Here at Maximum Business Solutions, our bookkeepers in Melbourne strongly advise against DIY bookkeeping.
And it’s not just because of the risk of mistakes (although that’s certainly important) – if you don’t do your small business bookkeeping properly, you might also run into problems with the law!
Bookkeeping is crucial for your business. Not only does it help you make decisions, but it also helps you stay on top of your tax obligations, among other things.
So it’s no surprise that small business bookkeeping comes with a whole range of strict legal requirements that you’ll be required to follow!
Here are just a handful of them…
Keeping records for 5 years, minimum
Every time your business makes a transaction, you need a record of it. What’s more, these records need to be kept for a minimum of 5 years.
In particular, bookkeeping legal requirements set by the ATO require you to keep records of:
- Income tax and GST (in the form of BAS returns)
- Sales, purchases and expense reports
- Banking records
- Payments to employees and contractors
- PAYG withheld
- Fuel tax credits
And it isn’t enough to simply record it either – you need to make copies of the most recent, up-to-date version of that record.
Here’s an example: say you generate a sales invoice, to be paid on credit. Once this invoice is created, it needs to be held for 5 years.
However, every time you update that record – for example, when your customer pays off the money they owe you – this “resets the timer” so to speak.
Electronic storage requirements
It’s not just how long you’ll need to keep records for that the ATO specifies – you’ll also need to adhere to some pretty important legal requirements regarding how it’s stored, especially with regard to electronic records.
In particular, the ATO requires you to create backups in case of computer failure.
This is where cloud bookkeeping comes in.
Instead of storing all your vital records on-site (and risk losing them all in the event that your computer fails), your records will be stored remotely on a secure server.
All of this ensures that the way your bookkeeping records are stored properly and in full compliance with ATO requirements.
Read this blog post to learn more about how cloud bookkeeping is changing bookkeeping for small business.
Applying as a GST-registered business and lodging BAS returns
All businesses collect GST – however, not all of them are GST-registered businesses.
It sounds counter-intuitive, we know.
Simply put, BAS statements record all the GST paid and collected on behalf of the ATO in addition to PAYG and fringe benefits tax. The ATO requires all businesses that make an annual income of more than $75,000 to make BAS lodgements.
However, many small business owners in particular completely overlook this particular requirement!
In some cases, it’s because they don’t realise that their annual income has crossed the threshold for mandatory BAS returns – in others, it’s because they simply don’t know that they have to register at all.
Either way, failure to register or lodge a BAS return on time can subject your business to a fine – $170 for every 28-day period overdue, with higher fines for repeat offenders.
Paying superannuation on time
There are many legal requirements that come with super payments – one of which is ensuring that your employees receive their superannuation payments on time.
And unfortunately, many employers aren’t doing this!
Superannuation needs to paid quarterly at the very least.
However, one of the mistakes small business owners make with their bookkeeping is leaving their compulsory superannuation contributions until the last minute.
Sometimes it’s laziness, while in others it’s an effort to save time by doing them all at once.
No matter the reason, you might find yourself having to pay extra in the form of interest and admin fees. In more extreme cases, you might even be hit with a penalty!
Small business bookkeeping comes with many bookkeeping legal requirements
Maximum Business Solutions can help you keep on top of them!
Maximum Business Solutions ensures that your bookkeeping is timely, accurate and most importantly, compliant with all the bookkeeping legal requirements.
In addition to looking after your small business bookkeeping, we can also help you enjoy the power of cloud bookkeeping. We help with integration and training on cloud platforms, making you bookkeeping:
- Faster and easier
- More accurate
- 100% compliant with your legal obligations