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5 Rules for Record-Keeping

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

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.

The ATO have put together the "5 Rules for Record-Keeping" to help simplify their requirements. They are:

1. 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.

2. 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 demonstrate that you have appropriate safeguards in place.

  • 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 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 Superannuation 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.

4. You need to be able to show the 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 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.

5. Your records must be in English or able to be easily converted to English.


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