A record explains the tax and super-related transactions conducted by your business.
There are five record-keeping rules based on law and the ATO that apply to most records your business in order to meet your tax, super and employer obligations.
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.
Each record needs to contain enough information for the ATO to determine the essential features or purpose of the transactions, so it 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.
If your expenses relate to business use and personal use, make sure you have clear documents to show the business portion.
If you make any estimations or calculations about your tax of super you need to keep documents about how you made that estimate or calculation,
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.
o The ATO may ask you to show that you have appropriate safeguards in place.
o 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 from when you prepared or obtained the record, however there are a few exceptions (relating to fringe benefits tax, super contributions and super fund choice) and for some organisations, like Australian Securities & Investments Commission (ASIC) , the time period is seven years.
You also 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 required. This includes providing access to digital records that are encrypted or password protected. The data and records need to be labelled and indexed. The ATO needs to be able to extract your data and convert it to a standard format.
5. Your records must be in English or able to be easily converted to English.
There can be legal and financial consequences if your business doesn't comply with these record-keeping requirements.
This information is adapted from the ATO web page Overview of Record Keeping https://www.ato.gov.au/business/record-keeping-for-business/overview-of-record-keeping-rules-for-business/
For further information about record keeping please see the ATO website.
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