- 7 years?
- 10 years?
- 4 years?
You have an obligation to keep records for 7 years (the IRD can give notice increasing this to 10 years) but you need to ask, if in your situation, you should be keeping records indefinitely. Many people would find this burdensome, and providing they are at very low risk, it may be reasonable to keep records for the minimum period of time. But, before you decide that this applies to you, consider your situation carefully.
Have you left anything out of your tax returns (either deliberately or because you thought that no tax was payable)? Have you provided any information that may be misleading (for example estimating figures instead of providing actuals)?
One example of a problematic area is people involved with land transactions. There are many who have failed to declare relevant transactions to the IRD. Because land transactions are usually big ticket items, the consequences of being reassessed, many years later for tax and large penalties and interest, could be financially catastrophic. We believe that undeclared land transactions, that have any risk, are examples of situations where you should retain tax related records indefinitely. The IRD has indefinite access to land transfer information and this is an area that is of concern to the Department. Keeping records could make a big difference to the amount of an assessment if the IRD comes calling years later. There will also be other examples where it is wise to retain records indefinitely. Please talk to us if you have any questions.