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Small business accounting records

This week we look at one of the most frequently asked questions from our clients. How long do I need to keep my paper records to satisfy ATO legal requirements? Well, the short answer is five years from the date of the transaction or event. Of course there are always exceptions, so let’s focus on those. One example is that of a capital gain made on the sale of an item of equipment, shares or real estate.Without the initial purchase documents it is very difficult to prove your capital gain calculations in the event of an audit. For these capital items you should always keep the paperwork relating to the purchase until the day the item is sold. If you do not keep these records you will be unable to provide proof in the event of an ATO audit and could potentially be fined up to $2,200.00 for poor record keeping.

Another exception relates to workers compensation reviews, these reviews/audits can legally request the past seven years of wages records. Retailers in small business do not need to keep individual customer receipts any longer than on month, as long as they have the daily sales register summary. Any paper records should be stored securely in a dark, dry place to prevent damage or fading that can render paper records useless. A better alternative is to scan and store all records electronically on a secure medium. Make sure you keep a spare copy in a second location and that your storage media is compatible with current technology. It’s no use keeping your old vinyl records if you no longer own a record player! Another exception is for GST records, any expenses under $82.50 do not require actual tax invoices to be retained if you can prove the payment on a bank or credit card statement.