Is it Time for a ‘Spring Clean’ of Your Taxations Records?

Is it Time for a ‘Spring Clean’ of Your Taxations Records?

A question that we are often asked is how long do you need to keep your taxation records.  The answer is not as straight forward as it first seems as the period to retain records depends on the complexity of your tax return.

For an individual who is classified to have simple tax affairs, records need only be retained for two years.  You are classed as having simple tax affairs if you are an individual taxpayer whose income is from salary or wages, interest or dividends and claim deductions only for the cost of managing your tax affairs and deductible gifts of money.

However if you have claimed a deduction for depreciation, acquisition or disposal of an asset or are in dispute with the Tax Office you need to retain written evidence for five years from the date of lodging your tax return.

When you have acquired or disposed of an asset which might be subject to capital gains tax you should keep all documents relating to the transaction. Once the asset is disposed of a CGT event occurs and you will need to declare the event in the income year in which it occurs.  If you fall into this category it is recommended you contact our office to discuss the documentation required to account for the capital gain as it can become quite complicated.

By law, you must keep enough business records to allow the ATO to work out how much tax you are liable to pay. You must keep them:

  • for five years after they are prepared, obtained or the transactions completed, whichever occurs latest, and
  • in English, or in a form that can be easily accessed and converted in order to work out the amount of tax you are liable to pay.

You will have to keep records for longer if you use information from those records in a later tax return.  For example, if you claim a loss carried forward from a business activity in an earlier year.  Under these circumstances, you must keep the records until the end of any period that we can review that later return (referred to as the ‘period of review’).

 

Submitted by Linda McMahon

Share this post