Businesses accumulate many documents over their lifetime. As a business owner, you will need to make decisions about what documents to keep and which ones to throw away. You will need to preserve important documents to make them accessible over time for your business needs and to meet community expectations. At the same time, document retention can be expensive and take up a large amount of space. Before throwing any documents away, it is a good idea to be aware of any legal obligations you may have regarding retaining documents. This article sets out the mandatory minimum retention requirements and unpacks some key considerations when determining what documents to keep in New South Wales (NSW).
Mandatory Minimum Retention Requirements
The table below sets out some of the common documents held by businesses in NSW. Each document has a minimum retention period which you must maintain. Of course, in some circumstances, you may need to keep these documents longer.
For example, you will need to preserve any document relating to a current or anticipated legal proceeding.
|
Type of Document |
Retention Period |
| Financial Records: This includes any document that records and explains your financial position and performance. These are important to retain because they enable accurate financial statements to be prepared and audited. For example, you should keep all invoices, receipts and bank statements. | Seven years from the date the transaction covered by the record is complete. |
| Australian Tax Office (ATO) Records: This refers to any document that records and explains income tax or ATO-related transactions. It also includes any document demonstrating how you arrived at figures used in ATO-related dealings, including corporate tax records, year-end records and GST records. | Five years from the last relevant transaction. |
| Company Documents: You need to keep all materials relating to your company’s creation and ongoing governance. This includes your company constitution, shareholders agreement and company resolutions. | Permanently. |
| Employee Records: This encompasses any document that relates to any employment relations between your business and an employee. For instance, your employee’s details, type of employment and commencement date. You should also keep records of your employees’ pay, leave, superannuation and expenses. | Seven years from the end of the financial year, you created the document. |
| Contracts: This includes any leases, supply contracts and purchase orders. | Permanently while the contract applies. After terminating the contract, you should keep it for six years from the date you completed the transaction. Further, you should retain deeds for 12 years from the date you completed the transaction. |
Consequences
It is important to adhere to these retention requirements. The various regulatory bodies involve strict penalties if you fail to comply with them. For example, if you do not retain employee records adequately, you may be fined up to 30 penalty units ($6,660) per breach as a business.
Likewise, if you do not retain financial records appropriately, your business may be presumed insolvent throughout the period you failed to keep those records. Consequently, this may give rise to recovery proceedings against the company.
Continue reading this article below the formKey Considerations
Some of your documents will likely have mandatory minimum retention requirements. Ultimately, whenever you make decisions about whether to retain documents, you should consider:
- whether the document holds any significance to your business that will require you to refer back to it;
- where the information in the document came from, the purpose you collected it and whether the purpose is still relevant, concerning any applicable privacy laws;
- whether the document may be relevant to any current or future court proceedings; and
- whether the destruction of a particular document could appear to be wrongful or in bad faith, such as to cover up evidence.
Accordingly, you should focus on the retention rather than the destruction of documents. Many businesses put together a document retention policy. This policy establishes processes to guide employees on your business’ obligations and internal policies concerning document retention. This is important because it assists you, as the business owner, in balancing the competing priorities of retaining documents for legal requirements and not holding on to them for too long, which may risk privacy and security issues.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
Key Takeaways
Documents and records are critical to the ongoing management and performance of a business. However, they can be costly to retain indefinitely. For this reason, your business should understand its legal obligations to retain documents. Before you dispose of a document, you should consider:
- any mandatory minimum retention period;
- whether you will need the document again;
- whether it relates to any past, current or potential future litigation proceedings; and
- whether the destruction of a document could lead a court to make an adverse inference against your business.
If you need help determining whether you can dispose of a document, contact our experienced contract lawyers, who can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Some examples include financial records, Australian Tax Office (ATO) records, company documents, employee records, contracts and deeds.
Some considerations include whether the document holds any significance to your business that will require you to refer back to it, whether the information in the document and its purpose is still relevant, particularly concerning privacy laws and whether the document may be relevant to any current or future legal proceeding.
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