With tax time just around the corner it is important to not only consider what you need to provide to your accountant but what you need to keep and for how long. The ATO has strict guidelines on how long supporting documentation needs to be kept in case of an audit or review.
Why do you need to keep records?
At any time the ATO can audit you. This can be a simple review or a full blown audit where every cent you’ve earned and claimed comes under the microscope. It can not only be time consuming for yourself and your accountant but also very costly with penalties and fines should you not have the required documentation.
As a general rule documents relating to your financial statements and tax returns need to be kept for a minimum of five years. While your accountant may keep some of these records on file it is a good idea to keep a copy at home just in case. You are able to keep electronic copies however the ATO suggests a back up copy is kept in case the original files are destroyed. There are limited circumstances where the ATO will accept items without records however this is restricted to events outside the control of the individual such as fire or theft.
Simple Tax Affairs
If you have simple tax affairs you may only need to keep records for two years. You are classified as having simple tax affairs if:
- your income consists only of
– salary or wages (other than from associates)
– interest paid by a financial institution or government body, and/or
– dividends from an Australian company listed on the Australian Stock Exchange (ASX)
- you claim deductions only for
– the cost of managing your tax affairs
– bank fees and charges, including taxes and duties, and/or
– deductible gifts of money and donations of money.
- you are not
– a foreign resident for the year of income
– entitled to a foreign tax credit
– required to adjust your taxable income because of payments to or from your associates
– in receipt of a capital gain or loss that must be taken into account in your tax return, and/or
– in receipt of foreign employment income, or income from service on an approved overseas project that is exempt from tax in Australia.
What needs to be kept?
The main types of records that need to be kept are:
- amounts received such as salary and interest
- expenses relating to payments you received including accounting fees and work-related expenses
- when you have acquired or disposed of an asset
- gifts, donations and contributions that are tax deductible, and
- disability aids, attendant care or aged care expenses.
Companies are required by ASIC to keep records of the constitution, shareholder details and minutes on an ongoing basis and have that information held at a registered office. Many companies choose to have accountant’s hold the documentation at their office as they are the most likely regular users of such information.
If you have a self-managed super fund there will be additional documentation and record keeping requirements. Items such as trust deeds, minutes, trustee declarations and membership details all need to be kept for a minimum of ten years. While ten years is the recommended time frame it is helpful to continue to hold onto these documents until the entity is would up in case of changes occurring outside the ten year time frame e.g. trust deed amendments.
Contact a member of our team for more information.