Record keeping

There are many benefits to keeping good records. It can help you:

• keep track of your business’s health, so you’re able to make good business decisions
• meet your tax and superannuation obligations
• manage your cash flow
• demonstrate your financial position to banks or other lenders.

You must keep records of all transactions related to your business’s tax and superannuation affairs, including records that support the information you include in your tax returns and reports.

The records you need to keep depend on the tax and superannuation obligations of your business and the structure of your business (sole trader, partnership, company or trust).

The Australian Taxation Office (ATO) requires that:

1. Your records must not be changed and must be stored in a way that restricts the information from being changed or the record damaged.
2. You need to keep most records for five years, starting from when you prepared or obtained the records, or completed the transactions (or acts they relate to), whichever is the later.
3. You need to be able to show the ATO your records if they ask for them.
4. Your records must be in English or able to be easily converted to English.

We recommend you check the record-keeping requirements of all organisations you deal with.

You can keep records electronically or in paper form. The ATO recommends that businesses use electronic record keeping if possible, as they are progressively moving towards electronic reporting for tax and super obligations. Keeping your records electronically should make some tasks easier and save you time once you have your system set up.

If you keep your records electronically, there’s no need to also keep paper copies unless a particular law or regulation requires a paper copy.

You can also store and keep paper records electronically. The ATO accepts images of business paper records saved on an electronic storage medium, provided the electronic copies are a true and clear reproduction of the original paper records and meet their record-keeping requirements. Once you have saved an image of your original paper records, you don’t have to keep the paper versions.

Whichever you choose, make sure you store your records in a secure place. Back up your records and, if possible, have a secure off-site storage location, which may include cloud storage.

The records must also be on a computer or device that:

• you have access to (including all passwords)
• is backed up in case of computer failure
• allows you to control the information that is processed, entered and sent  

In general, you need to keep most records for five years. Starting from when you prepared or obtained the records, or completed the transactions (or acts they relate to).

There are some situations where you will have to keep records for longer than five years, including if your business owns capital assets that are subject to capital gains tax – refer to the ATO’s Acquiring CGT assets.

The Australian Securities & Investments Commission (ASIC) requires companies to keep records for seven years.

If you’re a sole trader, you can use the ATO app's myDeductions tool to record your:

• business income
• expenses
• vehicle trips.

At tax time you just upload your data to pre-fill your tax return or email it to your tax agent.

Manual bookkeeping

Manual bookkeeping systems use a series of books or ledger accounts. You can often get these from your local newsagent, office supply or book store.

The advantages of a manual system can include:

• cheaper to set up
• less likely that data will become corrupted
• a simpler system to use if you’re not familiar with accounting software
• duplicate copies of the same records are usually avoided.

Electronic bookkeeping

The ATO is moving towards all electronic records. So, now may be a good time to go electronic. Some advantages of digital record keeping include:

• less physical storage space than a manual system
• automatically calculates amounts
• easy to generate reports
• easy to back up and keep safe in case of fire or theft.

Your electronic options include accounting software, web-based systems and spreadsheets.

Accounting software

Off-the-shelf or tailored software accounting packages help you to:

• record your transactions
• calculate goods and services tax (GST)
• update ledgers
• prepare financial statements
• generate invoices.

Check what software your accountant or business advisor recommends. Make sure software complies with Standard Business Reporting (SBR).

Web-based bookkeeping

A web-based or 'cloud' system:

• lets you update your books from any location
• provides automatic off-site storage for your financial records
• can be a cheaper digital option.

However, it does have security risks.

Find out about the cloud computing software service on the ATO website.

Spreadsheet accounting

Are you confident using a computer, but don't have the funds for an accounting package? Consider setting up a series of spreadsheets for your accounts.

Visit the ATO website for more information on manual and electronic record keeping systems.

Point-of-sale (POS) systems

As your business grows, you may find you need to update or upgrade to a POS system. These are computer systems that help you process sales and can support record keeping.

Depending on the system you choose, POS systems can automatically:

• adjust sales income and inventory records
• create receipts, invoices and tax invoices
• process EFTPOS and credit and debit card sales.

Think about the features your business needs before buying a POS system.