Business records keeping:
What records the ATO may ask for and why they matter
Many business owners focus on keeping their bookkeeping up to date, lodging BAS on time and paying employees correctly. While these are all important, there is another area that often gets overlooked until there is a problem.
Business records.
If the Australian Taxation Office (ATO) reviews or audits your business, one of the first things they are likely to ask for is documentation that supports how your business is structured and operated.
Having these records organised and readily available can make the process much smoother. It can also help demonstrate that your business is meeting its obligations and that decisions have been properly documented.
What records might the ATO request?
The exact information requested will vary depending on your business structure and the reason for the review. However, there are several documents the ATO commonly asks for when auditing companies and trusts.
These may include:
- Trust deeds and any variations
- Company constitutions
- Shareholder agreements
- ASIC incorporation documents
- Minutes and resolutions relating to business decisions
- Share registers and unit registers
- Records of changes to directors, officeholders, shareholders or unit holders
These documents help establish how your business is structured and who has authority within the organisation.
If records are missing, incomplete or inconsistent, it can raise questions that may require additional investigation.
Why does the ATO want these documents?
Business structures come with specific tax and legal requirements.
The ATO uses documentation to confirm that income, distributions, loans and business activities have been handled correctly and in line with the rules that apply to that structure.
For example, these records help the ATO determine:
- Who controls the business or trust
- Who is entitled to income or trust distributions
- Whether shareholder loans or drawings have been treated correctly
- Whether dividends have been documented appropriately
- Whether the structure is operating as intended
Without supporting records, it may be difficult to demonstrate that transactions have been treated correctly.
This is one reason why maintaining accurate documentation throughout the year is just as important as maintaining accurate bookkeeping records.
Good record keeping goes beyond compliance
Many business owners think of record keeping as something they do to satisfy the ATO.
In reality, good record keeping also helps you run your business more effectively.
When information is organised and easy to access, it becomes much easier to answer questions, prepare reports, work with your accountant and make informed business decisions.
It can also save significant time if information is requested by your accountant, bookkeeper, lender or government agency.
Businesses with organised records generally spend less time searching for information and less money fixing issues later.
What does good record keeping look like?
Good record keeping does not have to be complicated.
In most cases, it comes down to having consistent systems and processes in place.
A well-maintained business will generally have:
Supporting documentation for transactions
Every transaction should have documentation to support it.
This may include invoices, receipts, contracts, agreements or other relevant records.
If a transaction cannot be supported, it may become difficult to justify during an audit or review.
Receipts attached within accounting software
Modern accounting software makes it easier to store records electronically.
Attaching receipts and source documents directly to transactions helps create a clear audit trail and reduces the risk of documents being misplaced.
Many accounting platforms also integrate with receipt capture and document management apps, allowing business owners and employees to photograph receipts on their phone and upload them directly into the accounting system. This can help reduce paperwork, improve accuracy and ensure supporting documents are stored in one central location.
If you are looking to improve your record-keeping systems, First Class Accounts Ovens Murray can help. As business app implementation specialists, we understand the different software options available across a range of industries and business types, and can help you choose and implement solutions that streamline document management, improve compliance and make accessing records easier.
Using integrated apps also makes retrieving information much faster when questions arise.
Regular bank reconciliations
Bank reconciliations help confirm that your accounting records match your actual bank activity.
Reconciling accounts regularly allows discrepancies to be identified and corrected promptly.
It is also important to retain copies of bank statements, as these may still be required as supporting evidence.
Up-to-date payroll and superannuation records
Payroll records should accurately reflect wages, leave balances, superannuation payments and reporting obligations.
Businesses that fall behind with payroll administration can face compliance issues and additional work if records need to be reconstructed later.
If managing payroll and superannuation is taking time away from running your business, First Class Accounts Ovens & Murray can help. Our experienced bookkeeping team can assist with payroll processing, record keeping and compliance requirements, giving you confidence that your employee records remain accurate and up to date.
Information that can be easily retrieved
A good record-keeping system allows information to be found quickly.
If the ATO requests documentation, you should be able to locate it without spending days searching through emails, filing cabinets or old folders.
Income records matter too
If your business sells products or services, you need documentation that clearly shows:
- What was sold
- Who you earned the revenue from
- When the transaction occurred
- How much income was received
Invoices, sales records, contracts and payment records all help support the income reported in your business.
The ATO expects businesses to maintain sufficient records to verify the income they declare.
Don't forget expense records
Business owners are generally aware that expenses can be claimed where they relate to earning assessable income.
What is sometimes overlooked is the need to retain evidence supporting those claims.
If you are claiming a business expense, you should assume that supporting documentation may be requested at some point.
Receipts, invoices, supplier records and payment confirmations all play an important role in demonstrating that an expense was legitimate and business related.
Adding to this, outsourcing your bookkeeping can help ensure supporting documentation is collected, stored and maintained correctly throughout the year. By providing professional bookkeeping support, First Class Accounts Ovens Murray can implement consistent processes, attach receipts to transactions, reconcile accounts regularly and keep records organised, reducing the risk of missing evidence when deductions need to be substantiated.
Staying organised throughout the year
Trying to gather records at the end of the financial year or during an audit is rarely the easiest approach.
A better option is to maintain organised systems throughout the year so information is captured as transactions occur.
Cloud accounting software, document management tools and regular bookkeeping processes can all help keep records accurate and accessible.
For many businesses, having an experienced bookkeeping team manage these processes provides confidence that records are being maintained correctly and consistently.
Make record keeping one less thing to worry about
Accurate records support your bookkeeping, payroll, BAS preparation and business reporting. They also help ensure you are prepared if the ATO ever requests information about your business.
First Class Accounts Ovens Murray provides reliable bookkeeping support to help businesses maintain accurate records, organise documentation and keep financial information up to date throughout the year.
If you would like support reviewing your current record-keeping processes or improving how documents are managed within your business, contact us.
FAQS about business record keeping
What records should a business keep for an ATO audit?
Businesses should keep records such as invoices, receipts, bank statements, payroll records, trust deeds, company constitutions, shareholder agreements, meeting minutes and other documents that support business transactions and decisions.
How long should business records be retained in Australia?
In most cases, the ATO requires business records to be kept for at least five years. Some records relating to assets, trusts or company structures may need to be retained for longer periods.
Can accounting software help with record keeping?
Yes. Accounting software can help businesses store receipts, track transactions, reconcile bank accounts and maintain an audit trail. When used correctly, it can make retrieving information much easier if records are requested by the ATO.