With the technological world developing at a rapid rate, businesses must stay on top of the requirements for record keeping. It is a legal imperative that your business keep accurate records of their business transactions; including those pertaining their employee responsibilities.
The two most basic principles for keeping business records are;
- Records must be kept for 5 years after they are produced, received, or the transactions are complete.
- The records must be kept in English or in a format that allows for all tax related issues to be deciphered.
Within these two basic rules there are some slight variations depending upon the type of business you are involved in. If your business consists of any of the following arrangements then you are required to keep your records for 5 years; Individuals, Sole Traders, Partnerships, and Trusts. However, if you are an official corporation, the requirement is for 7 years and if you are a Super Fund you must keep your records for 10 years.
For all business owners the answers with regard to record keeping can be found in the Corporations Act 2001. The Act requires that all companies keep written financial records that document their transactions, financial decisions and standing, and their business performance. All documents must be in a format that would allow for an accurate and efficient audit to take place should the need arise.
What should be kept?
Financial records include any or all of the following:
- Purchase receipts
- Business travel expense records
- All banking transactions
- Financial ledgers including cheque books and credit card statements
- Vouchers of purchase or sales
- Tax returns
- All employee payroll information/retirement funds/ health insurance costs
While the idea of keeping all of these physical records can be daunting, the law allows records to be kept electronically. The right type of software can help businesses keep records well organised and updated with ease. In addition, electronic records are easy to access, share when necessary, and require no physical storage space.
It is important that any records you keep electronically, or on the web, can still be verified as reliable. Also, a third party company must ensure that records stored electronically are tamper proof so as to protect the authenticity of the documents.
In addition to keeping accurate records of your business transactions, it is also important that every employer also keep accurate records of their employee transactions including;
- Employees Name
- Employment Status ie: full time or part time
- Rate of Pay ie: hourly/salary/overtime
- Taxes Taken
- Employee Contributions ie: retirement funds/ educational deductions/ child care deductions/ health care costs
- Dates of Employment
- Termination Records
- Leave Time ie: parental leave/ family medical leave/ vacation leave
- Overtime worked
Protecting the privacy of employee records by an employer varies depending on whether it is the private sector or the public sector. The Commonwealth Privacy Act of 1988 contains the guidelines for dealing with private information.
If an employee works in the private sector, then they are exempt from the regulations of the Privacy Act. The only time the Privacy Act encompasses private sector employees is if the employer is trying to use personal information outside of the scope of the employee’s employment.
Conversely, all public sector employees are governed and protected by the Privacy Act. The most important thing an employer can remember is that employment records are meant to be used for employment purposes only. In following this guideline an employer can protect themselves from possible privacy violations.
While it is true that the main motivation for keeping accurate business records is legal compliance, there are other good reasons for keeping organised business records. Keeping good records allows for an employer to have all the necessary business information at their fingertips. This allows for immediate and accurate reflection pertaining to the financial growth and maintenance of the business. It also allows for quick and accurate tax preparations for the business and its employees.
By keeping accurate records of employee issues, a business can always know their employment costs, health benefit costs, the composition of their workforce and the current status of each employee. Finally, good record keeping allows for the business owners to communicate accurately and quickly with outside interests such as banks, creditors, vendors, accountants, tax prepares and legal advisers.
Therefore, it is both legally imperative and in line with good business practices, to keep accurate business records for the time required by law. It is also crucial that all records, both business oriented and employee generated, be kept in a safe tamper free electronic program that is backed up regularly.
For all your business practices inquires please consider contacting the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs.
Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.
At Owen Hodge Lawyers, we always strive to provide you with the best legal advice and guidance – no matter your issue. We specialise in a range of law matters, and have a blog that offers in-depth and comprehensive articles. Read our recent post that shows you a sample letter requesting that an employee attend a medical examination.