Every year you are responsible for lodging a tax return. In order to be prepared, make sure that you have all of your tax records in place. Not having the right tax records when it comes to lodge your return could cost you money.
Why is it important to keep tax records?
Tax records provide written documentation of any claim you are making on your tax return. Without these records it is impossible to tell if you have claimed all of your entitlements and for the right amount. plus, if the ATO ever questions an item on your tax return, you will be able to provide them with the proof.
How long do I need to keep my records for?
In most instances you are going to want to hold on to your tax records for five years following the date that the relevant return was lodged. Other instances where you will want to keep them for five years include:
- If you have claimed a deduction for a decline in the value of property five years after the date of your last claim for a decline in value.
- If you have acquired or disposed of an asset five years after you are certain that there will be no capital gains tax event. Otherwise you must hold onto those records in order to work out the capital gain or loss.
What type of records do I need to keep?
There are four main categories of tax records that you should have on file to complete your tax return:
- All income you have received including wages, interest, dividends, rental income, managed investment funds etc.
- Receipts or invoices for work related expense claims. For a more in depth look at the records for expenses click here.
- Paperwork related to the acquisition and sale of an asset including an investment property or shares.
- Donations, contributions or gifts to charitable organisations.
What about electronic records?
The ATO allows for documents that have been stored electronically, so long as the electronic copies are a true and clear reproduction of the original paper records. If you do store your tax records electronically, it is recommended that you back up the files or store them online as a safety measure in case of computer failure.
The myDudctions app from the ATO is a record-keeping tool that makes it easier for you to keep track of your records digitally. You can upload your completed records from the myDeductions tool and email your records directly to us to prepare your tax return.
What happens if I’ve lost or destroyed the records?
In the event that your receipts/documents have been lost or destroyed, you may still be able to use the information contained in them if:
- You have a copy of the document in its entirety
- You took reasonable precaution to prevent the loss or destruction and it is not possible to obtain a substitute.
In some cases, the ATO accepts evidence of your expenses in the form of a bank or credit card statement that shows the amount that was paid, when and who it was paid to. If you pay by cash and have no other documentations to support your claim, you will not have sufficient evidence to claim a deduction.
Not having the right tax records when it comes time to lodge your return could cost you money. Save whatever you think may be relevant in a safe place throughout the year, to be sure that you are receiving a correct assessment and possible refund.