Overview

Australian Businesses are required to keep proof of purchases for any purchases over $75.00 (Ex GST). A Proof of Purchase (or Source Document) is a document that contains specific information; this normally comes in a format of a Receipt or a Tax Invoice. Australian Businesses are required to issue tax invoices within 28 days from the date the service has been provided.

The Tax Practitioner Board stipulates in their Code of Conduct, the requirement for all Registered Agents to conduct due diligence when dealing with their Clients’ financial information.

Although the GST ruling clearly states a proof purchase is required for transactions over $75.00 (Ex GST), as Registered Agents we still need to abide by our TPB Code of Conduct and request proof of purchase from Clients for all their purchases.

Our goal, when asking for proof of purchase, is to ensure that the purchases made through the Business Account are for Business purposes and not for personal. Furthermore, Tax Invoices allow us to make a clear determination of the type of purchase made (so we can code it to the correct expense account) and whether the particular Supplier is registered for GST or not.

We have developed a process to help us deal with a number of scenarios where a Client is unable to provide us with the required proof of purchase for transactions or when a Client states a specific purchase is Business related, and we believe it's not.

Overall when reviewing this process one key aspect across all transactions is the importance to make clear and succinct annotations detailing the reason we have decided to post the transaction to potentially a non-Tax Deductible account.  

Based on a review conducted with a number of Clients, we have outlined 4 common scenarios:

1. No Source Document provided > Transaction under $75 (Ex GST)
2. No Source Document provided > Transaction over $75 (Ex GST) | Expense Identifiable
3. No Source Document provided > Transaction over $75 (Ex GST) | Expense Not Identifiable
4. Disputed Transaction > Transaction claimed for Business purposes which we have reason to believe are personal

Process

1. The transaction appear in the Bank Feeds > We flag in the notes
   1. The client ignores the message > Leave the transaction unreconciled until the BAS deadline and go to Step 2
   2. The client responds confirming the receipt is lost > go to Step 3
2. At BAS preparation, the transaction will be included in the Unreconciled Report Transaction. If the Client acknowledges the Tax Invoice has been lost or ignores the message, go to Step 3.
3. Tax Invoice is lost/not provided by BAS deadline:
   1. The Transaction is under $75 (Ex GST) > we post it to the relevant expense account with the annotation ‘No receipt provided’'
      
      è  Recording a transaction under $75.00 with no receipt
      
      
      
   2. The Transaction is over $75 (Ex GST) > based on the description from the Bank Fees we can determine the expense type. We post the transaction using the item: ZZZ-NOINV.
      This item is linked to the Suspense account. We then replace the Suspense Account with the relevant expense account, keeping the Tax Rate to BAS Excluded. In the notes, we note the reason given by the Client for not having the relevant Supporting documentation.
      
      è  Recording a transaction over $75.00 with no receipt 
      
      Step 1 > Go to the [Create] Tab and click on Add Details
      
      Step 2 > Enter the spend money transaction by selecting the Item ZZZINV and replacing the Suspense Account with the relevant Expense account
      
      
      
      
   3. The Transaction cannot be determined > based on the description from the Bank Fees we cannot determine the expense type. We post the transaction using the item: ZZZ-UNDET.
      This item is linked to an Account called ‘Director’s Loan – Undetermined Transaction. In the notes, we note the reason given by the Client for not having the relevant Supporting documentation.
      
   4. The Client claims the transaction is for Business use, but we believe it’s for Personal use. We post the transaction using the item: ZZZ-DISPUT. This item is linked to an Account called ‘Director’s Loan – Undetermined Transaction. In the notes, we note the reason why we believe the transaction is for personal use and not for business use.
      
      è  Recording an undetermined or disputed transaction
      
      Step 1 > Go to the [Create] Tab and click on Add Details
      
      
      
      Step 2 > Enter the spend money transaction by selecting the Item ZZZ-UNDET or ZZZ-DISPUT and update the Description
      
      
      
      
4. At the end of the year, we will send a report to the Accountant (as part of our EOFY Reconciliation process) which lists all these transactions and they can make the correct Tax determination.