Record Keeping for the ATO
What to keep, how long, and how to survive an audit.
Notes from Randall Harper. Thirty years working alongside owner-operators, executives and boards — companies of all types and sizes — across entertainment & media, hospitality, service based business, lifestyle businesses, financial services, retail and not-for-profit, in Australia, Asia, the United Kingdom and the United States. What follows is the thinking I keep returning to.
Records are not bureaucracy, they are protection
The ATO does not expect you to remember every transaction; it expects you to have records of them. Good record keeping is not about pleasing the tax office; it is about being able to defend your position if you are ever asked to. Owners who keep tidy records pay less tax (because they capture every deduction), survive audits more easily, and sleep better.
What you must keep, and for how long
- All sales invoices, receipts, and bank records — five years from the date the document was created or the transaction was completed, whichever is later.
- All purchase receipts and supplier invoices — same five years.
- Wages, super, and PAYG records — five years.
- BAS and tax returns, with supporting workings — five years.
- Asset purchase and disposal records — five years from the year the asset is sold.
- Business structure documents — for the life of the business, plus five years.
Digital is fine, and easier
The ATO accepts digital records as the originals. Photograph receipts immediately, attach to the corresponding transaction in your accounting software, and the paper original can usually be discarded. The discipline is to capture the receipt at the moment of purchase, not weeks later when the shoebox has filled up.
How audits actually work
Most ATO audits begin with a written request for information about specific transactions or claims. They are not raids. The owner with tidy records, supplied promptly with a clear explanation, almost always emerges quickly and without penalty. The owner who delays, supplies partial information, or appears evasive almost always faces a longer, more invasive audit, regardless of whether the underlying tax position is correct.
When something is missing
If you cannot find a record — receipts lost in a flood, a bank that no longer exists — the ATO has reconstruction procedures that allow reasonable estimates supported by other evidence. The key is to engage honestly. Pretending to have records you do not have, or claiming deductions without evidence, escalates quickly. Missing records are usually a small problem; concealed missing records are a large one.
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The contents of this paper are the opinion of Clear Point Advisory only. Readers should rely on their own judgement and obtain professional advice appropriate to their circumstances.