How Long to Keep Tax Records: The Practice’s Duty

How long to keep tax records depends on the record and its starting event. Five years is the usual tax period. Your practice’s service records and identity-check notes have separate clocks. AML/CTF customer due diligence records generally need seven years after the relationship ends.

How Long to Keep Tax Records, and Which Clock Applies

Most business tax records need five years from preparation or receipt, or completion of the related transaction, whichever happens later. For individual deduction evidence, lodgement generally starts the five-year period. Those periods are the starting point, with longer retention for assets, losses and unresolved disputes.

A short explanation you can forward to a client follows.

Keep the records supporting your tax return for at least five years after you lodge it. Keep asset purchase records while you own the asset. Longer periods can apply to asset disposals, carried-forward losses or an unresolved tax dispute. Ask us before destroying those records.

The client’s duty to substantiate their return continues even when your practice stores their documents. Your separate duty is to retain evidence of the tax or BAS services you provide. Returning the client’s originals does not end that duty.

For each file, identify the record type, the duty and the event that starts its retention period. Where duties overlap on one record, use the latest expiry. A five-year-old box can still contain records whose retention period has not started.

Three Duties, Three Clocks: Tax Law, the TPB Code and AML/CTF

Each duty attaches a retention period to a particular event. Calculate the expiry for each record before assigning a destruction date to the whole file.

Duty	Record	Minimum period and starting event
Business income tax, section 262A of the Income Tax Assessment Act 1936	Records explaining transactions, income, expenditure and tax calculations	Generally five years after preparation or receipt, or completion of the related transaction, whichever is later
TPB, section 30 of the Code Determination	Records of each tax agent or BAS service	At least five years after the service is complete
TPB proof-of-identity guidance	Record of the identity checks and relevant assessments	At least five years after the engagement ends
AML/CTF, section 111	Customer due diligence records for a designated service	Seven years after the business relationship ends or an occasional transaction is complete
AML/CTF, section 107	Transaction record made by the reporting entity	Seven years from creation
AML/CTF, section 108	Transaction document supplied by the customer where the service is provided	Seven years after receipt

The ATO’s business-record ruling explains section 262A. Its individual deduction guidance confirms the usual five-year period from lodgement for those claims.

Under the TPB’s service-record obligation, your file must explain what you did and the result. Keep the information considered, client instructions and advice. For complex advice, retain the facts and reasoning, including calculation methods. The TPB’s wider Code obligations cover the rest of your professional duties.

AML/CTF retention applies when you provide a designated service as a reporting entity. It does not attach to every tax-return job simply because an accountant performs it. AUSTRAC’s record-keeping guidance separates customer due diligence from transaction records. Your AML/CTF program must support the applicable records. Program records generally remain until seven years after they cease to be relevant to compliance.

Consider this fictional company file. The company completes an ordinary transaction when it obtains the invoice. Your practice completes the related tax service six months later. Its ongoing designated-service relationship ends two years after the transaction.

Assuming no extension, the ordinary invoice can leave the tax archive at the five-year point. Your service evidence remains until five-and-a-half years after the transaction. Seven years of CDD retention then run from the relationship’s end, taking that record to the nine-year point. A shared record needed for all those purposes stays until the last applicable period expires.

Material the Practice Holds for a Client, and Material It Holds About Them

Client-owned source documents and your practice’s working papers have different ownership rules. Separate ownership from retention: you can return an original while keeping the evidence your service file requires.

Subject to the engagement agreement, client property generally includes supplied invoices and receipts, ATO correspondence and paid-for returns or financial statements. Your internal drafts and working papers generally belong to the practice. A specific agreement about commissioned documents can change that position.

When the client leaves, return their property or arrange an authorised transfer. Keep your required service evidence and a record of the handover. The TPB’s document-ownership guidance does not support a blanket right to withhold supplied invoices over unpaid fees. Use the ending an engagement and handing over records for the transfer itself.

Keep a contemporaneous identity-check note after the relationship ends. Record when the check occurred, who performed it and how documents were sighted. Include document types, legibility, apparent concerns and the evidence of a representative’s authority. Retain the basis for any well-established-client assessment and the frequency of further checks.

The TPB’s identity guidance requires these records for at least five years after engagement ends. It does not require or recommend storing ID copies or originals. AML/CTF CDD records can require a longer period. Keep the verification information that duty needs without collecting unnecessary copies.

Payroll Tax Records and Employee Records

Employer clients need payroll evidence for both tax and workplace law. The Fair Work employee-record duty has a seven-year period, separate from the ATO’s usual five-year tax period.

Under section 535 of the Fair Work Act, employers covered by the Commonwealth workplace rules must keep prescribed employee records for seven years. The Fair Work Ombudsman’s record-keeping fact sheet lists the required information. It covers pay rates, payments and deductions, hours where required, leave and employment details. Super records include contribution amounts, payment dates, contribution periods and fund details.

The ATO requires records explaining PAYG withholding transactions for at least five years. Its super contribution guidance also requires contribution evidence for a minimum of five years. A payroll record subject to both five-year and seven-year duties must survive the longer period.

Keep the payroll calculations behind Single Touch Payroll reports, together with submission evidence, corrections and finalisation records. Reporting figures through STP does not supply every wage, leave or super record an employer must retain. If state or territory payroll tax applies, add that jurisdiction’s record rules to the schedule.

When your practice runs payroll, agree who stores the employer’s records and how the employer retrieves them after termination. The employer remains responsible for its obligations. Your practice also retains the instructions and calculations needed to explain its BAS or tax services, with the service-completion clock applied separately.

When the Clock Runs Longer Than the Standard Period

Asset records and information reused in later returns can outlive the ordinary five-year archive cycle. Put those files on a separate retention schedule.

• Keep capital gains tax acquisition and cost-base evidence through ownership and generally for at least five years after the relevant CGT event. A later relevant event or an unapplied capital loss can extend the need.
• Business depreciating-asset records generally stay throughout ownership and for another five years after disposal. Low-value pools and rollover relief have different requirements.
• Keep evidence supporting carried-forward losses until the losses are used and the relevant assessment’s review period has expired. Do not calculate expiry solely from the year the loss arose.
• Retain records through applicable amendment periods. Reusing an old calculation in a later return can give that evidence a later retention need.

The ATO explains capital gains tax records and business depreciating-asset records separately.

Suspend destruction when an audit, objection, review or dispute concerns the file. Record the hold and release it only after the matter ends and remaining retention duties are assessed. Representing a client in a later ATO review is a new service. The TPB’s detailed record guidance explains why relevant records then need five years from completion of that review service.

SMSF trustees have separate five-year and ten-year categories. Accounting records, annual statements and lodged returns generally fall in the five-year category. Trustee meeting minutes, trustee changes, member reports and relevant trustee declarations fall in the ten-year category. The ATO’s SMSF record guide lists the categories. Asset and income-tax rules can extend retention further.

Storing, Digitising and Destroying Files Safely

Digital copies can replace ordinary paper tax records when they reproduce the original clearly and remain accessible throughout the required period. Scanning does not shorten retention.

The ATO permits clear electronic reproductions of PAYG paper records that it can retrieve and read. Check every page after scanning. Keep files protected against alteration, with backups and a tested way to retrieve them. Preserve an original where another law or its legal purpose requires it.

Limit access to ID material to authorised staff. Use encrypted storage, separate access permissions and locked physical storage for paper files. Avoid adding ID copies to general email archives.

For cloud or offshore storage, assess who can access the records, where they are handled and how you can export and delete them. Document client disclosures and permissions where required. Outsourcing storage leaves your practice responsible for the information it holds. Overseas disclosure can engage additional privacy duties.

The OAIC’s security guidance explains protection and disposal. Where the Australian Privacy Principles apply, destroy or de-identify information once no permitted purpose or retention requirement remains. A retention minimum does not justify keeping every ID document forever.

Use an approved destruction routine.

1. Identify the records and calculate each applicable expiry.
2. Check for live disputes, legal holds and continuing asset or loss records.
3. Obtain approval from the person responsible for retention decisions.
4. Destroy paper and electronic copies securely, including provider-held copies where applicable.
5. Keep a record of what was destroyed and the approval, without copying the discarded personal information into it.

If stored information is exposed, use the data breach response guide to assess and respond to the incident.

What to Settle With a New Client at Engagement

Settle document ownership and storage responsibilities in the engagement letter before files begin arriving. State what you hold for the client and what you retain to explain your work.

Record the following points in the terms.

• The client remains responsible for keeping records required by tax and employer law.
• Any agreement for your practice to retain the client’s source records names the covered material and access arrangements.
• Your service records remain for at least five years after each service is complete, with longer duties applied where relevant.
• Identity-check records have their own retention period, and designated-service CDD records follow the AML/CTF period when applicable.
• The terms explain ownership, returning originals and transfer arrangements when the engagement ends.
• Cloud storage or outsourcing disclosures describe the actual arrangements used.

Ask a new client which originals, asset records and loss calculations their previous adviser still holds. Identify incomplete jobs and unresolved reviews. Obtain authority to request the required material, then record what arrives and what is missing.

For a return or destruction instruction, record who gave it, their authority, the covered records and the intended action. Explain any material your practice must still retain. A client’s request cannot cancel a statutory retention duty. Before you authorise destruction, confirm that every applicable clock has expired and every hold is released.