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  • You need to know



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    Records you need to keep

    You must keep records of most transactions in English for five years after you prepared or obtained them, or five years after you completed the transactions or acts to which they relate, whichever is the later. Taxation Ruling TR96/7 - Income tax: record keeping-section 262A-general principles clarifies the record-keeping obligations of small businesses, particularly for cash transactions. In addition, Taxation Ruling TR97/21 - Income tax: record keeping-electronic records provides further information on electronic records.

    The Australian Taxation Office (ATO) is helping small business operators meet their record-keeping obligations by reviewing their record-keeping practices. These reviews start with a telephone call or a brief visit to the business premises. The process is explained, you can ask questions and an interview is arranged for a later date.

    Some of the more significant record-keeping problems identified by the ATO are failure to:

    • record cash income and expenditure
    • account for personal drawings
    • record goods for your own use
    • separate private expenses from business expenses
    • keep valid tax invoices for creditable acquisitions when registered for GST.
    • keep adequate stock records
    • keep adequate records to substantiate motor vehicle claims.

    For additional information, please refer to Record keeping for new small business (NAT 3029-6.2002).

    To get a copy of the electronic record-keeping package e-Record CD-ROM, phone 1300 139 051.

    Hobby or business?

    It is important to determine whether you are carrying on a business or pursuing a hobby, sport or recreational activity that does not produce income.

    In general, you are considered to have a business if the activity:

    • has actually commenced
    • has a significant commercial purpose or character
    • has a purpose of profit as well as a prospect of profit
    • is carried out in a manner that is characteristic of the industry
    • is repeated, regular or continuous
    • cannot be more accurately described as a hobby, recreation or sporting activity.

    For additional information, please read 'Are you carrying on a business' in the publication Tax basics for small business (NAT 1908-6.2002). Primary producers should also refer to Taxation Ruling TR 97/11 - Income tax: am I carrying on a business of primary production?

    Last modified: 25 Feb 2020QC 27476