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In Australia, running a business means more than just selling great products or offering excellent services. Behind the scenes, there are legal requirements that every business owner must follow – and record keeping is right at the top of that list. Accurate record keeping not only helps you stay on top of your finances and operations, but is also essential to meet various legislative obligations. Neglect this area and you could risk fines, audits, or even legal disputes.
Whether you’re hiring your first employee, lodging your first BAS, or planning to grow your business, understanding the legislative requirements for record keeping is essential. In this guide, we’ll break down what’s legally required, what kind of records you need to keep (including for payroll), how long you need to keep them, and tips to make compliance manageable. Keep reading – with the right knowledge and strategies, record keeping can be a straightforward part of running your dream business.
What Does Legislative Record Keeping Mean for Businesses?
Legislative requirements for record keeping refer to the rules set out by different Australian laws (such as tax, company, and employment laws) that require businesses to keep specific records for certain periods. These records help regulators verify your compliance with the law and can protect your business if questions ever arise about your activities, finances, or employment practices.
Record keeping isn’t just a “nice to have” – it’s a legal obligation, and authorities such as the Australian Taxation Office (ATO), Fair Work Ombudsman (FWO), and even the Australian Securities and Investments Commission (ASIC) can all require access to your records.
Why Is Record Keeping So Important?
Keeping comprehensive and accurate records isn’t only about following the rules. Well-organised records help you:
- Track your business performance and cash flow
- Meet your tax and reporting obligations efficiently
- Resolve disputes with employees, customers, or suppliers
- Substantiate claims in case of audits or investigations
- Enhance business value and facilitate smooth transitions should you ever sell or transfer ownership
If you ever face a legal review or audit, complete records can save you a lot of stress and money.
What Laws Govern Record Keeping Requirements for Australian Businesses?
Record keeping rules are scattered across several key pieces of legislation that impact businesses in different ways. Some of the most important include:
- Income Tax Assessment Act 1997 and ATO Requirements: Businesses must keep detailed financial records for all transactions relevant to income, deductions, and GST for at least 5 years.
- Corporations Act 2001: Companies must keep company financial records, board resolutions and more, typically for 7 years.
- Fair Work Act 2009: Employers must keep employee records such as payslips, wage records, and timeworked details for 7 years.
- Australian Consumer Law (ACL): If you’re providing goods or services, you need to keep records to back up warranties and refund policies.
- Privacy Act 1988: If you handle personal information, you must keep records about how that data is collected and handled, especially if you are required to have a Privacy Policy.
Depending on your industry or business activities, you may be subject to further requirements (for example, builders, health care, or charities). It’s wise to check if there’s industry-specific legislation, and seek legal advice if you’re unsure.
What Business Records Should I Be Keeping?
Australian legislation doesn’t just require “some” records – it specifies what types you must keep, especially around your finances and employees. Let’s break it down.
Financial Records
At a minimum, businesses must retain:
- Invoices and receipts for all sales and purchases
- Bank statements and loan agreements
- BAS lodgement records, GST calculations, and related documents
- Records for claiming business expenses and deductions
- Contracts and legal agreements (including customer contracts, supplier agreements, and leases)
- Asset registers (for depreciation and capital gains tax)
Company & ASIC Requirements
If you operate as a company, you’ll need to keep:
- Company constitution and registers of members
- Minutes of meetings and resolutions
- Statements and reports lodged with ASIC
- Records of any share issues, transfers, or buybacks (see our company structure guide)
Employee and Payroll Records
If you employ staff, you need to understand payroll record keeping requirements under the Fair Work Act. Employers must keep:
- Employee start and end dates, name, and employment status (full-time, part-time, casual, etc.)
- Wage rates, hours worked, overtime, and leave taken
- Payslips provided to employees (must contain specific information)
- Records of superannuation contributions and tax withholdings (PAYG)
- Details of awards, agreements, or contracts that set out pay and conditions (see employment contracts)
Employees have a right to request access to their records (a request for employee records), and you must be able to produce them promptly if asked by an employee or an inspector – otherwise, you risk penalties.
Other Business-Specific Records
- Licences, permits, and regulatory approvals: These support your authority to operate (council permits, GST registration, etc.).
- Warranties, refunds, and exchanges: Records for warranty claims and refunds (to comply with the ACL and demonstrate proper conduct).
- Insurance and legal claims: Including copies of relevant coverage and claims correspondence.
How Long Do I Need to Keep Business Records?
The answer depends on the type of record and the law that governs it, but as a general rule:
- Tax and financial records: At least 5 years from the date you lodge your tax return or relevant records are prepared, updated or transactions completed (according to the ATO).
- Employee and payroll records: At least 7 years from the date the entry was made or an employee’s employment ended (see Fair Work guidance).
- Company records: At least 7 years for company-related documents (Corporations Act Requirement).
It’s always safest to follow the longest retention period that applies, especially if records serve multiple purposes (for example, wage records that are used for both employment and tax).
Are There Special Rules for Digital Records?
Absolutely! The ATO and other regulators accept digital records, provided they are:
- Clear, accurate, and complete reproductions of the original document
- Secure from unauthorised alteration or deletion
- Easily retrievable if requested by an auditor or inspector
If you choose to store documents digitally (such as using cloud software or accounting programs), ensure you have reliable backup processes. Even if technology fails, the legal responsibility falls on you.
Also, if you collect or store any personal information digitally, you must comply with the Privacy Act and have an appropriate Privacy Policy.
Practical Tips for Good Record Keeping
Getting your record keeping right from the outset pays off. Here are strategies to help you stay organised and compliant:
- Choose the right system: Whether manual or digital, use a system that helps you capture and retrieve records quickly.
- Keep records up to date: Don’t let receipts, invoices, or employee records pile up – set aside time regularly to update your files.
- Understand your retention requirements: Set reminders for periodic destruction (in line with legal requirements), but never delete records too early.
- Back up digital records: Regularly create backups and test restoring from them.
- Restrict access to sensitive data: Ensure only authorised people can access payroll, financial, and personal data (important for both security and data breach prevention).
- Review your contracts and policies: For instance, your employment contracts and internal policies should reflect how employee data is handled.
And finally, if in doubt about whether something must be kept, it’s better to hold onto it than to risk breaching record keeping legislation.
Common Record Keeping Mistakes and How to Avoid Them
Starting a business is busy work, but overlooking your record keeping obligations can cause major headaches down the track.
Here are some frequent errors to watch for:
- Not keeping employee records for the required period – This can trigger Fair Work penalties and make it impossible to resolve workplace disputes.
- Mixing business and personal transactions – Makes it hard to substantiate business expenses to the ATO, risking denied claims.
- Inadequate backup (or lost records) – Digital records must be retrievable, so a failed hard drive or expired subscription can be a legal liability.
- Failure to update details with regulatory bodies – If your company changes address, directors, or structure, you must update ASIC records. Learn more about what to do if your company changes.
To avoid these (and other) pitfalls, check out our top 10 small business mistakes article.
What Legal Documents Help Support Good Record Keeping?
Having proper legal documentation goes hand in hand with good record keeping. The following documents aren’t just “nice to have” – they help you manage compliance, relationships and risk:
- Employment Contract: Sets out pay, hours, leave and dispute procedures, making wage and time records easy to maintain and check.
- Privacy Policy: Explains how customer and employee data is handled and the steps you take to keep it secure (find out if you need one).
- Service or Customer Agreements: Provide clear proof of what’s been agreed and can be useful if any dispute arises regarding payments or deliverables.
- Shareholders Agreement: If you run a company with multiple owners, this protects each party’s interests and clarifies decision-making and records access (learn about shareholder agreements).
- Supplier or Contractor Agreements: Make sure your supply chain and any outsourced work is properly documented.
Not sure which documents your business specifically needs? You might find our guide on essential legal documents for businesses a helpful place to start.
How Can Employees or Authorities Request Records?
Under both tax and workplace laws, employees and government authorities have the right to request access to relevant records. For example:
- Employees: Can request copies of their own records (such as pay slips, employment agreements, hours worked, or leave balances). As the employer, you must provide this information within a reasonable time.
- Fair Work Inspectors: Are entitled to inspect and request copies of all employee records – penalties apply for non-compliance or providing false records.
- The ATO: Can request various financial and tax records to check compliance with taxation law.
It’s important your record keeping system allows you to quickly and accurately supply these records. Fumbling for paperwork or missing records sends a message of poor compliance and could raise red flags or escalate an investigation.
Key Takeaways
- Legislative requirements for record keeping are serious legal obligations for all Australian businesses – ignoring them can lead to costly fines and audits.
- You must keep a range of records, including financial, employee, and company documents, for specific periods (usually at least five or seven years).
- Payroll record keeping requirements are strict under Fair Work Act – keep accurate wage, hours, and leave records, as well as payslips for every employee.
- Both authorities and employees can request records at any time, so your system must allow quick and accurate access.
- Using the right legal documents and contracts supports good record keeping and protects your business interests.
- Digital records are allowed – but must be secure, authentic, and easily retrievable.
- If you’re unsure of your obligations, consult a legal expert or review Sprintlaw’s range of resources on compliance and business setup.
If you’d like a consultation on legislative requirements for record keeping for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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