One question we are often asked by clients who are setting up a new business as a sole trader is “Do I need to setup a new bank account for the business?” Legally, the answer is “No” as there is no legal difference between you as an individual and you as the business if you are a sole trader.
However, there are some very good reasons why it is better to keep your business banking separate from your private banking.
Some of best reasons are:-
- Saving on Accounting Fees – if we need to go through all of your bank statements to find business income and expenses for your tax return, it will take longer than if all of the relevant items are separate on a business bank statement.
- Protecting your Privacy – we don’t need to see your private income and expenses if they are in a separate bank account. You also may not need to provide any but your business bank account statements if you are audited by the ATO.
- Keeping Tabs on your Private Spending – by drawing amounts from the business account to your private account on a regular basis, you can easily see what business profits are contributing to your private expenses.
You might ask “But what if I want to pay my business expenses via a credit card or paypal account or similar?” You can keep these separate too by applying for a second credit card which you then use only for business. Then your personal expenses will all be on one credit card and kept private and your business credit card statements can be supplied to us for your tax return.
Please remember that you still need to keep invoices and receipts for items you buy on your credit card. The credit card statement only shows the amount paid to the supplier, it doesn’t give the detail of what was bought and whether it included GST and all of those details that we need.