Whether you are just starting up or have an established creative styling business it is absolutely essential that you keep an accurate record of all your income and expenses. Most creatives will agree that keeping receipts and paperwork is nothing but a bother, this is when I remind my clients that it isn't as bothersome as paying unnecessary taxes!
Australia's income tax system works on a self-assessment principle, they define an expense as any money spent with the intention of earning income for your business. ALWAYS ask for receipts even if it is only for a cup of coffee with a potential client.
To avoid feeling overwhelmed separate your records into two categories - Financial and Business.
1. Financial record keeping refers to any transaction that has a financial element, for example:
- Copies of Tax Invoices/Receipts you provide for goods sold or services performed.
- Invoices for goods or services you purchased or business related bills you pay such as rent/rates for a commercial studio space/premises, insurance, licence fees etc.
- Records of any capital purchases that you use in your business eg. a new motor vehicle, laptop computer, camera related equipment, tools, office furniture.
- Records of any payments made to employees/contractors and to other organisations for your PAYG withholding, super and workcover obligations.
- Bank account and credit card statements.
2. Business record keeping refers to records relating to your business and employees.
- Any contracts, insurance policies and other legal documents.
- Your lease if you are renting.
- Licences and permits.
- Employee records including time sheets, copies of payslips etc.
- Safety records e.g. workcover/occupational health & safety
As a rule when deciding whether to keep a receipt ask yourself -
does it relate to either my business structure or the earning of income?
if the answer is yes, ask yourself - is it private or domestic in nature ? or is it of a capital nature ?
Sometimes the answer will be iron clad and sometimes it is not, this is why it is important to work closely with your accounting professional who knows the in's and out's of your business and will be able to help to minimize your tax and save you money.