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When should a transaction be recorded?
Generally, the ATO considers that it is good practice to create and retain records that are 'contemporaneous' with the relevant tax matter2. This means that the recording should happen as the transaction occurs or, if that is not possible, as soon as practicable after the transaction has occurred. What is practicable will depend on the facts of the case.
In the extended PRRT context, starting base assets need to be valued as at 1 May 2010. While it is expected that many market valuations will be undertaken after that date there may be records that the taxpayer held prior to 1 May 2010 that may nevertheless be relevant to the calculation and explanation of the basis for valuations subsequently undertaken. In addition, documents held after 1 May 2010 may also be relevant to the extent the information was reasonably known as at that date.
A taxpayer has, at 1 May 2010, five million barrels of oil (MMbbl) of resources. However, no technical assessment of the resource has been undertaken. Subsequently, technical assessment was undertaken on 1 July 2011 and, at this point in time, the taxpayer had 10 MMbbl of resources. The taxpayer should scale back the assessment to the known information as at 1 May 2010, that is, scaled-back to five MMbbl.
Timely recording of transactions helps the ATO to confirm the validity of the documents that support the taxpayer's valuation position.