1.8.1 In accordance with Access and Information Gathering Principle vi, under some circumstances, having entered premises or looked at documents on an informal basis, you may need to start using the Commissioner's formal access powers. This is referred to as 'immediate access'. These circumstances include where:
- taxpayers withdraw their cooperation so that you are no longer confident of obtaining all relevant documents
- you become aware of a second set of books
- you become aware that relevant information is being withheld
- you detect the use of a shredder and the occupier refuses your request to examine the documents before they are shredded
- you discover information, the existence of which has previously been denied
- a claim is made that documents are subject to privilege against self-incrimination
- a claim is made that documents are subject to legal professional privilege or public interest immunity, and further discussion or consultation cannot resolve the matter
- a blanket claim is made for legal professional privilege - see Chapter 6
- you hold a reasonable belief that documents will be disposed of or destroyed.
1.8.2 If it is not practical to obtain approval before taking the action, the case should be reviewed as soon as possible after the event by a senior officer.
Action to be taken at the premises
1.8.3 When using the access provisions and when acting informally, you should try to find the person(s) who can facilitate the access. You are not legally obliged to find a person in authority within the organisation or to wait for such a person to be present before entering premises. However, you should normally locate a person in authority before accessing documents. Courtesy requires that the ATO not place too much of a burden on junior staff. If a person in authority cannot be located or is unavailable, you should contact your local access specialist before attempting to access the premises or any documents.
1.8.4 If there is a reasonable prospect of legal professional privilege applying to any document, you are required to give an appropriate senior person able to make such a claim an adequate opportunity to inspect the documents and make proper claims of privilege or seek advice from a professional. In the guidelines Access to Lawyers' Premises Chapter 6 para 22(b)), officers are to wait until a partner, principal or lawyer authorised by a partner or principal is in attendance.
Example
Brett and Ernst, taxation officers, receive information from the Australian Federal Police that a company is alleged to be acting as a front for illegal activities. Brett and Ernst visit the company's premises for the purposes of locating records that will enable them to ascertain the taxable income of the company.
In view of the nature of the allegations and the potential for tampering with records, Brett declines to wait for the return of the manager before accessing the records. Ernst gives a junior employee, Mike, a pamphlet on access and explains the access powers and rights of the custodian to Mike. Mike permits access to the records. The records are solely of financial transactions and were not likely to be subject to legal professional privilege, or restricted or non-source accountants' papers.
Main point
If the security of the documents is not at risk, you should wait until a person in authority is present before seeking access to the documents. However, in special circumstances, such as if you hold a reasonable belief that the documents may disappear, access should proceed. Usually, your manager's approval should be sought.
If some documents are likely to be privileged, Brett and Ernst should ask for the records to be secured and await the return of the manager.
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1.8.5 When seeking access under any of the formal access provisions you should take the following steps:
a. Advise that you are an authorised officer of the ATO and then produce your authority. Any person lawfully on the premises who wishes to inspect the authorisation should be allowed to do so and make a note of its contents. However, for security reasons, photocopying of authorities should not be allowed, nor should an authorisation leave your possession.
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b. Advise that you are making enquiries for the purposes of the relevant Act(s) and name the Act(s).
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d. Advise that you are acting in accordance with the right conferred by the appropriate access provision.
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- a type or class of records, such as bank vouchers or statements for a particular entity or entities, or
- records for a particular period for a specified person, such as bank authority records for accounts where, for example, some person was a signatory for the specified period.
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- legal professional privilege
- the accountants' concession
- (where applicable) that access to particular documents should be limited on the basis they are corporate board documents on tax compliance risks (see PS LA 2004/14).
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j. Allow reasonable time and opportunity to consult another person - for example, the taxpayer (if they are a third party or a legal adviser).
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If you want to make an audio recording of a conversation while exercising the access power, you should follow the principles discussed later in this chapter.
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1.8.6 If a person whom the occupier wishes to consult is not immediately available, it may be appropriate to postpone the examination of documents and similar as part of the access visit for a reasonable amount of time, to enable the occupier to consult them.
1.8.7 Whether it is appropriate to postpone the examination depends on all the circumstances, including the risk to the integrity of the documents of interest.
1.8.8 Likewise, what a reasonable amount of time would be depends on all the circumstances, including whether it is an access with notice visit, or an access without notice visit.
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If the visit is access without notice, then the time given will be limited as the access will occur on the day.
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1.8.9 If it is not appropriate to postpone the access visit, you should attempt to reach an agreement with the occupier on a suitable process that protects the occupier's interests and enables the access visit to proceed. A suitable process may involve:
- making two copies of the documents of interest (depending on the volume or size of documents, the copies may be made in an appropriate electronic form)
- giving one copy to the occupier, and
- undertaking not to examine the other copy until the occupier and the person of their choice has been given a set and a reasonable amount of time to review their copy.
1.8.10 The length of time allowed for the occupier and/or the person of their choice to review their copy will generally depend on factors such as the volume of data, availability of specialist officers (such as forensic specialists, interpreters, legal advisers) and the proximity of advisers to the location. Where there is a large amount of data, it may be desirable to have a staged approach where the occupier and the person of their choice review the copies in batches.
1.8.11 While you should attempt to reach agreement with the occupier on a suitable process, ultimately it is not necessary that you reach agreement - the Full Federal Court in JMA Accounting Pty Ltd v Commissioner of Taxation [2004] FCAFC 274 held that there was no need to reach agreement; the terms just had to be reasonable.
1.8.12 If assistance is not provided or access is prevented, you should try to find out the custodian's reasons. Continued discussion on the best means of obtaining access to documents or the information will normally be appropriate. If the custodian does not have legitimate reasons for refusing access, repeat steps (i) to (v) above. In addition, advise the person of the possibility of the imposition of an administrative penalty under section 288-35 of the TAA.
1.8.13 Further, if an occupier does not provide reasonable facilities and assistance to an authorised tax officer, the occupier may be charged with an offence under sub section 263(3) of the ITAA 1936. In serious matters, a person can be prosecuted for hindrance or obstruction under section 149.1 of the Criminal Code Act 1995. You should read the sections to the occupier and provide copies.
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You should take detailed contemporaneous notes of the conversations between the taxation officers and the occupier in these circumstances.
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In cases in which the custodian cannot open a box, it is permissible to remove an obstruction - for example, by using a locksmith. While the occupier is taking advice, you will respect the right of the occupier to obtain private advice; but you should remain on the premises to ensure that the records are not removed or destroyed. You have a legal right to be there.
Example
Kate is auditing a company which the ATO believes has understated its assessable income by not returning cash placed in a bank safety deposit box. The bank staff have a direction from their manager (who is out of the office) not to allow anyone other than customers to have access to their boxes on the basis that only the customers have the right to open them. The bank does not hold a key to the box. However, Kate has brought a locksmith with her who waits in the public area of the bank.
Kate shows a bank employee, Liz, her authority and a copy of the legislation. She explains that she is an authorised officer of the ATO and that section 263 of the ITAA 1936 gives her the right to have access to all 'buildings, places, books, documents and other papers' for the purposes of the Act.
Liz accepts what Kate says, but is anxious that there might be a breach of client confidentiality if access to the box is granted.
Kate assures Liz that the access provision is a statutory obligation which overrides the duty and any contractual obligation a banker has to a client. Kate advises Liz that if she wishes to contact the bank's legal section, she will be given time to do so; and if she prefers, she will await the return of the manager.
If Liz permits access to the box, the locksmith will be requested to open it and then leave. If the box is damaged, it will be replaced.
If Liz's manager refuses access, Kate should discuss with her manager the options for further action, such as seeking urgent advice from the local access specialist or external legal advice through Legal Services Branch. She also advises Liz's manager that if persons obstruct an authorised officer in the valid exercise of an access provision, they may be committing an offence for which they are liable to prosecution under section 149.1 of the Criminal Code, or under sub section 263(3) of the ITAA 1936, or be liable to an administrative penalty under section 288-35 of the TAA. She provides a copy of the sections.
Main point
Liz is given adequate time to obtain legal advice.
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1.8.14 If access is still obstructed or hindered, you should act in accordance with the guidelines. You should only take action according to those guidelines after consultation with your manager and approval by an officer at the Executive Level 2.2 or higher. If you anticipate any difficulty in obtaining access, you should take a mobile phone to keep contact with the office. In the rare situations in which it is not possible to obtain approval before the action, you should review the case with your manager and record the facts in your case notes as soon as possible afterwards.
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A temporary denial or postponement of access in order for the custodian to seek advice (whether legal or other advice) does not constitute an obstruction or hindrance. You should allow a reasonable time for advice to be sought before any further attempt to gain access is made.
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1.8.15 The length of time that is reasonable will depend on the circumstances of each case. You should seek guidance from your team leader in the first instance and if further clarification is required then an access specialist should be consulted.
1.8.16 You should grant a request by the custodian to obtain professional advice and temporarily postpone access. You should also grant a request to contact the taxpayer to enable the taxpayer to obtain professional advice - for example, regarding the application of legal professional privilege or the accountants' concession, or the 'corporate board documents' concession described in PS LA 2004/14. You should make arrangements to ensure there is no tampering with the records - these arrangements could involve the documents or copies of the documents being sealed in an envelope or box with both you and the custodian signing an undertaking not to open the item until the advice has been received. Alternatively, the documents could be lodged with a reliable third party. Further guidance is contained in paragraph 22 of Appendix 2 to Chapter 6, Access to Lawyers' Premises.
Relevance
1.8.17 You should not abandon attempts to obtain access merely because an occupier states that the records contain nothing relevant to the purposes of the exercise. The advice can be taken into account, but you should form your own views about whether to proceed.
1.8.18 Provided that you are seeking access for the purposes of the Act, it is not necessary to demonstrate how the documents sought are relevant to that purpose. For accessing records held on a computer, you should refer to the judgment of the Full Federal Court in JMA. The Court held that some effort had to be made to discern relevance prior to copying the documents, particularly if the records were located on a computer. Their Honours stated that a word search would constitute 'some effort'. Examples may include a word search on:
- the name of the tax haven where the investment took place
- the section of the Act
- the name of the arrangement.
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For further information about accessing records held on a computer, refer to Chapter 5.
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Locating and examining records
1.8.19 The access provisions impose a statutory obligation on an occupier to provide all reasonable facilities and assistance to officers exercising the access powers. You can seek a wide range of information, provided it is required for the purposes of the particular Act. The access powers are not limited to scrutinising the affairs of a nominated person. They can be used to enquire at a general level about a category of persons, such as by occupation, to identify persons engaged in a particular activity. However, you should bear in mind the compliance costs involved for the person to whom such 'general level' enquiries are made.
1.8.20 You may seek access to a range of documents relevant to more than one Act. If compliance with more than one Act is being investigated, you should ensure that you are authorised under the access provision in each Act. Note that a trans-border investigation under section 13F of the TAA requires a matter first to be referred to the ATO in writing by a state tax officer.
Example
Alistair seeks access to the employee records of a company for the purpose of checking compliance with the PAYG and superannuation guarantee provisions. Alistair verifies that his authority authorises him to exercise all powers under section 76 of the Superannuation Guarantee (Administration) Act, as well as section 263 of the ITAA 1936.
Main point
Officers seeking access to records for the purpose of administering an Act must be authorised under the access provision contained in that Act.
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1.8.21 When using an access provision, section 15A of the TAA allows you to certify that the copy is a true copy. A certified copy will be treated by courts and tribunals in proceedings arising out of a taxation law as if it were the original. Examples of the wording for certification are given in Chapter 5. This form of certification will also satisfy the requirements of section 48 of the Evidence Act 1995.
1.8.22 If records of a third party are inspected, the custodian may request a letter for their files in case breach of confidentiality or privacy is raised by their client.
Interviews during process of access
1.8.23 When acting under an access provision, you can require answers only to questions that are incidental to the exercise of the right of access - for example, questions which concern the location of records and how to obtain them. If you were to insist on answers to other questions, you would be acting beyond power and have no legal right to expect taxpayers to provide that extra assistance.
1.8.24 Although the access provisions themselves do not grant a right to conduct an interview, many interviews proceed on an informal basis without recourse to the notice provisions - for example, section 264 of the ITAA 1936. These informal interviews will usually reduce the cost of compliance by not requiring the person to attend the office for an interview or to produce the required records under a formal notice.
1.8.25 You may ask that custodians agree to answer relevant questions that go beyond access if it is made clear to custodians that they are under no compulsion to answer. You should only ask the questions if the custodian agrees to the request. Any further questioning must be in good faith and for the purposes of the Act. However, if an objection to the questioning is raised, the access provisions do not give you a power to require answers to any questions not relevant to the exercise of the right of access. In these circumstances, you should not persist with such questioning.
1.8.26 If you have reasonable grounds for seeking further information about the documents and custodians are unwilling to supply it on an informal basis, you can prepare and issue a notice under the appropriate information or evidence gathering provision (see Chapter 2).
Record of removal of records
1.8.27 Whenever possible, you should copy documents on the premises, even if this means that you have to take a portable photocopier or scanner. Custodians may want to take duplicate copies of documents requested by the ATO, in order to build up an information file so that the taxpayer is aware of the documents which have been provided to the ATO. When requested by the custodian, it is the ATO's usual practice to provide a second set of copies or a burnt CD if a scanner is used.
1.8.28 You should advise custodians that you do not have a right to seize the documents, but that they may agree to you taking records to the ATO for examination and copying.
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Section 353-15 of Schedule 1 to the TAA empowers tax officers to access goods and other property, as well as documents, and to take samples, provided it is for the purposes of an indirect tax law - for example, GST.
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1.8.29 You should not make advice sound like a threat. Custodians who refuse to give you possession of records or give permission to take records back to the ATO for examination (in the absence of a notice seeking the production of documents) are merely exercising their legal rights. If the person agrees to allow removal of the books, documents and similar, you should record the conversation in the interview/inspection report. It is a sensible precaution to execute a formal written agreement.
Example
Agreement for Removal of Documents
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I, ........................................................................, having custody of the documents described below, authorise their removal from premises at .............................................................. by the undersigned officers of the Australian Taxation Office. The officers agree to return the documents when requested but no later than ../ /201x .
This authority to remove the documents is given voluntarily.
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No.
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Description
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Reference Number / Code
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1.
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2.
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3.
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Tax Officer (signature)
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Tax Officer (signature)
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Tax Officer (full name)
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Tax Officer (full name)
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Contact No.
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Contact No.
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Date
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Date
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Custodian (signature)
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Custodian (full name)
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Date
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1.8.30 A receipt must be prepared whenever documents are removed from the custodian. The receipt should be prepared in duplicate, with the custodian retaining the original. The receipt should describe the documents in as much detail as is practical. The receipt should record any identifying numbers of the books or records taken. You should also ask custodians to sign an authority stating that they have voluntarily authorised the removal of the documents. This is necessary in the event of any dispute about which records were taken by you and whether you have acted beyond power. You must obtain a similar receipt from the custodian when you return the documents. An example of a receipt is set out on the next page.
1.8.31 You should assure the custodian that the records will be returned as soon as required. If the custodian requests that the records be returned, you should immediately deliver them to the custodian because you have no power to retain them. In contrast, if a notice to produce the documents had been served on the custodian, you would be able to retain the documents for a reasonable period to permit you to carry out your investigations.
1.8.32 The receipt should record any identifying numbers of the books or records taken. You should also ask custodians to sign an authority stating that they have voluntarily authorised the removal of the documents. This is necessary in the event of any dispute about which records were taken by you, and whether you have acted beyond power. You must obtain a similar receipt from the custodian when you return the documents.
1.8.33 If the custodian denies permission for the removal of documents from the premises, and it is not practical to copy the documents, you should consider using the notice provisions requiring production of the documents.
Records held by third parties
1.8.34 You are empowered to obtain access to records held by a particular taxpayer, as well as records held by third parties, such as solicitors, accountants, tax agents, employers, suppliers, banks and other organisations and persons. This right may be restricted by the doctrine of public interest immunity.
1.8.35 Generally, you should contact the taxpayer before seeking information from third parties to give the taxpayer the opportunity to obtain any records or information held by those third parties. However, there are some situations where you would not normally do so, including but not limited to situations where:
- you are collecting information relating to a large number of taxpayers in similar circumstances, such as from a financial institution, investment manager or employer
- you are collecting information to help decide which individuals or businesses to audit
- you are making enquiries under an international tax treaty
- you are collecting information relating to enquiries, reviews or investigations under the promoter penalty laws
- transfer pricing audits are involved
- you decide access without notice is appropriate
- you have asked the taxpayer for the information, but the taxpayer has not given it to you
- there is a potential risk to the safety of ATO officers
- the matter relates to refund integrity
- the matter relates to identity fraud or transaction fraud
- the taxpayer is not contactable
- it is otherwise impossible, impractical, or inappropriate.
1.8.36 If the taxpayer is unable to obtain the information, declines to do so, or takes an unreasonably long time doing so, you should discuss with the third- party custodian whether procedures can be agreed upon that will result in a cooperative approach to obtaining the required information, even though you will be using the access powers. If possible, officers should explain to third parties the purpose of their enquiries, subject of course to privacy and secrecy considerations.
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An approach involving consultation and cooperation between you and the persons holding information is generally preferable because it minimises the inconvenience and cost to them and the ATO.
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1.8.37 A refusal by a third party to provide information or documents informally does not necessarily indicate an unwillingness to cooperate with the ATO. Custodians may want you to use the formal access powers if they require protection against an action for breach of confidence or breach of the Privacy Principles.
1.8.38 When accessing the business premises of third parties, conduct the access in such a way so as to minimise disruption to their business operations - for example, you should seek to reach agreement:
- as to how you will access documents stored on a computer (for example, by imaging the hard drive), and
- on Terms of Inspection for the making of claims for legal professional privilege or for the accountants' concession, or that access to particular documents should be limited on the basis they are corporate board documents on tax compliance risk.
1.8.39 If documents are likely to be:
- subject to legal professional privilege
- restricted source or non-source documents under the guidelines governing access to accountants' papers, or
- corporate board documents on compliance risk (see PS LA 2004/14.)
then you should consider whether access would be more effective if sought from the owner of the privilege. You should also be aware of the rules of evidence when considering the source, nature and extent of any documentation sought. If in doubt, you should discuss this with your local access specialist.
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If the ATO discloses information to a third party about someone else's affairs (for example, if a tax officer discloses a taxpayer's private residential address to a bank) the taxation secrecy laws prevent that third party (the bank) from on-disclosing this information. The penalty for making such a disclosure is up to two years imprisonment. There are limited exceptions to this prohibition, which are detailed in Subdivision 355-C of Schedule 1 to the Taxation Administration Act 1953.
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Main point
Officers can access records held by a third party if those records are not subject to legal professional privilege or are not accounting advisers' papers classified as restricted or non-source documents.
Rowena has been given the opportunity to provide the records.
Example
Rowena has a large portfolio of shares and keeps all records relating to the purchase and sale of the shares in an envelope lodged with her bank. Taxation officers Will and John want to examine those records for the purposes of the ITAA 1936, but Rowena has refused to supply the records.
Action
Will and John gain access to the envelope at the bank using section 263 of the ITAA 1936.
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Last Modified: Friday, 29 June 2012