You are legally required to keep records of all transactions relating to your tax, superannuation and registration affairs as you start, run, sell, change or close your business. This includes:
- any documents related to your business’s income and expenses
- any documents containing details of any election, choice, estimate, determination or calculation you make for your business’s tax and super affairs, including how (basis or method) the estimate, determination or calculation was made.
To meet your record-keeping requirements and avoid common errors, ensure you understand what records are needed for your business and make accurate and complete record-keeping practices a part of your daily business activities. As your business changes or grows, you may need to review what records you need to keep.
There can be legal and financial consequences if your business doesn’t comply with these record-keeping requirements.
What is a record?
A record explains the tax and super-related transactions conducted by your business.
Your business records need to contain enough information for us to determine the essential features or purpose of the transactions, so we can understand the relevance of the transactions to your business’s income and expenses.
The minimum information that needs to be on a record is generally the:
- date, amount, and description (for example, sale, purchase, wages, rental) and the relevant goods and services tax (GST) information for the transaction
- purpose of transaction
- relationships between parties to the transactions, if relevant.
5 rules for record keeping
These 5 record-keeping rules apply to most records your business is required to keep to meet your tax, super and registration obligations. These are based on law and ATO view:
- You need to keep all records related to starting, running, changing, and selling or closing your business that are relevant to your tax and super affairs.
- If your expenses relate to business use and personal use, make sure you have clear documents to show the business portion.
- The relevant information in your records must not be changed (for example, by using electronic sales suppression tools) and must be stored in a way that protects the information from being changed or the record from being damaged.
- We may ask you to show us you have appropriate safeguards in place.
- You need to be able to reconstruct your original data if your record-keeping system changes over time.
- You need to keep most records for 5 years.
- Generally, the 5-year retention period for each record starts from when you prepared or obtained the record or completed the transactions or acts those records relate to, whichever is later. However, in some situations, the law states that the start of the 5-year retention period is different. For example:
- fringe benefits tax (FBT) recordsthe 5 years starts from the date you lodge your fringe benefit tax (FBT) return
- records for super contributions for employees, the 5 years starts from the date of the contribution
- records for super fund choice for your employees, the 5 years starts from the date of employee engagement or when an employee is offered, chooses or changes their choice of fund.
- There are also situations where you need to keep some records for longer than 5 years, including covering the period of review for an assessment that uses information from that record.
- You need to keep all information about any routine procedures you have for destroying digital records.
- Generally, the 5-year retention period for each record starts from when you prepared or obtained the record or completed the transactions or acts those records relate to, whichever is later. However, in some situations, the law states that the start of the 5-year retention period is different. For example:
- You need to be able to show us your records if we ask for them.
- Make sure you keep information about your record-keeping system so we can check that it meets the record-keeping requirements.
- Make sure that the information on the record includes the relevant details to meet your tax, super and employer obligations.
- If you store your data and records digitally
- using an encryption system – provide encryption keys and information about how to access the data when asked. You also need to ensure we can extract and convert your data into a standard data format (for example, Excel or CSV).
- using passwords to protect your records – provide information about how to access them
- ensure your data and records are identifiable, labelled or indexed as you store it. We may need to extract it and use an indexing or text-search system to look at it.
- Your records must be in English or able to be easily converted to English.
RECORDS YOU NEED TO KEEP FOR LONGER THAN FIVE YEARS
Records connected to an assessment that’s amended
You should keep records long enough to cover the period of review (also known as the amendment period) for an assessment that uses information from the record.
The period of review is the time period within which the assessment can be amended by you or by us.
You need to keep your records long enough to cover the 5 year retention period and the period of review for the relevant assessment. In many cases, the 5 year retention period will also cover the period of review
When your FBT assessment is amended, the period of review for that amended assessment restarts from the day after we give you the notice of amended assessment
Records of information used again in a future return
If you use information from a record in your tax return in one financial year and then use that information again in a future return, you need to keep that record until the period of review for the later tax return has ended.
Examples include:
- If you have to spread your borrowing expenses over 5 years, you will need to keep those records for long enough to cover the period of review for the tax return from the last year in which you claimed those expenses.
- If you work out that you made a business loss in 2017–18 and you carry that loss forward and deduct it in your business’s 2023–24 tax return, you need to keep the records you used to work out the loss until, at least, the 2023–24 tax return’s period of review has ended.
Records of depreciating assets
For depreciating assets, you generally need to keep the record for as long as you have the asset, and then another 5 years after you sell, or otherwise dispose of, the asset. However, there are different time periods and requirements that apply if the depreciating asset is in a low-value pool or is subject to rollover relief.
Records of capital gains tax assets
- For capital gains tax(CGT) assets, you generally need to keep the record for as long as you have the asset, and then another 5 years after you sell, or otherwise dispose of, the asset.
