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Jimmy B Prince, author of Tax for Australians for Dummies

Under Australian tax law all taxpayers and more particularly investors are required to keep accurate records of their financial transactions. Keeping proper records are primarily required for the following purposes:

1.    When you lodge your annual individual tax return you need to disclose all assessable income you derive such as salary and wages, business profits and investment income, all deductible expenditure you incur, and any tax offsets you’re entitled to claim.

2.    If you derive business income you may be required to prepare ‘Business Activity Statements’ and pay tax on an ongoing basis.

3.    If you’re registered for GST you must account for all the GST you collect from your customers and remit the amount to the Australian Taxation Office (ATO).

4.    If you derive investment income you may be required to prepare quarterly ‘Instalment Activity Statements’, disclosing any gross rent, dividends and interest you derive and pay tax on an ongoing basis. The ATO will notify you if you have to do this. This means you’ll need to keep an ongoing record of the amount of investment income you receive during each reporting period.

5.    If you sell investment assets such as shares and real estate you’ll need to work out whether you had made a capital gain or capital loss, and the amount of tax you’re liable to pay on any gain you made.

6.    If you own a block of land or holiday house you’ll need to keep track of all your non-capital costs (such as non-deductible interest, rates, insurance and repairs), as these outlays can be added in the property’s cost base.

The secret to keeping proper records is to open a cheque account to record and keep track of all your income and expenditure. One great thing about having a cheque account is that you will receive regular financial statements summarising all your credits and debits. It then becomes a simple matter of transferring the appropriate details to a spreadsheet. This will help you to quickly summarise all the income you derived and expenditure you incurred.

With respect to recording any assets you own; you can record the necessary details in an ‘asset register’. For more details visit the ATO website and read Taxation Ruling TR 2002/10 – Income Tax: capital gains tax: asset register.

By the way, under Australian tax law you must keep your records for five years after you lodge your annual tax return. Penalties may apply if you fail to comply with this important requirement.

With respect to your investment holdings you’ll need to keep the following key documents:

Share transactions

•    The ‘buy and sell contract notes’ you receive from your stockbroker. You need to keep these documents to work out whether you had made a capital gain or capital lose on sale
•    The ‘statement of holdings’ you receive from the company recording the number of shares you own
•    Dividend statements recording the dividends and franking credits you receive from the company
•    A record of expenditure you incur such as interest on borrowings

Real estate

•    Contract of sale and settlement statement setting out the property’s cost base
•    Certificate of title confirming legal ownership
•    A record of any capital improvements you make to your property
•    Non-capital costs if you own a block of land or non-income producing property
•    Rental statements recording the amount of gross rent you receive each year
•    Invoices and receipts of deductible expenditure you incur such rates, insurance and repairs
•    Financial statements setting out any interest your incurred on borrowings
•    Depreciation schedule setting out all your depreciable assets

Interest

Bank accounts and statements recording the amount of interest you receive and bank fees you incur.

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