ATO's new protocol for making LPP claims
Recently, the ATO released a protocol document which contains its recommended approach for identifying communications covered by Legal Professional Privilege (LPP) and making LPP claims. As a part of the ATO’s formal information gathering powers, it can compel taxpayers to provide information and documents. However, information and documents containing a communication that is protected by LPP do not have to be provided.
The new ATO LPP protocol
While the purpose of the protocol document is ostensibly to assist the ATO in deciding whether to accept, review or challenge an LPP claim in an interaction with the taxpayer, it conversely provides taxpayers with clarity in making LPP claims when responding to formal information gathering notices. The protocol applies to both legal practitioners and non-legal practitioners and all LPP claims, regardless of the firm or business structure within which the service or engagement is provided.
Where a claim for LPP is made, the most challenging part of the ATO’s role is to make an informed decision about the communication and the basis on which LPP is claimed. Although the approach contained in the protocol is only voluntary and not intended to replace legal advice, the ATO notes that where the protocol is followed, it will usually have a sufficient level of information to be able to decide its next steps. In many cases, it is likely that the ATO will accept the claim for LPP without further enquires.
The protocol itself contains 3 steps: assessing the situation and the communications involved; explaining the basis of the LPP claim; and advising the ATO how the LPP claim was approached.
Assessing the engagement and each communication
This step requires the taxpayer to identify each service or engagement that gave rise to the communication. For example, this might include separately assessing service engagements involving the following: legal practitioners; more junior non-legal persons acting under the close supervision and direction of legal practitioners (e.g. paralegals, clerks, law graduates, executive assistants etc); in-house counsel; those involving non-legal persons or by legal practitioners not acting in the capacity of legal practitioners; third-party advice other than from a legal practitioner.
For each of the above engagements, taxpayers will need to review each specific communication separately (i.e. each email within an email chain, attachments, forwarded copy of email and its attachments), evaluate the overarching relationship, and determine the capacity in which the communication was made.
Taxpayers are also encouraged the check for communications which are usually not privileged but may potentially be eligible for a claim of LPP. This might include internal reports and memoranda, file notes and minutes of meeting with third parties, and original documents which constitute or evidence transactions.
Explaining the LPP claim
It is the ATO’s view that taxpayers should explain LPP claims on or before the due date specified in the formal notice seeking information or documents, although a staged approach to accepting information may be adopted in some instances. For documents and files, details such as the name of privilege holders, the identity and role of each person between whom the document or communication was made, and the dominant purpose for which the communication was made are required.
For in-house counsel, details expected from the ATO include their name, whether they have been admitted to practice (jurisdiction of admission), the functions/positions/roles/responsibilities at the time of communication, and the capacity in which the legal advisor was acting in making the communication.
For specific engagements, taxpayers will need to provide an evaluation of the service, engagement or relationship, purpose of the communications, role of non-legal practitioners, and for each person involved in the preparation of communications their name, position, capacity, and whether they hold a current practising certificate.
Advising the ATO of your approach in claiming LPP
Finally, it is recommended that taxpayers advise the ATO of the process used for making a claim for LPP framed around the following key questions:
- whether the first step was followed.
- whether any computer-assisted processes were used.
- whether any assumptions or pre-determined judgements around the context of the communications guided the LPP assessment.
Need help?
LPP is a highly contested area. In all cases, whether a document or information is subject to LPP turns on the facts of the individual case, including the parties involved and the subject and purpose of the communication.
If you have been issued a notice under the ATO’s formal information gathering powers, we can help you work out which communications contained in documents or information are subject to LPP and whether to make a claim for LPP under the new protocol or otherwise.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.