Need help with business transactions for tax time

[dont_waste_dollars]

Gday,

this year ive started buying a selling on ebay for a profit but recently have realised next financial year im going to have to pay income tax on my profit but i have no idea what programs to use to keep decent records. today i registered my business name and got an ABN but im a little but clueless in the whole record keeping area

also if i complete a transaction and then three months later get credited 5% cashback from a cashback website, how do i keep a record of that? and if i dont include that in my profit.. will the ATO find out?

currently all im doing is doing various calculations SELL  PRICE - FEES - BUY PRICE = PROFIT rounded to nearest dollar. Then i add on the cashback figure to get my final profit and just put that figure in a notepad document.

Im guessing thats definately not a decent record keeping device but i have no idea what else to use... i mean i could put it in excel and not round it to the nearest dollar... but is that good enough proof? do i need to include transaction receipt numbers etc? ive used many different accounts to pay for the items, paypal, credit card, bank account. ARGH any help would be GREAT 

THANKYOU very much in advance

[davewil1964]

You definitely need to talk to an accountant. As a registered business (bad move if you're not going to turn over at least $75k pa) you will also have to have your accounts audited annually.

Rule of thumb -

Keep receipts for ALL purchases

Keep receipts for ALL expenses.

Keep receipts for ALL income

Paypal and eBay will provide you with information for the income and part of the expenses bits. You need to be aware of what is a tax-deductible expense, what is a capital outlay only recoverable on sale (your stock), what constitutes income. I suspect a 5% rebate on stock counts as a deduction on your expenses/capital.

I use a spreadsheet, but others use professional accounting software.

[dont_waste_dollars]

from november 18 2013-july 27 2014 my turnover has been 30k

I was told that if i was turning over 20k i should have an ABN and if im turning over 75k thats when i have to start paying GST

so aslong as i stay under 75k i should only have to pay income tax on my profit correct?

ive downloaded an ebay excel spreadsheet and ill start putting all my data into there. 

With the receipts should i save monthly my paypal received transactions, my ebay sales and the invoices for every item i buy?

so like a folder for paypal folder for ebay and a folder for invoices just saved in my documents will that suffice?

[5kazam]

Correct me if I am wrong (and I'm sure you will), but unless things have changed in the last years, there is no requirement for OP's accounts to be audited.  He/she is only a registered business, most likely not Pty. Ltd., no shareholders, so an audit wouldn't be necessary, or required.

[jensmanchester-australia]

Best to speak to an accountant first.

If you are looking for a easy online accounting package to use Xero is excellent and not overly expensive. It is ideal for online businesses as it automatically feeds transactions from Paypal and bank accounts into the Xero program. It is then very simple to allocate each transaction into either a sale or an expense. It will also take care of the cashback situation for you.

It saves hours if you are currently doing it manually.

Also you don't have to have your accounts audited every year just because you have an ABN

[thecatspjs]

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@5kazam wrote:

Correct me if I am wrong (and I'm sure you will), but unless things have changed in the last years, there is no requirement for OP's accounts to be audited.  He/she is only a registered business, most likely not Pty. Ltd., no shareholders, so an audit wouldn't be necessary, or required.

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You are correct 5kazam.  It depends on the type of entity that you are registering a business as for the audit requirements to quick in.

[clarry100]

My wife and I operate two stores and two auction IDs. We have our ABNs in place.

I spoke with my tax accountant last year before we started selling seriously as you indicated.

He said keeping your records in a spreadsheet is fine and that's all he needs to transfer it all into his tax return software.

Like you we are over $20K but under $75K sales in the tax year. So we are subject to income tax but not GST yet.

I have setup my own spreadsheet as I'm OK with Excel.

I have created a bunch of tabs each one for a different aspect of income/expenses.

Then I just roll up all the various totals to a summary page at the top. And I track each expense as a percentage of total sales so I can see where the money is going. At the bottom is a profit figure after all allowable expenses are deducted.

The Excel worksheet tabs I have are something like this:

Gross Income (sales) for each ID we have

Stock Purchase costs

Fees for ebay & paypal

Rent (not sure what happens if you have a mortgage. Maybe the interest portion only!)

Utilities Costs

Phone/Internet Costs

Postage Costs

Asset Costs

Stock value on Hand (Counted each July 1st)

Floor Space Calculations

Vehicle Log Book (for low usage you only need to log a single week in the year)

Other Allowable Expenses

According to my accountant if you use a certain floor area of your home that is dedicated 100% to ebay work then that percentage is in general what you can claim for things like rent, utilities and the like.

Phones & internet costs are apportioned to business/private use. Be realistic with this and you will be OK.

Above all, keep ALL receipts for ALL expenses. And I enter them into the s/sheet as they occur. This way I dont forget.

Hope this helps some.

[dont_waste_dollars]

i looked at xero and the cheapest package is $25 dollars . im not quite sure if i would need the bigger packages. how can i tell?

[dont_waste_dollars]

thankyou for your response, i think this is what i will do

-create a folder with monthly paypal, ebay, bank account and purchase invoices, also my cashback site credits aswell somehow

-start from july 1 this year and put all my information into an exel spreadsheet

what else would u guys recommend?

[jensmanchester-australia]

At this stage you would probably only need the $25.00 a month package.

They have a 30 day free trial.