Detailed business record-keeping requirements
The five rules for record keeping apply to all records your business needs to keep to meet your tax, superannuation and employer obligations.
In this section you will find the detailed information about the types of records you are legally required to keep, for the stages of your business’s life cycle and for the different tax obligations and situations relevant to your business.
Different businesses will have different record-keeping needs depending on their size, structure and nature so use the section headings to choose what’s relevant to your business.
Record-keeping tips
Ensure you understand the record-keeping requirements for your business and make it a priority to keep accurate and complete records. By doing so, you can avoid the various penalties that may apply.
The following tips can help you get it right. They are based on common record-keeping errors the ATO see:
- Keep accurate records of all cash and electronic transactions.
- Complete regular reconciliations of your sales (both cash and EFTPOS) and enter the amounts into your main business accounting software system. Depending on your business, this may be daily, weekly or monthly.
- Where business expenses have both business and private use portions, work out and record the business portion accurately.
- Ensure you have sufficient records to substantiate business expenses claimed as tax deductions.
- Don’t use estimates to prepare your tax returns and business activity statements (BAS). Ensure you have complete and accurate records to substantiate the information you include in them.
- Be accurate in how you use your source records to work out the amount you claim for the research and development tax offset, if this is applicable to your business.
Source – https://www.ato.gov.au/Business/Record-keeping-for-business/Detailed-business-record-keeping-requirements/
Overview of record-keeping rules for business
You are legally required to keep records of all transactions relating to your tax and superannuation affairs as you start, run, sell, change or close your business, specifically:
- 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.
The record needs to contain enough information for the ATO to determine the essential features or purpose of the transactions, so the ATO can understand the relevance of the transactions to your business’s income and expenses.
The minimum information that needs to be on the record is generally the:
- date, amount, and character (for example, sale, purchase, wages, rental) and the relevant GST information for the transaction
- purpose of transaction
- relationships between parties to the transactions, if relevant.
Five rules for record keeping
These five record-keeping rules apply to most records your business is required to keep to meet your tax, super and employer 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 and must be stored in a way that protects the information from being changed or the record from being damaged.
- The ATO may ask you to show them 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 five years.
- Generally, the five-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 five-year retention period is different. For example, for
- fringe benefits tax (FBT) records the five years starts from the date you lodge your fringe benefit tax (FBT) return
- records for super contributions for employees, the five years starts from the date of the contribution
- records for super fund choice for your employees, the five 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 five 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.
- You need to be able to show ATO your records if they 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 the ATO 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. The ATO 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.
The Australian Securities & Investments Commission (ASIC) requires companies to keep records for seven years.
Benefits of keeping acc
Detailed business record-keeping requirements
The five rules for record keeping apply to all records your business needs to keep to meet your tax, superannuation and employer obligations.
In this section you will find the detailed information about the types of records you are legally required to keep, for the stages of your business’s life cycle and for the different tax obligations and situations relevant to your business.
Different businesses will have different record-keeping needs depending on their size, structure and nature so use the section headings to choose what’s relevant to your business.
Record-keeping tips
Ensure you understand the record-keeping requirements for your business and make it a priority to keep accurate and complete records. By doing so, you can avoid the various penalties that may apply.
The following tips can help you get it right. They are based on common record-keeping errors the ATO see:
- Keep accurate records of all cash and electronic transactions.
- Complete regular reconciliations of your sales (both cash and EFTPOS) and enter the amounts into your main business accounting software system. Depending on your business, this may be daily, weekly or monthly.
- Where business expenses have both business and private use portions, work out and record the business portion accurately.
- Ensure you have sufficient records to substantiate business expenses claimed as tax deductions.
- Don’t use estimates to prepare your tax returns and business activity statements (BAS). Ensure you have complete and accurate records to substantiate the information you include in them.
- Be accurate in how you use your source records to work out the amount you claim for the research and development tax offset, if this is applicable to your business.
Source – https://www.ato.gov.au/Business/Record-keeping-for-business/Detailed-business-record-keeping-requirements/
Overview of record-keeping rules for business
You are legally required to keep records of all transactions relating to your tax and superannuation affairs as you start, run, sell, change or close your business, specifically:
- 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.
The record needs to contain enough information for the ATO to determine the essential features or purpose of the transactions, so the ATO can understand the relevance of the transactions to your business’s income and expenses.
The minimum information that needs to be on the record is generally the:
- date, amount, and character (for example, sale, purchase, wages, rental) and the relevant GST information for the transaction
- purpose of transaction
- relationships between parties to the transactions, if relevant.
Five rules for record keeping
These five record-keeping rules apply to most records your business is required to keep to meet your tax, super and employer 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 and must be stored in a way that protects the information from being changed or the record from being damaged.
- The ATO may ask you to show them 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 five years.
- Generally, the five-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 five-year retention period is different. For example, for
- fringe benefits tax (FBT) records the five years starts from the date you lodge your fringe benefit tax (FBT) return
- records for super contributions for employees, the five years starts from the date of the contribution
- records for super fund choice for your employees, the five 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 five 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.
- You need to be able to show ATO your records if they 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 the ATO 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. The ATO 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.
The Australian Securities & Investments Commission (ASIC) requires companies to keep records for seven years.
Benefits of keeping accurate and complete records
Accurate and complete records allow you to:
- monitor the health of your business and know whether your business is running at a profit or loss
- make sound business decisions
- keep track of money you owe and money owed to you
- monitor your cash flow to help you to make payments on time
- avoid penalties which may apply for failing to keep records
- demonstrate your financial position to lenders, businesses, tax professionals and prospective buyers
- more easily meet your tax, super and employer obligations, including preparing and lodging your returns, BAS, and taxable payments annual report (if you are a business that is required to)
- provide the information the ATO need if they audit your business, making the process easier and shorter.
Source: https://www.ato.gov.au/Business/Record-keeping-for-business/Overview-of-record-keeping-rules-for-business/#Fiverulesforrecordkeeping
Accountability for business record keeping
As the business owner, you are accountable for understanding your record-keeping obligations. If you use a registered tax or BAS agent to manage your records, you still retain primary accountability.
Accountable management and oversight is one of the principles of effective tax governance that can benefit all businesses.
ATO’s reviews and audits
The ATO have a responsibility to government and the community to ensure everyone complies with the laws they administer.
If the ATO check your tax and super affairs, it doesn’t mean they consider you’ve been untruthful. If they find a discrepancy, they accept mistakes can be made. They consider this if the law allows them to, when they determine if any penalties should apply.
They presume you’re trying to meet your obligations unless your actions give them reason to believe otherwise.
Penalties for not keeping or retaining records
There are penalties that may apply if you don’t keep or retain your records as required. The ATO take your circumstances, compliance history and behaviour into consideration if they need to make a penalty decision.
Source: https://www.ato.gov.au/business/record-keeping-for-business/overview-of-record-keeping-rules-for-business/accountability-for-business-record-keeping/?anchor=Ourreviewsandaudits#Ourreviewsandaudits
Keeping your tax records
The Australian tax system relies on taxpayers self-assessing. This means you are responsible for working out how much you can declare and claim on your tax return. You also need to be able to show how you arrived at these figures – in some cases, you may be required to provide written evidence.
In order to prepare an accurate tax return and support the claims you make, you need to keep careful records. The records you need to keep depend on your situation, but as a rule, it is better to keep too many records than not enough.
The importance of keeping records
Keeping good records helps you and your tax adviser:
- to provide written evidence of your income and expenses
- to help you or your tax agent prepare your tax return
- to ensure you are able to claim all your entitlements
- in case we ask you to prove the information you provided in your tax return
- reduce the risk of tax audits and adjustments
- improve communication with us
- resolve issues relating to disputed assessments or adjustments
- avoid exposure to penalties.
Reasons for keeping good records are to reduce the cost of managing your tax affairs. If your records are accurate and organised, you may be able to manage your own affairs via ATO Online services. If you use a tax advisor, reducing the time they spend sorting and preparing your records will give them more time to ensure you get what you are entitled to.
How long to keep your records
Generally, you must keep your written evidence for five years from the date you lodge your tax return.
There are some more specific situations. If you:
- have claimed a deduction for decline in value (formerly known as depreciation) – keep records for the five years from the date of your last claim for decline in value
- acquire or dispose of an asset – keep records for the five years after it is certain that no capital gains tax (CGT) event can happen
- are in dispute with us – keep records for the later of either
- five years from the date you lodge your tax return
- five years from the date the dispute is resolved.
Format of your records
You can keep your records in paper or digital format. If you make paper or digital copies, they must be a true and clear copy of the original.
The ATO recommend you keep a back-up of all your digital records.
Your documents must be in English unless you incurred the expense outside Australia.
Types of records you should keep
You should organise your records into these categories:
- payments you’ve received
- expenses related to payments you’ve received
- asset acquisition or disposal – such as shares or a rental property
- tax-deductible gifts, donations and contributions
- disability aids, attendant care or aged care expenses.
You may also need to keep records in some other categories, or for other family members – for example, if you receive the family tax benefit.
In some cases, you may choose not to keep particular records – for example, because you expect to claim for only a small amount of business travel. However, keep in mind that if you actually travelled more than you expected during the year, but don’t have all the records, you may not be able to claim for the extra travel.
As a rule, it is best to keep a record of all income and expenses. At tax time, you can decide what you do and don’t need. If you incur expenses for private purposes, you must have records that show how you worked out the amount of any private use.
Source : https://www.ato.gov.au/Individuals/Lodging-your-tax-return/In-detail/Record-keeping/Keeping-your-tax-records/
Accurate and complete records allow you to:
- monitor the health of your business and know whether your business is running at a profit or loss
- make sound business decisions
- keep track of money you owe and money owed to you
- monitor your cash flow to help you to make payments on time
- avoid penalties which may apply for failing to keep records
- demonstrate your financial position to lenders, businesses, tax professionals and prospective buyers
- more easily meet your tax, super and employer obligations, including preparing and lodging your returns, BAS, and taxable payments annual report (if you are a business that is required to)
- provide the information the ATO need if they audit your business, making the process easier and shorter.
Source: https://www.ato.gov.au/Business/Record-keeping-for-business/Overview-of-record-keeping-rules-for-business/#Fiverulesforrecordkeeping
Accountability for business record keeping
As the business owner, you are accountable for understanding your record-keeping obligations. If you use a registered tax or BAS agent to manage your records, you still retain primary accountability.
Accountable management and oversight is one of the principles of effective tax governance that can benefit all businesses.
ATO’s reviews and audits
The ATO have a responsibility to government and the community to ensure everyone complies with the laws they administer.
If the ATO check your tax and super affairs, it doesn’t mean they consider you’ve been untruthful. If they find a discrepancy, they accept mistakes can be made. They consider this if the law allows them to, when they determine if any penalties should apply.
They presume you’re trying to meet your obligations unless your actions give them reason to believe otherwise.
Penalties for not keeping or retaining records
There are penalties that may apply if you don’t keep or retain your records as required. The ATO take your circumstances, compliance history and behaviour into consideration if they need to make a penalty decision.
Source: https://www.ato.gov.au/business/record-keeping-for-business/overview-of-record-keeping-rules-for-business/accountability-for-business-record-keeping/?anchor=Ourreviewsandaudits#Ourreviewsandaudits
Keeping your tax records
The Australian tax system relies on taxpayers self-assessing. This means you are responsible for working out how much you can declare and claim on your tax return. You also need to be able to show how you arrived at these figures – in some cases, you may be required to provide written evidence.
In order to prepare an accurate tax return and support the claims you make, you need to keep careful records. The records you need to keep depend on your situation, but as a rule, it is better to keep too many records than not enough.
The importance of keeping records
Keeping good records helps you and your tax adviser:
- to provide written evidence of your income and expenses
- to help you or your tax agent prepare your tax return
- to ensure you are able to claim all your entitlements
- in case we ask you to prove the information you provided in your tax return
- reduce the risk of tax audits and adjustments
- improve communication with us
- resolve issues relating to disputed assessments or adjustments
- avoid exposure to penalties.
Reasons for keeping good records are to reduce the cost of managing your tax affairs. If your records are accurate and organised, you may be able to manage your own affairs via ATO Online services. If you use a tax advisor, reducing the time they spend sorting and preparing your records will give them more time to ensure you get what you are entitled to.
How long to keep your records
Generally, you must keep your written evidence for five years from the date you lodge your tax return.
There are some more specific situations. If you:
- have claimed a deduction for decline in value (formerly known as depreciation) – keep records for the five years from the date of your last claim for decline in value
- acquire or dispose of an asset – keep records for the five years after it is certain that no capital gains tax (CGT) event can happen
- are in dispute with us – keep records for the later of either
- five years from the date you lodge your tax return
- five years from the date the dispute is resolved.
Format of your records
You can keep your records in paper or digital format. If you make paper or digital copies, they must be a true and clear copy of the original.
The ATO recommend you keep a back-up of all your digital records.
Your documents must be in English unless you incurred the expense outside Australia.
Types of records you should keep
You should organise your records into these categories:
- payments you’ve received
- expenses related to payments you’ve received
- asset acquisition or disposal – such as shares or a rental property
- tax-deductible gifts, donations and contributions
- disability aids, attendant care or aged care expenses.
You may also need to keep records in some other categories, or for other family members – for example, if you receive the family tax benefit.
In some cases, you may choose not to keep particular records – for example, because you expect to claim for only a small amount of business travel. However, keep in mind that if you actually travelled more than you expected during the year, but don’t have all the records, you may not be able to claim for the extra travel.
As a rule, it is best to keep a record of all income and expenses. At tax time, you can decide what you do and don’t need. If you incur expenses for private purposes, you must have records that show how you worked out the amount of any private use.
Source : https://www.ato.gov.au/Individuals/Lodging-your-tax-return/In-detail/Record-keeping/Keeping-your-tax-records/