Records you need to keep
You must keep records of most transactions, in English, for 5 years after you prepared or obtained them or 5 years after you completed the transactions or acts to which they relate, whichever is the later. Taxation Ruling TR 96/7-Income tax: record keeping-section 262A-general principles clarifies the record-keeping obligations of small businesses, particularly for cash transactions. In addition, Taxation Ruling TR 97/21-Income tax: record keeping-electronic records provides further information on electronic records.
The Australian Taxation Office (ATO) is helping small business operators meet their record-keeping obligations by reviewing their record-keeping practices. These reviews start with a telephone call or a brief visit to the business premises. The process is explained, you can ask questions and an interview is arranged for a later date.
Some of the more significant record-keeping problems identified by the ATO are failure to:
- record cash income and expenditure
- account for personal drawings
- record goods for your own use
- keep adequate stock records
- keep adequate records to substantiate motor vehicle claims.
For additional information, please refer to the publication Record keeping for business.
To get a copy of this publication or electronic record keeping package e-Record CD-ROM, ring 13 24 78.
Hobby or business?
It is important to determine whether you are carrying on a business or pursuing a hobby, sport or recreational activity that does not produce income.
In general, you are considered to have a business if the activity:
- has actually commenced
- has a significant commercial purpose or character
- results in a profit
- is carried out in a manner that is characteristic of the industry
- is repeated, regular or continuous
- cannot be more accurately described as a hobby.
For additional information, please read 'Are you carrying on a business' in the publication Complete tax guide for small business (NAT 1908-10.2000). [This publication has been replaced by a series of fact sheets. Refer to Are you in business? Primary producers should also refer to Taxation Ruling TR 97/11-Income tax: am I carrying on a business of primary production?.
Government industry payments
If they are assessable income, include payments received from all government sources at item P8 on your 2001 business and professional items schedule. Examples are: bounties, diesel fuel rebate, drought relief, employee subsidies, export incentive grants and Medicare payments to medical practices.