It’s Tax Time –  Start the Financial Year Right

The types of documents you will need to complete your tax return will vary, depending on your personal circumstances.

Records you need to keep may include proof of regular income and deductions, for example:

• Pay as you go summary (PAYG)
• Bank statements showing interest earned
• Share dividend statements
• Papers from any investments, including properties and related expenses
• Work-related deductions and receipts
• Travel and work-related car expenses
• Private health insurance charges
• Charitable donations

Tax-related documents are generally required to be kept for five years from when you lodge your tax return. Just in case you are asked by the Australian Tax Office (ATO) to substantiate your claims. These can be in either paper or electronic form.  Further information is available on the Australian Taxation Office Website www.ato.gov.au.

Please note: This is intended as general guidance to organise your paperwork and it’s recommended that you consult an accountant who can give you the best advice suited to your individual situation.

Preparation is key to doing your taxes. Thus, the first important step is to collect everything together so that it can then be sorted and organised more easily.  This applies to both paper and any electronic records.

For paper records, create one designated home for all your tax paperwork.  This could be on your desk or other area of your home – even a single shelf will suffice.  Most importantly, with a ‘catch-all’ area, you can find what you need when you need it.  Vertical systems are easiest, so you can simply drop in the newest paperwork in as you receive it. For simple tax affairs, you might choose a magazine file box, labelled manila files or tabbed, plastic-divided pockets . Add a small box to catch any loose receipts.  The amount of paperwork you have will determine what storage system best suits your needs. If you have lots of different categories, the Howard’s Storage World clear desk file box works brilliantly with the addition of some suspension files.  Remember to clearly label all files so you can find and reference papers quickly and easily.

For digital files and emails, create folders on your computer for each tax year and subfolders using the same names as your physical paperwork.  Remember to also back-up these electronic records too.

When you come to do your tax return, you may have more than one year to go through. Therefore, make things more organised and easy to understand by first sorting paperwork into chronological order. Then, separate out different tax years if needed.

Then, if you haven’t already grouped papers by category, you can start to divide it into different piles using your categories, so you can further review each in turn.

This makes the job of summing up each category and transferring information onto your tax return a straightforward task.  Alternatively, if your accountant processes your tax return for you, having your paperwork organised will make their task quicker – they will not only thank you, but it will probably cost you less too!

Remember that each year you should also be able to remove and shred old supporting tax paperwork once they go past the five years from date of lodgement – remember to first check with your accountant before you destroy anything.

As the ATO accepts electronic copies of supporting tax paperwork, you can further cut the paper clutter by going digital.  There are so many great Apps, computer software and cloud-based systems that can make it easy. Therefore, take a bit of time to review and choose a system that matches your specific needs.

You may choose to create a simple spreadsheet to summarise your income and deductions. For instance, scan supporting documents to your computer with a scanner or your phone camera.  It’s important to be consistent in naming your documents. For example, a receipt you can use the date and name of supplier. That way you can easily search and find document if needed. Remember to always back-up any electronic files on your computer and consider also keeping a back-up copy in the cloud, as an added protection.

If you download the ATO App on your phone, you can record expenses on the go. It also has some tools and calculators and links to online MyGov services where you can lodge your tax return online. Other great cloud-based systems include Evernote and Dropbox. They have corresponding Apps and also have the benefit of being accessible by all your devices anywhere.

For businesses, there are many cloud-based accounting solutions, including Xero and QuickBooks that can also integrate with other applications to further streamline things.

Once you have a home for all your tax paperwork to live, it’s important that you commit to transferring all tax-related items to their home.

Schedule time in your calendar to process your tax paperwork so you can keep things moving.  Having a great system makes it easy for all paperwork to flow in, through and eventually out.

Developing these good habits will also prevent that last-minute scramble and keep things in control!