Record keeping for businesses in NSW – what you need to know

Doesn’t matter if you’re a sole trader, small business, or a company, every business must follow the record keeping laws.

Besides making sure you don’t run into compliance or legal problems, maintaining clear and complete records helps you manage your finances, and can help you understand your business performance.

What is a record when it comes to business?

The ATO defines a record as:

A record explains the tax and super-related transactions conducted by your business.

The record needs to contain enough information for us to determine the essential features or purpose of the transactions, so we can understand the relevance of the transactions to your business’s income and expenses.

The minimum information that needs to be on the record is generally the:

  • date, amount, and description (for example, sale, purchase, wages, rental) and the relevant goods and services tax (GST) information for the transaction
  • purpose of transaction
  • relationships between parties to the transactions, if relevant.”

What is the law about record keeping

By law, your business must:

  • Document all financial transactions.
  • Keep these records in English or in a format that can be easily translated.
  • Store them for at least 5 years (some records might need longer storage).

Consequences of not record keeping in line with requirements

If you don’t maintain your records in line with the requirements, you could face fines or penalties from the ATO. Besides that, poor record keeping means:

  • It becomes challenging to accurately report income, leading to tax discrepancies.
  • Poor record keeping can result in cash flow issues
  • It may affect your ability to make business decisions.

Where to find the record keeping rules for businesses 

The Australian Taxation Office (ATO) website is a comprehensive source for record-keeping rules. Visit ATO’s Record Keeping for Business page for detailed guidelines on what records to keep, how to keep them, and for how long.

How can a bookkeeper help you with record keeping

Managing records can be pretty complex and time consuming. Outsourcing your bookkeeping to include accurate record keeping can:

  • Save you time and allow you to focus on core business activities.
  • Make sure your financial records are accurate 
  • Keep you compliant with the latest tax laws and regulations.
  • Offer peace of mind knowing professionals are handling it for you

A bookkeeper can assist a business owner with the rules about maintaining financial records for five years by:

Organisation: They can help in organising financial records systematically, ensuring easy retrieval and reference.

Compliance: Bookkeepers know legal requirements like the back of their hand, including ones for record retention and can ensure that a business complies with these regulations.

Regular Updates: They can keep financial records up-to-date, regularly reviewing and updating them as necessary.

Secure Storage: Bookkeepers can advise on or manage the secure storage of financial records, whether digitally or in physical form, to protect them from damage or loss.

Audit Preparation: By maintaining organised and accurate records over the required period, bookkeepers help prepare the business for any potential audits.

Advisory: They can provide guidance on what records need to be kept and for how long, tailored to the specific needs and context of the business.

What a relief knowing your business’s financial record-keeping is thorough, compliant, and well-managed, aligning with legal requirements like the five-year retention rule.

How and where to keep records: Xero and QuickBooks

The days of having a huge filing cabinet full or paper are gone. Modern technology means there are cloud based solutions for record keeping. Tools like Xero and QuickBooks are excellent for this purpose. They allow you to:

  • Store all your financial records in one place, accessible anywhere.
  • Automatically sync transactions, reducing manual entry errors.
  • Generate financial reports with ease.
  • Securely store data with cloud backups.

How to dispose of business records

When it’s time to dispose of old business records, make sure you do it securely to protect sensitive information. 

Here are some tips:

Understand Retention Requirements: Before disposing of any records, make sure  they’re not needed for legal, tax, or operational purposes. Typically, business records should be kept for a minimum of five years.

Shred Physical Documents: For paper records, use a cross-cut shredder. This ensures that confidential information cannot be reconstructed.

Securely Delete Electronic Records: For digital records, simply deleting files isn’t enough as they can be recovered. Use digital shredding software to permanently erase files.

Use Certified Disposal Services: For large quantities of sensitive documents, consider using a professional document disposal service that can provide certification of secure destruction.

Recycle Responsibly: After shredding paper documents, recycle the remnants if possible, keeping in mind environmental responsibilities.

That’s a wrap

Keeping accurate and complete records is not just a legal requirement but essential for successful business management. If you’re finding it challenging to keep up with your record keeping obligations, consider outsourcing to a professional bookkeeping service. Not only will this ensure compliance and accuracy, but it will also free up your time to focus on growing your business. Don’t let the complexity of record-keeping hold your business back and get you in trouble down the track.

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