Australia

Details

  • Service: Tax, Dispute Resolution
  • Type: Regulatory update
  • Date: 19/09/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Maria Lui

Maria Lui
Partner, Tax

+61 3 9288 6572

mlui@kpmg.com.au

If only we had... The importance of contemporaneous documentation 

by Maria Lui, Tax Law Specialist

Well-organised records and contemporaneous documentation have emerged as an increasingly significant compliance tool following a suite of recent legislative and administrative changes across numerous taxation contexts. Quite often, taxpayers discover too late that legal agreements alone are not sufficient to support a taxation position. The following are some of the situations where one may lament 'If only we had documented...'
  • Transactions (e.g. M&As, restructures) – Factual evidence on commercial reasons for such transactions are often difficult to find, in particular, a few years after completion and key personnel have left. Why was funding done in a particular way (impacts on deductibility of interest) or what was the intention in acquiring a particular asset (revenue or capital) are questions often asked in an ATO risk review.
  • Part IVA – The first question to be answered when considering the application of Part IVA is whether a scheme participant had the 'requisite' (read, 'dominant') purpose of securing a tax benefit. This means taxpayers must, more than ever, carefully document a transaction, to rebut the suggestion that it was entered into with the dominant purpose of securing a tax benefit.
  • Transfer Pricing – The newly-minted transfer pricing labyrinth is perhaps the greatest example of the importance of contemporaneous documentation. Under the rules, taxpayers wishing to establish a reasonably arguable position in order to qualify for penalty reductions in the event of a transfer pricing adjustment must have – before the date of lodging its return – high-quality contemporaneous documentation that meets the standards set by the ATO in TR 98/11.


In addition to these statutory contexts, recent experience has shown that well-organised contemporaneous documentation can be of enormous assistance in the tax controversy and litigation space. Such records are invaluable in the preparation of responses to ATO position papers, Court submissions and affidavits.

 

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