A question that I get asked frequently is: “How long do I have to keep all this paper? I can get rid of it after seven years right?”
According to the CRA website, “As a general rule, you have to keep all of the records and supporting documents that are required to determine your tax obligations and entitlements for a period of six years.”
Of course with every general rule there are exceptions: “Records and supporting documents concerning long-term acquisitions and disposal of property, the share registry, and other historical information that would have an impact upon sale or liquidation or wind-up of the business must be kept indefinitely.”
That means the 25 year-old forklift you’ve got out in the back lot – you need the original invoice on that for as long as you own it – and six years after you’ve gotten rid of it. The building you bought in 1989? Same thing. The reason for this is that the Capital Cost Allowance (depreciation) that you claim for that asset this year is, in CRA’s view, a transaction in the current year. So the document must be retained as though the original transaction had just happened.
If you reorganize your company to create a family trust or pass the business on to the next generation those documents need to be kept for as long as the company continues (and a couple years after that too). The good news is that you’re accountant and lawyer will probably want to keep those on hand for their own reference as well.
These days many companies are adopting a ‘paperless office’ strategy, or maybe just a less-paper office. This will usually involve scanning and keeping many of the original documents (invoices from suppliers, bank statements, bills to clients) electronically, often as PDF’s. These records will most likely satisfy CRA’s requirements, but they do have some specific additional guidance in this area, so if you are planning to, or already have, start in this direction you should find out what these criteria are.
The golden rule is: save it.
If you have specific questions give me a call – I would love to chat.