Record-keeping obligations: what clients must actually keep
A clear guide to the records businesses are required to keep, how long to keep them, and how good habits make every other compliance task easier.
Record-keeping is the unglamorous foundation that every other compliance task rests on. When a client's records are complete and organised, BAS, tax returns, and any ATO review all become straightforward. When they are not, every job becomes slower and every question harder to answer. Helping clients understand what they must keep, and for how long, is quietly one of the most useful things a practice does.
What the law requires
Businesses are generally required to keep records that explain all their transactions, in a form that allows their tax and super obligations to be worked out and substantiated. In practice that means invoices issued and received, receipts, bank statements, payroll and super records, and the documents behind any deductions or claims. The records must be kept in English or in a form that can be readily converted, and they must be genuine contemporaneous records rather than reconstructions.
The specific requirements, including the general five-year retention period, are set out by the ATO. Certain records, such as those relating to capital assets, may need to be kept longer because they are relevant to a future CGT event.
How long to keep things
The general rule is that records must be kept for a defined period from when they are prepared, obtained, or the transaction is completed, whichever is later. Some records outlive that period because of what they relate to.
- General records: kept for the standard retention period.
- Capital assets: kept until well after the asset is sold, for CGT purposes.
- Employee records: retained in line with payroll and super requirements.
Digital records and the modern practice
Most records today are digital, and that is generally accepted provided they are true and clear reproductions and remain accessible. Cloud accounting has made this far easier, with source documents attached directly to transactions. The risk has shifted from losing paper to losing access, so encouraging clients to keep documents within systems that preserve them reliably is now part of the advice.
Make good records the client's habit
The practice cannot keep the client's records for them, but it can set up the habits and tools that make good record-keeping natural. Where a client keeps documents organised as they go, the year-end work is a fraction of what it is otherwise. In Finye you can request specific documents from clients through the portal and keep everything attached to the relevant job, so the records supporting a piece of work stay together in one place. You can see how firms streamline document collection in Finye's guides.
Records underpin every other obligation
It is worth reminding clients that record-keeping is not a separate task competing with the real work, it is what makes the real work possible. Every BAS figure, every deduction, and every tax position ultimately traces back to a source document. When those documents are captured cleanly as transactions happen, the quarterly and annual jobs draw on a reliable foundation. When they are not, the same jobs turn into detective work. Good records are the quiet reason a well-run client is cheaper and calmer to service.
Records are audit insurance
The deepest reason record-keeping matters is that it is the substantiation on which every position rests. If a deduction is questioned or a figure is reviewed, the records are the answer. A client with complete, organised records can respond to almost any query quickly, while one without them faces a stressful reconstruction. Framed that way, good record-keeping is not a chore imposed by the rules, it is insurance the client will be grateful for the day a question arrives.