Many of you may have noticed that a lot of receipts these days are printed on thermal paper (particularly receipts that come from cash registers.) The two main problems with thermal paper is that the text can fade over time, and also the entire receipt can turn black when exposed to high temperatures – for instance lying in the sun. This presents an issue when it comes to keeping receipts and financial records for tax time; especially if the ATO asks for copies of these records at a later point in time. The ATO is not lenient if you can’t provide the receipts. However, there are a few things you can do to prevent such a small matter from becoming a large issue:
• Photocopy these receipts and file these copies. A photocopy of the original receipt is sufficient for the ATO, provided that the copies are a true and clear reproduction of the originals.
• Scan and file the receipts electronically. If you make electronic copies they must be a true and clear reproduction of the original. We recommend that if you store your records electronically you make a back-up copy to ensure the evidence is easily accessible if the original becomes inaccessible or unreadable (for example, where a hard drive is corrupted).
Why should you keep financial records?
• To provide written evidence of your income and expenses.
• To help you or your tax agent prepare your tax return.
• To ensure that you are able to claim all your entitlements.
• In case the ATO asks you to prove the information you provided in your tax return.
How long should you keep your records?
Generally, you must keep your written evidence for five years (businesses must keep them for seven years) from the date you lodge your tax return or if you:
• have claimed a deduction for decline in value (formerly known as depreciation) – five years from the date of your last claim for decline in value
• acquire or dispose of an asset – five years after it is certain that no capital gains tax (CGT) event can happen so you know you don’t need the records to work out a capital gain or loss
• are in dispute with the ATO – the later of five years from the date you lodge your tax return or when the dispute is finalised.
What records should you keep?
You should keep records in these main categories:
• any payments you have received
• any expenses related to payments received
• when you have acquired or disposed of an asset – such as shares or a rental property
• any tax deductible gifts or donations
• any medical expenses.
You may also need to keep records in some other categories, or for other members of your family – for example, if you receive the family tax benefit. Also, in some cases you may need to estimate items, such as how far you will travel during an income year. At the end of the year, if you travel more than you estimated, you may need to have kept more records. Remember that if you’re unsure as to whether or not you need to keep a record, you should keep it – you can always throw it out if you find you don’t need it at tax time.
Here at The Quinn Group our experienced team of accountants and tax agents can assist you in managing your financial records. For more information on how to safely store you documents or for any other taxation issues submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.