18 July 2008 - Taxpayers have been urged to keep their financial records "indefinitely" following a recent Federal Court decision that gave the tax office unlimited time to amend tax assessments for assets sold.

Chris Wookey, a taxation director at chartered accountants GMC Centric, said the recent ruling gave the Australian Tax Office an inifnite time to amend tax assessments for assets sold under a contract that was signed in one financial year and settled in the next.

Previously, it was thought taxpayers had to keep their records for only four years from the time of they received their tax assessment from the ATO.

"With the exponential growth in property investment in recent years and the common use of multiple-month settlement terms, there are likely to be many taxpayers whose property sales straddle the end of a financial year," Mr Wookey in a statement.

The decision meant taxpayers did not have any certainty about their capital gains tax affairs from the 1998/99 financial year onwards, Mr Wookey said.

According to the 2006 census, 19 per cent of the 3.5 million houses in Australia's eight capital cities were investment properties.

In terms of apartment units, the figure jumps to about 62 per cent of the 615,000-odd units.

"In extreme situations, a property investor could be assessed on gross sale proceeds received without any allowance for the cost of the property sold," Mr Wookey said.

But the implications of the ruling from Federal Court justice Arthur Emmett, which was being appealed to the full bench of the Federal Court, was not restricted to property transactions.

Mr Wookey said the decision - in the case of Metlife Insurance Ltd v Commissioner of Taxation - also exposed those who had shares and business transactions where the settlement period straddled the end of the financial year.

And plenty of people buy and sell shares, with about 19 billion shares traded on the the benchmark S&P/ASX200 index in the past 30 days alone.

As millions of Australians sit down to prepare their annual tax returns and begin "turfing out" old material, Mr Wookey advised them to retain documentation "indefinitely" during the appeals process and before the final judgement is handed down.

"Though the decision is under appeal and its technical correctness has been criticised, it is a worrying precedent," Mr Wookey said.

"It is a pronouncement of the law by a court having jurisdiction specifically over tax matters and therefore has the potential for wide-ranging impacts on many people."

Source:
http://www.wabusinessnews.com.au/en-story/1/64775/Taxpayers-urged-to-keep-records-