Knowing what business records you should keep and for how long is essential to stay compliant with tax laws. Good record keeping also gives you insight into your business’s performance.
What is business record-keeping?
Business record-keeping involves tracking all your business transactions and key information. By law, you must keep all tax and super records and supporting documentation, like receipts, invoices, wage and salary records, contributions to employee super and records related to business assets.
Why keeping business records is important
Keeping business records is important as it helps you keep on top of the financial health of your business. It’s also a legal requirement of the Australian Taxation Office (ATO). You must produce these if you’re ever asked for them or audited by the ATO, and you might face fines or other penalties if you can’t. You must keep all your business records for at least five years.
What types of business records should you keep?
The types of business records you should keep are those related to what you spend, owe and own in your business.
These include financial statements and tax returns, tax receipts and bank statements, employee wage and salary information, superannuation contributions, contracts with suppliers, your business assets register, depreciation schedules and records of business loans and shares.
Record-keeping requirements for businesses in Australia
Record-keeping requirements in Australia you legally must follow are:
All records must be kept for at least 5 years
All records must be kept for at least five years, starting when you prepare the records, get them from your accountant, or complete the transactions — whatever comes later. So, if you use accrual accounting, the five years start when the money changes hands.
Records mustn’t be changed and must be stored in a manner that restricts changes
Records mustn’t be changed and must be stored in a manner that restricts changes. If you save an electronic version of a paper record, it needs to be a genuine and clear reproduction. When this is safely stored, you don’t need to keep a paper copy too.
Records must be in English or easily convertible
Records must be in English or easily convertible if needed.
Records must be easily accessible
Records must be easily accessible, either digitally with passwords handy or manually stored in easy reach. It’s a good idea to back up your records, too. If manual, this should be an offsite area. If digital, choose a cloud-based system.
Business records that need to be kept for longer than 5 years
Some business records need to be kept for longer than 5 years. The Australian Securities & Investments Commission (ASIC) requires companies to keep records for seven years. Other scenarios include:
Records relating to an amended assessment
You may need to keep records of an amended assessment for longer than five years. An amended assessment is when the ATO changes an already completed tax assessment. These changes may happen if the ATO or you spot a mistake.
In this case, the five-year clock resets. You need to keep those records for five years after the ATO amends the assessment.
Depreciating asset records
Depreciating asset records must be kept for five years after you sell or dispose of the asset, not from when you first bought the asset.
Capital gains tax asset records
Capital gains tax asset records must be kept for five years after you sell or dispose of the asset.
Records of any information used again in future returns
Records of any information used again in future returns must be kept until the review period has finished for the last year you used the information. For example, if you spread borrowing expenses over two years, you must keep all the records until the review period of the final year has passed.
Petroleum resource rent tax records
Petroleum resource rent tax records relate to profits made from selling marketable petroleum commodities. You must keep these records for seven years. Find out more about record keeping for PRRT.
How do you store business records?
You can store business records electronically or in hard-copy, depending on your preference. However, the ATO recommends electronic storage because it’s the most efficient way to store and manage documents.
Top tip: With MYOB's accounting software, you can bring all your business information together in one place. Plus, your data is stored safely in the cloud and retrievable at the click of a button.
What are the benefits of record-keeping?
The benefits of good record-keeping include better control over your business:
Staying on top of your business cash flow
Staying on top of your business cash flow and tracking expenses is easier when you keep accurate records. You can use cash flow analysis to see where you're spending or making money and where you can make changes.
Meet tax and super obligations to stay compliant with the ATO
Meeting tax and super obligations to stay compliant with the ATO is central to your long-term survival as a business. MYOB's in-built payroll software will enable you to keep good records and file accurate returns.
Have records on hand when needed
You must have records on hand when needed, like if you’re audited or the ATO asks to see them. It’s a requirement and will also make your life easier.
Business record keeping FAQs
Should I keep digital and paper copies of all business records?
You don’t have to keep digital and paper copies of all your business records. However, the ATO is moving towards electronic records, so they prefer you do, too.
What penalties are imposed for inadequate record-keeping?
The penalties imposed for inadequate record-keeping can include accruing penalty units that can be as much as $313 per unit. The ATO may also require that you take a record-keeping course.
How long should I keep client records for?
Generally, you should keep client records for five years before disposing of them. If you’re unsure about your record-keeping obligations, get advice from an accountant, bookkeeper or other qualified professional.
Stay compliant with business record-keeping
Understanding your obligations around record-keeping is important to staying compliant with tax laws — and it’s good for business, too. It lets you see how well your company is performing and any areas where you can improve your cash flow.
It doesn’t need to be complicated. MYOB Business takes the stress out of record-keeping, letting you get on with delivering for your customers and making money. Try it today.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.