Many of us like to start the new year with a clean slate, decluttering our homes by getting rid of excess paperwork. But what should you do with your old tax records?
Should you keep them for the long-haul or is it okay to shred them after you’ve lodged your return for the year?
The general rule for keeping tax records
In most cases, you should hold on to your tax records for five years after lodging the relevant tax return. However, it can be longer than this depending on the circumstances.
For example, if you:
- Carried forward tax losses: Keep all records from the start of those losses until five years after you make the final claim
- Claimed a deduction for a depreciable asset: Keep all records relating to the purchase until five years after you make the final depreciation claim
- Own a capital asset such as property or shares: Keep records of the purchase and holding costs (known as the ‘cost base’) until five years after you’ve sold or otherwise disposed of the asset. This is so you can accurately work out any capital gain or loss.
- Are in a dispute with the ATO: Keep tax records for the year in question for five years after the dispute is resolved
- Own a business: All financial records relating to your business should be kept for seven years to comply with the Corporations Act 2001.
Why is it important to keep tax records?
The Australian tax system is based on a self-assessment model. So, you first need good records to accurately work out how much you can declare and claim on your tax return.
Then, if the ATO ever questions your calculations, keeping tax records means you’ve got the written proof on hand to back up your claims.
What type of records do you need to keep?
It’s best to keep all records relating to your income and expenses such as receipts, calculations and other evidence that supports the contents of your tax return.
Managing your tax affairs can be complicated. But it doesn’t have to be. Get in touch to see how Accounting Excellence can save you time, money and stress by emailing info@universeaccountants.com.au or calling 0431 981 005.
Please note that this is intended to provide general information only and it is not designed to be a substitute for professional advice. The information is valid at the time of writing.
