We can’t really think of anyone who actually enjoys sorting through paperwork for the guys at the tax office. But it is important to keep everything in a neat and orderly fashion, or you risk penalisation (hint: it’s a lot worse than the odd parking fine).

The Essentials:

You should keep all important business documents (see ‘what records do I need to keep for the ATO’) for 5 years
Documents should be well organized and easily retrievable for when the ATO drops in.

You must hold on to your records until it becomes certain that no Capital Gains Tax (CGT) event can happen where the records could reasonably be expected to be relevant.

If you have electronic records, you don’t need to retain a paper copy of the information unless another law or regulation you to retain paper copies.

If you’re unsure, it’s better to have too many records than too few, but in any case a digital copy that fulfils the ATO criteria is just as a good as an original (in fact a lot better since it’s not clogging up your office-space!)

The five years begin when the records are prepared or obtained, or five years after the completion of a transaction to which the records relate.

Find out how your document management fares with the ATO Record Keeping Evaluation Tool

See the ATO’s website for more information on personal record-keeping.

Or here for more information on professional record-keeping.

Being organized throughout the year, means much less stress when it comes to tax time. Not only will it make the whole process simpler, it makes it easier for you to be reimbursed as much as possible!

So, as an Australian business, what documents do you need to keep for tax purposes?

The Australian Tax Office (ATO) asks that business owners keep all documents that are relevant to their income and expenditures. This includes papers which:

Contain “particulars of any election, estimate, determination or calculation made by the person under that Act, and particulars showing the basis for, and the methodology used to derive an estimate, determination or calculation.”
Record “every act, transaction, event or circumstance that can reasonably be expected to be relevant to working out whether they have made a capital gain or capital loss from a capital gains tax (CGT)”

The great news is, the ATO accepts digital storing of records, provided that the electronic copies are a true and clear reproduction of the original paper records.

You can send us your:

Bills and invoices
Employment contracts
Receipts
Important emails and notes

And when it comes around to tax time, they will be online and accessible to you, your tax agent or bookkeeper – even if you’re on holiday or away fro the office!

Sign up to PaperFree today!

Consider these statistics from a PriceWaterhouseCoopers (USA) study:

• Companies spend US$20 in labor to file a document, US$120 in labor to find a misfiled document, and $220 in labor to reproduce a lost document
• 7.5% of all documents get lost, and 3% of the remainder get misfiled
• Professionals spend 5-15% of their time reading information, but up to 50% looking for it.

The alien observer would think we were still living pre-Information Age, right?

It’s just not quite right. Even the most modest business IT outlay these days will put enough computing power at your disposal to search the entire web – billions and billions of documents. If only it could reach into your few hundred or thousands of paper files…

What if filing and searching for your paper documents was just as easy as handling the you could send all your paperwork away, for someone else to store for you? And you could find a single document with a simple online search? What would you do with all that extra time? What could you do with all that extra space?

PaperFree clients have understandably asked about security – a bonus of digital archiving is actually enhanced security by getting rid of duplicate documents, reducing the risk of documents ending up in the wrong hands. And because all your documents are backed up online, you’re safeguarding against possible document loss.

Bigger companies have indeed been able to achieve all these things – freeing up time, freeing up space, increasing document security – by outsourcing digitising work to traditional bureaus who will scan and index for a fee. The trouble is that traditional document scanning and archival is all about economies of scale, and the prices involved are decidedly big-end-of-town. This has put this kind of service out of the reach of the smaller operator.