You say "The current CHESS system does not allow you to set the transaction in concrete as far as I am aware". I agree entirely, and the ATO acknowledges this in ruling that:
"In other cases (ie no share certificate or other identifier accompanying order to sell) the Commissioner of Taxation will accept your selection of the identity of shares disposed of. Alternatively, you may wish to use a ‘first in, first out’ basis."
"You may wish" - not "you must."
I disagree that my records are insufficient to satisfy the ATO. My records are broker contract notes dated and showing cost of purchase. No broker is interested in which parcel I am selling and your suggestion that I find a broker to whom I specifically designated the transactions and requested that they confirm by email is.....you're not serious, are you?. When presented with these I believe the Commissioner of Taxation will accept my selection of the identity of the shares disposed of.
Further, every accountant and auditor I have dealt with since the inception of CHESS has agreed with the interpretation. When I put the question to a a few shareholder forums over the weekend, there was unanimous agreement with my interpretation. You are, in fact the first person I've come across to interpret it this way.
So where to from here? I believe you are wrong, and without confirmation from the ATO I will continue to submit returns as I have done for myself, a discretionary trust, and the beneficiaries of that trust since the inception of CHESS. Must I now engage another auditor in order to get the certification required to submit my tax return, or must I wait until you report the fund to the ATO and they rule upon it?