Digital record keeping for small business: ATO requirements

Published Thursday 1 October 2026

Table of contents

• What is digital record keeping?
• What business records does the ATO require you to keep?
• The ATO's 5 rules for record keeping
• How long do you need to keep records?
• Are digital copies of receipts accepted by the ATO?
• How to set up a digital record keeping system
• Digital tools that help you stay ATO compliant
• Benefits of digital record keeping
• Simplify your record keeping with Xero
• FAQs about digital record keeping and the ATO

Key takeaways

• The ATO accepts digital records, and electronic records carry the same legal weight as paper ones.
• You need to keep most records for five years, starting from when you prepared the record or completed the transaction, whichever is later.
• Your records must be accurate and relevant, protected from change, in English (or easy to convert to English), and ready to show the ATO on request.
• The right software makes payroll reporting, eInvoicing, and receipt capture happen automatically, so your records stay organised.

What is digital record keeping?

Digital record keeping means storing your business records electronically instead of on paper. Think income, expenses, payroll, and tax records saved in accounting software, mobile apps, or secure cloud storage.

For digital record keeping and the ATO (Australian Taxation Office), this matters: the ATO treats electronic records the same as paper. A digital record carries the same legal weight, so you can go paperless without losing any protection.

Going digital also cuts the shoebox of receipts and the manual data entry that eat into your week. Your records live in one place, and you can find them in seconds rather than digging through folders.

What business records does the ATO require you to keep?

The ATO requires you to keep records that explain your business transactions and support your tax, super, and employer obligations. In practice, that covers the money coming in, the money going out, and the paperwork behind each entry.

Common records you need to keep include:

• income and sales records, such as invoices and receipts
• expense and purchase records, including tax invoices and supplier bills
• goods and services tax (GST) records if you're registered for GST
• payroll and super records for your employees
• bank and financial statements, including loan and interest records
• records for buying and selling assets, such as equipment or property

These are the core ATO record keeping requirements for most small businesses. If you're unsure what applies to your situation, the government’s guidance on records to keep for your business walks through each category.

The ATO's 5 rules for record keeping

The ATO sets out five rules for record keeping that every business needs to follow. Meet all five and you'll have records that stand up if the ATO ever asks to see them.

The rules are:

• Keep all records that relate to your tax, super, and employer obligations.
• Make sure records can't be changed, and protect them from damage.
• Keep most records for five years.
• Be able to show the ATO your records if they're requested.
• Keep records in English, or in a form you can easily convert to English.

Digital record keeping makes these rules easier to hit, because good software stores records securely and keeps them ready to share. You can read the full detail on the ATO's overview of record keeping rules for business.

How long do you need to keep records?

You need to keep most business records for five years. The five years starts from when you prepared or obtained the record, or completed the transaction, whichever is later.

You might have heard you need to keep records for seven years, and for some records that's true. The ATO's tax-record rule is five years for most records, but other Australian laws set a seven-year period for certain records.

Employee records, such as time and wage records, must be kept for seven years under the Fair Work Act. If you run a company, you must keep the company's financial records for seven years under ASIC (Australian Investment and Securities Commission) rules.

Some other situations also call for a longer period. If you buy and sell assets that involve capital gains tax, or you're in a period of review or dispute, you may need to hold records beyond five years. When in doubt, keep the record until you're sure the period has passed.

Are digital copies of receipts accepted by the ATO?

Yes. The ATO accepts digital copies of receipts, as long as each copy is a true and clear reproduction of the original.

Once you've scanned or photographed a receipt and stored it correctly, you generally don't need to keep the paper original. That's the appeal of digital receipts: the ATO gets the same information, and you get to clear out the paper. The ATO app includes a tool called myDeductions that lets you snap and store receipts as you go.

Here’s one quick clarification, since the terms get mixed up: a receipt proves you paid for something, while a tax invoice is the document a seller issues that shows GST. You may need both, so capture whichever you receive.

How to set up a digital record keeping system

Setting up a digital record keeping system takes an afternoon, and it pays you back every week after that. Follow these steps to get organised:

1. Choose accounting software or a record keeping app that suits the size of your business and connects to the tools you already use.
2. Connect your bank feed so transactions flow in automatically, which cuts manual data entry and reduces errors.
3. Capture receipts and bills digitally by scanning or photographing them as soon as you get them, so nothing goes missing.
4. Keep payroll and super records in one place, so pay runs and employee details stay linked to the rest of your finances.
5. Back up and secure everything with cloud storage and strong passwords, so your records are protected from loss or change.
6. Review your records regularly, ideally each month, so small issues get fixed before tax time.

Build these habits early and your records stay accurate all year, rather than becoming a scramble at the end of the financial year.

Digital tools that help you stay ATO compliant

A few digital tools do the heavy lifting when it comes to meeting ATO record keeping requirements. Each one automates a task that used to mean manual paperwork.

Single Touch Payroll

Single Touch Payroll (STP) is the way employers report payroll to the ATO. You send salary, tax, and super information to the ATO each payday through STP-enabled software, rather than at the end of the year. If you want a deeper look at how Single Touch Payroll works, this dedicated guide covers the setup and reporting steps.

STP adds no new record keeping obligations, so your Single Touch Payroll records are the same payroll records you already keep. From 1 July 2026, super liability amounts are included in your payday reporting under Payday Super, which keeps super in step with wages.

eInvoicing through Peppol

eInvoicing lets you send and receive invoices directly between accounting systems, using a shared framework called Peppol. It's a practical option for eInvoicing in Australia, because an eInvoice is a valid tax invoice and skips the manual steps of emailing PDFs.

You keep eInvoice records for five years, the same as any other invoice. The ATO offers free eInvoicing training for small businesses, so you can get comfortable before you switch.

Digital receipt and bill capture

Receipt and bill capture tools let you photograph a document and pull the details into your records automatically. That means fewer lost receipts, less typing and a clear trail behind every expense.

Benefits of digital record keeping

Digital record keeping does more than tick a compliance box. Day to day, it saves you time and gives you a clearer view of your money.

Here are some key benefits:

• There’s less manual admin and paper, so you spend more time running the business.
• Records stay audit-ready and easy to share with the ATO.
• There are fewer lost receipts, because everything's captured and stored as you go.
• You get a real-time view of your finances, rather than a picture that's weeks out of date.
• You experience an easier tax time, with your records already sorted and in one place.

Simplify your record keeping with Xero

Xero brings your income, expenses, payroll, and receipts together in one place, helping keep your digital records accurate and ATO-ready with less manual work. Bank feeds, Single Touch Payroll reporting, and receipt capture all happen in the same system, which means less chasing paper and more time on your business.

Ready to keep compliant records the simple way? Get one month free.

FAQs about digital record keeping and the ATO

Here are quick answers to the questions small business owners ask most about digital record keeping and the ATO.

What are the legal requirements for record keeping by the ATO?

You must keep accurate records that explain your transactions, protect them from change, keep them in English, and hold most of them for five years. You also need to produce them if the ATO asks.

What records need to be kept for seven years in Australia?

The ATO keeps most tax records for five years, but employee records must be kept for seven years under the Fair Work Act. If you run a company, you must also keep the company's financial records for seven years under ASIC rules.

Does digital record keeping meet Single Touch Payroll requirements?

Yes. Reporting through STP-enabled software satisfies your payroll reporting, and it doesn't create any extra record keeping obligations beyond the payroll records you already keep.

Can you throw out paper receipts once they're scanned?

Generally yes, if the scan is a true and clear copy and you've stored it securely. The digital version is accepted by the ATO in place of the paper original.