How long do I have to keep my tax records?

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According to legal requirements, it is necessary to maintain business and taxation records for a period of approximately five years from the letter of their preparation, acquisition, or completion of the transaction, and it is advisable to consult with a tax advisor for further guidance. For individuals with uncomplicated matters, a potential option could be retaining records for at least two years, but it is important to note that matters regarding taxes are not always that simple.

Simple individual returns

Individuals with straightforward tax affairs need only retain records for two years. However, determining whether your affairs are simple is quite involved. It can depend on what types of income you have been receiving, so each person’s circumstances are different. Additionally, if you have to hold a related entity’s business records for longer than this (see below), it may be prudent to hold the related individual’s tax records simultaneously so it is easy to satisfy any future ATO requests.

Other taxpayers

Generally, you must keep your written evidence for five years from the date you lodge your tax return.

There are several instances where you must keep your records for a more extended period or for an indefinite period of time.

  • If you have claimed a deduction for a decline in value (formerly known as depreciation), you need to keep the acquisition records for five years from the date of your last claim for the decline in value.
  • Records regarding the acquisition and disposal of assets should be kept for five years after it is inevitable that no capital gains tax (CGT) event can happen. For example, if you incur a capital loss, you need to retain the relevant records for a period of five years after the loss is extinguished by capital gains that may arise at some stage in the future.
  • One of the small business CGT concessions for those in business is a 15-year active asset exemption. If you can access this concession, you may need to reference your records back 15 or more years.
  • It is advisable to retain business records for seven years. Payroll records can be requested and audited by state government authorities for a period of seven years.
  • Self-managed superannuation funds must retain minutes and other governance documents for 10 years.

The ATO requires that your records are in English or in a form that can easily be accessed. You can issue and store records in either paper or electronic format.

You must back up your data when you choose to retain your records electronically. You should retain at least two copies of your data. The backups should not be on a single device, and keeping your backups in separate physical locations is prudent. Where data is retained on electronic devices, it is best practise to periodically check that the device functions correctly and that files can be restored.

As you can see from the above, there is no hard and fast rule regarding how long to retain your records. If you are unsure, it is better to keep too many records than not enough.

If you have any questions, please contact us for guidance.

Kreston Stanley Williamson Team

*Correct as of October 2017

*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.

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