The 5 most frequently asked questions about record keeping

Can I “Guesstimate”? A Business Expense?

Not at all. You cannot ‘guesstimate’ an expense.

Expenses cannot be claimed without proper documentation that they occurred. By 'guesstimating', you may expose yourself to penalties.

How Long Do I Have To Hold Receipts For?

After you file your tax return, you are generally required to keep tax records for five years.

Keep all receipts, proofs of income, calculations, nominations, and other records supporting your tax return for five years.

What’s The Best Way To Keep Records?

As for how you want to keep the records, it comes down to personal preference. Many people prefer to keep hard copies in shoeboxes, while others prefer to keep them in specific files their computer. Make sure that you have backups available. Whether this is through cloud storage, a USB or additional print copies, having backups means you’re covered if anything goes awry.’ Using apps like Hubdoc which feed into your software will assist with record keeping.

Are There Exceptions To The 5-Year Rule?

If the records are related to a company, then the Corporations Act 2001 requires the company to keep financial records for 7 years.

If the records relate to a superannuation fund, then some of those records must be kept for 10 years, including minutes of trustee meetings and copies of all reports given to members.

In addition to the general rules, there are some circumstances where you must keep the tax records for longer than 5 years after lodging the relevant return.

Carried forward tax losses: If you have tax losses that have been carried forward from earlier years, you will need to keep all records from the start of those losses until 5 years from when you make the final claim.

• Depreciable assets: If you have depreciable assets, you will need to keep all records relating to that purchase from the date of purchase until 5 years from when you make the final depreciation claim.
• Cost base for capital gains tax: If you own a capital asset – such as an investment property or shares – you will need to keep records of the cost base (including the purchase price, the costs involved in acquiring the asset and the costs involved in holding the asset). This is so that when you get rid of the asset, you can accurately calculate the capital gain or loss. The cost base records should then be kept for five years after the tax return in which the gain or loss is reported.
• In a dispute with the ATO: If you are in dispute with the ATO, you need to keep your records for five years after the dispute is resolved.
• Employees: If you pay wages, you should keep tax records relating to your employees for up to seven years (according to the Fair Work Act 2009) after their employment is terminated.

If I Gave Records Directly To My Accountant, Do I Still Need To Keep Them?

Even if your records were given to your accountant for your tax returns, you still need to keep a copy of them up to the time limits given above (depending on the record).