CRA - where does the 7 year rule come from?

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Dec 9th, 2018 7:05 pm

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Dec 9th, 2018 11:21 am

angryaudifanatic [OP]: Deal Addict; Nov 10, 2018; 4374 posts; 4642 upvotes

Dec 9th, 2018 11:21 am

CRA - where does the 7 year rule come from?

I was surprised to read from the CRA directly this comment in regards to record retention: "Generally, you must keep all required records and supporting documents for a period of six years from the end of the last tax year they relate to."

As per: https://www.canada.ca/en/revenue-agency ... early.html

So what this means (I have confirmed this), is that the 2012 tax year records for us Canadians, can be destroyed on December 31st, 2018. I find this odd because I have been told that record keeping should be 7 years. For example, if I wanted the oldest records from my financial institution, I would be able to get tax records on December (this month) of 2011. This basically means that while personal tax record/receipts and such for the 2012 tax year can be destroyed on Dec 31, 2018, financial institutions would still have information for the entire 2012 tax year.

This discrepancy is really odd to me. Anyone know why there is this disconnect of 1 year? If I can destroy my 2012 tax year receipts/records on Dec 31, 2018, why are financial institutions forced to keep all information for CY2012 then?

For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

7 replies

Dec 9th, 2018 11:44 am

robsaw: Deal Addict; May 16, 2017; 2168 posts; 2821 upvotes

Dec 9th, 2018 11:44 am

Not actually a disconnect. The same six year rules applies to incorporated businesses. The reason for 7 years is the practical effect of the rule given the timing of actually filing returns and carry-forward implications, particularly for businesses, that make keeping records for an additional calendar or fiscal-year period advisable if not necessary. Also, if you have capital acquisition records or similar costs/expenses that stretch back beyond 6 years, but have tax implications not yet fully realized, those records must be retained until those tax implications have been dealt with.

+2

Dec 9th, 2018 12:00 pm

angryaudifanatic [OP]: Deal Addict; Nov 10, 2018; 4374 posts; 4642 upvotes

Dec 9th, 2018 12:00 pm

robsaw wrote: ↑ Not actually a disconnect. The same six year rules applies to incorporated businesses. The reason for 7 years is the practical effect of the rule given the timing of actually filing returns and carry-forward implications, particularly for businesses, that make keeping records for an additional calendar or fiscal-year period advisable if not necessary. Also, if you have capital acquisition records or similar costs/expenses that stretch back beyond 6 years, but have tax implications not yet fully realized, those records must be retained until those tax implications have been dealt with.

Eg capital cost allowances? So if I'm depreciating an asset now 9 years in and I bought it 9 years ago I must keep the original receipt for that asset until I'm done depreciating it?

For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

Dec 9th, 2018 2:25 pm

WetCoastGuy: Deal Addict; Dec 24, 2007; 1648 posts; 2028 upvotes; BC

Dec 9th, 2018 2:25 pm

angryaudifanatic wrote: ↑ Eg capital cost allowances? So if I'm depreciating an asset now 9 years in and I bought it 9 years ago I must keep the original receipt for that asset until I'm done depreciating it?

Yes, but practically speaking after 9 years if you claimed CCA each year there wouldn't be much left undepreciated anyways. As a general rule, all costs being claimed must be supported especially for Capital Gains as those assets are long term and can be many years between purchase and sale so such records must be kept.

It's the annual recurring expense type records that only needs to be kept 7 years, but again practically speaking the CRA doesn't have the right to reassess beyond 3 years except for cases of fraud and misrepresentation.

+1

Dec 9th, 2018 3:41 pm

angryaudifanatic [OP]: Deal Addict; Nov 10, 2018; 4374 posts; 4642 upvotes

Dec 9th, 2018 3:41 pm

WetCoastGuy wrote: ↑ Yes, but practically speaking after 9 years if you claimed CCA each year there wouldn't be much left undepreciated anyways. As a general rule, all costs being claimed must be supported especially for Capital Gains as those assets are long term and can be many years between purchase and sale so such records must be kept.

It's the annual recurring expense type records that only needs to be kept 7 years, but again practically speaking the CRA doesn't have the right to reassess beyond 3 years except for cases of fraud and misrepresentation.

Yeah I never thought of ACB calculations for stock from a long term records retention need. I'm glad ive always kept my records although I'm starting to run out of physical space!

Many thanks.

For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

Dec 9th, 2018 3:50 pm

Sanyo: Deal Guru; Feb 9, 2009; 12324 posts; 11128 upvotes

Dec 9th, 2018 3:50 pm

angryaudifanatic wrote: ↑ Yeah I never thought of ACB calculations for stock from a long term records retention need. I'm glad ive always kept my records although I'm starting to run out of physical space!

Many thanks.

Many of the brokerages are keeping track of acb for you now. I sold a stock this year and at year end even had a capital gains/loss summary now... the days of bookkeeping is ending related to stocks at the brokerage..

Dec 9th, 2018 6:59 pm

angryaudifanatic [OP]: Deal Addict; Nov 10, 2018; 4374 posts; 4642 upvotes

Dec 9th, 2018 6:59 pm

Sanyo wrote: ↑ Many of the brokerages are keeping track of acb for you now. I sold a stock this year and at year end even had a capital gains/loss summary now... the days of bookkeeping is ending related to stocks at the brokerage..

Unfortunately some but not all. Transferring stock into a registered account adds to the complexity because it now means multiple brokerages may be involved.

For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.

Dec 9th, 2018 7:05 pm

burnt69: Deal Addict; Oct 6, 2015; 2463 posts; 1385 upvotes

Dec 9th, 2018 7:05 pm

Sanyo wrote: ↑ Many of the brokerages are keeping track of acb for you now. I sold a stock this year and at year end even had a capital gains/loss summary now... the days of bookkeeping is ending related to stocks at the brokerage..

They get it wrong half the time, especially if there's any sort of splits, spin-offs, etc.

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