Unsure what records you actually need to keep for the ATO, and for how long? Here’s a simple, practical guide to staying compliant without drowning in paperwork and uncertainty.
What Records Do You Really Need To Keep For The ATO?
When it comes to record keeping, many business owners fall into one of two camps;
- keeping everything “just in case”, or
- putting it off to tax time and hoping for the best
The ATO doesn’t expect perfection but they do expect accurate, complete records that support what you report. The good news? Once you know what is required and have systems setup, staying compliant is much simpler than it sounds.
Here’s a clear breakdown of what records you actually need to keep, and why they matter.
Why Record Keeping Matters
Good records aren’t just about ticking an ATO box, they help you;
- lodge accurate BAS and tax returns
- claim deductions you’re entitled to
- understand how your business is really performing
- have peace of mind that you can handle enquiries quickly and easily in the case of an audit
How Long Do You Need To Keep Records
In most cases, business records must be kept for at least 5 years from the later date you;
- lodged the relevant tax return, or
- completed the transaction
The Key Records The ATO Expects You To Keep
Income Records
You need to keep evidence of all money your business earns, including;
- tax invoices issued to customers
- sales receipts
- bank deposit records
- EFTPOS and payment processor reports (eg. Square, Stripe etc)
- Cash register and petty cash reconciliation reports
These records support the income you report to the ATO and help ensure nothing is missed OR double counted.
Expense Records
To claim a business deduction, you must have proof of the purchased goods and payment made;
- supplier tax invoices and receipts
- bills for utilities, rent, insurance and subscriptions
- purchase contracts for equipment and assets
- finance contracts, loan statements and interest schedules
If there is not adequate substantiation, the deduction is likely to be dissallowed.
Bank and Credit Card Statements
Even if you’re using accounting software with bank feeds activated, you still need to retain;
- business bank statements
- business credit card statements
- loan and line of credit statements
These documents act as a cross-check for reconciling your accounts as well as support proof of payment for your expenses.
Payroll and Employee Records
If you employ staff and / or are drawing a wage from your company, you must keep records relating to;
- tax file number declarations
- superannuation choice forms
- employee details
- wages and salaries paid
- employee timesheets
- employee leave records
- PAYG withholding
- superannuation contributions
- superannuation clearing house reports
- Single Touch Payroll (STP) reports
Employee records generally need to be kept for 7 years under Fair Work requirements.
Asset and Depreciation Records
For business assets (vehicles, equipment, machinery etc) you need to keep;
- purchase contracts or tax invoices
- finance contracts and / or proof of payment
- depreciation schedules (with the assistance of your accountant)
- asset register
- sale or disposal records
These are needed to calculate depreciation and capital gains correctly.
BAS and Tax Records
For all lodgements, you should retain copies of;
- lodged BAS and IAS statements
- GST reports
- income tax returns
- ATO correspondence
These records tie everything together and show how your reported figures were calculated.
Paper Vs Digital Records – What's Allowed?
The ATO accepts both paper copies and digital records, as long as they are;
- clear and readable
- stored securely
- able to be produced if requested
Using cloud based software and document storage is often the easiest, safest and most organised option. Helping to quickly and easily find records when requested with the lowest risk of lost paperwork.
Quick Tip: If keeping paper copies of your records, make sure you take a photocopy as many receipts / tax invoices are printed using thermal paper meaning they fade easily in direct light, heat and friction.
Common Record Keeping Mistakes To Avoid
Some of the most common issues we see include;
- mixing personal and business expenses
- missing records for cash purchases
- relying on bank statements alone
- not taking copies of thermal paper documents
- confusing an EFTPOS receipt as adequate substantiation
- leaving record keeping until tax time and misplacing them in the meantime
These mistakes can quickly snowball into a compliance nightmare.
How A Bookkeeper Helps You
A bookkeeper doesn’t just record transactions, they;
- ensure your records meet ATO requirements
- keep your accounting system up to date throughout the year
- organise documents in case of an audit
- prompt you for missing documents
- help maximise legitimate deductions
A good bookkeeper will remove the guesswork and stress, keeping you confident and in control of your accounts.
The Bottom Line
You don’t need to keep everything but you do need to keep the right records, for the right amount of time. Staying organised throughout the year makes compliance easier and less stressful, tax time will be smoother and you will be more confident and in control of your business figures.
If you’re unsure whether your records are ATO-compliant or want help setting up a simple, stress-free system, get in touch with Insight Bookkeeping & Payroll. We strive to make record keeping a seamless and reliable solution meeting your business compliance needs.
Disclaimer: The content provided in these articles are for general information purposes only and does not constitute financial, tax or legal advice. While we strive to ensure accuracy, Insight Bookkeeping & Payroll accepts no responsibility for errors or omissions. We recommend seeking independent professional advice tailored to your circumstances before acting on any information provided.