29 Oct 2013
Words
Tim Admin
Record keeping obligations
Taxpayers should be aware of record keeping obligations imposed under taxation legislation.At the basic level, any document relating to income earned, and to substantiate expenses claimed, should be kept. Documents should at least contain the transaction date, amount and some description of the nature of the transaction. However, there are many more records required to be kept, including:
- motor vehicle log books: where a taxpayer claims a business use percentage of a vehicle
- elections: indicating the taxation treatment adopted where several options exist under the taxation legislation
- declarations: most relevant in the fringe benefits tax area, where an employer is often required to obtain confirmation from an employee regarding private use of items provided by the employer
Records must be kept in English and may be in electronic form, provided they are readily accessible and convertible to print. Taxpayers should safeguard against accidental loss of records or changes in software preventing access to documents in the future.The standard period tax records are required to be kept is five years from completion of the relevant transaction. Some changes in recent years have reduced this timeframe for taxpayers regarded as having simple taxation affairs, e.g. those not in business. We recommend a greater level of care with record keeping for capital gains tax transactions, as the value of transactions is often higher and failure to keep appropriate records could significantly increase tax payable.In respect of capital losses, a taxpayer is required to keep all records to substantiate how the loss amount was ascertained. The ATO recommends retaining these records for five years after the year in which the loss was recouped. The year in which it was recouped can sometimes be several years after the loss initially arose. Despite this additional compliance burden, given the value of losses to a taxpayer, it makes good sense to comply.As with all aspects of taxation, concessions to the above rules may apply to certain taxpayers. Conversely, there are circumstances where additional obligations are imposed.NB: This information is general in nature. Taxpayers should seek advice specific to their circumstances from their professional advisor.
