Early in the tax dispute lifecycle, contemporaneous documentation is used to outline the taxpayer’s position in its response to the ATO’s Position Paper - for example, to demonstrate that a particular transaction was not entered into for the sole or dominant purpose of obtaining a tax benefit.
Nevertheless, this may not be sufficient to satisfy the ATO and the dispute may still progress beyond the audit and Position Paper stages.
Once a dispute reaches the Tribunal or Court, the outcome will depend on the taxpayer’s ability to defend its position using the relevant information captured at the time of the impugned transaction. At this point, well-organised contemporaneous documentation is critical, as it may provide the basis for preparing witness statements which will be tendered by the taxpayer as evidence in support of its submissions.
Advisors to a transaction should therefore bear in mind the importance of creating quality contemporaneous documentation, as such documentation offers critical support to the taxpayer’s position at all stages of a potential dispute with the ATO.