Record Keeping Essentials for Sole Traders

Why Record Keeping Matters

Good records are the foundation of a healthy business. They help you track income and expenses accurately, prepare your tax return and BAS, claim all eligible deductions, monitor business performance, and satisfy ATO requirements if you're audited. The ATO can impose penalties for failing to keep adequate records.

What Records to Keep

• Income records: Invoices issued, cash register tapes, receipt books, records of cash and electronic payments received
• Expense records: Receipts, invoices, and bank/credit card statements for all business purchases
• Bank statements: For all business accounts — reconcile monthly
• Employee records: Payroll records, super contributions, tax withholding amounts
• Asset records: Purchase price, date, depreciation schedules for business assets
• Motor vehicle logbook: If claiming car expenses using the logbook method, keep a 12-week logbook
• Contracts and agreements: Leases, loan agreements, supplier contracts

How Long to Keep Records

• 5 years from the date you lodge your tax return — this is the standard retention period for most records
• Longer for CGT assets: Keep records for the entire time you own the asset, plus 5 years after you dispose of it
• Longer if lodging late: If you lodge your return late, the 5-year period starts from the date you actually lodge

Recommended Tools

Modern accounting software makes record keeping much easier. Popular options for sole traders include:

• Xero: Cloud-based, great for invoicing and bank feeds
• QuickBooks: User-friendly with strong reporting features
• Wave: Free option suitable for simple businesses
• ATO myDeductions app: Free app for tracking expenses and receipts on the go

Optium Accountants is a certified partner for all major accounting software platforms and can help you set up the right system for your business.