For your tax return to the ATO, be sure to keep the following documents.
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In the event that you need to provide evidence to the ATO or amend a return for a prior year, you are required to keep a record of your finances and tax returns for at least three to five years. Keeping accurate records also guarantees that you won't pay any more tax than is required, which is another reason why it's in your best interest to keep as many records as you possibly can.
You are required to keep certain tax records.
If you aren't sure whether or not a record pertaining to your tax return should be kept, a good rule of thumb to follow is "when in doubt, keep it," which states that you should keep the record regardless of your uncertainty. When it comes time to fill out your Australian tax forms, there are five main categories of tax records that you should have on file for reference, and those categories are as follows:
- Any and all payments that have been made to you, such as wages, interest, dividends, rental income, and so on (the majority of these records will most likely be kept digitally in the form of bank statements).
- Those costs that you incurred and which are directly connected to the income that you made. For instance, if your job requires you to buy a special uniform, or if you recently made repairs to the rental property you own as an investment, you can deduct those expenses.
- Transactional paperwork associated with the purchase or sale of an asset This is most commonly in reference to the purchase or sale of a home, but it also includes other major assets like shares.
- To charitable organizations, donations, contributions, or gifts of any kind
- Any and all medical costs that you and any member of your family have declared on your Australian tax returns.
- Keep a record of the money that you have put into your retirement account over the years, particularly the money that you are trying to deduct from your taxes.
- Information regarding your tax returns and refunds from the prior year.
How long do I have to make sure I keep all of my records?
After you have submitted your tax return in Australia, you should keep your tax records for a period of time that is determined by the specifics of your situation. You should, in most circumstances, keep your records for a period of five years following the date that the relevant return was submitted. Other records that you should keep for a period of five years include the following:
- If you have claimed a deduction for a decline in the value of property and it has been 5 years since the date of your most recent claim for a decline in value for a decline in property value, you are not eligible for the deduction. The previous term for this concept was "depreciation of value."
- If you bought or sold an asset five years after you were certain there would be no capital gains tax (CGT) event, then you are exempt from paying any tax on the gain. In any other case, you are required to keep those records in order to calculate the profit or loss on your investment.
- If you are in the midst of a dispute with the ATO at this time, In this situation, you will want to make sure that you keep your tax records for the year in question for at least another five years after the dispute has been resolved.
Since the 2004-2005 tax year, it has been determined that some records held by Australian taxpayers with simple tax affairs only need to be kept for a period of two years instead of the previous four. These are the following:
- A pact within the family
- Copies of the summaries of the payments
- Declarations from taxpayers for returns and documents that were filed by a tax agent on behalf of the taxpayer. These declarations give the tax agent permission to file the returns and documents and certify that the information that was supplied is accurate.
Individual taxpayers whose only source of income is a salary or wage, interest paid by a bank or government institution, or dividends from an Australian company that is listed on the Australian Stock Exchange are considered to have simple tax affairs when they file the returns required by the Internal Revenue Service.
In addition, the individual taxpayer is only claiming deductions for the cost of managing tax affairs, bank fees and other charges, tax-deductible gifts of money, and tax-deductible donations of money.
If any of the following apply to you, you cannot be considered a taxpayer with simple tax affairs:
- A non-resident alien for the year in question with regard to income
- Having the right to claim a credit for taxes paid abroad
- Because of payments that were made to or received from your associates, you are required to make adjustments to your taxable income.
- The individual or entity that is the beneficiary of a capital gain or loss that will be included on your tax return
- The person who receives income from working overseas or income from working on an overseas project that has been approved by the Australian government and is exempt from tax in Australia
What should I do if I am unable to locate the records or if I have destroyed them?
You may still be able to use the information that was contained in important tax documents even if those documents have been lost or destroyed, provided the following conditions are met:
- You are in possession of a copy of the document that is complete in its entirety.
- You took all of the necessary precautions to prevent the loss or destruction, but it was still unsuccessful and there is no way to get a replacement.
It is always a smart idea to store your records in a fireproof container that can be locked at any time. In the event that you do end up misplacing important tax documents, having copies stored in a separate location will be of great assistance to you.
What about digital files and records?
The Australian Tax Office will accept documents that have been stored electronically as long as a clear reproduction of the original can be produced when the documents are printed. If you do choose to keep your tax records electronically, it is strongly advised that you create a backup of the files or store them online as an additional layer of protection in the event that the hard drive becomes damaged.
When it comes time to file your return, if you do not have the appropriate tax records, you could end up owing more money. Throughout the course of the year, put aside anything that you believe may be of use and store it in a secure location. This will ensure that you are given an accurate evaluation and may even be eligible for a refund.
A tax agent can assist you in filing your return in the most effective manner.*This is the lowest possible fee that can be assessed for income item tax returns The terms and conditions outlined below apply to the price that is displayed on this table. Please visit the agent's website to submit an enquiry if you would like more information or if you would like to receive an accurate quote for your tax return.
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DISCLAIMER: Many of the observations made in this article are of a general nature, and anyone who intends to apply the information to practical circumstances should seek professional advice in order to independently verify both their interpretation and the information's applicability to their own particular circumstances.
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