In attempting to arrive at the correct amount of tax that needs to be paid by taxpayers, the Commissioner of Taxation has a number of tools at their disposal, one of which is a written notice issued under Section 353-10 of Schedule 1 to the Tax Administration Act 1953 (Cth), more commonly known as a 353-10 notice.
The notice requires the recipient (which may either be the taxpayer or a third party that has information about the taxpayer) to:
- provide information (usually electronic) to the Commissioner; or
- attend and give evidence before the Commissioner; or
- produce documents in the taxpayer’s custody or control in order to assist with the Commissioner’s administration of a tax law.
A 353-10 notice is a powerful tool that allows the Commissioner to compel the recipient to produce information that might assist with the Commissioner’s inquiries into a taxpayer’s affairs. It is often used by the Commissioner to obtain a better understanding of the:
- Key details about a transaction including key dates leading up to the finalisation of a transaction and key personnel involved (particularly those who hold key decision-making roles);
- Rationale for entering a transaction or structuring a transaction in a particular way;
- Historical correspondence that supports a particular technical position adopted by the taxpayer; and
- Parties who advised on the transaction including lawyers, accountants and in some cases, experts in a particular field or industry.
Importantly, there are very few grounds to resist these notices.
What happens if the recipient fails to respond to a 353-10 notice?
Failure by a person to answer questions or provide information requested by the Commissioner is considered a strict liability offence and may be subject to civil penalties.
Are there certain documents that the recipient does not have to produce to the Commissioner?
The short answer is yes, there are certain communications which are protected because of the nature of the relationships that exist between the recipient and their advisor. Some common examples are documents covered by legal professional privilege (LPP) or administrative concessions granted by the ATO such as the accountants’ concession (AC) or the corporate board advice concession.
You should take care when attempting to resist an ATO information notice by relying on LPP or otherwise. In recent cases the ATO has challenged this through the courts and has been fairly successful. On the other hand, providing the documents with a valid LPP claim could waive LPP with severe non-tax implications.