The essential guide to keeping good tax records

11 Feb 2019

 

With the end of the financial year a little over 4 months away, we thought it might be an opportune time to recap the record keeping requirements for taxpayers. 

 

Australia’s tax system is self-assessing. This means that you as the taxpayer are responsible for working out your deductions and keeping the appropriate records. It’s really important to keep good records because it not only makes tax time easier for you (and your accountant!) but it also provides evidence of your income and expenses and will help to resolve any future issues that may arise.

 

In order to make the whole process easier for you we’ve put together some of the questions that we frequently get asked: 

 

 

How long do I need to keep my records for? 

 

Generally, taxpayers are required to keep written records for five years from the date you lodge your tax return. However, individual taxpayers that are classified as having simple tax affairs only need to keep their records for 2 years. 

 

If you are a company or self-managed super fund (SMSF) taxpayer, the tax office requires you to keep your tax records for five years. But there might be some records that need to be kept for longer. For example, companies are required to keep certain records for 7 years under the Corporations Act, and the SIS Act requires SMSFs to keep some documents for 10 years!

 

 

What records do I need to keep? 

 

Basically, you should keep anything related to your tax return. For example, records relating to: 

·      Payments you receive 

·      Expenses related to payments received – including any log books or calculations related to working out the business use of an expense 

·      Donations. 

 

Any information regarding the acquisition or disposal of a capital asset (eg, shares, rental properties, etc), need to be kept for 5 years from disposal of the asset (or five years after it is certain no capital gains tax event will happen). 

 

Calculating the capital gains of your asset becomes quite difficult if purchase records are destroyed 5 years after purchase. Make sure to keep them for 5 years after disposal otherwise working out the capital gains will be time consuming and costly.

 

 

 

What should be included on expense receipts? 

 

Receipts and invoices should show: 

·      The name of the supplier 

·      The ABN of the supplier 

·      Amount of the expense or purchase 

·      Nature of the purchase or expense 

·      Date incurred. 

 

 

 

How should I keep records? 

 

The ATO accepts your records in paper or electronic format. Where you are keeping paper copies, we recommend that these records be scanned or photocopied, as some receipts fade over time. 

 

For small business, electronic software such as Xero, has the capability to store electronic copies of your documents in the cloud. These records can be attached to specific transactions to make record keeping easier. Please have a chat with us if this is something that you’re interested in.

 

 

 

 

If you are a small business (whether trading as a sole trader, family trust, partnership or company), the ATO has a useful evaluation tool that produces a report to show whether you are meeting the minimum requirements for record keeping and what you could do to improve your record keeping. This tool can be found at https://www.ato.gov.au/Calculators-and-tools/record-keeping-evaluation/ 

 

 

If you need any assistance with your record keeping requirements or have any questions after reading this, please do not hesitate to get in contact with us we’d love to help.

 

 

 

 

 

 

 

 

 

 General Advice Warning – The information in this article is educational and general in nature. It does not take into consideration your personal financial or taxation information, goals and objectives. Please ensure you seek appropriate financial and taxation advice. 

 

Liability Limited by a scheme approved under Professional Standards Legislation 

 

 

 

 

 

 

Adapted from - https://www.ato.gov.au/Individuals/Lodging-your-tax-return/In-detail/Record-keeping/Keeping-your-tax-records/ 

 

 

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