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Record-keeping requirements and retention
If you are carrying on a business, you must keep records relevant for any tax purpose that record and explain all transactions and other acts you are engaged in. subsection 262A(2) of the ITAA 1936 prescribes the records to be kept, including:
- any documents relevant for the purpose of ascertaining the person’s income or expenditure
- documents containing particulars of any election, estimate, determination or calculation made by the person for tax purposes and, in the case of an estimate, determination or calculation, particulars showing the basis on which and the method by which the estimate, determination or calculation was made.
You must keep these records for your financial arrangements covered by the TOFA rules, even if you are not carrying on a business in relation to those arrangements.
Generally, the trust must keep all relevant records for five years after they were prepared or obtained, or five years after the completion of the transactions or acts to which they relate, whichever is the later. This period may be extended in certain circumstances. Keep records in writing and in English. You can keep them electronically as long as the records are in a form that we can access and understand to ascertain your tax liability.
- TR 2005/9 Income tax: record keeping – electronic records
Trust record retention
Keep the following records:
- a copy of the trust deed
- a copy of all trustee resolutions
- detailed statement of assets and liabilities
- the names in which business contracts are made
- a record of the name and contact details of the trustee at year end
- records that show you have met your choice of superannuation fund employer obligations.
Tax losses record keeping
If your trust incurs tax losses, you may need to keep records longer than five years from the date when the losses were incurred.
Generally, tax losses incurred this year can be carried forward indefinitely, until they are applied by recoupment. When applied, the loss amount is used in calculating the trust’s net income (and beneficiary’s taxable income) in that year. It is in the trust’s interest to keep records substantiating the balance of this year’s losses until the amendment period for the trust’s or beneficiary’s assessment for the recoupment year in which the losses are fully applied has lapsed.
For more information on record keeping where losses are incurred, see TD 2007/2 Income tax: should a taxpayer who has incurred a tax loss or made a net capital loss for an income year retain records relevant to the ascertainment of that loss only for the record retention period prescribed under income tax law?
Capital gains tax (CGT) record keeping
A trust must keep adequate records of all expenditure which will help to correctly work out the amount of capital gain or capital loss made when a CGT event happens. A trust must keep records relating to the ownership and all the costs of acquiring and disposing of property. It will also help to make sure the trust does not pay more CGT than is necessary.
A trust must keep records of everything that affects the trust’s capital gains and capital losses. Penalties can apply if the trust does not keep the records for at least five years after the relevant CGT event. If the trust uses the information from those records in a later tax return, the trust should generally keep records longer. If the trust has applied a net capital loss, the trust should generally keep records of the CGT event that resulted in the loss until the end of any period of review for the income year in which the capital loss is fully applied.
For more information on record keeping for CGT, see the Guide to capital gains tax 2015 and TD 2007/2 Income Tax: should a taxpayer who has incurred a tax loss or made a net capital loss for an income year retain records relevant to the ascertainment of that loss only for the record retention period prescribed under the income tax law?
Record keeping for overseas transactions
Keep records of any overseas transactions in which the trust is involved, or has an interest, during the income year.
The involvement can be direct or indirect, for example, through individuals, trusts, companies or other entities. The interest can be vested or contingent and includes a case where the trust has direct or indirect control of:
- any income from sources outside Australia not disclosed elsewhere on the tax return, or
- any property, including money, situated outside Australia. Where this is the case keep a record of the
- location and nature of the property
- name and address of any partnership, trust, business, company, or other entity in which the trust has an interest
- nature of the interest.
If an overseas interest was created by exercising any power of appointment, or if the trust had an ability to control or achieve control of overseas income or property, keep a record of the:
- location and nature of the property
- name and address of any partnership, trust, business, company, or other entity in which the trust has an interest.
If there is no trustee who is an Australian resident, the onus is on the public officer to keep this information.
Last modified: 21 Jan 2016QC 44346