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5 rules for record-keeping

Date: 15 July 2022

You should ensure that you understand what records are needed for your business and make accurate and complete record-keeping practices a part of your daily business activities. Talk to your tax adviser about what records your business needs to keep and for how long.

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.

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;
  • the purpose of the transaction; and
  • any relevant relationships between the parties to the transaction.

The ATO has five record-keeping rules based on law and the ATO’s views. Please read below to find out what they are:

  1. You need to keep all records related to starting, running, changing, and selling or closing your business 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.
     
  2. 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 – you need to be able to reconstruct your original data if your record-keeping system changes over time.
     
  3. You need to keep most records for five 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 start of the 5-year retention period is different. For example, for super contributions for employees, the five years start from the contribution date. You need to keep all information about any routine procedures you have for destroying digital records.
     
  4. You need to be able to show the ATO your records if they ask for them. The ATO will also need to check that your record-keeping system meets the record-keeping requirements. If you store your data and records digitally using an encryption system, you will need to 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 (e.g., Excel or CSV).
     
  5. Your records must be in English or able to be easily converted to English.

Need help with your record-keeping?

Keeping correct records is very important. Failing to do so could have financial consequences. We can help you with your documents. Get in contact with us today enquiries@rm.net.au

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