Small Business Tax Dictionary
Record Keeping
Record keeping is the systematic recording and maintaining of financial documents related to home office expenses and business activities. Good record keeping ensures compliance with tax regulations and substantiates claims during audits.
What records should you keep?
For home office deductions, relevant records include:
- Receipts and invoices — for all home office expenses such as utilities, insurance, and equipment purchases
- Bank statements — showing payments made for claimable expenses
- Bills — electricity, internet, phone, and rates statements
- Floor plan or measurements — to support the area calculation used in apportionment
- Working hours log — if using a time-based method to calculate the business portion
For payroll and business taxes:
- Wage records — payslips, timesheets, and PAYE calculations
- GST/VAT records — tax invoices for sales and purchases
- Business income records — sales records, contracts, and invoices issued
How long should you keep records?
Record retention requirements vary by jurisdiction:
- New Zealand (IRD) — generally 7 years from the end of the tax year the records relate to
- Australia (ATO) — generally 5 years from when you lodge your tax return
- United Kingdom (HMRC) — generally 5 years after the 31 January submission deadline for self-assessment, or 6 years for companies
Why record keeping matters
Thorough records provide transparency and accountability, helping validate that deductions are accurate and legitimate. If your tax affairs are ever queried, good records are the difference between a straightforward resolution and a stressful audit.