Mistakes, Penalties and Official Sources
Business record keeping requirements in Australia: the five-year rule and what to keep
What records an Australian small business must keep, for how long, in what form, how digital copies and software exits work, and how good records lower your accountant's fee.
Australian businesses generally must keep records that explain all transactions relevant to their tax affairs for at least five years from when the record was prepared or obtained, or the transaction was completed, whichever is later. Records must be in English or readily convertible, and can be digital if they are true and clear copies. Some records must be kept longer: records supporting a capital gain or loss run for five years after the CGT event, records for tax losses may need to be kept until the loss is used and the amendment period ends, and employee records under workplace law generally have to be kept for seven years. Good records are also the cheapest way to reduce accounting fees.
This guide is part of the accounting mistakes overview.
The legal basis
The general record keeping obligation for income tax is in section 262A of the Income Tax Assessment Act 1936. GST, PAYG withholding, fringe benefits tax and superannuation have their own record requirements, and the Fair Work Act 2009 and its regulations set rules for employee records. Failing to keep proper records can attract an administrative penalty and, more practically, can mean deductions or GST credits are disallowed in an ATO review.
What to keep
| Area | Records | Usual minimum period |
|---|---|---|
| Income | Sales invoices, point-of-sale reports, bank deposits, cash takings records | 5 years |
| Expenses | Tax invoices, receipts, bank and card statements | 5 years |
| GST | Tax invoices for purchases over $82.50 including GST; adjustment notes; BAS working papers | 5 years |
| Assets | Purchase invoices, depreciation schedules, asset register, sale documents | 5 years after disposal or CGT event |
| Vehicles | Logbook if using the logbook method; odometer records; fuel and running costs | Logbook generally valid for 5 years |
| Employees | Pay slips, time and wage records, tax file number declarations, super contributions, STP reports | 7 years under workplace law; tax rules also apply |
| Contractors | Invoices, ABNs, records for taxable payments annual report where required | 5 years |
| Company | Minutes, dividend statements, Division 7A loan agreements, ASIC documents | Corporations Act requirements plus tax periods |
| Trusts | Trust deed, distribution resolutions, beneficiary details | Long-term; keep the deed permanently |
| Losses | Calculations and supporting records | Until the later of 5 years or the end of the amendment period for the year the loss is used |
Digital records
You do not have to keep paper. The ATO accepts digital records, including scanned or photographed receipts, provided the copy is a true and clear reproduction of the original, readable, and kept for the required period. That means:
- Photograph receipts promptly; thermal paper fades.
- Store files where you can find them by date and supplier.
- Back up regularly to a location you control.
- Make sure the format will still be readable in five years.
Receipt capture and bank feeds can do much of this automatically; see software costs and automation.
The software exit problem
Cloud accounting software stores your records on the vendor's servers. If you cancel the subscription, access may be limited or, after a period, lost. Before you cancel or switch:
- Export a full set of reports for each year: general ledger, trial balance, profit and loss, balance sheet, BAS reports, payroll reports.
- Download attachments (receipts and bills) where the software allows.
- Check whether the vendor offers a read-only archive.
- Keep the files where the business, not the accountant, controls them.
If your accountant owns the subscription, agree in writing how you will keep access. See switching accountants.
How records affect your accounting fee
| Record quality | Typical accountant work at year end (illustrative) |
|---|---|
| Bank feeds reconciled monthly, receipts attached, asset register current | Review and adjustments only |
| Bank feeds connected but unreconciled; some receipts missing | Reconciliation, follow-up questions, estimates |
| Spreadsheet and paper receipts, personal spending mixed in | Rebuilding the ledger before the real work starts |
If clean-up takes an accountant 10 extra hours at $180 (illustrative), that is $1,800. Set against a one-off automation set-up, the automation payback calculator can show how quickly better records pay for themselves.
Records in an ATO review
In a review or audit, the ATO may ask you to substantiate income and claims. Without records, it can disallow claims and, in some cases, estimate income using benchmarks such as its small business benchmarks for your industry. Shortfall penalties may apply if a lack of records shows a failure to take reasonable care. See ATO penalties.
Practical routine
- Daily or weekly: capture receipts, record cash takings, reconcile bank feeds.
- Monthly: check that every transaction has a document attached.
- Each pay run: confirm payroll reports and super payments.
- 30 June: stocktake if you hold inventory; update the asset register; keep trustee resolutions.
- Yearly: archive a full export of the year's records.
Frequently asked questions
Do I need to keep the paper receipt after scanning it?
Generally not, if the digital copy is a true and clear reproduction and you keep it for the required period.
How long should I keep records if I close the business?
The five-year period still applies, and longer for some records such as CGT and employee records.
Are bank statements enough?
Usually not on their own. A bank statement shows a payment, not what was bought or whether GST was included. Keep tax invoices.
What records does a sole trader need?
The same types as any business, scaled to its activity. The ATO's record keeping guidance for small businesses lists them.
Sources and where to check
- Australian Taxation Office — record keeping for business, digital records, small business benchmarks
- Fair Work Ombudsman — employee record keeping and pay slip rules
- Federal Register of Legislation — Income Tax Assessment Act 1936 section 262A and the Fair Work Act 2009
- business.gov.au — record keeping overview for small businesses
