Income tax: record keeping and access - electronic records

This Ruling explains our (the ATO's) view on record keeping in electronic form for the purposes of section 262A of the Income Tax Assessment Act 1936 (ITAA 1936). It discusses how you must retain and, when required, provide access to electronic records [1] , including encrypted records, records created from e-commerce and records stored in the cloud. [2] It applies to individuals and companies carrying on a business.

Records stored or recorded by means of a computer are recognised as documents for the purposes of Commonwealth legislation [3] , including the record keeping requirements [4] and access powers [5] in the taxation legislation.

Computer-generated documents are admissible evidence in taxation matters (subject to relevance and, where necessary, proof of the competence of the computer device). [6]

If you are carrying on a business, you must keep records that record and explain all transactions and other acts you engage in that are relevant for any purpose of the income tax legislation. [7] Electronic records must be in a form that we can access and understand in order to ascertain your income tax liability when required. [8]

For record keeping purposes, business transactions carried out electronically (for example, using either electronic data interchange (EDI) specific systems or the Internet) are no different from other forms of business transactions. [9] You are required to keep records that explain all electronic business transactions that are relevant for any income tax purpose. [10] The minimum information that must be recorded is: • the date • amount, and • character of the transaction.

You may keep true and clear electronic reproductions of original paper records. However, documents created through conversion processes that do not produce a complete and accurate copy of original documents [11] are not considered to be a true and clear electronic reproduction.

Any electronic records are subject to the same record keeping requirements as paper records. [12] This includes encrypted records, e-commerce records and records stored in the cloud.

Your record keeping must meet all four of these requirements: • Records must not be altered or manipulated, and must be stored in a way that restricts the information from being altered or manipulated. - We may ask you to demonstrate that you have appropriate safeguards in place to protect your records from alteration, manipulation or inadvertent destruction. - If your system changes over time, the original data must still be capable of being reconstructed. • Generally, they must be retained for five years after the records are prepared or obtained, or the transactions are completed, whichever occurs later. - Keep all information about any routine procedures you have for destroying electronic records. • They must be capable of being retrieved and read by us when required. [13] - Keep system documentation that explains the basic aspects of the system, including structure, programs, inputs and outputs so we can ascertain that the system is doing what it is claimed to do if required. - Keep encryption keys for encrypted records and a means of accessing records in any record keeping system you use. - Data should be capable of being extracted and converted into a standard data format, and appropriately identifiable, labelled or indexed to enable retrieval and manipulation through some form of indexing or text search system. • They must be in English, or in a form that we can access and easily convert to English.

Additional requirements may apply in specific circumstances (for example, some taxpayers may be required to retain records for different periods of time). [14]

It is generally not necessary to retain a hard copy of the information contained in an electronic record unless a particular law or regulation requires you to retain a paper copy.

It is your responsibility to ensure that your electronic records are secure, accurate and maintained in accordance with the record keeping requirements.

If you do not keep or retain records as required you may be liable to a penalty. [15]

If we need to access electronic records you hold, we prefer to seek your cooperation in making it available to us. However, the laws we administer give us wide-ranging powers to obtain information, and in some situations we need to use these powers.

Under our powers to obtain information and evidence we can, by notice in writing, require you to produce any electronic document in your custody or under your control for the purposes of a taxation law. [16] We also have the right to full and free access to any electronic document and to make copies when required for the purposes of a taxation law. [17]

Similarly, our access powers permit us to access any printed copies of electronic records, as well as allowing us to read system and software manuals.

If we require access to, or for you to produce, a document or information that is stored electronically, you may provide it in either electronic form or a hard copy form unless we direct you otherwise. [18]

As the occupier of land, premises, or a place being accessed, you must provide us with reasonable use of your facilities and assistance to extract information you have stored electronically if we require it. What is considered 'reasonable' may vary on a case-by-case basis.

In the context of electronically stored records, reasonable facilities and assistance extends, where necessary, to the provision of login codes, keys (including encryption keys) and passwords.

There is an administrative penalty if you do not provide us with all reasonable facilities and assistance as required. [19]

If your electronic records are stored in the cloud and are immediately accessible to you, we can use our access powers to obtain them. We may also seek the records under a double tax agreement or under our offshore information notice power if the cloud service provider is offshore. [20]

This Ruling applies to years of income commencing both before and after its date of issue. However, the Ruling will not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).

The following is a detailed contents list for this Ruling: Paragraph Summary - what this ruling is about 1 Class of person/arrangement 1 Ruling 2 Electronic records 2 Storage of electronic records 4 e-commerce transaction records 5 Storage of paper records in electronic form 6 Record keeping requirements for electronic records 7 Other general requirements 9 ATO access powers and electronic records 13 Date of effect 21 Appendix 1 - Detailed contents list 22