Tax Tip 7: keep All Receipts forever

Tax Tip: keep All Receipts forever


By law you are only required to keep receipts for about 7 years. But this is 7 years after you claim an expense.


You should always keep your receipts just in case. If you move out of the main residence and rent it at some stage then the expenses incurred when you were living there can be used to reduce the CGT payable.


When someone dies and their property is inherited by someone else the cost base of the deceased will often be the cost base of the property for the person that inherited the property. So expenses incurred when the deceased was alive and living there or renting the property out can be relevant to the tax of the person that inherited the property.

 

Seven years ? Five is law. I'm very comfortable with telling ATO staff that time has expired. Especially when the amendment period is just two years. The five year rule applies for allegations of fraud and evasion. I call it the shredding rule.

https://www.ato.gov.au/Tax-professi...tantiate-deductions/#How_long_to_keep_records

CGT records apply from the sale year not the year the cost was incurred. In that case the forever rule sort of applies. The ATO are bound by what are called PSLA.(Public Sector Law Admnistration) ..That the internal ATO rules. ..I care not for their limits. Its nice to advise they are out of time. Save my efforts and client $.

There are exceptions. NO records are required to be kept for some deductions. A benefit of tax advice.

 

Have to consider other laws as well as tax law.

Corporations Act is 7 years for example as is anti money laundering legislation. Heaps of other legislation to consider as well.

Best to keep important records forever as it is easily done these days by scanning in and best to keep all receipts as you may not know which ones are important until much later.

 

What if I threw out a lot of my old council rates notices, but have the payments from my bank account
Does the ATO accept bank statements as evidence of your payments in the absence of receipts?

 

Statements would prove you made a payment, but not what the payment is for.

 

I have started taking photos of receipts from my phone then uploading to dropbox straightaway. Anything closely tax related I'll upload then when i get to it i sort all items. I keep an excel list of all receipts, file name, purpose and amount to send to Mr accountant at tax time.

 

Great idea. These days disk space is not so much an issue - can use google docs too.

 

A good app is cam scanner or any that convert to pdf rather than jpeg photo. its minimal data, plus dropbox you can either use to send to who you need as a link or transfer files to hard drive and email as attachements

 

If you are wanting to keep something forever I would not be using an online service as the primary storage place. Sure keep a copy there, but make sure you have a local copy as the master copy.

I know I'm a little old school on this, but I don't trust anyone with my records - both from a security perspective and also having confidence that it won't go missing.

 

yeah i dont trust it either. its the easiest way i found to scan and park files on the run, then to be put into the computer, then deleted. I dont have a fancy office with a mahogany desk. mostly done on the run type stuff... pub lunch selfie for the tax man. he'll know how much the t bone was

 

@Terry_w @Paul@PFI

How to deal with faded receipts?

Most officeworks and service station recipts are useless in a year or two.

For record keeping, I would recommend waveapps...bits xero,myob by miles.

 

They can't be used as evidence if they cannot be read - you will need to take extra care with these.

 

What about if receipts are destroyed, by something like a fire/flood? Not just 'a dog ate my homework' type excuse.

 

Special rules for that Ed - see https://www.ato.gov.au/Business/Man...ing-advice-or-help/Lost-or-destroyed-records/

 

For Office works, nowadays you can ask them to send a copy to your email

 

Cool, if I ever find myself getting audited with a massive claim that I can't substantiate I'll do a Jewish stocktake.

 

The ATO will generally ask for the receipt AND evidence of payment for some costs. If needed the council can generate a account showing the payment credited and together with your bank stmts should suffice. The statement alone is insufficient.

 

Is there a reason as to why one wouldn't keep digital copies forever and toss the physical ones?

 

Honest answer ? Sometimes you don't want to have perfect proof if you also have something to hide. Often its nothing wrong either. Its the mistakes you aren't aware of. Careful with telling ATO you are a perfect taxpayer and handing them information. It can be used against you.

Scanned copies are very convenient if your records support how it was paid as well. Unlike thermal receipts PDFs don't fade.

 

Or who you paid the council rates on the statements. Is it for you, parents, kids, friend, a random person of the street?