The Importance of Record Keeping

With many tax returns currently underway it’s a good time to be reminded of the record-keeping requirements in support of tax returns.

Records are normally required to be kept for five years from 31st October, 2008 or the date your tax return is lodged, whichever is later.

The ATO requires taxpayers to keep records that record or explain all transactions that are relevant for tax purposes, including:

• Documents that are relevant for the purpose of ascertaining the taxpayer’s income and expenditure; and
• Documents containing particulars of any election, estimate, determination or calculation made by the taxpayer and the basis on which the estimate, determination or calculation was made.

In the case of an audit, deductions may be disallowed if a taxpayer is unable to provide evidence
substantiating expenses. The taxpayer would also have to repay the underpaid tax and will usually be liable for penalties and interest as well.

Please ask us if you are unsure what records you must keep or what form they should take.

(Note: Corporations Law requires that companies retain accounting records for a period of seven years.)

Please also refer to our article on Capital Gains Tax record keeping for more specific information on the requirements for CGT purposes.