Business Record Keeping - Everything You Need to Know

4 March, 2025 · 10 min read

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Discover everything you need to know about business record keeping, including legal requirements, best practices, and tips for staying compliant.

Why Business Record-Keeping Matters
Legal Requirements for Business Records in Australia
What Records Do You Need to Keep and For How Long?
Practical Considerations for Retention Periods
Best Practices for Business Record-Keeping
Recent Developments and Emerging Trends
Conclusion

Behind every successful business is a solid record-keeping system that keeps your finances organised, ensures compliance with legal requirements, and ultimately supports your long-term growth.

When your records are in order, you can track income, plan for expansion, and avoid last-minute tax headaches.

If you’ve ever scrambled to find an invoice or wondered whether you were claiming the correct deductions, it’s a clear signal that your record-keeping processes could use an upgrade.

Why Business Record-Keeping Matters

Imagine running a business without knowing its true financial status.

You might believe you’re profitable, only to realise at tax time that expenses have soared above your revenue.

Without carefully organised records, your financial analysis relies on guesswork.

This can lead to cash flow issues, missed growth opportunities, and even unintentional non-compliance with Australian regulations.

Effective record-keeping is the foundation of responsible financial management. It:

Supports Tax Compliance: When receipts, invoices, and other documents are well-organised, preparing tax returns or Business Activity Statements (BAS) becomes far more straightforward. You can confidently claim deductions because you have proof of every purchase and expense.
Facilitates Easier Audits: In the event of an Australian Taxation Office (ATO) or government audit, clear documentation can save you from hefty fines, back payments, and the stress of reconstructing old financial data.
Provides Financial Clarity: Up-to-date records let you see exactly where your money is going. You can identify profitable activities, weed out unprofitable ones, and plan your growth strategy with real numbers instead of hunches.
Builds Credibility: If you ever want to apply for a loan, attract investors, or sell your business, detailed financial records demonstrate your enterprise’s stability and profitability.
Manages Cash Flow: Accurate income and expense tracking gives you a clear picture of when and how much you can afford to spend, which is crucial for paying staff, ordering inventory, or investing in new ventures.

Legal Requirements for Business Records in Australia

To remain compliant and avoid penalties, you need to understand the legal frameworks governing record-keeping in Australia.

The primary bodies involved include:

Australian Taxation Office (ATO): The ATO requires businesses to maintain records that are accurate, complete, and in English (or easily translatable). These must be stored for at least five years from the date you lodge your tax return or activity statements.
Australian Securities and Investments Commission (ASIC): For companies, ASIC requires certain records (e.g., financial statements, company registers) to be retained for seven years.
Fair Work Ombudsman: When you have employees, you must keep payroll and employment records for at least seven years, covering wage details, leave entitlements, tax payments, and more.

Some records, such as company minutes or trust documents, may need to be kept even longer, depending on your business structure and ongoing legal obligations.

Remember to verify the exact requirements for your specific industry and entity type, as regulations can change.

The Impact of Single Touch Payroll (STP)

Over recent years, the ATO has introduced Single Touch Payroll (STP) for employers, which requires businesses to report payroll information (like wages, PAYG withholding, and superannuation) each time they pay their employees.

While STP streamlines reporting to the ATO, it also means you need accurate, timely records of your payroll and employee details.

Failing to keep these updated can result in errors in your ATO filings and potential penalties.

What Records Do You Need to Keep and For How Long?

Financial Records

Typical Retention Period: At least 5 years

Invoices (issued and received): You must keep invoices for a minimum of 5 years from when you lodge the tax return in which those invoices were included. For example, if an invoice is accounted for in your 2023–24 return lodged on 15 May 2025, you’d typically need to keep it until at least 15 May 2030.
Receipts: As with invoices, all receipts that support your income and expenses should be retained for at least 5 years from the date you lodge the relevant tax return. This includes both paper and digital receipts.
Sales and Purchase Records (e.g., cash register rolls, POS summaries, purchase orders): Maintain these records for at least 5 years after filing the tax return. They validate your declared income and expenses and are crucial during an ATO audit.
Bank Statements: Keep statements for 5 years from the date of lodgment. These are essential for reconciling income and expenses, as well as for verifying your transactions if questioned.
Loan or Mortgage Statements: For any borrowed funds, retain statements for 5 years after they relate to your tax return. If the loan remains active, keep statements for the life of the loan plus 5 years after the final repayment has been accounted for in your tax records.

Note on ASIC Requirements: If you operate as a company, ASIC may require certain key financial records to be retained for 7 years – for instance, annual company financial reports and records related to your solvency.

Employee Records

Typical Retention Period: At least 7 years

Payroll Information (wages paid, hours worked, tax withheld, superannuation contributed): Under the Fair Work Act 2009 and ATO requirements, these details must be kept for at least 7 years. This rule covers payslips, timesheets, and any records showing how wages and deductions were calculated.
Employment Contracts: Retain executed contracts for the duration of employment plus a minimum of 7 years after the employment relationship ends. Doing so helps resolve any disputes regarding entitlements or contractual terms.
Tax File Number Declarations: Keep for 5 years from the date of lodgment of the corresponding tax return or from the time the employee stops working for you – whichever is longer. However, in practice, many employers keep these alongside other employee records for the full 7-year span to maintain consistency.
Leave Entitlements (annual, sick, long service, etc.): Maintain these records for at least 7 years. This ensures you can accurately track accrued leaves, payouts, or any disputes that may arise.

Taxation Records

Typical Retention Period: At least 5 years

Business Activity Statements (BAS): If you lodge BAS quarterly or monthly, keep those statements for 5 years from the date of lodgment. They demonstrate your Goods and Services Tax (GST), Pay As You Go (PAYG) withholding, and other tax obligations.
GST Records: If your turnover exceeds the GST threshold (currently AUD $75,000), you must register and keep all GST-related documents for 5 years from the date of lodgment of the corresponding return. These records should detail transactions where GST was charged, as well as input tax credits claimed.
Tax Returns: Retain a copy of all lodged tax returns (including any amended returns) for 5 years from the date you lodge them. This includes both company and individual returns (if you are a sole trader).
Superannuation Details: Keep evidence of super contributions (including payment dates and amounts) for 5 years from the date of lodgment of the corresponding BAS or tax return. However, if superannuation matters are disputed or remain in question, it’s prudent to keep records for the full 7-year period that aligns with employee records.
Capital Gains Tax (CGT) Exception: If you own an asset subject to CGT, you need to keep records for as long as you own the asset, plus 5 years after you sell or otherwise dispose of it. This ensures you can accurately calculate and substantiate the capital gain or loss when you lodge your return.

Asset and Liability Records

Asset Registers: Keep documentation of purchase date, cost, depreciation schedule, and disposal details for 5 years after the relevant asset has been sold, scrapped, or otherwise disposed of, in line with CGT record-keeping rules.
Lease or Rental Agreements: Maintain these for 5 years from the end of the lease period if they affect your tax return. If the lease has ongoing financial implications (e.g., rent increases, asset depreciation), keep them for longer until all related tax matters are resolved.
Loan Agreements: Similar to financial records, hold onto these for 5 years from the date of the final repayment if the loan’s interest or repayments are claimed as a business deduction.
Insurance Policies: While there’s no strict rule on how long to keep expired policies for tax purposes, the best practice is to maintain them for at least 5 years after they become inactive, especially if any claims or potential liability issues could arise from that policy period.

Legal Documents

Business Registrations (ABN, ACN, relevant licenses): Although these are not strictly “records” you discard, you must keep proof of these registrations for as long as they remain active. If you cancel or change a registration, retain documentation of the change for 5 years.
ASIC Filings (annual statements, director or shareholder changes): Companies must keep these records for 7 years, as mandated by ASIC. This includes minutes of annual general meetings (AGMs), solvency resolutions, and share transactions.
Contracts and Agreements (clients, suppliers, or partners): Keep signed contracts for at least 7 years beyond their end date to cover any late-emerging disputes or obligations. If the contract involves recurring financial transactions, align with the ATO’s 5-year rule post-lodgment of the final tax return that includes those transactions – but in practice, 7 years is safer for legal dispute resolution.
Intellectual Property (trademark registrations, patents, legal documents): Retain these as long as your IP is in force. If you let a registration lapse, maintain the lapsed documents for 5 years to confirm the timeline in case of any challenges or disputes.

Practical Considerations for Retention Periods

1. Overlap Between Agencies

While the ATO typically requires keeping records for 5 years, ASIC mandates 7 years for many company documents. In cases of overlap, it’s safest to adhere to the longer retention period.
Employee records must be kept for 7 years, which can exceed the ATO’s 5-year requirement for tax purposes. Again, following the longer time frame is usually best practice.

2. Digital vs. Physical Records

The ATO accepts digital versions of receipts and invoices, provided they are accurate, easily readable, and stored safely for the required period.
If you opt to go paperless, ensure you have reliable backups – both cloud-based and local – and that they’re securely stored to prevent data loss.

3. Capital Gains and Other Special Cases

Assets subject to CGT have their own unique record-keeping requirements, which extend beyond the standard 5-year rule.
Some industries (e.g., medical, legal, financial services) may have specific record retention laws that exceed general ATO guidelines.

4. Extended Audits and Disputes

If you are involved in a dispute with the ATO, ASIC, or the Fair Work Ombudsman, you may be asked to produce records older than 5 or 7 years. In such scenarios, you should retain all relevant documents until the matter is fully resolved.

Best Practices for Business Record-Keeping

Simply knowing what you must keep isn’t enough – a robust system in place will save you from headaches down the line. Below are essential strategies and tips for maintaining a streamlined, compliant record-keeping process.

1. Choose the Right Accounting Software

Gone are the days when spreadsheets and manual ledgers were enough to manage business finances effectively.

Today, a range of accounting platforms (e.g., ANNA, Xero, QuickBooks, MYOB) offer automation, real-time reporting, and easy integration with other business tools:

Automation and Bank Feeds: Most software lets you link your bank account so transactions automatically appear, reducing the risk of manual data entry errors.
Real-Time Insights: Generate financial reports (profit and loss statements, balance sheets, etc.) in just a few clicks.
Scalability: As your business grows, your accounting software can grow with you, adding modules for payroll, inventory, or project tracking.

2. Separate Personal and Business Finances

Mixing personal and business expenses often leads to confusion, messy reconciliations, and potential compliance issues.

Open a Dedicated Business Account: Keep a separate bank account and credit card for business purposes only.
Establish Clear Boundaries: If you pay yourself a salary, record it properly instead of just transferring money on an ad hoc basis.
Stay Compliant: The ATO can look skeptically at mixed accounts, especially if you’re audited. Clean separation can save you from unwanted questions and prove legitimate business expenses without hassle.

3. Reconcile Transactions Regularly

Many small business owners wait until the end of the quarter, or worse, the end of the year, to reconcile their accounts. This is a recipe for oversight and error.

Monthly or Weekly Checks: Regularly compare bank statements with your accounting records to catch any discrepancies.
Fraud Detection: Prompt reconciliation can help you spot unauthorised transactions or double payments.
Stress Reduction: Avoid the frantic rush before BAS lodgment or tax filing by staying on top of your accounts year-round.

5. Conduct Periodic Internal Audits

An internal audit doesn’t have to be as intimidating as a formal government audit. Think of it as a self-check to ensure accuracy.

Spot Financial Discrepancies: Review a small sample of invoices, receipts, and payroll entries to confirm consistency with your recorded data.
Evaluate Processes: Check whether your staff (or you) are following established procedures, like scanning receipts right away or categorising expenses properly.
Identify Process Improvements: Perhaps you’ll discover your filing system could be more intuitive or that a software upgrade would save you hours each month.

Recent Developments and Emerging Trends

The business environment and record-keeping requirements in Australia continue to evolve. Staying ahead of these trends will ensure your systems remain modern, efficient, and compliant.

Electronic Invoicing (eInvoicing)

The Australian government is encouraging the adoption of eInvoicing to reduce manual data entry and lower the risk of human error.

eInvoicing uses a standardized format that can go directly into your accounting system without the need for PDF or paper documents.

If you work with larger businesses or government agencies, you may already be required to issue eInvoices.

Director Identification Number (director ID)

For company directors, the recent introduction of director IDs by the Australian Business Registry Services (ABRS) means you need to keep accurate personal and company records tied to your directorship. This ensures transparency and reduces fraudulent activity in corporate entities.

Sustainability Reporting

An emerging area of record-keeping for some businesses is environmental, social, and governance (ESG) reporting.

While not yet mandatory for all SMEs, larger corporations and increasingly smaller ones in certain sectors are tracking carbon footprints, waste management, and other metrics.

Accurate record-keeping in these areas can open up opportunities for government grants or partnerships with socially responsible organizations.

Conclusion

As your business grows, juggling countless paper receipts and staying on top of endless admin can feel overwhelming. That’s why ANNA is dedicated to transforming your financial management experience, especially when it comes to dealing with receipts and expenses.

Our Receipt Scanner App takes away the stress of manual tracking by automatically capturing and sorting your receipts – so you don’t have to.

Why choose ANNA’s receipt scanning?

Quick and Effortless: Simply snap a photo of your receipt and watch our app do the rest. No more manual data entry or misfiled paperwork.
Accurate Expense Tracking: Our smart sorting system categorises expenses on the spot, ensuring your books stay precise and up to date.
Tax Ready: Digitised receipts help you claim every deduction you’re entitled to – making tax season smoother and more rewarding.
Secure Storage: All your scans are stored safely in one place, so you’ll never have to scramble for lost receipts again.

But that’s just the beginning. ANNA doesn’t stop at receipt scanning.

Our suite of services helps you register a company, stay compliant with ASIC and the ATO, manage invoices and taxes, and even streamline your annual reporting.

From startup incorporation to everyday bookkeeping, we provide the support and tools you need to keep your business running flawlessly.

Ready to ditch the paper trail and supercharge your bookkeeping?