12yo bank records to establish deductability?

Discussion in 'Accounting & Tax' started by Barneymaroon, 20th Aug, 2019.

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  1. Barneymaroon

    Barneymaroon Well-Known Member

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    I have been investing in shares since mid-2007 (craker of a time to start - not). I understand I have to keep all my tax records for seven years - and have done so - but perhaps have not looked after my bank records beyond the seven years - like - I can't find them (I had kids!).

    Bell and ANZ have records of all my transactions so I can prove all my CGT records with these if need be, but what I don't have - I realise now - is the bank records which *prove* I borrowed money to buy my shares.

    Every dollar of interest I have ever claimed was certainly attached to borrowings - but in fact this would be a nightmare for me to prove. The loans would have been secured against my house, but there were some dark months in 2008 (catching a very large falling knife) where there were loans shared between personal and investment use for about 12 months - but I have a speadsheet which calculates the interest on each day they were shared and makes sure that I only claimed the investment. This was 11 years ago - and I can't find my statements (pre -online days). Should I stress about this - would I need them if audited now? I should also note that some of share loans are called house loans by the ANZ so I get a cheaper interest rate - hard to beleive that saving interest by using the house as security would be a problem - but maybe I don't know what I don't know.

    One part of me tells me that the lack of records from 10 years ago which established that I borrowed the funds cannot be a problem. Prodiving I have interest statements justifying my claims each year for the last seven I should be fine. I guess however it is hard to tell the loans are for shares if they are called "house loans"?

    What would happen if I was audited?

    Advice.., thoughts.

    Thanks
     
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    The ATO may not accept you have made a reasonable calculation. And lack substantiation.

    The interest may be deductible in which case it may have already become a past issue. However if the interest is a CGT cost (ie shares that dont pay a dividend) you may lack reasonable evidence and substantiation for your calculation/s and the ATO could disallow that element of a calculation if it was an audit review item. They may also query the apportionment used and if that cant be supported it could be contentious for the amounts now calculated.

    Lack of records from 10, 20 or more years ago can become a problem. For property audits the ATO expect to trace back to acquisition and the settlement of the loan/s. No matter how many refinances have occurred. If they see any new $$ drawn they also expect that can be explained.
     
  3. Barneymaroon

    Barneymaroon Well-Known Member

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    Thanks. I can do all the CGT events as I have all the share transaction records and good diaries. To me the issue is proving that all my current interest rate claims are in fact being made against money I borrowed for investment (they were), and I have all the "total interest for this year" statement - but not the transaction which show 20K going out on day X and 20K going into a share purchase. I have all from the past 7 years, but not prior. I have a 450K loan and more than that in shares. There have several complex refinances along the way, some over 7 years ago.
     
  4. Barneymaroon

    Barneymaroon Well-Known Member

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    I have google and WXOZ (divi < interest) - I take it I need to be clever about CGT on these when I sell - is that right. I have records to these.
     
  5. Marg4000

    Marg4000 Well-Known Member

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    We were always told the ATO required that all records relating to assets purchased (property or shares) had to be kept until seven (?) years AFTER the asset was sold.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    It is a good idea to keep records 'forever' as like you say it will be difficult to establish that the current loans were actually used for the share purchases. It would depend on how deep the audit was for this one, but you could argue that records are only required to be kept for 7 years after claiming the interest against income.
     
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  7. Barneymaroon

    Barneymaroon Well-Known Member

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    If they had asked earlier I would certainly have had the records. It is much easier to keep them now they are online.
     
  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    The onus is on a taxpayer. The ATO need not ask, remind or explain.

    If an audit occurred a element of practicality does come into it. But dont count on it. I had the ATO ask a client to produce receipts for paying rates etc going back 20+ years. And asking for property settlement info on a pre-CGT asset. We did a title search and it satisfied them that the transfer date was pre-CGT. (ie our information was reasonable) They wanted to know who the vendor was and we told them to search land titles data themselves. It was an unreasonable request outside taxpayer obligations.

    A common problem is taxpayer often fail to keep any CGT records for their own home. Years later they suddenly find a reason why they should have kept records and all claim "but nobody told me". The most common issue is they use the home for business or a small % of it is used for income. eg rented for a week. All their private costs are now a element of the costbase. All their non-deductible interest, rates etc....

    Establishing a chain with any original loan and the present amount will likely be important. It can be recovered. It just is complex inconvenient and costly. Banks always maintain old records !! Its part of their own legal & prudential obligations if they seek to use the mortgage security etc and things go to courts. And they charge a fee to recover it. If you provided the past 6 years the ATO may look at that and accept your records are incomplete but diligent but I wouldnt count on that. The ATO have pretty good powers of requesting the info from a bank even if you cant. Have seen that. They said - Dont worry we will request it. They get it for free !! They even asked the bank for the refinancing docs and the original loan statements. They then later told us we could submit a FOI request to obtain a copy. As it related to the taxpayer they gave it after spouse consented to the FOI request. (joint loan v one legal owner)

    I'm with Terry...Some matters are best kept forever. Data storage these days is cheap.
     
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  9. Barneymaroon

    Barneymaroon Well-Known Member

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    Thanks all. Very helpful. I will make it a project to keep an eye out for my old records - might be in crates under an uncle in law's place etc. The ANZ will only supply statements for the last 7 years (according to the website) - but it sounds like they might have more if push came to shove.
     
  10. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    They can produce way further back in most cases...for a price ;)
    Maybe they tickle you for a higher fee after 7 ? Maybe they cant.
    Wonder how they may react if I said - Nah I dont want to pay you after 7 years...Bet they can find the mortgage and contracts. Imagine if I produced a claim they overcharged me and its a compound interest problem. How may they defend it ?
    The Royal Commission was pulling up old cases.