Taxpayers are required (by s263(3) of the ITAA36) to give all reasonable assistance and facilities to ATO officers. The ATO recognises that, apart from communications with legal professionals who are eligible to be protected by legal professional privilege, taxpayers should be able to communicate confidentially with other, non-legal advisers in relation to their tax affairs.
The ATO’s Our approach to information gathering sets out its approach regarding access to professional accounting advisers’ papers. The ATO will follow these guidelines in respect of seeking access to specified categories of “documents” containing communication between taxpayers and their professional accounting (or other non-legal) advisers. This is known as the “accountants’ concession”.
The accountants’ concession is purely an administrative concession offered by the ATO. While the courts have recognised that taxpayers generally have an entitlement to expect that the ATO will adhere to its own guidelines in relation to this matter, the concession certainly has no legal standing. This is a fundamental difference between the accountants’ concession and legal professional privilege, which has been endorsed as a legally enforceable common law doctrine.
The following sets out excerpts of how the ATO will deal with different types of documents, and the extent of the concession.
Categories of documents
Documents will be treated differently depending on whether they are considered to be “source”, “restricted source”, or “non-source” documents.
Source documents (record of transactions)
ATO auditors will seek full access to:
papers prepared in connection with the conception, implementation and formal recording of a transaction and which explain the setting, context and purpose of transactions or arrangementstraditional accounting records such as ledgers, journals, working papers for financial statements, profit and loss accounts and balance sheetspermanent audit documents including those outlining the organisation’s history and structure, chain of command, chart of accountsmemorandum, articles and continuing contracts, andtax working papers including the tax return (eg used to prepare trial balances and reconciliation statements).
Restricted source documents (some advice)
These documents will normally consist of tax advice prepared by an external accountant on how to structure a transaction or arrangement. They form an integral part of what has actually occurred and provide an understanding of the tax strategy or specific courses of action implemented. They are also likely to canvass issues in which frankness is an essential element. Access to restricted source documents will be sought in exceptional circumstances only.
Non-source documents (some advice)
Typically, these include advice provided after a transaction has been completed, if that advice did not affect the recording of the transaction.
Includes non-permanent papers on the current audit file obtained by an external accountant during:
any statutory audit, or prudential auditdue diligence report, ortax working papers which merely state the accountant’s opinion.
Access to non-source documents will be sought in exceptional circumstances only.
Other examples of non-source documents include letters of engagement, the audit plan, letters of confirmation, test analyses, working schedules and commentaries.
Access to restricted source and non-source documents would be sought only if the:
taxpayer or the accountant refuses to provide the source documentssource documents are not available (for example: they are held overseas)source documents have been lost or destroyedsource documents are insufficient and the opinions are considered to offer an integral understanding of the transaction involved, orwhere there are reasonable grounds to believe that fraud or evasion, or an offence under the TAA, or any other illegal activity has taken place.
Objection papers
Tax papers prepared by an accountant as part of an objection, appeal or review will be exempt from scrutiny by ATO auditors.
Access to papers
Initially the ATO auditor as part of a tax audit may seek from the taxpayer the facts and an understanding of the consequences of a transaction. Taxpayers may be asked for this to be in writing. If the information is not given within 30 days, the ATO auditors may seek access to restricted source documents. If they don’t reveal the required information, access can then be to non-source documents.
Time to seek advice on the request
If access is sought, reasonable time will be allowed to enable the taxpayer to consult with advisers on the confidentiality of documents.
Access to restricted source and non-source documents
Where relevant exceptional circumstances apply and access is sought to restricted source or non-source documents, written approval of the relevant Deputy Commissioner is needed.
If the taxpayer considers that documents sought by the ATO attract the accountants’ concession, they should complete a form “AC1” which lists the documents the taxpayer claims attract the concession.
If the taxpayer and the ATO auditor disagree with a claim(s), the documents are to be placed in a sealed envelope (with contents indexed) and entrusted to the taxpayer’s accountant, who is required to give an undertaking that the secured papers won’t be removed for 30 days. From this point in the process, there are inspection and independent review procedures to determine the validity of the concession claim.
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