Keeping and maintaining accurate records is crucial by law. It is also vital for anyone in business because it makes it easy to manage your cash flow, comply with tax obligations, and understand how your business is doing. In this blog post, we’ll explore different types of records you need to keep for more than 5 years.
Why is record-keeping important?
The tax system of Australia counts on self-assessment so the ATO accepts that the information you provide is correct. If the ATO reviews your tax return and you don’t have proof to support claims for a deduction, you will not get tax deductions. You can get bookkeeping services in Melbourne to ensure you have updated and accurate records. Maintaining accurate records benefits both you and your tax adviser by:
- Offering written proof of your income and expenses
- Assisting in the preparation of your tax return
- Ensuring you can claim all eligible entitlements
- Providing evidence for the information on your tax return if requested
- Reducing the chance of tax audits and amendments
- Enhancing communication with us
- Addressing any issues related to disputes over your assessments or adjustments
- Reducing the risk of penalties
Maintaining accurate records can lower the cost of managing your tax affairs. If you work with small business tax accountants, having well-organised records can reduce the time they spend sorting and preparing them, allowing them to focus more on ensuring you maximise your claims. For expenses used partially for personal purposes, you need to keep records that detail how you calculated the portion related to earning assessable income.
What records should you maintain for longer than five years?
Records related to an assessment that is changed
You need to maintain records for a longer period of time to cover the period of review for an assessment that uses data from the record. The period of review is the time within which the assessment can be amended by you or the ATO. For instance, the period of review for:
- An income tax return for individuals and small businesses is 2 years and for other taxpayers, it is 4 years, from the day the ATO gives you the notice of assessment.
- A Business Activity Statement (BAS) is 4 years from the day after receiving the notice of assessment.
- A fringe benefits tax return is usually 3 years from your lodgment date.
You must maintain your records for a longer period to cover the 5-year retention period and the period of review for the relevant assessment. In several cases, the 5-year retention time period will also cover the period of review. You can choose bookkeeping for small business to be sure that you will have maintained records for a longer period of time.
Records of information used again in a future tax return
If you use data from a record in your tax return in one financial year and then use that data again in a future return, you must maintain that record until the period of review for future tax returns has ended.
Records of depreciating assets
For depreciating assets, you must maintain the record until you have the asset and then another 5 years after you dispose of the asset. However, there are different time periods and conditions that apply if the depreciating asset is in a low-value pool or is liable to rollover relief.
Records of CGT assets
For capital gains tax (CGT) assets, you must maintain records until you have the asset and then another 5 years after you dispose of the asset.
Petroleum resource rent tax records
Records of petroleum resource rent tax (PRRT) must be kept for 7 years or more.
Conclusion
By now, you have an idea about crucial records you need to maintain for more than 5 years. As a business owner, it might be difficult for you to keep track of essential records. Therefore, you can receive Reliable Bookkeeping Services for your businesses. Bookkeepers will ensure you have accurate and updated records that will be kept for a longer period.