While the Australian Taxation Office (ATO) has formal powers to access documents and evidence, in some situations, you may be able to claim your documents are protected by legal professional privilege (LPP). The ATO cannot compel the production of information or documents where the underlying communication is privileged. Possible concessions may relate to professional accounting advisers’ papers and to certain advice for a corporate board on tax compliance risk.
Although the ATO recognises that in many cases applying LPP is appropriate, it suggests that reckless LPP claims over non-privileged documents unduly hinder ATO investigations. To address these concerns, the ATO has developed a protocol for responding to formal notices requiring production of documents, and specifically for identifying communications covered by LPP and making LPP claims where the taxpayer does not wish to provide those communications to the ATO. This article explores the key points outlined by the ATO.
Respecting the rights of taxpayers
ATO Deputy Commissioner Rebecca Saint explained that “The ATO wants all taxpayers to get high-quality professional advice and respects the right of taxpayers to keep their legal advice confidential if they so choose”.
“This protocol will support the right of taxpayers to keep their legal advice confidential, while at the same time giving taxpayers a robust framework to enable the ATO to have confidence that all other relevant documents have been provided”, said Ms Saint.
Investigating LPP claims
While the ATO respects the rights of taxpayers where they have a genuine LPP claim, it is concerned that these claims may be abused by taxpayers in situations where the underlying communications are not privileged, but who simply do not want to provide the communications to the ATO.
The courts have supported the ATO’s view that they can request details of LPP claims. “Whilst we respect and accept appropriate claims, we require sufficient information to be able to decide whether to accept, review, or challenge a claim of LPP,” Ms Saint said.
The implications of making a false LPP claim
“Failure to take reasonable care when making LPP claims in response to a formal notice may result in non-compliance with the notice. There can be serious implications for non-compliance with formal information gathering notices, including prosecution”, said Ms Saint.
Therefore, the ATO recommends that businesses adopt its voluntary procotol to ensure that they appropriately respond to formal notices from the ATO requiring production of documents, and to ensure that any LPP claims made are legitimate.
Key takeaways
If you have received a formal notice from the ATO requiring the production of documents, depending on the circumstances, you could be entitled to legal professional privilege. The ATO cannot compel the production of information or documents where the underlying communication is privileged. However, it is important to be aware that the ATO will fully investigate LPP claims. If it deems that a claim has been submitted inappropriately, it may be found that a taxpayer has not complied with a formal information gathering notice, and prosecution is a possibility.
