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The ATO has voiced its concern over the likelihood of “baseless and reckless” legal professional privilege (LLP) claims impacting their investigations.
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‘Baseless and reckless’: ATO flags concern on legal professional privilege claims
27 October 2021
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9 minute read
Commissioner of Taxation Chris Jordan has flagged the growing concern the ATO has about LLP claims coming to light.
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“We fully respect LPP is a fundamental common law right,” Mr Jordan said in his commissioner’s address at the 2021 Tax Institute Tax Summit.
“We respect this communication between lawyer and client should remain confidential. But we’re concerned when baseless and reckless LPP claims are made in an attempt to withhold information from us during our investigations.”
Mr Jordan reiterated the necessity of the Tax Office being permitted to conduct thorough investigations when required.
“We are not, and do not seek to be, the arbiter of privilege claims. This is the role of the Courts,” he explained.
“However, to appropriately conduct investigations and audits, the ATO must be able to properly consider, and potentially challenge, claims for privilege.
“This requires contextual information on the underlying communications, which most taxpayers provide voluntarily.”
Mr Jordan also used the opportunity to point to the ATO’s draft LLP protocol, released last month, that sets out its recommended approach to identifying communications covered by LPP, and the level of detail required in explaining claims.
“A draft guide we have recently released for consultation sets the recommended approach for making legal professional privilege (LPP) claims in response to a formal notice,” Mr Jordan said.
“The guide is most relevant for the small number of large businesses that receive formal notices as part of an audit, and reflects the misuse of LPP that we have publicly spoken about.
“It is our preference to gather information by simply requesting what we need from taxpayers. In most cases, this happens without having to use our formal powers.
“It is voluntary, but following the guidance will provide taxpayers with more certainty about their LPP claims.
“This allows everyone to focus on progressing the substantive tax issue rather than diverting efforts and resources to disputes about information gathering.”
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