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How to keep your tax records?

KPG Taxation has compiled all the information from the ATO website regarding how to keep your tax records. It is an attempt to help the clients who have a question for too long.

The Australian tax system relies on taxpayers’ self-assessing. This means you are responsible for working out how much you can declare and claim on your tax return. You also need to be able to show how you have arrived at these figures – in some cases, you may be required to provide written evidence.

In order to prepare an accurate tax return and support the claims you make; you are required to keep the tax-related records accurately and carefully. The records you are required to keep depend on your situation, but as a rule, it is better to keep too many records than not enough.

The importance of keeping records

Keeping good records helps you and your tax adviser:

  • to provide written evidence of your income and expenses.
  • to help you or your tax agent prepare your tax return.
  • to ensure that you can claim all your entitlements.
  • in case ATO asks you to prove the information you provided in your tax return.
  • reduce the risk of tax audits and adjustments.
  • improve communication with ATO.
  • resolve issues relating to disputed assessments or adjustments.
  • avoid exposure to penalties and liabilities.

Reasons for keeping good records are to reduce the cost of managing your tax affairs. If your records are accurate and organized, you may be able to manage your own affairs via ATO Online services. If you use a tax advisor, it reduces the time they spend sorting and preparing your records. It will give them more time to ensure you get what you are entitled to.

See also:

  • PS LA 2005/2 Penalty for failure to keep or retain records

How long to keep your records?

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

There are some more specific situations. If you:

  • have claimed a deduction for decline in value (formerly known as depreciation) – keep records for the five years from the date of your last claim for the decline in value.
  • acquire or dispose of an asset – keep records for the five years after it is certain that no capital gains tax (CGT) event can happen.
  • are in dispute with us – keep records for the latter of either. – five years from the date you lodge your tax return. – five years from the date the dispute is resolved.

Format of your records

  1. You can keep your records in paper or digital format. If you make paper or digital copies, that must be a true and clear copy of the original.
  2. We recommend that you keep a back-up of all your digital records.
  3. Your documents must be in English unless you incurred the expense outside Australia.
  4. Types of records you should keep.
  5. You should organise your records into these categories:
  • payments you have received.
  • expenses related to payments you have received.
  • asset acquisition or disposal – such as shares or a rental property.
  • tax-deductible gifts, donations and contributions.
  • disability aids, attendant care or aged care expenses.

You may also need to keep records in some other categories, or for other family members – for example, if you receive the family tax benefit.

In some cases, you may choose not to keep records – for example, because you expect to claim for only a small amount of business travel. However, keep in mind that if you have traveled more than you expected during the year, but do not have all the records, you may not be able to claim for the extra travel.

As a rule, it is best to keep a record of all income and expenses. At tax time, you can decide what you do and do not need.

If you incur expenses for private purposes, you must have records that show how did you work out the amount of any private use?

For any tax-related queries feel free to visit KPG Taxation, Dandenong

Address: Dandenong Hub Suite 40, Level 1, 15-23 Langhorne Street Dandenong Vic 3175 Australia

Call 03 9706 9313, or book online at www.kpgtacation.com.au, and your tax agent will be in touch to help.

Email: info@kpgtaxation.com.au