How Long Do You Need To Keep Tax Documents?
Sorting out your annual tax return generally involves sorting through a messy collection of paperwork, but just how long do you need to hold onto those receipts — and do you need paper records at all?
Even if you work in a single salaried job and haven’t changed employers, there are several crucial documents you’re going to need come tax time each year. The most obvious include your payment summary, bank statements detailing any interest earned, and health fund details if you don’t want to pay the excess Medicare levy. Then there’s receipts for any allowable deductions, both those related to your employment and more general ones such as charitable donation receipts.
A simple way to keep all that paperwork organised is to store it in a document wallet or folder. As you obtain any tax-related documents, stash them in the folder. When the time comes to do your annual return, everything’s in one place.
While that kind of organisation (effectively a simple application of the SPACE method ) can help you get through tax time quickly, over time you’ll still end up with a healthy collection of paper that can contribute to a clutter problem. Knowing the rules on what you need to keep, and in what format, can help reduce that issue.
How long do I need to keep tax-related records?
While the requirements for certain types of specific documents vary, the general position taken by the ATO is that documents should be kept for five years after you’ve received a notice of assessment relating to that year’s return. After that, you don’t need to hold onto them — though if you want to keep track of your salary over time, then keeping the return and assessment might make sense even if you dispose of the supporting documents.
Can I use electronic records instead?
Electronic records are entirely acceptable, both if received in that form originally (such as emailed statements) or as scanned versions
of original paper documents. If you’re seeking to reduce clutter, moving to entirely electronic storage is an obvious way to go. The retention requirement of five years is the same; in practice, given how cheap storage is, there’s no sensible reason to delete older files.
Where receipts aren’t needed
Having a receipt (paper or scanned) is the best way to demonstrate that your expenses are justified if you get audited, but the ATO does allow some deductions and expenses without a receipt.
The first general rule is that if your total deductions exceed $300, you will need written evidence to back up your claims. If the total of all deductions is below that amount, you don’t need any written evidence, though the ATO may ask you to provide a basis for how you calculated the figure. If the total is above $300, you need written evidence for the whole amount, not just the over-$300 element.
If you’ve paid an expense by credit card or EFTPOS, then the relevant bank statement can also be used in place of the original receipt, provided that the expense can be meaningfully identified.
In circumstances where it’s unreasonable or impossible to get a receipt (such as parking fees or train tickets swallowed by a security gate), you can keep a diary. This needs to detail the date of the expense being incurred and its nature. You can also use diary entries for expenses under $10 each, provided that the total of these is less than $200.
Finally, for charity donations, you can claim up to $10 for “bucket donations” (such as those made at a public event or to a street collector) without needing a receipt.
As ever, this is general advice based on published information from the ATO (and generally applicable to individuals rather than businesses); consult a professional if you have a specific concern.
Lifehacker’s weekly Loaded column looks at better ways to manage (and stop worrying about) your money.Source: www.lifehacker.com.au