ATO using its access powers to assist with challenging legal professional privilege

By Adrian Varrasso, Partner, Carmen McElwain, Partner, Jason Hawe, Associate, MinterEllison

CUB Australia Holding Pty Ltd v FCT [2021] FCA 43 marks the first addition to the body of case law regarding legal professional privilege (LPP) for 2021. 

The decision by the Federal Court reaffirms the broad nature of the Commissioner’s access powers under s 353-10 of Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA). It also confirms that these access powers extend to information requested for the purposes of deciding whether to accept or challenge a claim for LPP.

Additionally, the decision demonstrates the steps a taxpayer can expect the Commissioner to take in mounting a potential challenge against a taxpayer’s claim of LPP in response to a document production request.

The key points are as follows.

  • In accepting that s 353-10 extends to information requested by the Commissioner in determining whether to accept or challenge an LPP claim, the broad nature of the power conferred upon the Commissioner by s 353-10 has again been highlighted by the Federal Court.
  • The Commissioner has signalled the ATO’s intention to use these broad information gathering powers to assist with actively challenging perceived improper LPP claims.
  • LPP claims continue to be a topical issue and taxpayers should be alert to the possibility of a challenge from the Commissioner, particularly where LPP claims are made over a sizable number of documents.


Section 353-10 provides the Commissioner with broad information gathering powers to obtain information and evidence for the purpose of the administration or operation of a taxation law. 

Under this provision, the Commissioner can, by notice in writing, require a person to give the Commissioner any information or produce any documents in the person’s custody that could assist the Commissioner in administering a taxation law.

However, it is well established that a person may claim LPP in respect of communications that they may otherwise be required to produce to the Commissioner under a s 353-10 notice.

LPP is a fundamental common law right, allowing persons to obtain competent legal advice without the same being used against them. LPP protects the disclosure of confidential communications between a lawyer and their client, provided that the communication is for the dominant purpose of preparing for actual or anticipated litigation, or seeking or providing legal advice.

The rationale underlying the existence of LPP is to encourage full and frank disclosure between lawyers and their clients, to facilitate the proper administration of justice. The principle of LPP recognises that lawyers hold a unique and integral role in the legal system. 

Circumstances leading to the decision

During the course of an audit, the Commissioner issued a notice under s 353-10 to CUB Australia Holding Pty Ltd (CUB) in May 2018 requiring CUB to produce certain documents (May 2018 Notice).

CUB claimed LPP over a number of documents (in excess of 20,000) covered by the May 2018 Notice. It provided some details regarding these documents, but did not provide certain additional details (such as the titles of the documents/subject line of emails, and names of authors and recipients of the documents) requested by the Commissioner to enable the ATO to assess whether the claim for LPP had been properly made.

The Commissioner issued a further notice under s 353-10 in March 2020 (March 2020 Notice) requiring CUB to provide further details in relation to the documents over which LPP had been claimed. These further details included:

  • the title of the document or, where the document is an email, the subject line of the email;
  • the name of the person who authored the document;
  • the name of each person to whom the document was communicated; and
  • where the document is an email, for each person who received the email, whether the email was sent directly to the person or copied to the person.

CUB sought judicial review of the decision of the Commissioner that CUB be required to provide information pursuant to the March 2020 Notice. 

While there were three grounds upon which CUB challenged the Commissioner’s ability to issue the March 2020 Notice, the ultimate question for the Court to determine was whether or not s 353-10 authorised the Commissioner to issue a notice in the nature of the March 2020 Notice. That is, can the Commissioner use s 353-10 to seek further details in relation to documents over which a taxpayer has claimed LPP?

CUB also claimed that the titles of the documents upon which LPP had been claimed (being a particular requested by the Commissioner in the March 2020 Notice) were themselves privileged. This claim was not considered by the Court as part of this decision and is presently the subject of a later hearing.

Federal Court decision

Moshinsky J held that the March 2020 Notice was validly issued for the purpose of the administration of a taxation law.

Crucial to this conclusion were his Honour’s findings of fact that:

  1. the Commissioner’s purpose in issuing the March 2020 Notice was to obtain information that the ATO considered necessary to determine whether to accept or challenge CUB’s LPP claims in respect of the relevant documents; and
  2. the Commissioner considered the documents as responsive to the May 2018 Notice, which were relevant to the statutory functions the Commissioner was still carrying on.

The central tenet of CUB’s case was that the Commissioner’s purpose (or substantial purpose) in issuing the March 2020 Notice was “to determine the validity of CUB’s legal professional privilege claims”. It was contended that this was not a proper purpose for the exercise of power conferred by s 353-10 because determining or resolving an LPP claim falls within the role of a court exercising judicial power, not the Commissioner.

The Court was not satisfied that CUB had discharged its burden of proof in establishing that the Commissioner’s primary or substantial purpose was to determine the validity of CUB’s LPP claim, as opposed to determining whether to accept or challenge such claim.

His Honour acknowledged that some of the communications between the parties, if viewed in isolation, suggested that the Commissioner was seeking the particulars in order to determine LPP claims. However, upon viewing the communications in the broader context in which they were made, and having regard to the nature of the particulars requested in the March 2020 Notice, it was clear that the Commissioner sought the information to form a view as to whether to accept or challenge CUB’s LPP claims.


This case serves as another reminder of the breadth of the Commissioner’s powers under s 353-10.

His Honour considered a number of judicial authorities relating to the predecessor of s 353-10 (ie s 264 of the ITAA 1936). A common theme throughout this body of case law is the continued rejection by the Courts of attempts to limit the broad scope of the power conferred upon the Commissioner by what is now s 353-10. 

The authorities demonstrate that the Commissioner can validly exercise the power to seek information for the purpose of conducting “wide-ranging inquiries” (see FCT v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 409) or a “fishing expedition” (see May v FCT (1999) 92 FCR 152).

Importantly, this decision confirms that the Commissioner’s power under s 353-10 extends to information requested by the Commissioner in determining whether to accept or challenge an LPP claim.

The manner in which LPP claims are made has become a significant issue for the ATO in recent years, and the Commissioner has been vocal in signalling an intention to more actively challenge LPP claims that are considered to be improperly made. In addressing The Tax Institute’s 34th National Convention on 14 March 2019, the Commissioner stated:

“Another focus for us going forward is cracking down on the misuse of legal professional privilege.

But when lawyers are claiming privilege on thousands or tens of thousands of documents – and we have seen this – we start to wonder if it’s a genuine claim or an effort to conceal a contrived tax arrangement.

It all comes back to fairness – are you using legal professional privilege because you have a genuine need, or as a way to cheat the system? We’ll be taking a tougher stance in the future.”

More recently, the Commissioner has been active in pursuing civil claims, and foreshadowed possible referral for consideration of criminal charges, in relation to the potential inappropriate use of LPP to withhold facts and evidence during the course of tax audits.

While the present decision does not suggest that CUB’s LPP claim was not validly made, the magnitude of documents over which LPP was claimed (in excess of 20,000) was certainly a relevant factor in the Commissioner issuing the March 2020 Notice. 

Paragraph [47] of the decision contained an excerpt of a letter sent by the Commissioner to CUB in which the Commissioner stated:

“… our concerns with your LPP claims arise due to the quantum of claims in combination with the limited information provided to allow us to assess the validity of each claim.”

This case indicates that where a taxpayer makes an LPP claim over a large number of documents, it is likely the Commissioner will seek detailed particulars in relation to the documents. In the event that a taxpayer does not provide, or perhaps in the Commissioner’s opinion does not adequately complete, a “Legal professional privilege form 1 (LPP 1)” in respect of documents over which LPP is claimed, it seems the Commissioner will not hesitate to exercise the power under s 353-10 to require the taxpayer to provide further information.

A taxpayer required to provide particulars in relation to a communication over which an LPP claim has been made should seek legal advice about the particulars to be provided to the Commissioner in order to demonstrate that LPP applies. Taxpayers and their advisers should consider the nature of the information requested by the Commissioner to ensure that the provision of such information does not inadvertently waive privilege over the document.

Thomson Reuters, a worldwide trusted provider of answers, helps professionals make confident decisions, run better businesses and gain competitive advantage in complex arenas – law, tax, compliance, government and media.

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