Keeping accurate records isn’t just about staying on the ATO’s good side—it’s about giving yourself control, peace of mind, and confidence in your numbers. This guide explains the essentials of record keeping for small business in Australia, with practical tips you can apply straight away.
Why Record Keeping Really Matters
Every tax season I meet two kinds of clients.
The first walks in with neat digital records of invoices, payroll summaries, and receipts. They’re calm, confident, and usually get the maximum deductions they’re entitled to.
The second? They turn up with a shoebox (or nowadays, a crumpled shopping bag) full of loose receipts. They’re stressed, they’ve missed claims, and sometimes they’re facing questions from the ATO.
Here’s the thing—good record keeping isn’t about being boring. It’s about avoiding penalties, saving money, and making better decisions.
What Records Do You Need to Keep?
The ATO requires small businesses to keep records that explain all their transactions. According to the ATO record keeping rules, these include:
- Sales & income records – invoices, receipts, till tapes, online sales reports.
- Expense or purchase records – supplier invoices, receipts, credit card statements.
- Bank records – bank statements, loan contracts.
- GST records – tax invoices, BAS calculations, GST adjustments.
- Wages & super records – payslips, PAYG summaries, super contributions.
- Asset records – purchase and sale agreements, depreciation schedules.
- Other key records – stocktakes, insurance policies, contracts, and any legal agreements.
👉 And here’s the kicker: you must keep most of these for at least five years.
One café owner told me, “I thought my bank statements were enough proof for tax.” The problem? The ATO doesn’t agree—without invoices and receipts, deductions can be denied.
Business Structure and Record Keeping
Your business structure makes a difference.
- Sole traders: Keep sales, expenses, and GST records linked to your ABN.
- Partnerships: Must also track partner drawings and distributions.
- Companies: Required to keep minutes of directors’ meetings, solvency resolutions, and full double entry financial records.
- Trusts: Need records of trustee decisions, trust distribution minutes, and beneficiary information.
👉 If you’re unsure which rules apply to your setup, we’ve explained the differences in our article on Business Start Up Tips.
Employee and Fair Work Records
If you employ staff, the Fair Work Act requires you to keep wage, leave, and superannuation records for at least seven years. Missing these can lead to Fair Work penalties—even if your ATO reporting is correct.
Paper vs Digital Records
Here’s the good news—digital records are 100% acceptable.
- Scans and photos of receipts are valid if they’re clear and stored securely.
- Cloud accounting software like Xero or QuickBooks lets you upload invoices and attach them directly to transactions.
- Files must be in English or easily convertible.
- They must be accessible if the ATO asks for them.
One of my clients, Sarah, ran a catering business. She kept receipts in envelopes—some faded, some lost. When the ATO reviewed her GST claims, she panicked. We set her up with a digital system where invoices fed straight into Xero. Next BAS, everything was at her fingertips. She said, “For the first time, I felt in control.”
What Happens If You Don’t Keep Records?
Poor record keeping for small business doesn’t just cause stress—it has real financial consequences.
- Lost deductions – no receipt, no claim.
- ATO penalties – late or incorrect lodgement fines.
- Default assessments – if you don’t lodge, the ATO can “guess” your income, often overstating the amount you owe.
- Audit risk – inconsistent BAS or large GST refunds can trigger an ATO review, and the first thing they’ll ask for is your records.
👉 The Queensland Government’s guide makes it clear: poor records are one of the fastest ways to put your business at risk.
A retail client failed to separate personal and business expenses. When the ATO audited, several deductions were disallowed. They were required to pay thousands more tax than necessary—all avoidable with cleaner records.
How Long to Keep Records
- Standard ATO requirement: 5 years.
- Assets: Keep purchase and sale documents until 5 years after disposal.
- Employees: 7 years for wages and super (Fair Work rules).
- Companies & Trusts: Ongoing requirement to keep resolutions, distributions, and director minutes.
Practical Tips to Make Record Keeping Simple
Separate Personal and Business Accounts
Open a business bank account and card. This avoids mixing transactions and saves hours at tax time.
Reconcile Regularly
Don’t wait for year-end. Reconciling monthly means mistakes are caught early.
Use Technology
Apps like Hubdoc or Dext capture receipts with your phone and send them straight to your accounting software.
Back Up Securely
Store everything in the cloud and keep backups—so if your laptop dies, your records don’t vanish.
👉 For more practical tools, see our free resources here: Business Guides & Templates.
From Stress to Relief
Record keeping is emotional as much as technical.
I’ve seen clients lose sleep before audits. I’ve also seen the relief when they know everything is sorted. One client put it perfectly: “It’s like a weight lifted—I finally know where my money’s going.”
Good record keeping means less panic, more confidence, and more time to focus on growth.
What You’ve Learned
So, record keeping for small business comes down to this:
- Keep sales, expense, GST, wage, and asset records.
- Retain them for at least 5 years (7 for staff records).
- Digital is valid—and easier than paper.
- Different business structures have different obligations.
- Poor records cost money, create stress, and increase audit risk.
Handled properly, record keeping becomes a powerful business tool—not just a compliance chore.
Next Steps
📅 Want help putting the right systems in place? Book a meeting here: Book a Meeting
📘 Download our free guides, including templates and checklists: Download Free Guides
And while you’re here, check out our related post: Business Start Up Tips.
Take the stress out of record keeping—and get back to growing your business with confidence.
