S286 Corporations Act: Financial Record-Keeping Requirements

If you run a company in Australia, keeping proper financial records isn’t just a “good practice” - it’s a legal must. Section 286 of the Corporations Act 2001 (Cth) sets out clear obligations for companies to keep financial records that explain transactions and financial position, so you can prepare true and fair financial statements when required.

In this guide, we’ll unpack what s286 requires in plain English, what “financial records” actually include, how long you must keep them, and practical steps to stay compliant as a small business. We’ll also cover what can go wrong if your records are incomplete - and how to avoid those headaches.

The goal is to help you build simple, scalable systems so your company stays on the right side of the law while you focus on growth.

What Is Section 286 Of The Corporations Act?

Section 286 requires a company (and certain other entities) to keep written financial records that:

• Correctly record and explain its transactions and financial position and performance; and
• Enable true and fair financial statements to be prepared and audited (if an audit is required).

Financial records must be kept for seven years. You can keep them in paper or electronic form, as long as they are readable and convertible into hard copy if needed.

Practically, s286 is the backbone of your company’s financial governance. It ensures directors have reliable information to make decisions, investors and lenders can trust your numbers, and regulators can verify your compliance.

Who Does S286 Apply To - And Why Does It Matter?

S286 applies to Australian companies of all sizes, including small proprietary companies. It also applies to registered schemes and disclosing entities. So even if you’re a small startup with one or two directors, these rules still apply from day one.

For directors, s286 interacts with your broader duties to act with care and diligence and to prevent insolvent trading. If your records are poor or missing, it becomes difficult to show the company was solvent or that you took reasonable steps. That risk flows into board processes (like the annual decision to make a solvency resolution) and routine filings with ASIC.

Keeping proper records also makes it far easier to manage essential director and officer paperwork, such as documenting decisions via a Directors Resolution or executing contracts under section 127 with correct signing blocks. Good governance and good record-keeping go hand in hand.

What Financial Records Must You Keep Under S286?

The Act defines “financial records” broadly. Think of it as anything that records or explains your company’s financial transactions, position, or performance. In practice, your records should cover at least the following areas.

Revenue And Receivables

• Sales invoices, receipts, and point-of-sale reports.
• Accounts receivable ledgers and aging reports.
• Contracts or terms of sale that underpin the revenue (e.g. your customer terms or online T&Cs).

Expenses And Payables

• Supplier invoices and bills, purchase orders, approvals, and payment confirmations.
• Accounts payable ledgers and vendor statements.
• Any long-term supply arrangements or service agreements that explain recurring costs.

Banking And Cash

• Bank statements for all company accounts and credit cards.
• Reconciliations between bank statements and your general ledger.
• Petty cash records and cash handling procedures.

Assets, Liabilities And Equity

• Fixed asset registers (purchase documents, depreciation schedules, disposal records).
• Loan agreements, leases, guarantees, and security documents.
• Share registers, share issue or transfer documents, and your Company Constitution or shareholder approvals that support capital movements.

Payroll And Superannuation

• Employment agreements, payroll journals, timesheets, payslips, and PAYG summaries.
• Superannuation contributions and records of employee entitlements.

Tax And Indirect Taxes

• Business Activity Statements (BAS), GST working papers, and tax returns.
• Fringe benefits tax (FBT) records if applicable.

Source Documents And Working Papers

• Original source documents (invoices, contracts, receipts, bank statements).
• Accounting system reports and reconciliations.
• Board papers, director minutes, and supporting materials for key decisions.

Remember, the test isn’t just “did we save the invoice?” It’s whether your records, taken together, “record and explain” the transactions and enable you to produce true and fair financial statements. If an auditor or regulator asked, could your records tell the whole story?

How Long And In What Form Must Records Be Kept?

Under s286, keep records for seven years after the transactions covered by the records are completed. This is a minimum - some records may be worth keeping longer for commercial or tax reasons.

You can keep records electronically. That’s often the most efficient approach for small businesses, as long as the system ensures:

• Information is readily accessible and readable in English.
• Backups exist so records aren’t lost.
• You can produce hard copies if required.

When managing electronic records, it’s wise to think about signature and execution requirements as well. For example, when you’re signing contracts, understand the rules for electronic signatures and how documents can be validly executed under section 126 (agents) or section 127 (companies) of the Corporations Act. Proper execution helps ensure your contracts are enforceable - and that your records prove it.

If you store financial records that include customer personal information, you’ll also need to consider privacy obligations. Having a clear, up-to-date Privacy Policy and sensible internal processes for handling personal data will help align your record-keeping with your privacy compliance.

Practical Steps To Comply With S286 In Your Small Business

Compliance doesn’t have to be complex. The most effective approach is to standardise and automate, so good record-keeping happens by default.

1) Map Your Financial Document Flow

List the documents you create or receive across the business: sales, supplier invoices, payroll, bank statements, tax records, contracts, board minutes, and so on. Note where each document originates, where it’s stored, and who’s responsible.

This simple map will expose gaps (e.g. missing source documents, inconsistent filing) so you can fix them before they become problems.

2) Choose A Single Source Of Truth

Use a modern accounting system as your “source of truth” and connect it to your bank accounts. Implement bank feeds and monthly reconciliations. Avoid keeping parallel spreadsheets that diverge from the ledger.

Adopt a secure cloud document storage structure with clear folders, naming conventions, and access controls. If you handle sensitive customer data, ensure your storage practices align with your privacy settings and the commitments in your Privacy Policy.

3) Standardise Approvals And Evidence

Introduce simple approval workflows for spending, supplier onboarding, and contract execution. Save the approval evidence (e.g. email approvals, delegated authority) with the relevant document.

Use consistent execution blocks and sign-off processes for contracts, noting whether you’re signing under s126 or s127. Store signed versions in a central, restricted folder so they’re easy to find later.

4) Keep Your Corporate Records Tight

Company changes (director appointments, share issues, office address changes) trigger ASIC notifications and internal paperwork. File ASIC forms promptly and keep your supporting records (resolutions, consents, registers) together.

When you update details, your team should know how to handle the corresponding filing - common changes are lodged using ASIC Form 484. Ensure your registers and minute books reflect the change, and keep them alongside your constitution and key corporate documents.

5) Schedule Regular “Close” And Review Cycles

Set a monthly or quarterly “close” schedule: reconcile bank accounts, review aged receivables/payables, file all source documents, and check GST/BAS workings against the ledger. Lock the period in your accounting software when complete.

Directors should receive short, consistent management reports. These reports, plus board minutes, create a clear decision trail. They’ll also support your annual solvency resolution process.

6) Lock In Retention And Access Rules

Document your record retention policy so staff know what to keep and for how long (at minimum, seven years for financial records). Assign responsibility for backups and periodic checks to confirm records remain accessible and readable.

If your business also handles operational or customer data, align your financial retention policy with your broader approach to data retention, so your team follows one clear set of rules.

7) Train Your Team

Even small teams need a short induction on “how we keep records here”. Show where documents live, how to name and file them, and who to ask if something doesn’t fit the process. A 30-minute training can prevent years of confusion.

8) Plan For Audits And Due Diligence

If you ever seek investment, sell the business, or face an audit, clean records will save enormous time and cost. Keep a simple “due diligence” folder structure ready - finance, tax, legal, corporate, IP, HR - and drop in key documents as you go.

What Happens If You Don’t Comply? Penalties And Risk

Failing to comply with s286 can lead to serious consequences, including offences under the Corporations Act. But the bigger commercial risk is what poor records do to your company’s credibility and your directors’ exposure.

• Regulatory issues: ASIC can investigate and penalise non-compliance. Missing records can complicate routine filings and reviews.
• Director risk: In insolvency scenarios, inadequate records can raise presumptions against directors. If you can’t show solvency or explain transactions, your defence to claims (like insolvent trading) becomes much harder.
• Tax risk: The ATO expects reliable source records to support BAS and income tax positions. Poor records increase the chance of adjustments, penalties, or audits.
• Funding and exit roadblocks: Investors and buyers rely on clean financials. Incomplete records can kill deals or significantly reduce valuation.

The good news is these risks are avoidable. Simple, consistent systems - started early - are your best protection.

Frequently Asked Questions About S286 (For Busy Founders)

Do I Need Paper Copies, Or Are Electronic Records Enough?

Electronic records are fine if they’re secure, readable and can be converted to hard copy. Many businesses go fully digital and use e-signing for contracts, provided execution complies with electronic signature rules and the Corporations Act signing provisions.

What If I’m A Small Proprietary Company That Doesn’t Need An Audit?

S286 still applies. You must keep financial records that explain transactions and position, and that would enable you to prepare true and fair financial statements if required. “Small” doesn’t mean “exempt from record-keeping”.

Who Is Responsible For Compliance - The Accountant Or The Directors?

Directors are ultimately responsible. External accountants and bookkeepers help enormously, but directors must ensure systems are in place and records are complete and accessible. Board oversight and short, regular finance reports are essential.

What’s The Minimum I Should Put In Place This Month?

If you’re just getting started: adopt a cloud accounting system with bank feeds, standardise your document storage, implement monthly reconciliations, and lock in a simple approvals process. File core corporate records (constitution, registers, resolutions) neatly and keep ASIC filings up to date - common changes go through ASIC Form 484.

Key Takeaways

• S286 of the Corporations Act requires all companies to keep financial records that explain transactions and financial position and allow true and fair financial statements to be prepared.
• Keep records for at least seven years; digital records are acceptable if they’re secure, readable and printable on request.
• Your financial records should cover revenue, expenses, banking, assets/liabilities/equity, payroll, tax, and the source documents and working papers that tie everything together.
• Practical compliance = standardised systems, monthly reconciliations, tight corporate records, clear approvals, and a basic retention policy aligned with your Privacy Policy.
• Directors remain responsible for record-keeping. Clean records reduce regulatory, tax and director liability risk, and make funding or a future exit smoother.
• Pay attention to proper execution and storage of contracts under s126 and s127, and keep core corporate documents like your Company Constitution and resolutions in one secure place.

If you’d like a consultation about setting up robust record-keeping systems and meeting your obligations under s286 for your company, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.