 5 years after the date the records were prepared or the date of the relevant transaction, whichever is later
- individuals with simple affairs – 2 years from the date you lodge your tax return (refer to link for definition of ‘simple affairs’)
- individuals without simple affairs – 5 years from the date you lodge your tax return
If you have any questions regarding your tax affairs, please get in touch, we’d love to help.