Retaining Cash-Register Z-Totals as Taxation Records on a Daily Basis

Is a taxpayer required to retain the 'Z Total' portion of a cash register roll in order to satisfy the record keeping obligations under section 262A of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. A taxpayer must retain the 'Z Total' portion of the cash register roll to satisfy the record keeping obligations under section 262A of the ITAA 1936.

The taxpayer uses a cash register tape to keep a record of daily business sales. At the end of each day, the taxpayer records by hand the cash sales onto a daily summary. The taxpayer retains the cash register roll for one month and then destroys it, including the 'Z Total'. This means that after one month, no original cash register records are retained. The only record of cash sales kept after a month are the hand written daily sales summaries which have been prepared by the taxpayer.

Section 262A of the ITAA 1936 requires a person carrying on a business to keep records that record and explain all transactions related to that business, including any documents that are relevant for the purpose of ascertaining that person's income and expenditure.

In accordance with Taxation Ruling TR 96/7, it is considered essential that a taxpayer must keep source or primary records that can independently verify any summaries or secondary records prepared by the taxpayer. In respect of cash sales records from cash registers, the only independent source record is the cash register roll and the relevant 'Z total'.

The retaining of both the 'Z Totals' and the cash register rolls may be quite onerous given the bulk of the material. Therefore, in accordance with TR 96/7, taxpayers are regarded as having satisfied their record keeping obligations under section 262A of the ITAA 1936 if they retain only the 'Z total' portion of the cash register roll, provided that an appropriate sample period of both the cash register rolls and the 'Z-totals' is kept. This sample period should, in accordance with TR 96/7, be no less than one month after the end of the last period that the that the 'Z-totals' were reconciled with actual cash sales and bankings.

A taxpayer who prepares a hand written summary of 'Z-totals' without keeping the source records that can independently verify that summary is considered to have failed to satisfy the record keeping obligations under section 262A of the ITAA 1936.