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Business owners can be overwhelmed by their record keeping requirements under different legislation. For example, the requirements for tax purposes are different to those for Corporations Act purposes and for state tax purposes.

Penalties may apply where proper records are not kept, records are not kept for the required period of time or steps are not taken to keep records in an appropriate format.

Below is a summary of the key requirements under the Corporations Act 2001(Cth) and for income tax and Queensland state tax purposes as provided by McInnes Wilson Lawyers, current as at July 2015.

WHAT BUSINESS RECORDS MUST BE KEPT?

Below is a non-exhaustive summary of the business records must be kept by law. Depending on the type of business carried on and a range of other factors, further records may need to be kept.

PURPOSE RECORDS
Income tax purposes
(ITAA36 section 262A,TR 96/7, TR 2005/9)
  • Income tax records – sales and expenses information, year-end information and bank records.
  • Employees and contractors records – TFN forms, withholding forms, records of wages/allowances/other payments, superannuation records, records of fringe benefits and contracts with contractors.
Corporations Act purposes
(Small business guide – Part 1.5, sections 286 – 289)
“Financial records” – being records that:

  • correctly record and explain a company's transactions and financial position and performance; and
  • would enable true and fair financial statements to be prepared and audited.

“Financial records” are defined to include:

  • invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and
  • documents of prime entry; and
  • working papers and other documents needed to explain:

(i) the methods by which financial statements are made up; and

(ii) adjustments to be made in preparing financial statements.

Employment purposes
(Fair Work Act 2009(Cth) Part 3.6)
  • General
  • employer’s and employee’s name
  • employer’s Australian Business Number (ABN) (if any)
  • employee’s commencement date
  • whether the employee is full-time, part time, or casual.
  • Pay – including pay rate, gross and net amounts paid, any deductions from the gross amount, details of any incentive-based payments.
  • Hours of work - any penalty rates or loadings paid to full-time or regular part-time employees for overtime hours worked, the guaranteed pay rate for the set period of time worked by casual or irregular part-time employees, a copy of the written agreement if an employer and employee have agreed to an averaging of the employee’s work hours.
  • Leave - any leave taken, how much leave an employee has.
  • Superannuation contributions - amount paid, pay period, date(s) paid, name of super fund, reason the employer paid into the fund (e.g. a record of the employee’s super fund choice and the date they made that choice).
  • Individual flexibility arrangements

If an employer and employee agree to an individual flexibility arrangement under an award or registered agreement, a record must include both:

  • a copy of the written agreement
  • a copy of any notice or agreement to terminate the flexibility arrangement.
  • Ending employment - how the employment was terminated e.g.by agreement, summarily, or in some other way (specifying details), if notice was provided and, if so, how much, the name of the person who terminated the employment.
Queensland state tax purposes
(Taxation Administration Act 2001 (Qld), Part 9)
Records necessary to enable the person’s tax law liability to be ascertained.The commissioner may, by written notice given to a person, require a taxpayer to keep a particular record stated in the notice for a stated revenue law. The taxpayer must not fail, without reasonable excuse, to comply with the notice.

How long do business records need to be kept for?

A general summary of the period for which business records are required to be kept for Queensland businesses is as follows.

PURPOSE TIME PERIOD
Income tax purposes 5 years after they are prepared, obtained or the transactions completed – whichever occurs later.
Note – you may be required to keep the records for a longer period if you use information from those records for a later tax return (e.g carrying forward losses). In this case, the records must be kept until the end of any period of review for the later return.
For capital gains tax purposes, records of acquisition, improvement, etc must be kept for 5 years after you sell or otherwise dispose of an asset.
Corporations Act purposes 7 years after the transactions covered by the records are completed.
Employment purposes 7 years
Queensland state tax purposes
(Taxation Administration Act 2001 (Qld), Part 9)
Records must be kept until the later of the following:(a) 5 years has elapsed after it was made or obtained;(b) 5 years has elapsed after the completion of the transaction or matter to which it relates;(c) if the person’s liability under a revenue law depends on the continued satisfaction of conditions for a period stated in the revenue law after the making of an assessment to which the record relates—2 years has elapsed after the end of the period.

What format must business records be kept in?

It is important that the business records which are kept are kept in the format required by law.

PURPOSE RECORDS
Tax purposes Records can be issued and stored in either paper or electronic form.The records must be kept in the English language.If records are kept in electronic form, certain principles must be adhered to – importantly they must be “readily accessible so as to be usable for subsequent reference”.
Corporations Act purposes Financial records can be kept electronically provided they can be converted into hard copy.Hard copies must be made available within a reasonable time to a person who is entitled to inspect the records.If the electronic records are kept by a third party (e.g. accountant) the directors still have an obligation to provide the hard copy of the records.
Employment purposes Time and wages records have to be:

  • readily accessible to a Fair Work Inspector;
  • legible;
  • in English.

Time and wages records can’t be:

  • changed unless the change is to correct an error; or
  • false or misleading.
Queensland state tax purposes The records that a person is required under a tax law to keep must keep the record:

  • in the form of a document written in English with information about amounts expressed in Australian currency; or
  • in a form that can be readily converted or translated into the form mentioned in the previous paragraph.

 

If you require clarification on business record keeping requirements, please speak with your usual Hanrick Curran adviser.

Thanks to Christopher Davis principal at McInnes Wilson Lawyers for the provision of content.

 

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.