You need to keep a record of your finances and tax returns for at least 3-5 years, in case you need to give proof to the ATO or amend a prior year's return. Proper record-keeping also ensures you don't pay more tax than you need to, so it's also in your interest to keep as many records as you can.
Tax records you need to keep
A good rule of thumb to follow if you're not sure if a record related to your tax return should be kept is when in doubt, keep it. There are five main categories of tax records that you should have on file to reference when it's time to fill out your Australian tax forms:
- All payments you have received, including wages, interest, dividends, rental income, etc (these will mostly be digital records in the form of bank statements).
- Expenses that you incurred that are related to the income you received. For example, if you must purchase a special uniform for work or made a repair on your investment property.
- Paperwork related to the acquisition or sale of an asset. This is most often in relation to a home sale or purchase, but also includes other major assets such as shares.
- Donations, contributions or gifts to charitable organisations.
- All medical expenses for you and any family member listed on your Australian tax forms.
- Records of contributions you've made into your super fund (especially those that you're claiming a tax deduction for)
- Your previous year's tax returns and refund details
How long do I need to keep my records?
Different circumstances will dictate how long you should keep your Australian tax records after your return has been lodged. In most instances you should keep your records for 5 years following the date that the relevant return was lodged. Other records you should keep for 5 years include:
- If you have claimed a deduction for a decline in the value of property 5 years after the date of your last claim for a decline in value. This was formerly known as depreciation of value.
- If you have acquired or disposed of an asset five years after you are certain that there will be no capital gains tax (CGT) event. Otherwise you must hold onto those records in order to work out the capital gain or loss.
- If you are currently having a dispute with the ATO. In this case you will want to keep your tax records for the year in question for five years following the resolution of the dispute.
Since the 2004-2005 tax year, a determination was made that some records held by Australian taxpayers with simple tax affairs will only need to keep those for two years. This includes:
- A family agreement
- Copies of payment summaries
- Taxpayer declarations for returns and documents that were lodged by a tax agent on the taxpayer's behalf that authorise that agent to lodge and declare that the supplied information is correct
Simple tax affairs are classified as returns lodged by an individual taxpayer whose income consists only of a salary or wage, interest paid by a bank or government institution, or dividends from an Australian company that is listed on the Australian Stock Exchange.
In addition, the individual taxpayer is only claiming deductions for the cost of managing tax affairs, bank fees and other charges, and deductible gifts of money and donations of money.
You do not qualify as a taxpayer with simple tax affairs if you are:
- A foreign resident for the year of income
- Entitled to a foreign tax credit
- Required to make adjustments to your taxable income because of payments made to or from your associates
- The recipient of a capital gain or loss that will be a part of your tax return
- The recipient of foreign employment income, or income from service on an approved overseas project that is exempt from tax in Australia
Finder survey: How do Australians track their monthly expenses?
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% |
What happens if I’ve lost or destroyed the records?
In the event that important tax documents have been lost or destroyed, you may still be able to use the information contained in them if:
- You have a copy of the document in its entirety
- You took reasonable precaution to prevent the loss or destruction and it is not possible to obtain a substitute.
It is always a good idea to keep your records in a fire safe box that is locked at all times. Having copies in a separate location will always be helpful in the event that you do lose important tax documents.
What about electronic records?
The Australian Tax Office will allow for documents that have been stored electronically, so long as when printed they are a clear reproduction of the original. If you do store your tax records electronically, it is recommended that you backup the files or store them online as a safety measure in case the hard drive becomes corrupted.
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.
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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