The textbook answer to this is to aid in the progress of the business. Traditionally, a good accounting record monitors improvements and drastic changes in the business. Another reason to have a good accounting record would be to prepare precise financial statements – which generally comprise an income statement and balance sheet.
It is essential to keep a good record of your work to prepare for your tax returns. These records are imperative to support your incomes, expenses, and credits that have been reported. Individuals and businesses should keep a trail of documents. This retention of documents will assist in fulfilling the requirements of the Tax Administration Act and satisfying SARS that the individual/business has complied with the requirements. (sars.gov.za)
How long should we keep accounting records according to SARS?
Records must be kept –
- in their original form;
- in the form, including electronic, prescribed by the Commissioner by public notice; or
- in the case of a request by a specific taxpayer to retain records or documents in a different but acceptable form, the form authorised by a senior SARS official;
- in an orderly fashion;
- in a safe place; and
- open for inspection, audit, or investigation by SARS.
- A person who has submitted a return – Five years, counting from the date of submission of a return until the last day of the period.
- A person is required to submit a return but has not complied. – Five years, after the end of the five years, indefinitely until the return is submitted.
- A person who is not required to submit a return, but has, during a tax period, received income, has a capital gain or loss, or engaged in any other activity that is subject to tax or would be subject to tax but for the application of a threshold or exemption. - Five years or until the audit has concluded, whichever occurs first.
- A person who has lodged an objection or appeal against an assessment or decision under the TAA. – Five years or until the disputed assessment or decision becomes final, whichever occurs first.
- A person who has been notified or is aware that the records are subject to an audit or investigation. – Until the audit or the investigation is concluded.
Who should keep records?
Tax Administration Act requires the following persons to keep records:
- A person who is registered and has filed a return.
- A person who is required to submit a return but has not complied.
- A person who is not required to submit a return, but has, during the tax period, received income, has a capital gain or capital loss, or engaged in any activity that is subject to tax.