On 19 November 2021, the Law Council of Australia released the submission it made to the ATO about the draft it released, of its ‘protocol’ for taxpayers and/or their advisers, to claim ‘Legal Professional Privilege’ (LPP). The ATO invited feedback on the draft, which the LCA was giving. The draft Protocol was controversial for many reasons, including what many saw as ‘overreaching’ the information required to establish privilege, and the privilege itself (effectively putting pressure on taxpayers, and practitioners to waive the privilege, in the course of claiming it). I understand the ATO will finalise the draft Protocol next year and issue a compendium of the feed back they received.
The LCA’s Covering letter
The Law Council of Australia appreciates the context underpinning the development of the Australian Taxation Office’s (ATO) draft legal professional privilege (LPP) protocol (consultation draft Protocol), and welcomes attempts to assist advisers and taxpayers to work through LPP matters.
Indeed, the Law Council and its Business Law Section (BLS) acknowledges the ATO’s constructive engagement to date with its Working Group consisting of members of the BLS Taxation Committee, and welcomes those areas in the consultation draft Protocol that have been amended to reflect previous feedback provided by this Working Group.
This submission raises a number of key concerns with the consultation draft Protocol, both in terms of its consistency with established principles of LPP, and professional and ethical obligations held by the legal profession. In terms of specific feedback, the Law Council offers a number of observations in relation to the practical effect of the consultation draft Protocol, including in relation to:
- instances where the ATO appears to be requesting information concerning the subject matter in respect of which advice is given (including matters such as subject lines, topics and client names);
- the appropriateness of terminology used throughout the consultation draft Protocol;
- the practicality of performing all of the required steps, and assembling all the required particulars, for each individual document in large-scale information requests;
- the possibility that the Commissioner will claim that LPP has been waived due to the level of detail expected by way of particulars;
- the ATO’s apparent concern with arrangements involving junior non-lawyer staff such as law graduates or paralegals, acting under the direction or supervision of lawyers; and
- the draft Protocol’s approach to communications or documents in the furtherance of an act that renders someone liable to administrative penalties.
These matters, and others, are addressed in further detail within this submission. At all times, this response intends to promote the view that it is in both the ATO’s and the community’s interests to achieve the dual goals of:
- providing the Commissioner with the documents to which he is entitled; and
- preserving confidentialities that LPP claimants are entitled to preserve.
The Law Council looks forward to continuing to work collaboratively with the ATO and other stakeholders to pursue an acceptable protocol that strikes the correct balance between these two objectives.