Proper record-keeping and invoicing are not just good business practices in Australia — they are legal obligations enforced by the Australian Taxation Office (ATO).
Failure to comply can result in penalties, audits, and even criminal charges. This guide explains exactly what records you must keep, for how long, and how to issue compliant invoices for your business.
1. What Records Must You Keep?
Under the Taxation Administration Act 1953 and Income Tax Assessment Act 1997, you must keep records that explain all transactions relating to your tax affairs.
- Income records: Sales invoices, receipts, cash register tapes, bank statements, and EFTPOS summaries.
- Expense records: Purchase invoices, receipts for business expenses (rent, utilities, stock, marketing), and credit card statements.
- Asset records: Invoices for equipment, vehicles, computers, and depreciation schedules.
- Banking records: Deposit books, cheque butts, loan documents, and interest statements.
- Employee records: Payroll reports, superannuation contribution records, tax file number (TFN) declarations, and Single Touch Payroll (STP) data.
- GST records: Tax invoices, adjustment notes, and Business Activity Statement (BAS) copies.
Critical fact: Electronic records are acceptable if they are readable, accessible, and can be converted to paper format when requested by the ATO.
2. How Long Must You Keep Records?
The standard retention period is five years from the date you lodge your tax return or BAS (whichever is later).
However, there are exceptions:
- Company records: Five years after the company ceases to exist (wound up or deregistered).
- Asset records: Five years after you dispose of the asset (sell, scrap, or lose it).
- Employee records: Seven years (some awards require longer).
- Property records: Five years after you stop owning the property.
Pro tip: Many accountants recommend keeping records for 7 years to be safe, especially if your business is under audit risk.
3. Tax Invoice Requirements Under GST Law
If your business is registered for GST (mandatory if annual turnover exceeds $75,000), you must issue valid tax invoices for taxable sales above certain thresholds.
For sales of $1,000 or less (excluding GST): A simplified tax invoice must include:
- Supplier's business name and ABN (Australian Business Number).
- Date of issue.
- Brief description of items sold.
- Total price (including GST).
- Statement 'Total price includes GST'.
For sales over $1,000 (excluding GST): A full tax invoice must also include:
- Buyer's identity or ABN (if the buyer requests).
- Quantity of each item.
- GST amount payable (or statement that GST is 0% if GST-free supply).
4. Digital Record-Keeping & Single Touch Payroll (STP)
Since 2019, most employers must report payroll data via Single Touch Payroll (STP) directly to the ATO each time you run payroll.
STP-ready software (Xero, MYOB, QuickBooks) automatically keeps digital records.
- You do not need to send payslips separately unless requested by employees.
- STP eliminates the need for annual Payment Summaries (they are now 'income statements' in MyGov).
5. Penalties for Non-Compliance
Failing to keep proper records or issuing incorrect invoices can lead to:
- Penalty for failure to keep written records: up to $2,220 for individuals, $4,440 for businesses (per offence).
- Penalty for false or misleading statements: 75% of the tax shortfall (up to 95% if intentional disregard).
- Disqualification from claiming GST credits or deductions if no record exists.
6. Practical Tips for Small Business Owners
- Use cloud accounting software (Xero, MYOB, QuickBooks, Reckon).
- Keep digital backups (external hard drive or cloud storage like Dropbox/Google Drive).
- Never use cash-only without recording — the ATO's data-matching algorithms flag discrepancies.
- For paper receipts, photograph or scan them immediately (ATO accepts smartphone photos).
Final reminder: The ATO conducts random audits. A well-organised record system is your best defense.