The Australian tax system relies on taxpayers self-assessing. This means that you are responsible for working out how much you can declare and claim on your tax return. You also need to be able to show how you arrived at these figures– in some cases you may be required to provide written evidence. The written evidence must be kept for a minimum of five (5) years. If you are a sole trader with employees or operate your business via a company you must keep the written evidence for seven (7) years.
Documents that you are required to keep can be in written or electronic form. If you make paper or electronic copies they must be a true and clear reproduction of the original. It is recommended that if you store your records electronically you make a backup copy to ensure the evidence is easily accessible if the original becomes inaccessible or unreadable (eg. where a hard drive is corrupted).
Sometimes your tax records maybe accidentally lost or destroyed – for example, if your home is burgled or burnt.
In these instances, the ATO can allow you to claim a deduction for certain expenses if either of the following apply:
- you have a complete copy of a lost or destroyed document
- the ATO is satisfied that you took reasonable precautions to prevent the loss or destruction and, if the document was written evidence, it is not reasonably possible to obtain a substitute document.
Our suggestion is that you should document any factual circumstances such as these and notify the ATO in writing to protect yourself.