Sole trader bookkeeping basics: the six habits that keep you out of trouble

Habit 1: one account for the business

Open a separate bank account (it does not have to be a fee-charging business account; a second everyday account in your name works for a sole trader) and run everything through it: all income in, all business expenses out, and a regular transfer to your personal account as your pay. Get a debit card on it. From that moment the bank statement is a complete list of your business transactions and your bookkeeping is mostly categorising it. Mixing business and personal money in one account is the single biggest cause of missed deductions and painful tax time.

Habit 2: categorise everything

Every transaction gets a category: sales, materials, fuel, software, phone, insurance, drawings, and so on. Categories are what turn a list of transactions into income and expense totals for the BAS and tax return. Do it as you go rather than in June; a transaction is easy to categorise the week it happens and a mystery a year later.

This is the step software does for you. Upload the statement and FlowFi’s AI assigns a category to each line, flags the ones it is unsure about, and learns from your corrections. Your job becomes a five-minute review rather than a data entry session.

Habit 3: keep the receipts

The bank line proves you paid; the receipt proves what for and whether it carried GST. Photograph paper receipts the day you get them and attach them to the transaction. Forward emailed invoices to the same place. Anything over $82.50 needs a tax invoice to claim the GST; anything at all needs some evidence to claim the deduction. Five years is the keeping period. See record keeping requirements.

Habit 4: track GST as you go, if registered

If you are registered, each sale has GST in it and some purchases do. Recording that per transaction means that at the end of the quarter G1, 1A and 1B are already totals rather than a project. Watch the usual traps: bank fees, wages, overseas subscriptions and government charges have no GST; mixed-use items only carry the business share. FlowFi decides the GST treatment for each line as it categorises, so the BAS page shows the running position all quarter. If you are not registered, keep an eye on your rolling 12-month turnover for the $75,000 threshold instead.

Habit 5: reconcile monthly

Reconciling just means checking that your records match the bank: every statement line is categorised, nothing is missing, nothing is doubled. If you work from an uploaded statement it is almost automatic, because the statement is the record. The monthly check is for the things that are not on it: cash income you have not entered, an expense paid from a personal card, an invoice that was paid but not marked paid. Fifteen minutes on the first of the month.

Habit 6: put the tax aside

A sole trader has no employer withholding tax, so the bookkeeping has to include the bill. Two transfers as income arrives: one eleventh of GST-inclusive receipts to a GST account if registered, and a share of the rest for income tax based on your expected rate. The sole trader tax calculator gives a monthly figure. Money set aside is money you cannot accidentally spend, and it makes the BAS and the tax return non-events. See setting aside money for tax.

What the year looks like

Weekly: photograph receipts, send invoices, glance at what has been paid. Monthly: upload the statement, review the categories, reconcile, move the tax money. Quarterly: lodge the BAS from the totals, by the 28th. Annually: hand the categorised year to your accountant or complete the business schedule yourself, with the equipment purchases, vehicle percentage and home office hours already recorded. See how often to do your bookkeeping for the rhythm and what to give your accountant for the year-end pack.