A sole trader must keep records of all business income and expenses, and keep most of those records for at least five years. The five years runs from the date you lodge the tax return the records support, or from when you completed the transaction, whichever is later. That covers your sales and invoices, your purchase and expense receipts, your bank statements, your motor vehicle logbook, and, if you are registered for GST, your tax invoices and BAS working papers. A few records, such as those for assets you might sell later, need to be kept longer.
The rest of this guide sets out exactly what to keep, how long to keep each type, and the mistakes we see sole traders make most often.
What records does a sole trader need to keep?
You need to keep any record that explains your business income, your expenses, and the deductions you claim. If a number appears on your tax return or BAS, you need a record behind it.
The core records for a sole trader are your income records, including sales invoices, receipts you issue, and cash register or point of sale records. All income counts, including cash sales, and cash income without records is a common trigger for ATO attention.
You also keep your expense records, meaning the tax invoices, receipts, and statements for anything you claim as a business cost. Alongside these you keep your bank and credit card statements for any account used for the business, and any record that shows how you split private and business use for a phone, a car, or a home office.
If you claim car costs you keep your motor vehicle logbook and car expense receipts. If you are registered for GST you keep your GST records and BAS working papers. If you pay staff you keep employee wage and super records. And for anything you buy to use in the business, such as a laptop, tools, or a vehicle, you keep the purchase records, because you use them to claim depreciation and to work out capital gains tax later.
How long do you need to keep sole trader records?
The general rule is five years. For most records the clock starts from the date you lodge the return they relate to. Keeping copies of the lodged returns themselves is sensible too. The table below shows the retention period for each common record type.
| Record type | How long to keep it |
| Income records (invoices, sales, receipts) | 5 years from lodgement |
| Expense and purchase receipts | 5 years from lodgement |
| Bank and credit card statements | 5 years from lodgement |
| GST records and BAS working papers | 5 years from lodgement |
| Motor vehicle logbook | 5 years from the last year you rely on it (a logbook is valid for up to 5 years) |
| Records for depreciating assets (laptop, tools, equipment) | 5 years after your final decline in value claim |
| Records for assets subject to capital gains tax | 5 years after you sell or dispose of the asset |
| Records supporting a tax loss carried forward | 5 years after the loss is fully claimed |
| Employee wage and super records | 5 years |
Which records must you keep longer than five years?
Some records outlive the standard five years because the event they relate to happens later.
For a depreciating asset, keep the purchase record until five years after your last claim for its decline in value, not five years after you bought it. If you claim a laptop over three years, the record needs to survive until five years after that third claim.
For an asset that is subject to capital gains tax, such as a business premises or shares held in the business, keep every record from the day you buy it until five years after you sell it. In practice that can mean keeping a record for a decade or more.
For a tax loss you carry forward to a future year, keep the records that prove the loss until five years after the year you finally use it.
The ATO can also ask for records older than five years in some cases. If you are in a dispute, or your return is being amended or reviewed, keep the records until that matter is fully resolved. Where tax fraud or evasion is involved, no time limit applies.
What are the ATO’s five record-keeping rules?
The ATO sets out five plain rules that apply to every sole trader.
Keep all records that relate to starting, running, changing, or selling your business and that affect your tax or super.
Do not change a record once it is made, and store it somewhere secure so it cannot be altered or lost.
Keep most records for five years, starting from when you prepared them or completed the transaction, whichever is later.
Be able to produce the records if the ATO asks, including the passwords or keys needed to open any encrypted digital files.
Keep records in English, or in a form that can be easily converted to English.
Can you keep sole trader records digitally?
Yes. The ATO accepts digital records, and for most sole traders a digital system is easier and safer than a shoebox of paper. A photo or scan of a receipt is fine, as long as it is a true and clear copy, it is stored securely, and it can be produced in English. You do not need to keep the original paper once you have a clear digital copy.
If you use accounting software such as Xero, MYOB, or QuickBooks, the software stores most of your records for you. You still need to make sure the underlying receipts and invoices are captured and backed up, because the responsibility to keep them stays with you. If you would rather not manage this yourself, our bookkeeping and accounting team can set up a system that captures your receipts and invoices automatically.
Do you still need records if a tax agent or software does your books?
Yes. Using a registered tax agent or accounting software does not remove your obligation to keep records. Your agent lodges on your information, and the software stores what you enter, but if the ATO reviews your return, you are the one who must produce the records behind it. Keep your own copies even when someone else handles the lodgement.
What happens if you do not keep proper records?
If you cannot support a claim with a record, the ATO can disallow the deduction, which increases the tax you owe. It can also apply penalties and interest, and poor records make an audit slower and more stressful. Good records protect your deductions and make tax time faster and cheaper, because your accountant spends less time chasing paper.
Example: records for a home-based sole trader
Priya runs a sole trader graphic design business from home in Mill Park. In September 2026 she lodges her 2025 to 2026 tax return. She must keep the records behind that return, her client invoices, her software subscriptions, her home internet split, and her laptop receipt, until at least September 2031.
The laptop is the exception. She bought it in 2025 and claims its decline in value over several years. Because the last depreciation claim falls in a later year, she keeps that purchase receipt until five years after that final claim, well beyond the five years that applies to her other 2025 to 2026 records.
