The NSW Supreme Court has held that a Deputy Commissioner did not disclose protected information when a copy of the taxpayer’s tax return was tendered in civil proceedings against the Deputy Commissioner.

The Deputy Commissioner had issued recovery proceedings against the taxpayer. In an amended statement of claim, it was alleged the taxpayer owed $3.3m (comprising income tax, penalty tax and GIC). The taxpayer cross-claimed, seeking damages for abuse of process, misfeasance in public office and breach of duty to act in good faith. The Deputy Commissioner’s amended statement of claim was later dismissed. During the hearing of the cross-claim, the Deputy Commissioner sought to cross-examine the taxpayer on his tax returns and gave the Supreme Court a copy of the 2012 tax return. The taxpayer objected to the document being tendered, arguing that it had not been prepared by him and that its production breached the secrecy provisions in Div 355 of Sch 1 to the Taxation Administration Act 1953 (which prohibit the disclosure of information about a taxpayer’s tax affairs, except in certain specified circumstances). The taxpayer claimed that the Deputy Commissioner was seeking to use the tax return “in a non-tax related purpose, that is, the defence of proceedings in tort”.

The Supreme Court dismissed the taxpayer’s argument, holding that the exception in item 3 of s 355-50 of Sch 1 applied. Item 3 permits disclosure in performing duties as a taxation officer, where the disclosure is in civil proceedings “that are related to a taxation law”. In the Court’s view, the taxpayer’s civil proceedings were related to taxation laws as they arose from the conduct of an ATO audit and the issuing of an amended notice of assessment. Further, the Court said that the expression “in performing duties as a taxation officer” in s 355-50 should be widely interpreted, in accordance with the Federal Court decision in 12 Years Juice Foods Australia Pty Ltd & Ors v FCT [2015] FCA 741, to include defending the taxpayer’s cross-claim.

(DCT v Frangieh (No 2) [2016] NSWSC 310, NSW Supreme Court, Harrison AsJ, 17 March 2016.)

[LTN 56, 23/3/16]