Tax Facts: Keeping Records
When tax time comes, most of us find ourselves fishing through a year’s worth of paperwork, or even worse sifting through years and years of saved records to find exactly what you need.
The Australian Taxation Office (ATO) website provides comprehensive information on what records you need to keep and how long you need to keep them for. We provide a summary below.
The ATO says that records must be kept so that you can prove the information provided on your tax return, ensure you’re able to claim all entitlements, help you or your tax agent prepare your tax return and provide written evidence of your income and expenses.
Should it stay or should it go? The records you should keep
Generally, you should keep any records that have helped you to lodge your tax return, and stick to the rule that if you’re not sure, keep it!
Records across the following main categories should be kept:
- payments you have received
- expenses related to payments received
- records relating to acquiring or disposing of an asset
- tax deductable gifts or donations
- medical expenses.
How long should you keep your records for?
The general rule of thumb is that all records and written evidence should be kept for five years from the date of the notice of assessment.
‘Simple tax affairs’
Yes, there is such a thing as simple tax affairs, and they could make your record keeping easier!
For records relating to the 2004-05 financial year or later, some people will be classed as having ‘simple tax affairs’ for that income year and will therefore only need to keep certain records for two years.
The ATO says you are classed as having simple tax affairs if you are an individual tax payer and:
1. Your income consists only of:
- salary or wages
- interest paid by a financial institution or government body, and/or
- dividends from an Australian company that is listed on the Australian Stock Exchange (ASX).
2. You claim deductions only for:
- managing your tax affairs
- bank fees and charges, including taxes and duties, and/or
- deductible gifts of money and donations of money
3. You are not:
- a non-resident of Australia for the year of income
- entitled to a foreign tax credit
- required to adjust your taxable income because of payments to or from your associates
- in receipt of a capital gain or loss that must be taken into account in your tax return, or
- in receipt of foreign employment income, or income from service on an approved overseas project that is exempt from tax in Australia.
Records relating to rental properties
As with any income producing asset, you will need to keep records of both income and expenses relating to your rental property.
Fact: If you own a DHA investment property, a summary of income and expenses related to that property is included in your annual statement.
These records will not need to be provided to the ATO, however will need to be kept for five years after lodgement and produced in the event the ATO asks to see them.
You will also need to keep records relating to any capital gain or loss you have incurred on a property for a minimum of five years.
Disposing of your records safely
When it comes time to finally get rid or your old records, it’s important to make sure you dispose of them properly in order to minimise risk of identity theft.
By obtaining your tax file number (TFN) and other personal details such as address and date of birth, it’s possible someone may commit fraudulent activity under your name.
It’s therefore important that you keep personal details, including your TFN, as secure as possible.
To minimise risk of idenity fraud, the ATO recommends you keep all personal details like bank account passwords and your TFN secure by:
- not carrying them in your purse, wallet or storing them in your mobile phone
- not sharing them with friends
- not providing your TFN on the internet when applying for work
- shredding or destroying documents containing identity details before disposing of them
- installing up-to-date anti-virus software on your computer
- only providing your identity details to trusted or reliable organisations, and
- making sure if you use a tax agent to complete and/or lodge your tax return, that your tax agent is registered by checking on the Tax Practitioner’s Board
- Keeping your tax records, Australian Taxation Office.
- Rental Properties 2009, Australian Taxation Office.
- Identity theft and your tax file number, Australian Taxation Office.