As tax season approaches, preparing your records for your tax return becomes a crucial task in order to prepare your 2025 return. In today’s digital age, leveraging technology can streamline the process, ensuring accuracy and efficiency. Here’s a guide from a tax agent on how to get your records ready for your tax return using digital methods. Let’s get your 2025 return ready!
1. Understand What Records You Need
Before diving into the organisation of your records, it’s essential to understand what information you need to gather. Typically, this includes:
– Income Records: Payment summaries, bank statements showing interest earned, dividend statements, and income from investments.
– Expense Records: Receipts for work-related expenses, educational expenses, investment-related expenses, and any other deductible expenses.
– Vehicle Records: If you use your vehicle for work, keep a logbook or diary of work-related journeys to calculate your claim.
– Rental Property Records: Income and expenses related to rental properties.
– Medical Expenses: Receipts for medical expenses if you are claiming a tax offset.
2. Digitise Your Documents
If you’re still holding onto physical receipts and documents, now is the time to digitise them. Use a scanner or a scanning app on your smartphone to create digital copies of all your tax-related documents. Ensure to back up these digital files in multiple locations, such as on your computer, an external hard drive, and a cloud storage service.
3. Use Accounting Software
For those who are self-employed or running a small business, using accounting software can simplify tax preparation for your 2025 return. Platforms like Xero, QuickBooks, and MYOB allow you to track income and expenses throughout the year, categorise transactions, and even generate reports that can be useful for tax purposes. Ensure that all your data is up-to-date and accurately reflects your financial transactions for the year.
4. Organise Your Digital Records
Create a dedicated folder on your computer or cloud storage for the current tax year. Within this folder, organise your documents into subfolders such as income, expenses, vehicle, and home office. This organisation makes it easier to find specific documents if needed during the tax preparation process.
5. Review Your Expenses for Deductibility
Go through your expenses and identify which are tax-deductible. Common deductible expenses include work-related expenses, investment expenses, and certain personal expenses. If you’re unsure about the deductibility of an expense, consult with a tax professional.
6. Keep Up with Tax Law Changes
Tax laws and regulations can change from year to year, affecting what deductions and credits you can claim. Stay informed about any changes that could impact your tax return. This can include changes to deduction rates, introduction of new credits, or alterations to income reporting requirements.
7. Consult with a Tax Professional
Even with digital records and accounting software, consulting with a tax professional can provide peace of mind and ensure you’re maximising your 2025 return. A tax agent can offer personalised advice, help identify additional deductions, and assist in complex tax situations.
8. Prepare for Next Year
Once this tax season is over and your 2025 return lodged, start preparing for next year. Maintain good habits of recording and organising your financial transactions digitally. Consider setting up automatic tracking within your accounting software for a smoother process next year.
Preparing for your tax return with digital records not only simplifies the process but also minimises errors and improves accuracy. By understanding what records you need, digitising documents, using accounting software, and staying informed about tax laws, you can ensure a more efficient and stress-free tax season. Remember, when in doubt, consulting with a tax professional can provide additional guidance and support.
The Team at The Accountants and The Finance Brokers are here to help you navigate your cash flow requirements in your business. We offer complimentary cash flow reviews and assist you in understanding your finance needs.
