Author: Wendy Waack, Partner, TAG Financial Services
Marie Kondo, the tidying guru, has highlighted the joy you get when you remove clutter from your life. This includes that overflowing file cabinet full of tax records.
So, if you’re stuck for something to do on a cold winter’s day, it’s a great opportunity to go through your tax records and purge anything you don’t need.
Let’s face it, no tax record is going to ‘spark joy’, so here are some guidelines to help you along.
The basics
The ATO requires records to be kept for all transactions relating to your businesses’ tax and superannuation affairs.
Generally, they need to be:
- kept for five years – this starts from when you prepared or obtained the record, or completed the transactions or acts those records relate to, whichever is later;
- stored in a way that prevents it from being altered or damaged;
- be able to be produced when requested by the ATO; and
- be in English or readily translatable to English.
In some situations, the law states that the start of the five-year retention period is different. For example, for fringe benefits tax (FBT) records, super contributions for employees, and super fund choice for your employees.
There are also situations where you need to keep some records for longer than five years (i.e. any depreciation asset or asset subject to capital gains, you will need to keep your records for the life of that asset and five years after the date these assets are sold).
If you are registered as a company, the Australian Securities & Investments Commission (ASIC) requires you to keep records for seven years.
Benefits of decluttered tax records
Each year, on the 30 June is when your well organised pile of tax records will come into play.
The government will have access to your wage, dividend, interest, health benefits details and some managed funds. If you have quoted your tax file number to the bank or investment, the ATO will have these details and be able to provide these to your accountant.
The data required from you will be items such as:
- Association and membership renewals
- Donations
- Income protection insurance
A well organised tax record will not only allow you to easily produce these documents, but also see any changes that occurred within the last financial year.
Whilst organising tax records isn’t a ‘joy’ sparking exercise in itself, it will likely provide you with some calmness at tax time, knowing you have everything done and ready to go.
Make it a winter thing; make it a yearly thing, and keep ‘Marie Kondo’-ing your tax records.
If you have questions or need any assistance, please do not hesitate to contact us on 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.