The Australian Tax Office (ATO) requires that you keep written evidence of any claims and expenses in your tax return for 5 years from the date you lodge your tax return, in case you need to give proof to the ATO down the track, or amend a prior year's return. Proper record-keeping also helps make sure you don't pay more tax than you need to, so it's in your best interest to keep as many records as you can.
In most cases, you should keep your tax return records for 5 years following the date that the return was lodged. The main records you should keep for 5 years are:
1. Proof of income.
All payments you have received, including wages, interest, dividends, rental income, etc. These will mostly be digital records in the form of bank statements – a great place to store them is secure cloud storage, like Google Drive or Dropbox, so they're accessible even if your computer is damaged.
2. Expenses.
Any costs that you incurred and claimed on tax, which are related to the income you received. For example, if you purchase a special uniform for work or made a repair on your investment property.
3. Donations.
Donations, contributions or gifts to charitable organisations of over $2 are tax deductible. They charity must be registered with the as a deductible gift recipient (DGR), and you can't claim gifts or donations that provide you with a personal benefit (like raffle tickets or merchandise).
4. Superannuation contributions
Keep records of contributions you've made into your super fund, especially those that you're claiming a tax deduction for. Bank statements should be fine.
5. Evidence of buying or selling an investment asset
Paperwork related to the acquisition or sale of an asset, like the contract of sale on a house purchase, or details of shares you've bought.
"The ATO has three golden rules: You must have spent the money yourself, without reimbursement. The expense must directly relate to earning income. And you need a record – usually a receipt."
There are a few other things you may want to hang on to, like receipts for medical expenses for you and any family member listed on your Medicare (in case you reach the Medicare Safety Net). Also keep record of your previous year's tax returns and refund details – as well as the cost of managing tax affairs, as you can claim a deduction for that. In more complicated situations, the ATO has other rules, for instance:
In the event that important tax documents like receipts and invoices have been lost or destroyed, you may still be able to use the information contained in them if:
That said, if the ATO reviews your tax return and you don't have evidence to support claims for a deduction, your claims can be disallowed (taken off your tax return).
Not having the right tax records when it comes time to lodge your return could cost you money. Save whatever you think may be relevant in a safe place throughout the year, to be sure that you are receiving a correct assessment and possible refund.
"Using cloud-based software offers numerous benefits for managing your tax records efficiently. It provides real-time access to your financial data from anywhere, enhancing flexibility and convenience. This digital approach keeps your records up-to-date and reduces the risk of errors and missed deductions through live bank feeds. Permanent document storage ensures full substantiation across the years, which is crucial for capital claims to minimise CGT. With the ATO scrutinising individual taxpayers more closely, there's never been a better time to go digital and ensure your records are audit-proof."
Response | |
|---|---|
| Banking app | 22.31% |
| I don't track my expenses | 16.63% |
| No formal tracking | 15.34% |
| Spreadsheet | 15.34% |
| Pen and paper | 14.54% |
| Budgeting app | 4.68% |
| Receipts and invoices | 3.59% |
| Expense tracking in statements | 3.09% |
| Automated transactions | 2.79% |
| Other | 1.69% |
Tax law sets specific time limits around filing your taxes by the deadline, and both auditing and amending returns. Generally, the ATO can audit records for most individual taxpayers going back 2 years.
For larger businesses, the period is generally extended to 4 years.
However, there is no time limit on audits if the ATO suspects tax fraud or evasion.
DISCLAIMER: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information applicability to their own particular circumstances.
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