Keeping your tax records
Keeping your tax records
The Australian tax system relies on taxpayers self-assessing. This means that you are responsible for working out how much you can declare and claim on your tax return. You also need to be able to show how you arrived at these figures - in some cases you may be required to provide written evidence.
In order to prepare an accurate tax return and support the claims you make, you need to keep careful records. The records you need to keep depend on your personal circumstances. If you are not sure, it is better to keep too many records than not enough.
This guide will provide general advice to help you identify what records you need to keep.
- To provide written evidence of your income and expenses.
- To help you or your tax agent prepare your tax return.
- To ensure that you are able to claim all your entitlements.
- In case we ask you to prove the information you provided in your tax return.
Generally, you must keep your written evidence for five years from the date you lodge your tax return, or, if you:
- have claimed a deduction for decline in value (formerly known as depreciation) - five years from the date of your last claim for decline in value
- acquire or dispose of an asset - five years after it is certain that no capital gains tax (CGT) event can happen, so you know you don't need the records to work out a capital gain or loss
- are in dispute with us - the later of five years from the date you lodge your tax return or when the dispute is finalised.
Shorter retention from 2004-05 on
We have made a determination SDR 2006/1 that some records for 2004-05 and later income years held by individuals with simple tax affairs need only be retained for two years. The records that are covered by this determination are a:
- family agreement that is relevant to 2004-05 or later
- copy of a payment summary given to an individual in the income year commencing 1 July 2004 or later
- taxpayer declaration that is made on or after 1 April 2004 for returns and documents lodged with us by a tax agent on a taxpayer's behalf, authorising the agent to lodge and declaring that the information supplied is correct (for example, the taxpayer declaration on a tax agent lodged tax return).
What are simple tax affairs?
You are classed as having simple tax affairs in an income year if you are an individual taxpayer and:
- your income consists only of
- salary or wages (other than from associates)
- interest paid by a financial institution or government body
- dividends from an Australian company listed on the Australian Stock Exchange (ASX)
- you claim deductions only for
- the cost of managing your tax affairs
- bank fees and charges, including taxes and duties
- deductible gifts of money and donations of money
- you are not
- a foreign resident for the year of income
- entitled to a foreign tax credit
- required to adjust your taxable income because of payments to or from your associates
- in receipt of a capital gain or loss that must be taken into account in your tax return
- in receipt of foreign employment income, or income from service on an approved overseas project that is exempt from tax in Australia.
You should keep records in these main categories:
This advice tells you what main types of records you should keep in each of these categories. You may also need to keep records in some other categories, or for other members of your family - for example, if you receive the family tax benefit.
You may decide not to keep particular records - for example, because you expect to claim for only a small amount of business travel. If it turns out that you travel more than you expected during the year, you may be limited to a smaller claim than if you had kept more records.
So if you're not sure whether or not to keep a record, you should keep it - you can decide whether you need it at tax return time.
If you incur expenses for private purposes, you must have records that show how you worked out the amount of any private use.
If you obtain receipts or invoices, they could show such things as the:
- name of the supplier
- Australian business number (ABN) of the supplier
- amount of the expense or purchase
- nature of the goods or services purchased or expense incurred
- date the expense was incurred
- date of the document.
There may be time when your records are accidentally lost or destroyed - for example, if your home is burgled or burnt.
In these instances, we can allow you to claim a deduction for certain expenses if either of the following apply:
- you have a complete copy of a lost or destroyed document
- we are satisfied that you took reasonable precautions to prevent the loss or destruction and, if the document was written evidence, it is not reasonably possible to obtain a substitute document.
Electronic records
Documents that you are required to keep can be in written or electronic form. If you make paper or electronic copies they must be a true and clear reproduction of the original.
We recommend that if you store your records electronically you make a back-up copy to ensure the evidence is easily accessible if the original becomes inaccessible or unreadable - for example, where a hard drive is corrupted.
Payments you received
Salary, wages and allowances
Written evidence can include:
- your Pay as you go (PAYG) payment summary - individual non-business, (previously known as a group certificate)
- a comparable signed letter or statement from your payer, if you do not have a payment summary.
Income from interest, dividends, managed funds or rental properties
Written evidence can include:
- statements, passbooks or other documentation from your financial institution showing the amount of interest you received
- statements from the company, corporate unit trust, public trading trust or corporate limited partnership that pays you dividends or makes distributions to you. These records should show
- the amount of franked and unfranked dividends you received
- the amount of franking credits, and
- any tax file number amounts withheld from unfranked dividends
- statements or advice from the managed fund showing the amount of any distribution. The statement should show details of
- the amount of any primary production or non-primary production income
- any capital gains or losses
- any foreign income, and
- your share of any credits, such as franking credits
- records of the rent you received, such as
- a statement from your property agent
- a rent book or bank statements showing rental payments transferred into your account, and
- records of any bond money retained in place of rent.
Government benefits and pensions
Written evidence can include:
- your PAYG payment summary - individual non-business (previously known as a group certificate)
- a letter from the agency that pays your allowance, pension or payment stating the amount you received.
Other pensions or annuities
Written evidence can include:
- your PAYG payment summary - individual non-business (previously known as a group certificate)
- your PAYG payment summary - superannuation income stream.
Expenses related to payments you received
Read on for details of specific types of expenses.
Car expenses
The records you need to keep will depend on your estimated business kilometres travelled. However, your claim at the end of the income year will depend on your actual business kilometres. So, if you cannot estimate your business kilometres, you should keep documentation as required by the logbook method. This will ensure that you will be able to make your claim under the method which gives you the greater deduction.
If your estimated travel will be more than 5,000 kms, you can use one of four methods:
If your estimated travel will be 5,000 km or less, you can use either:
Cents per kilometre method
You need records showing how you calculated business kilometres travelled and the amount of the claim - for example, diary entries and documents you can use to show the engine capacity of your car.
Logbook method
For each year you need:
- odometer readings for the start and end of the period being claimed
- business usage percentage based on the logbook
- receipts or other documents showing fuel and oil expenses, or a reasonable estimate based on odometer readings
- receipts or other documents showing other expenses for your car - for example, registration, insurance, lease payments, services, tyres, repairs, interest charges.
Your logbook is valid for five years. If this is the first year you are using this method (or the five years has expired) you will need to keep a logbook for this year. The logbook must cover at least 12 continuous weeks and show:
- when the logbook period begins and ends
- the car's odometer readings at the start and end of the logbook period
- the total number of kilometres travelled in the logbook period
- the number of kilometres travelled for work activities based on journeys recorded for the period in the logbook. In recording the journeys, you need the start and finishing times of the journey, the odometer readings at the start and end of the journey, kilometres travelled, and the reason for the journey
- the business-use percentage for the logbook period.
The following table sets out some of the rules about keeping logbooks in different circumstances:
Circumstance
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Rule
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First year of using logbook
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If this is the first year that you are using the logbook method, you must keep a logbook during this income year.
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Using the car for less than 12 weeks before the end of the income year
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If you started to use your car for work-related purposes less than 12 weeks before the end of the income year, you are able to continue to keep the logbook in the following income year so that your logbook covers the required 12 weeks.
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Keeping logbooks for two or more cars
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If you want to use the logbook method for two or more cars, the logbook for each car must cover the same period.
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You also need to monitor the pattern of your car usage during the year and adjust the business-use percentage accordingly. For example, your business use is likely to vary during a holiday period.
12% of original value method
You need:
- your sale or purchase, lease or hire purchase agreement
- the basis on which the business kilometres were calculated.
Claims under this method are restricted to 12% of the luxury car limit in the year you first used the car:
- $57,466 for the 2010-11 and 2011-12 income years
- $57,180 for the 2008-09 and 2009-10 income years
- $57,123 for the 2007-08 income year, and
- $57,009 for the 2002-03 to 2006-07 income years.
One-third of actual expenses method
You need:
- odometer readings for the start and end of the period you had the car during the year
- the basis on which the business kilometres were calculated
- details of the make, model, engine capacity and registration of the vehicle
- receipts or other documents showing fuel and oil expenses, or a reasonable estimate based on odometer readings
- receipts or other documents showing other expenses related to your car - for example, registration, insurance, lease payments, services, tyres and repairs.
Travel expenses
These records may include:
- a travel diary - that is, a document which shows the dates, places, times and duration of your activities and travel
- written evidence of your travel expenses, such as invoices, receipts or other documents showing the expense, and travel allowance details
- receipts or other documents showing actual costs incurred for using a car owned or leased by someone else - for example, petrol and oil
- receipts or other documents showing the amount and date of the expenditure for vehicles other than cars, such as
- motor cycles
- utilities or panel vans with a carrying capacity of one tonne or more, or
- any other vehicle with a carrying capacity of nine or more passengers
- receipts or other documents (such as diary entries) for air, bus, train, tram and taxi fares, bridge and road tolls, parking and car-hire fees.
The documentation required for travel depends on the length of stay and whether you have received travel allowance. Where you receive travel allowance and you restrict your claim to the reasonable amount we advise each year, you do not need to keep written evidence of the expenses incurred.
Clothing, uniform, dry-cleaning, laundry and sun protection
These records may include:
- receipts or other documents showing expenses for uniforms and occupation-specific and protective clothing
- a basis for your claim for laundry costs if claiming less than $150
- diary entries, receipts, or other documents evidencing claims greater than $150
- receipts or other documents showing dry-cleaning costs
- receipts or other documents showing expenses for sun protection items.
These records may include:
- receipts or other documents showing expenses such as course fees, textbooks, stationery, decline in value of and repairs to depreciating assets
- receipts, documents or diary entries for travel expenses.
These records may include:
- receipts, other documents or diary entries you make to record your expenses - for example, a diary maintained over a representative period to support the apportionment of computer home office costs
- receipts or other documents showing expenses related to the decline in value of depreciating assets
- PAYG payment summaries showing items such as union fees and overtime meal allowances.
Rental expenses
These records may include:
- documents such as bank statements showing the interest charged on money you borrowed for the rental property
- receipts or other documents showing other expenses for your rental property - for example, advertising, bank charges, council rates, gardening, property agent fees and repairs or maintenance
- documents showing details of expenses related to the decline in value of depreciating assets or any capital work expenses, such as structural improvements.
A local governing body (LGB) may resolve that its members be subject to the pay as you go withholding system.
If you are a local government councillor and your LGB has passed such a resolution, you will be treated as an employee for tax purposes and will be required to keep written evidence for your work related expenses and car expenses.
Written evidence may include receipts or other documents to show the expenses you have incurred in carrying out your duties as a local government councillor.
When you have acquired or disposed of an asset
If you acquire or dispose of an asset which might be subject to capital gains tax, you should keep:
- documents showing the dates you acquired an asset and the date the capital gains tax (CGT) event occurred. A CGT event must occur for a capital gain or loss to arise. There are a wide range of CGT events, but the most common CGT event occurs when you sell or give away an asset. Common examples of documentation are
- contracts for the purchase or sale of an asset (such as real estate or shares), and
- dividend reinvestment statements from your unit trust or managed investment fund
- documents showing the amount and date of any expenditure for that asset. In some cases, the expenditure is needed to calculate any gain or loss - for example, council rate notices for a vacant block of land
- records of any unapplied net capital losses from previous years. You may be able to offset these against capital gains in this year.
Gifts, donations and contributions
Written evidence may include:
- receipts for donations or contributions
- your PAYG payment summary - individual non-business (previously known as a group certificate) where you make donations to eligible organisations through your pay
- a signed letter from the eligible organisation confirming the amount of your donation or contribution (and the amount of the minor benefit, where you have made a deduction for a contribution where there is a minor benefit - for example, a charity dinner).
Medical expenses
Written evidence may include:
- receipts or other documents to show the medical expenses you can claim - for example, payments to hospitals, doctors, dentists, opticians and chemists for expenses relating to an illness or operation
- documents for any payments made to residential aged care facilities - some of these payments may be considered medical expenses
- statements from Medicare or a private health fund.
You should keep these documents that relate to you, as well as payments made for your dependants. This generally refers to your spouse and children, but may also include other dependants.
Education tax refund
You will need written evidence, such as receipts and invoices, to ensure that you are able to prove the expenses you have claimed if we ask you to substantiate them. Eligible education expenses must be listed separately on invoices.
Keeping good records helps you and your tax adviser:
- complete tax returns
- provide written evidence of tax-related transactions when you need to
- reduce the risk of tax audits and adjustments
- improve communication with us
- resolve issues relating to disputed assessments or adjustments
- avoid exposure to penalties.
Other reasons for keeping good records are to:
- make best use of your tax adviser - rather than paying them to sort through a shoebox of paperwork, give your tax adviser well-prepared records so they can ensure you get what you are entitled to
- minimise the cost of managing your tax affairs.
If you need additional help, phone us on 13 28 61.
Last Modified: Thursday, 28 June 2012
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