Legal professional privilege and tax audits

Following the April 2019 budget, the ATO looks set to secure an additional $1 billion in funding to tackle tax avoidance. We have recently seen the ATO move its audit activity towards arrangements that many advisers consider to be sensible commercial tax planning rather than tax avoidance.

The ATO also now has significantly more access to information, which is only assisted by data provided by banks under the Common Reporting Standard and releases of information like the Paradise Papers and Panama Papers.

The importance of legal professional privilege

Legal professional privilege is one of the foundations of our justice system. The ‘advice’ form of legal professional privilege allows clients and lawyers to have full and frank communications so that legal advice may be provided without clients fearing that another person can demand copies of that advice if it is unfavourable or highlights risks.

This means that there is often a tension between:

  1. the ATO accessing

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