Often small business owners ask us if they can throw out their tax records once they have lodged their tax return and received their Notice of Assessment from the ATO. The answer is no – definitely not!
Small business owners are required to keep their records for much longer than that. As a general rule of thumb, you must keep your records for the later of five years from when your tax return is due to be lodged, or when you lodge your tax return.
However, if you are claiming a depreciating asset as an expense (e.g. the purchase of a piece of equipment which is being depreciated), you must keep your records for (i) the period over which you are claiming the depreciation as well as (ii) a further five years on top of this. For example, consider the purchase of a piece of equipment for $2,000. Let’s say you depreciate it over 4 years. You must keep your records for the 4 years in which you depreciated the piece of equipment, plus another 5 years on top of that. Meaning that you will need to keep those records for a total of nine years.
Remember, there are other regulatory bodies which may make you keep records for longer periods than this. So make sure you have a chat to your Nudge Accountant if you are unsure.
This Tax Tips Tuesday is brought to you with love by Nudge Accounting. You can read other Tax Tips here.