February 2003 Newsletter
Print NewsletterIn this issue we look at:
Compensation from the ATO
It is possible to obtain monetary compensation from the ATO in the event that it can be shown that there has been defective administration by the ATO. The Institute of Chartered Accountants has issued material to assist in claiming compensation as part of it's general push to increase the administrative efficiency of the ATO. The cost of poor administration by the ATO does ultimately end up being borne by all taxpayers. Where it can be identified, a situation that will likely be successful in resulting in compensation being paid for a client, we will pursue the claim.
Record Keeping
Storage of records can be a costly exercise. In order to minimize your storage costs you should separate your records into two categories:
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- Important Records that should not be disposed of
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- General Records that can be disposed of
Important Records to Keep
We would suggest that the following types of records should not be disposed of:
Trust deeds, company constitutions (formerly known as Articles and Memorandums), other statutory records such as minute books, details of the acquisition of a capital asset such as shares or real estate property, evidence that will show when you commenced using a property as your principal place of residence, financial accounts and tax returns. If you are unsure, the general rule is that it is better to keep the document than dispose of it.
General Records That can be Disposed of Over Time
Records to be kept 5 years would include:
Source documents generated from running a business. This would include items such as customer and supplier invoices, till tapes, bank statements and cheque books.
Records to be kept 7 years would include:
Employee payroll information and business contracts.
How to Keep Records
We would recommend that you separate the documents at the time of storage into the "Important Records" and "General Records" classification. The "General Records" classification should be stored in a manner which allows you to identify the year in which they relate (ie box by year).
How Long to Keep
The longest period of record retention required under the law is 7 years. This applies to companies. For taxation purposes, records are normally required to be retained for 5 years from the date on which the record was prepared or obtained or from the time the relevant transaction or act was completed, whichever is the later. Some individual taxpayers have a shorter retention requirement. We recommend that if you are unsure, then you should keep the records for a minimum of 7 years. When a company is deregistered, its books of account vest in ASIC. However, notwithstanding this fact, the Corporations Act requires the directors to retain all books of the company, which will include registers, financial records and documents for a period of 3 years after the date on which the company is deregistered.
You may keep records in a non-written form (eg in an electronic medium such as magnetic tape or computer disc) provided it is readily accessible and convertible into English. They may also be kept on microfilm, microfiche or CD ROM.
Impact of the Firth decision on Interest Claims
Automatic Tax deductions for Gifts to Charities – “Workplace Giving"
Employees who donate money on a regular basis to one or more deductible gift recipients directly through their pay will now receive the effect of an upfront deduction through a reduction in tax withheld by their employer under the PAYG withholding system. When employers calculate the amount to be withheld from the employee's salary for a pay period, they should deduct the employee's donation amount from the gross salary before referring to the appropriate tax table. This has the effect of reducing the employee's potential refund at the time of lodging the next taxation return, as the amount of tax withheld has been reduced during the course of the year.
Employers should provide each employee with confirmation of the employee's donations for the employee to claim a tax deduction. The confirmation can be shown on the employee's payment summary or in another written or electronic form. It is the employer's responsibility to check that a charity has a Deductible Gift Registration.
If you require details about any of the items in this newsletter or would like more information, please contact us. Items in this Bulletin are general comments only. They do not constitute advice and should not be used as a substitute for business planning, financial or taxation advice.
