ATO record keeping requirements for sole traders

What you have to keep

• Income records: invoices you issued, receipts for cash, sales reports from platforms, bank statements showing deposits.
• Expense records: tax invoices and receipts for purchases, bank and card statements, contracts, subcontractor invoices.
• GST records: tax invoices supporting every credit claimed, copies of lodged BAS, adjustment notes.
• Asset records: purchase documents, dates first used, business-use percentage, depreciation calculations, and sale or disposal details.
• Apportionment records: vehicle logbooks, working-from-home hours, phone usage diaries, floor-area calculations.
• Year-end records: stocktake sheets if you hold stock, bad debt write-offs, super contribution receipts and notices of intent.
• Payroll records if you have employees, including super and STP reports.

How long

Five years is the general rule. The clock starts from the later of when you prepared or obtained the record and when the transaction was completed. For assets, that effectively means five years after you dispose of the asset, because the purchase record supports the depreciation and any balancing adjustment on sale. If you are in a dispute with the ATO or have amended a return, keep the records until the matter is resolved plus five years.

Format

Paper or electronic, the ATO does not mind. Electronic records must be a true and clear copy of the original, kept in a form the ATO can access, and in English or readily convertible to English. A photo of a receipt attached to the transaction in your bookkeeping software meets the standard. Thermal receipts fade within a year or two, so photograph them.

If you store records in the cloud, make sure you can still get to them if you change software or stop paying for it. Export a copy of each year’s records after you lodge.

The $82.50 rule

To claim a GST credit on a purchase over $82.50 (GST inclusive) you need a valid tax invoice from the supplier. For purchases of $82.50 or less, other evidence such as a bank statement entry or a till receipt is acceptable. That threshold is for GST credits; for income tax deductions the general standard is evidence that shows what you bought, from whom, when and how much, and a bank line is often enough for small items.

Bank statements do most of the work

For a sole trader with a separate business account, the bank statement is the spine of the records. Every line is a transaction with a date, a counterparty and an amount. The job is to add what the statement does not show: the category, the GST treatment, the business-use percentage, and the receipt where it matters. Software that reads the statement and lets you attach receipts, such as FlowFi, keeps all of that against each line and exports it as a pack for your accountant or the ATO.

Common gaps

• No record of working-from-home hours, which means no home office claim under the fixed rate method.
• A logbook that is more than five years old or does not cover 12 continuous weeks.
• Receipts for equipment that were lost after the purchase, leaving the depreciation claim unsupported.
• Platform payouts recorded as income without the platform’s sales report showing the gross figures and fees.
• Cash income not recorded at all.
• Personal purchases on the business card with no note explaining them as drawings.

Penalties

Failing to keep records can attract an administrative penalty, and more practically, a deduction or credit you cannot substantiate will be disallowed if reviewed, with interest on the resulting shortfall. The ATO has been clear that it uses data matching from banks, platforms and payment providers, so undeclared income is more likely to be found than it used to be.

A weekly habit

Ten minutes a week is enough: upload or check the bank transactions, categorise anything new, attach receipts from your phone, log kilometres and home hours. Do it on the same day each week and the quarter’s BAS becomes a review rather than a reconstruction. See the end of financial year checklist for the annual version.