When is it fine to discard old tax documents?

The Australian tax season is approaching and everyone will get busy in dumping useless data which constitute recently filed tax information as well. In this technological era, almost every accounting firm has migrated to paperless records but few of them still grapple with their tax record preservation. Accountants normally encounter their clients in a confuse state-of-mind while dealing with their tax records. They do not know what should be done with their past tax records and for how long they should be retained.

The Australian tax system allows tax-payers to self assess their income tax and are responsible for calculating amount to be declared and claimed on their tax return. This way ATO relies on the information provided by them. The tax-payers may be required to give written evidences to support their information. Hence, the ATO always encourages tax payers and their tax advisers to keep financial records.

But the question is still the same “How long to keep your records“

ATO advices that you must keep your written evidence for five years from the tax-return lodgment date. There are more reasons to retain your tax-

1. If you are claiming for depreciation deduction, then five years from the date of last claim for depreciation should be held.
2. If you have acquired or disposed an asset, then after five years of that you do not need to work out a capital gain or loss. Therefore it becomes certain that after five years there will be no CGT or Capital Gain Tax event.
3. If you are having any dispute with ATO, then you need to keep the records from the date of tax-return lodgment until the dispute is dissolved.

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