Home – New Forums Selling online How to record online expenses as business expenses?

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  • #995280
    Richard.G
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    Hi There,

    I am new here and this is my first post.

    I am an employee earning a monthly salary. My wife is not working. We are planning to start an online business. It won’t have an offline component, and the revenue will be from online services and products.

    In our research, we found it would be better to start the business as a trust for tax effectiveness.

    I got few questions on expense tracking.

    (1) How should I track online expenses like domain names, payments to freelancers, payments to advertising etc so that I can claim them as business expenses? Do the invoices have to have my business name and/or ABN ? Do I have to register in online services with my business name and email address?

    (2) Most of the expenses will be paid with my credit/debit card. Should I instead set up a business bank account?

    (3) Initial investments and expenses will be from my income earned via my current job. How should I record these?

    Thanks in advance…

    Richard.

    #1200908
    Paul – FS Concierge
    Keymaster
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    Hi Richard,

    If you set up a Trust, you will need to register for an ABN and TFN for the trust.

    When you have those, you can set up a business bank account with a debit Visa and Mastercard.

    And then use an accounting program like Xero, Saasu or Wave to record your transactions.

    In the meantime, your accountant will be able to help you to record business expenses and offer advice.

    Cheers

    #1200909
    John Debrincat
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    Richard.G, post: 238083, member: 84677 wrote:
    Hi There,

    I am new here and this is my first post.

    I am an employee earning a monthly salary. My wife is not working. We are planning to start an online business. It won’t have an offline component, and the revenue will be from online services and products.

    In our research, we found it would be better to start the business as a trust for tax effectiveness.

    I got few questions on expense tracking.

    (1) How should I track online expenses like domain names, payments to freelancers, payments to advertising etc so that I can claim them as business expenses? Do the invoices have to have my business name and/or ABN ? Do I have to register in online services with my business name and email address?

    (2) Most of the expenses will be paid with my credit/debit card. Should I instead set up a business bank account?

    (3) Initial investments and expenses will be from my income earned via my current job. How should I record these?

    Thanks in advance…

    Richard.
    Hello Richard,

    You need to consider that there are complexities and ongoing costs associated with setting up and running the trust. If you are going to produce some reasonable level of revenue it might be worthwhile but I am guessing that you don’t know.

    If you have ambitions of building and online business that might eventually be sold off then starting with a normal company structure might be a better approach.

    Most small online businesses start out as sole traders. You can apply for an ABN as a sole trader and there is very little cost involved.

    My suggestion is to get some personal tax advice from a trusted adviser.

    If you are unsure of what level of revenue that might be generated then jumping into a formal trust structure just might be overkill.

    This is not tax advice just some common sense from watching lots of small businesses start up.

    Regards

    John

    #1200910
    Richard.G
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    Thanks for your advice Paul and John..

    #1200911
    Easysmb
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    Hi Richard
    Regarding your questions:
    1. Bookkeeping should be based on your expectations of transaction volume, if there are not many. You can record manually, there is free excel bookkeeping template on our website for your reference. Small invoices do not have to come with your business’s details, but it is recommended to have proper invoices for large amount payment.
    2. For many sole trader, the easy way to separate business and personal expenses is to use separate bank account. If you plan to trade as sole trader first, you can just open separate bank account for business.
    3. Your personal investments in the business will be loan to business and can be paid back when business have free cashflow.

    Also regarding your business structure, it is really a matter of expectation of revenue. Trading discretionary trust is one option, and of course, there are extra compliance cost for trust. Based on your plan and expectation, you have option to trade under a Pty Ltd company or sole trader, which is easiest one.

    If your business is expected with high volume, it is recommended to use cloud accounting like Xero to reduce your admin burden and also it is easy to collaborate with your advisors.

    Good luck.

    #1200912
    bb1
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    #1200913
    Helen27
    Member
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    Definitely set up a business bank account, with all expenses relating to the business coming from, and going into, it. Then track with whatever book keeping software you decide to use. It would end up being an absolute mess using your own personal account.

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