Why should I care about keeping proper records? Isn’t it enough that I earn more than I spend and my bank balance shows a positive figure?
No it isn’t.
You should care about keeping proper records is because it is required under the law.
If you are “carrying on or exercising any trade, business, profession or vocation”, you are obliged to keep your business records for at least 5 years from the year of assessment to which any income relates. (Section 67(1)(a), Income Tax Act (Cap.134))[1]
Your business records include:
- books of account recording receipts or payments or income or expenditure
- invoices, vouchers, receipts, and such other documents as in the opinion of the tax authorities are necessary to verify the entries in any books of account; and
- any records relating to any trade, business, profession or vocation.
If the gross receipts from such trade, business, profession or vocation in the preceding calendar year exceeds certain limits (currently $18,000 from the sale of goods, or $12,000 from the performance of services), you may need to issue serially issued printed receipts.
But I’m just a hawker/Uber driver/freelance tuition teacher/celebrity blogger.
You may be considered to be a “self-employed” person by the tax authorities and may hence be required to maintain business records.
But surely I won’t get caught right?
Think again.
In FY 2015/2016, IRAS conducted 4,013 audits on individual income tax, 4,115 audits on corporate income tax and 3,201 GST audits. It also carried out 121 investigations, including investigations into tax evasion and fraud.
Penalties for tax evasion can be 4 times the amount of tax evaded in the case of income tax evasion and 3 times the amount of tax evaded in the case of GST tax evasion. You may also be fined and jailed.
Having said that, IRAS has said that it treats disclosures of past mistakes as mitigating factors when considering action to be taken. So it is better to comply sooner rather than later.
Want to learn more about getting your business records in order? Contact us today!
