Record-Keeping for Accurate Tax Returns

Records are written evidence of your income or expenses, which can be either paper or electronic. These records support the claims made in your tax return. For most expenses, you need a receipt or similar document from the supplier, showing the following: 

- Supplier's name or business name 

- Amount of the expense or cost of the asset 

- Nature of the goods or services bought 

- Purchase date 

- Date the document was produced 

A bank or credit card statement alone is not sufficient. 

Types of Records

The records required depend on the type of transaction. Here's a brief overview: 

1. Payments or Amounts Received: Income statements, PAYG payment summaries, or letters from your payer. 

2. Deductible Expenses: Receipts or similar documents for costs like managing tax affairs or charitable donations. 

3. Work-Related Expenses: Written evidence such as receipts or invoices, and a diary showing the work-related use. 

4. Investments and Assets: Records of purchase and income from investments like property or shares. 

Importance of Keeping Records

Australia's tax system operates on self-assessment, meaning they trust that the information you provide is accurate. If the ATO reviews your tax return and you lack evidence to support your deduction claims, those claims may be disallowed (removed from your tax return).  

Good record-keeping ensures: 

- Accurate tax return preparation 

- Full claim of entitlements 

- Proof of information provided 

- Reduced risk of audits and penalties 

How Long to Keep Records

- Generally, 5 years from the date you lodge your tax return. 

- For depreciating assets, 5 years from the last claim for decline in value. 

- For CGT assets, 5 years after it’s certain no CGT event can happen. 

- If in dispute, 5 years from the date of lodging the tax return or from the resolution date, whichever is later. 

Format of Records 

Records can be in paper or electronic format and must be in English for expenses incurred in Australia. Digital records should be true copies of the originals and backed up regularly. 

Using myDeductions Tool

The ATO's myDeductions tool helps keep track of records electronically, making it easier to store and manage receipts. It can be used for various deductions, including work-related expenses and business income for sole traders. 

Record-Keeping Exceptions

In some cases, exceptions apply, such as: 

- Total Work-Related Expenses $300 or Less: No need for written evidence, but you must show how the amount was calculated. 

- Total Laundry Expenses $150 or Less: No written evidence required. 

- Small Expense Receipts: For expenses $10 or less, up to $200 per income year, keep a record if a receipt is not available. 

- Hard to Get Receipts: Create a record with details similar to a receipt if getting a receipt is impractical. 

- Lost or Destroyed Records: Provide a complete copy or other sufficient evidence if original records are lost or destroyed. 

Following these guidelines helps you stay compliant and ensures you can make the most of your tax claims.