Financial records to capture for a small company

What "good enough" actually means

The Australian Taxation Office (ATO) sets a simple test for business records: they need to contain enough information for the ATO to determine the essential features or purpose of a transaction, so it can understand how that transaction relates to your business income and expenses. That is the standard to design your system around. A bank feed line reading "transfer $240" tells nobody anything. The same amount with a supplier invoice, a date, a description and a note on what it was for tells the whole story.

The ATO also says accurate and complete record keeping should be part of your daily business activities, not an annual scramble. For a small company that is the practical decision in front of you: you are choosing a repeatable daily habit, and the list below is what that habit needs to capture.

Sales and income records

Capture every transaction where money comes in, whether or not it is taxable:

• Tax invoices you issue, with your ABN, date, description, quantity and amount.
• Cash register tapes, POS summaries and EFTPOS settlement reports.
• Online marketplace and payment gateway settlements, including the fees deducted before funds reach your bank.
• Deposit slips and a daily takings summary if you handle cash.
• Grant, insurance or other one-off receipts, with the supporting correspondence.
• Credit notes and refunds, so income is not overstated.

Reconcile these against your bank statements each month. The reconciliation is what proves the income figure in your activity statement and company tax return is complete.

Purchases and expenses

This is where most small companies lose deductions. The expense is not the spend — it is the spend plus evidence of what it was for.

• Supplier tax invoices and receipts, including card receipts for small purchases.
• Evidence for expenses with a private component (phone, internet, vehicle, home office), such as a logbook or a reasonable basis of apportionment.
• Card and merchant statements, kept even where you also hold the invoice.
• Petty cash vouchers and receipts.
• Records of asset purchases: invoice, date first used, cost, and the depreciation calculation.
• Records of any bad debts written off, showing the debt and the decision to write it off.

Payments, banking and finance

Your bank statements alone are not sufficient, but they are essential. Keep:

• All business bank, credit card and loan statements.
• Loan agreements, lease and hire-purchase documents, with repayment schedules.
• Records of interest, fees and charges.
• Evidence of any owner or director funds put into the company, and any drawings taken out.

The reason to separate these cleanly: money moving between you and your company is a common audit trigger, and a company is a separate legal entity from its owners.

Payroll and superannuation

The ATO requires records of all transactions related to your business's tax and superannuation obligations. In practice:

• Employee details, start dates, tax file number declarations and employment contracts.
• Payroll records: gross wages, tax withheld, allowances, deductions and net pay, per pay period.
• Superannuation calculations and evidence contributions were paid, not just accrued.
• Leave balances and termination payments.
• Records for contractors, including invoices and ABNs, kept separate from employees.
• Fringe benefits records if you provide any.

GST and other tax records

Keep the working papers behind each activity statement: the GST collected and GST paid figures, the calculation, and any adjustments. Where you claim input tax credits, the supporting tax invoices are the claim. If you cannot produce them when asked, the credit can be denied.

Company records under the Corporations Act

Being a company adds a second layer on top of the tax rules. ASIC states that companies must keep financial records for at least seven years, and that records help a company keep track of its business and meet lodgement requirements. ASIC also notes that a company's constitution may include its own rules about records, so read yours.

This layer sits alongside the tax layer rather than replacing it. Keep company registers, director and shareholder resolutions, meeting minutes and the constitution together with the financial records.

How long to keep records

The two timeframes you will see quoted are both real, because they come from different rules:

The practical interpretation: a company should generally plan for seven years, because the company law period is longer than the tax period and the records often overlap. Your own constitution may require longer. Retention periods can also start from different events — for example, from when a transaction was completed rather than the calendar year — so confirm the start point for any record class you are unsure about.

Format, storage and access

The ATO recommends digital record keeping where possible and notes it is moving towards digital records. Two practical points follow from that:

• Digital storage can provide automatic off-site storage, which matters if your only copy is a laptop or a filing cabinet in the same building as the fire.
• If you use an electronic system, you must be able to produce a hard copy if the ATO or ASIC requests one. Scans and photos are generally used, so make sure they are legible and complete.

On access, ASIC states that directors have the right to access financial books and records at all reasonable times, while members' (shareholders') access may depend on the company constitution. If your company has multiple directors or outside shareholders, agree early on where records live and who can retrieve them.

business.gov.au also suggests tracking separate financial records for each business or department within your business. If you run two activities under one company, separate tracking is what makes each one's figures defensible.

Common gaps to check

Run this against your last completed quarter:

• Are there deposits in the bank with no matching invoice or receipt note?
• Do you hold tax invoices for every input tax credit claimed, not just bank evidence?
• Is every mixed-purpose expense supported by a documented basis of apportionment?
• Are superannuation amounts that were accrued actually shown as paid?
• Are director drawings and loans recorded, with repayments or a documented arrangement?
• Are scans legible, and do originals exist for anything signed?
• Can you produce a hard copy of your electronic records within a reasonable time?
• Are employee and contractor records stored separately?

Next steps

1. Pick one system and use it for everything — invoicing, payroll and expenses — so there is a single source of truth.
2. Set a weekly routine: capture receipts, code transactions, reconcile the bank.
3. Set a monthly close: reconcile accounts, review the debtors and creditors lists, file statements and reports.
4. Confirm your retention settings in that system match the seven-year company requirement, and check whether your constitution asks for more.
5. Run the ATO's free record-keeping tool, which business.gov.au describes as a way to check which records your business needs to keep and how well you are keeping them. It is the fastest way to find your own gaps.
6. Ask your registered tax agent or accountant which method or system suits your business, and to confirm your specific legal responsibilities. business.gov.au directs business owners to a professional for exactly this.

If your records are being built partly to support a future borrowing conversation, the home loan guides at /money/home-loans/ explain what lenders typically look for in company financials.

Things to verify for your situation

• Whether your constitution imposes record-keeping or access rules beyond the statutory minimum.
• The correct start date for the retention period on each record class you hold.
• Whether any industry-specific laws (for example, trust account or consumer record rules) add obligations.
• Whether your state or territory adds requirements for licensing or employment records.

General information only. This article is general information about Australian record keeping and is not legal, tax, financial or accounting advice, and it is not personalised to your company. Rules, retention periods and thresholds change. Confirm details with the ATO, ASIC and your registered tax agent or accountant before acting, and check the source URLs listed above for current guidance. Australian Ltd is not a lender, broker, government body, regulator or comparison service, and nothing here is a recommendation of any provider or product.