Why Some Records Must Be Kept Longer Than Five Years
As a business owner in Australia, maintaining accurate and compliant records is essential for tax and legal purposes. While most business records must be kept for at least five years from the date you lodge the relevant return, certain records require significantly longer retention periods. Understanding these requirements can help you stay compliant with the ATO and avoid penalties, and ensure you have the documentation you need in the event of a dispute, audit, or legal matter.
At Trinity Accounting Practice, we help businesses across Sydney and Australia set up record-keeping systems that meet all retention requirements and ensure nothing falls through the cracks.
Capital Gains Tax (CGT) Records
CGT records are one of the most commonly misunderstood retention requirements. If your business or you personally own a capital asset, you must keep records for the entire period of ownership plus five years after the CGT event occurs (such as a sale or disposal). This means that if you purchase an investment property and hold it for 20 years before selling, you need records stretching back the full 20 years plus a further five years after you lodge the return that includes the capital gain or loss.
These records include the original purchase contract, evidence of the cost base (including stamp duty, legal fees, and any capital improvements), and the sale contract. If the CGT event results in a capital loss that you carry forward to offset future gains, the records must be kept for five years after the loss is finally used in a tax return.
For assets acquired before 20 September 1985 (pre-CGT assets), you should still retain ownership records to prove the acquisition date, even though any gain on disposal is not subject to CGT.
Our business advisory team can help you establish a CGT record-keeping system that tracks cost base elements from day one, so you are not left scrambling to find documents decades later.
Depreciation and Asset Records
If your business claims depreciation on assets, records must be kept for five years after the last depreciation claim is made. For assets with long effective lives — such as building fit-outs, plant and equipment, or capital works — this can extend the retention period well beyond the standard five years.
For example, capital works deductions on commercial buildings are claimed at 2.5% over 40 years. The records supporting that claim, including the original construction costs and quantity surveyor reports, must be retained for the full 40-year deduction period plus a further five years.
Similarly, if you purchase second-hand depreciating assets, keep in mind that since 1 July 2017, owners of second-hand residential rental properties can no longer claim depreciation on existing plant and equipment assets. The original records still need to be retained to support the cost base calculation for CGT purposes when the property is eventually sold.
Business Structure and Ownership Documents
Documents related to company formation, partnership agreements, and trust deeds should be kept indefinitely. These are essential for audits, legal matters, and compliance requirements, and they form the foundation of your business structure.
Trust deeds, in particular, must be retained for the entire life of the trust and beyond, as they govern how income and capital are distributed. Any variations to the trust deed should also be kept alongside the original. Company constitutions, shareholder agreements, and minutes of director and shareholder meetings should also be retained permanently.
If your business operates through a company, be aware that Division 7A loan agreements must be kept for the duration of the loan (seven years for unsecured loans, 25 years for secured loans) plus five years after the loan is fully repaid. These records are critical to demonstrate compliance with minimum yearly repayment obligations and the benchmark interest rate.
Employee and Payroll Records
While the ATO requires payroll records to be kept for five years, the Fair Work Ombudsman requires employers to retain employee records for a minimum of seven years. This includes wages, PAYG withholding, superannuation details (currently at the 11.5% superannuation guarantee rate for 2024-25), leave balances, hours of work, and employment agreements.
For businesses using Xero or similar cloud payroll software, digital records are automatically stored, but it is important to ensure that backups are maintained and that you can access historical data even if you change software providers.
If your business operates in an industry covered by a specific award, such as the Hospitality Industry Award, the Building and Construction General On-site Award, or the SCHADS Award for NDIS providers, additional record-keeping requirements may apply. Our bookkeeping team can help ensure your payroll records meet both ATO and Fair Work requirements.
Superannuation and SMSF Records
If your business makes superannuation contributions for employees, contribution records should be kept for at least five years from the date the contribution was made. However, if these records relate to a self-managed super fund (SMSF), the retention requirements are more demanding.
SMSF trustees must keep records for a minimum of five years after the end of the financial year to which they relate, but in practice, records relating to asset purchases, member contribution histories, and pension commencement documents should be retained for much longer. Records supporting the tax-exempt status of pension income streams, in particular, should be kept for the life of the pension plus five years.
Our SMSF accounting team works with fund trustees to ensure all records are maintained in compliance with ATO and Australian Prudential Regulation Authority requirements.
Legal and Contractual Documents
Agreements such as leases, contracts, and records relating to legal disputes should be retained beyond the standard five-year period, especially if they impact ongoing business operations or financial reporting. Commercial leases, for example, should be kept for the duration of the lease plus at least five years, as they may be relevant to deduction claims, GST input tax credits, or CGT calculations if the lease is assigned or surrendered.
Insurance policies, even expired ones, should be retained indefinitely where they relate to potential claims that may arise years after the policy period. This is particularly relevant for professional indemnity and public liability insurance.
Practical Tips for Long-Term Record Keeping
Managing records over extended periods requires a systematic approach. Moving to cloud-based accounting software such as Xero ensures that digital records are stored securely and remain accessible over time. For physical documents, consider scanning and storing digital copies with clear file-naming conventions that include dates and descriptions.
It is also worth conducting an annual record-keeping review to ensure that current-year documents are being captured correctly and that older records are still accessible. If you are unsure whether a particular record can be safely destroyed, the safest approach is to retain it — storage costs are typically far less than the cost of being unable to substantiate a claim or position during an audit.
Our team at Trinity Accounting Practice can help you establish a retention schedule tailored to your business structure and industry, ensuring you meet all ATO, Fair Work, and regulatory requirements without drowning in unnecessary paperwork.
Trinity Accounting Practice
Accounting Firm in Beverly Hills, Sydney
Phone: 02 9543 6804
Address: 159 Stoney Creek Road, Beverly Hills NSW 2209
Website: www.trinitygroup.com.au
Weekend and after-hours appointments available
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Disclaimer: Information provided on this website is intended as a general overview only and does not replace professional advice tailored to your personal circumstances.
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