Digital Record Keeping Rules

Moving the bookkeeping to cloud software can feel like the record-keeping problem is solved — everything is "in there somewhere". The ATO sees it differently: the record-keeping obligation sits with you, not with your software provider, and the rules about what counts as an acceptable record apply to digital files just as much as to paper.

What the ATO requires of a digital record

• It explains the transaction — who, what, when and how much, including any GST.
• It is in English, or easily converted into English.
• It is readable — a corrupt file, a dead file format or a scan that has faded to grey is treated as no record at all.
• It is unaltered — records must be stored so the information cannot be changed or manipulated, and any correction should be visible rather than silently overwriting the original.

How long records must be kept

The general rule is five years, counted from when the record was prepared or obtained, or when the transaction was completed, whichever is later. Some records must live much longer in practice: anything supporting a capital gains calculation should be kept for five years after the asset is sold, records behind carried-forward losses need to survive until well after the losses are used, and employee records must be kept for seven years under Fair Work rules. When in doubt, keep it longer — storage is cheap.

Unaltered is the part cloud software handles well

Good accounting software keeps an audit trail, so an edited invoice shows its history rather than pretending the change never happened. What the software cannot do is stop you deleting attachments, purging old files or letting the subscription lapse. Lock dates on completed periods, attach source documents to transactions, and resist the urge to tidy up by deleting.

Cloud storage does not transfer the backup responsibility

This is the point that surprises business owners most. If your subscription lapses, the provider is acquired or shuts down, or your login is compromised, the ATO will still expect you to produce your records. Sensible protections include:

• Exporting key reports at each year end — general ledger, trial balance, GST reports and payroll summaries.
• Keeping source documents somewhere you control as well as attached inside the software.
• Downloading a copy of everything before cancelling or switching software, because read-only access after cancellation varies between providers.

If I use cloud accounting software, am I automatically compliant?

No — the software is a good tool for meeting the rules, but the legal responsibility for keeping complete, readable and unaltered records stays with you.

Do I still need the paper originals after digitising?

Generally not, provided the digital copy is a true and clear reproduction of the original and is kept for the full retention period.

What happens if my records are lost or destroyed?

Tell the ATO, reconstruct what you reasonably can from banks and suppliers, and document the loss — reasonable reconstructions can be accepted, but penalties can apply where records simply were not kept.