Accounting For Sole Traders
Sole traders are small businesses (often one person) who operate a business under a ABN using there own tax file number. Generally sole traders will register a business name. Sole traders may or may not be registered for GST but are required to keep records to prove their income and expenses for tax obligations. If you are a Sole Trader, Rider Accountant’s & Advisors are the experts at helping YOU unravel and sort out the mess of accounting and tax. We will bring your tax, BAS and accounting up to date so that in the eyes of the ATO you have a clean bill of health.
Some of the records a sole trader is required to keep includes the following:
1. Income records:
A sole trader whether you are based in Newtown, Mascot of Marrickville must keep a record of all income including invoices to customers, cash sales, bank statements, and other documents that prove the income coming into your business.
2. Expense records:
This includes invoices, receipts, bills, and any other documents that are related to the expenses of operating your business. This is important to calculate the tax deductions for sole traders. ALWAYS keep receipts and if you use a vehicle keep a log book of your travel. At Rider Accountants Marrickville, we recommend you download and install DriversNote on your phone.
3. Goods and Services Tax (GST) records:
If you are a sole trader earning more than $75,000 per year, you are required to register for GST and keep your GST records. Some GST records include tax invoices to customers and invoices from suppliers. Once you register for GST, you will be required to submit a Business Activity Statement (BAS) to the ATO either every 3 months or once per year. Sign up for Xero accounting software to make preparation of the BAS much easier.
4. Depreciation and capital assets:
If you have purchased capital assets such as vehicles or equipment, you need to keep records of receipts. This is useful to determine the depreciation and capital gains or losses for your business. There may be also significant tax benefits if you buy plant and equipment for your business so make sure you keep all purchase receipts such as a “Tax Invoice”.
5. Loans and debts records:
This includes the likes of loan agreements, interest payments, and repayment schedules. This is useful for tracking your liabilities and expenses.
Keeping sole trader and personal records separate
As a Sydney based sole trader, you are required to keep records, but things can get messy when involving your own personal finances. You may have wondered; how can I easily track my sole trader income and expenses.
1. Open a separate bank account:
Opening a separate bank account for your sole trader business can make it easier to track your income and expenses. Going through the process of manually separating your sole trader income and expenses from your personal account can be tedious. Opening a separate account means all your income and expenses are in one place and easy to access. This means sole trader tax deductions and income can be processed faster.
2. Use a Cloud accounting package such as Xero:
Using internet-based accounting software such as Xero can make the process of tracking your business’s income and expenses even easier. Using Xero accounting software is useful for Newtown and other Sydney-based sole traders as your finances are efficiently categorised and tracked). Email xero@rideraccountants.com.au to get a quote on the monthly cost of Xero. d