How to Sort Out Your Tax Filing System
Having a well-organised record-keeping system is the key to making tax time less stressful and time consuming
Tax time is time-consuming and stressful at the best of times, but it’s a hundred times worse when your tax documents and receipts are scattered all over the place and in no logical order. Having a well-organised tax record filing system is the key to making the process a whole lot simpler, quicker and hassle-free. Plus, it will ensure that none of your deductions are overlooked, which will (hopefully) see you get a nice big refund – or, at the very least, a reduced tax bill – once you’ve lodged your return.
If you’re yet to file your tax return for this year and find the whole process intimidating, as many of us do, here’s a quick rundown.
- If you have any tax withheld from your pay or earn $18,200 or more during the financial year, you must complete a tax return.
- One of the essential documents you need to lodge your return is a Pay As You Go (PAYG) payment summary, which should have already been given to you in either electronic or paper form by your employer/s. This essential tax-time document (which used to be called a group certificate) details your gross income, amount of tax withheld, as well as certain allowances or other benefits that were paid to you by your employer during the financial year.
- Once you’ve received your payment summary and other essential tax-time papers – for example, your private health insurance statement, which you’ll need for the Medicare Levy Surcharge section, and documents detailing other sources of income, deductions or investments – you can complete your return online, fill out a paper tax return, or hand your paperwork over to an accountant to do it for you.
- If you’re doing your own tax return, it must be lodged by October 31. However, if you’ve enlisted the help of a tax accountant, they can submit the return on your behalf past this deadline.
- According to the Australian Taxation Office (ATO), most refunds are processed within 12 business days or less if your return was lodged online. It can, however, take up to 50 days if you send in a paper return. You will also receive your notice of assessment (NOA), which is an itemised statement of the tax you owe on your taxable income (basically, it will tell you if you owe tax or will be getting a refund), during this time frame.
So, now that we’ve given you a basic rundown of the key tax-time dates and documents, it’s time to get down to business. Follow these tips to whip your tax filing system into shape so you’re ready to tackle the mammoth task of completing your return.
Sort your paperwork chronologically
The first step to setting up your tax record filing system is to gather all of the tax-related paperwork that’s lying around your house and sort them chronologically by year (if they’re not already grouped in this way), placing them in different piles as you go.
Gaining control over your old tax records will allow you to start your new filing system off with a clean (and wonderfully organised) slate and encourage you to continue building good record-keeping habits. Plus, it’ll help declutter your home office, and ensure the documents are ready to go in the event that you’re audited by the Australian Taxation Office.
Sort your paperwork chronologically
The first step to setting up your tax record filing system is to gather all of the tax-related paperwork that’s lying around your house and sort them chronologically by year (if they’re not already grouped in this way), placing them in different piles as you go.
Gaining control over your old tax records will allow you to start your new filing system off with a clean (and wonderfully organised) slate and encourage you to continue building good record-keeping habits. Plus, it’ll help declutter your home office, and ensure the documents are ready to go in the event that you’re audited by the Australian Taxation Office.
Bin your old tax records
The ATO only requires you to keep your tax records for the past five years, so bin or shred any paperwork or receipts for financial years prior to this time. Remember to check any documents before you destroy them (look out for paperwork relating to the purchase or sale of an asset or receipts for goods that have more than five years’ warranty), as you may need to retain them for legal or insurance purposes, or as proof of purchase.
The ATO only requires you to keep your tax records for the past five years, so bin or shred any paperwork or receipts for financial years prior to this time. Remember to check any documents before you destroy them (look out for paperwork relating to the purchase or sale of an asset or receipts for goods that have more than five years’ warranty), as you may need to retain them for legal or insurance purposes, or as proof of purchase.
Create folders for your filing cabinet …
Place your tax records for the past five years in separate manila folders and label them accordingly. When transferring your paperwork for the 2015-2016 period into its folder, place the documents that you’ll need when lodging this year’s tax return in front of the other papers so they’re easily accessible.
Place your tax records for the past five years in separate manila folders and label them accordingly. When transferring your paperwork for the 2015-2016 period into its folder, place the documents that you’ll need when lodging this year’s tax return in front of the other papers so they’re easily accessible.
You may also like to have several sub-folders within each financial year’s folder. In my own tax record drawer, I have three folders for each financial year – one for income; another for expenses and deductions; and the third for miscellaneous documents, such as my private health insurance statement. Depending on your situation, you might also like to have folders for assets and investments, or paperwork pertaining to government benefits you have received or tax cuts you’re entitled to.
If you have a large volume of receipts or other tax-related documents, sort the paperwork into smaller subcategories (for example, divide deductions into work-related car expenses, work-related uniform expenses, donations, etc.) and place them in separate folders. Assign different coloured folders to each of the main categories so you can quickly identify what folders belong to each group.
If you don’t have a filing cabinet in your home office or your pile of tax-related documents tends to be quite small every year, ring binders or accordion files are great tax record storage alternatives.
If you have a large volume of receipts or other tax-related documents, sort the paperwork into smaller subcategories (for example, divide deductions into work-related car expenses, work-related uniform expenses, donations, etc.) and place them in separate folders. Assign different coloured folders to each of the main categories so you can quickly identify what folders belong to each group.
If you don’t have a filing cabinet in your home office or your pile of tax-related documents tends to be quite small every year, ring binders or accordion files are great tax record storage alternatives.
… and for your computer and email, too
Create the same folders on your computer and in your inbox so you can file electronic receipts, invoices, bank statements and other digital tax-related documents in the appropriate folders as soon as you receive them.
Create the same folders on your computer and in your inbox so you can file electronic receipts, invoices, bank statements and other digital tax-related documents in the appropriate folders as soon as you receive them.
Digitise your records
Did you know that your tax records can be kept in either hard-copy or electronic form? If you have an aversion to clutter or don’t have a lot of storage available in your home office, scan and save soft-copies of your receipts and other essential tax documents to your computer and toss the paper versions out. Make sure you make a backup in case the files are accidentally deleted or become corrupted.
How to give paper the flick
Did you know that your tax records can be kept in either hard-copy or electronic form? If you have an aversion to clutter or don’t have a lot of storage available in your home office, scan and save soft-copies of your receipts and other essential tax documents to your computer and toss the paper versions out. Make sure you make a backup in case the files are accidentally deleted or become corrupted.
How to give paper the flick
Embrace spreadsheets
A simple way to keep track of your income and work-related expenses is by using an Excel spreadsheet. Plus, thanks to its fancy formulas, the program can also calculate the total amount of your earnings and deductions, saving you from doing it the old-school way with a calculator.
Refer to an old tax return form when setting up the spreadsheet, and create separate worksheets that correspond with different sections of the form. For example, make up different worksheets for each of the deductions subcategories, such as work-related car expenses, self-education expenses and donations. This will make filling out your tax return a breeze (for you or your accountant), as it offers a clear guide to the different amounts you need to declare on your tax return and the corresponding sections where the figures need to go.
A simple way to keep track of your income and work-related expenses is by using an Excel spreadsheet. Plus, thanks to its fancy formulas, the program can also calculate the total amount of your earnings and deductions, saving you from doing it the old-school way with a calculator.
Refer to an old tax return form when setting up the spreadsheet, and create separate worksheets that correspond with different sections of the form. For example, make up different worksheets for each of the deductions subcategories, such as work-related car expenses, self-education expenses and donations. This will make filling out your tax return a breeze (for you or your accountant), as it offers a clear guide to the different amounts you need to declare on your tax return and the corresponding sections where the figures need to go.
Regularly process your paperwork
The key to a well-oiled record-keeping system is regular maintenance. Set aside time each week (or once a month, if necessary) to update your hard-copy and electronic files, including your spreadsheets. This will prevent a backlog and (hopefully) stop receipts and other documents from becoming misplaced or lost.
If you accumulate a lot of hard-copy receipts, place a basket or in-tray by your computer. It’ll provide a handy spot to stash the invoices and act as a reminder to update your personal tax spreadsheet on a regular basis – don’t forget to input expenses that you’ve received electronic receipts for at the same time. Once you’re done, file the paper receipts away so they don’t get lost.
The key to a well-oiled record-keeping system is regular maintenance. Set aside time each week (or once a month, if necessary) to update your hard-copy and electronic files, including your spreadsheets. This will prevent a backlog and (hopefully) stop receipts and other documents from becoming misplaced or lost.
If you accumulate a lot of hard-copy receipts, place a basket or in-tray by your computer. It’ll provide a handy spot to stash the invoices and act as a reminder to update your personal tax spreadsheet on a regular basis – don’t forget to input expenses that you’ve received electronic receipts for at the same time. Once you’re done, file the paper receipts away so they don’t get lost.
Streamline the process with apps, computer programs and online tools
If you’re not spreadsheet-savvy and looking for a more user-friendly finance and receipt management system, there are plenty of online tools, record-keeping programs and services, and apps for your tablet or smartphone that you can try. I haven’t used any before, but a few that kept on popping up in my research were Evernote, Shoeboxed, Expensify and Etax Mobile App.
If you’re not spreadsheet-savvy and looking for a more user-friendly finance and receipt management system, there are plenty of online tools, record-keeping programs and services, and apps for your tablet or smartphone that you can try. I haven’t used any before, but a few that kept on popping up in my research were Evernote, Shoeboxed, Expensify and Etax Mobile App.
Keep calm and carry on
While setting up and maintaining your tax filing system isn’t a particularly fun or fast chore, you’ll definitely be thankful that you persevered with the project (as will your accountant) at the end of the financial year, as your beautifully organised records will make lodging your tax return easier, quicker and hassle-free.
TELL US
How do you organise your tax records? Tell us in the Comments.
MORE
What do spend your tax refund on
While setting up and maintaining your tax filing system isn’t a particularly fun or fast chore, you’ll definitely be thankful that you persevered with the project (as will your accountant) at the end of the financial year, as your beautifully organised records will make lodging your tax return easier, quicker and hassle-free.
TELL US
How do you organise your tax records? Tell us in the Comments.
MORE
What do spend your tax refund on