Test case litigation program
Test case litigation program
Foreword
Sometimes disagreements arise between taxpayers and the ATO about how laws apply. When this happens, taxpayers have rights to appeal decisions that are based on the ATO view of the law to the Administrative Appeals Tribunal and the courts. In some of these cases there may be uncertainty about how the law operates.
The test case litigation program was established in 1995 to provide financial assistance to taxpayers who are litigating matters that will clarify the tax and super laws we administer. By developing legal precedent we seek to ensure that we are providing the community with clear principles about how to apply the law.
To show we are committed to clarifying the law and willing to work with the community, we indentify cases that meet the criteria ourselves. We also receive applications for funding from taxpayers and associations. These applications are considered by a panel that includes senior ATO officers and external representatives such as former judges, accountants and solicitors.
This guide provides tax professionals with information about how the test case litigation program operates and how their clients can apply as well as providing answers to some common questions about the program.
Andrew England
Chief Tax Counsel
Chair of the Test Case Litigation Panel
Purpose of the program
The test case litigation program (the program) aims to clarify the operation of laws administered by us where there is uncertainty or contention. We provide test case funding to your client when a case involves a genuine question of uncertainty or contention and may have implications beyond the individual case to a broader section of the public. Such cases may be better served by seeking a judicial decision from a court which has the final say on what the laws mean.
For more information about the program, see Commonly asked questions.
Criteria for cases we fund
Cases we fund need to involve issues where all of the following apply:
- where there is uncertainty or contention about how the law operates
- that are of significance to a substantial section of the public or that have significant commercial implications for an industry
- where it is in the public interest for the issue to be litigated.
The following principles are a guide to how we apply these criteria:
Cases we may fund
Cases we generally will fund include those:
- involving reviews of our decisions on objections to assessments or private rulings - these can be appeals to the Federal Court or further appeals from a decision of the Federal Court or Administrative Appeals Tribunal (AAT); however, we will consider other cases about debt-related issues, applications for declaratory relief and judicial review issues if the funding criteria are met
- brought before the Federal Court, rather than the AAT, because they are more likely to provide legal precedent to clarify issues; however, we still consider funding cases before the AAT or Small Taxation Claims Tribunal, particularly if the case is to be heard by a presidential member.
Cases we won't fund
Cases that we would not fund include those involving:
- questions of fact if the facts are in dispute, unclear or unique with no application to other taxpayers
- established legal principles where the law is settled
- tax avoidance schemes; however, we will consider these cases for funding if they test the proper meaning of anti-avoidance provisions or if funding the case is in the public interest.
What else we consider
- As it is important to clarify uncertainty in the law as quickly as possible, we expect your client to cooperate with us to avoid delays in the litigation proceedings and to progress the case in a timely manner to achieve an early hearing - any indication that this may not occur will be considered before your client's application is approved.
- We take into consideration your client's financial capacity to pursue litigation - if your client has the capacity to fund their own case, funding may not be approved on the basis that it is not in the public interest to provide public monies to applicants who have sufficient funds to pursue litigation.
- If we make an appeal against a decision of a court or tribunal it usually indicates that an important issue is involved. For some of our appeals we have established policies for providing funding to your client. If your client is seeking funding for an appeal that falls outside one of these funding policies, they will need to submit an application for funding. We will consider their application under the usual criteria and will take into account that we appealed against the decision.
- We will consider whether there appears to be an attempt to gain a benefit clearly not intended by the law - this includes cases where your client is attempting to achieve a windfall gain or an outcome contrary to the intent of the legislation and public policy.
Test case litigation register
If you believe that your client's case meets the funding criteria, you should check the Test case litigation register before making an application to see if similar cases have been granted funding.
The register contains information about cases approved for test case funding. This includes information about cases in litigation that have wider ramifications and involve a public benefit.
The register provides the following information:
- the venue the matter is being conducted in
- the status of the matter, such as whether it is listed for a hearing or when a decision has been handed down.
- the outcome or decision of the case and when it is finalised
- the point of law to be clarified
- the benefit expected from the clarification of the law and the wider ramifications which may arise if there is no clarification
- why the particular case is appropriate to clarify the point of law
- what action we are taking to mitigate the impact on other taxpayers while the case is being heard and determined - including consideration of suspension or stay of disputes which are materially similar in fact or questions of law and remission, or stopping accrual of the general interest charge (GIC) for the period of the suspension.
How cases are identified
Applications we receive
Most applications for funding come to us directly from taxpayers who have begun litigation in a court or tribunal.
We also get applications from taxpayers who are considering litigation, asking for in-principle approval for the funding of their case if the matter proceeds. We also receive applications from professional or industry bodies seeking to test a significant issue for their members.
When we receive an application for funding, we will check that your client has provided all the information we need to consider their application. The section How to apply explains what your client's application needs to include.
If we need more information, we will contact you and give your client the opportunity to present their best case. Once we have all the information, we ask for comments from our internal stakeholders and include their comments with the papers considered by the panel.
Generally, we will make a decision less than three months after we receive an application, although it may take longer if we need more information. When we decline funding, we will give you the decision in writing, with reasons.
If we approve your client's application, we will inform you of the decision and then agree how that funding will be provided (see Funding arrangements). The most common arrangement is a formal agreement under a test case funding deed. In these cases, we will send you a draft deed setting out the terms and conditions. Your client will need to consider that offer carefully before responding or accepting.
Your client can apply for funding under the program for:
- a case which has started or is about to start
- in-principle approval to develop a case
- in-principle approval for an issue or case.
In-principle approval to develop a case
Sometimes more work is needed on a case before it can be litigated to test an important issue of law.
There are two types of in-principle funding to develop a case:
- We may agree to provide funding for the costs (including non-legal costs) of developing the case, such as preparing an objection or private ruling request - funding for these costs is usually capped.
- If we identify a case that has the potential to test an important issue, but the matter is not yet in litigation or is still before the AAT with questions of fact to be resolved, we may agree to offer in-principle funding for future litigation costs, if the matter proceeds to litigation or to a higher jurisdiction.
If we give in-principle approval to fund a particular appeal your client may litigate in the future, we will advise you in writing. The approval may be given on the basis that funding automatically starts on the date a particular appeal is lodged or it may be given on the condition you submit a further application for funding on behalf of your client to confirm their case still meets the funding criteria.
If your client seeks in-principle funding to develop a case for litigation, they need to apply for funding before they incur the expenses and make it clear in their application what they are seeking funding for, being the litigation or pre-litigation costs or both. Your client's application needs to include details of how the case will be developed so that it can be brought before a court or the AAT.
If your client seeks funding to prepare an objection or a private ruling request, their application will need to:
- show there are special circumstances to justify funding - for example, if clarification of the issue would be of significant benefit to the community but the cost to an individual of running a case would be disproportionate to the amount of tax in dispute
- provide details of a proposed work plan and budget for developing the case before we give in-principle approval
- describe each item of work, the person who will perform the work and their qualifications, and the proposed timeframe for completing the work
- provide a budget with the number of hours or days expected to be spent on each item in the work plan and the hourly and daily rates to be charged.
A funding contact officer will discuss the funding options with you if we grant this kind of approval.
In-principle approval for an issue
Although applications for in-principle approval for an issue sometimes come directly from taxpayers, they would usually be made by an association on behalf of its members. If an association has a tax issue of importance to its members, the association may seek in-principle approval for the issue to be funded. The association may do this before it incurs the expense of finding a case that will test the issue.
As the panel will not have an actual case to consider, it is particularly important to explain the legal principles that will be tested.
If we accept an issue for resolution under the program, we may identify a suitable existing case or identify a case jointly with the association. They will then need to send us an application for test case funding. If we give in-principle approval for the issue, we will advise the association in writing and allocate a funding contact officer to help them with their case and funding options.
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An approval in-principle does not automatically entitle your client to a reimbursement of costs. We will only reimburse costs if this has been agreed to in a formal written agreement - for example, in an executed test case funding deed.
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We usually send a letter of offer and draft test case funding deed to the taxpayer or their legal representative whose case is being used to test the issue.
Cases we identify
We identify cases and issues that need to be tested in two ways:
- when we identify a case that meets one of our funding policies
- when we identify an issue that is creating uncertainty within the community that would benefit from judicial clarification.
Cases identified through our funding policies
We can identify a test case and offer to fund a case under the program without an application for funding being made, if it is in the public interest. Generally, these cases are matters which meet one of our funding policies.
These funding policies are:
- appeals we make against AAT decisions
- appeals in funded cases
- appeals to the High Court and applications we make for special leave to appeal to the High Court.
We review our litigation cases regularly and identify when a case falls within one of our funding policies. We will contact you or your client's legal representative with an initial offer for funding, which is usually agreed by way of a cost order against us.
Appeals we make against AAT decisions
When we appeal against a decision of the AAT or the Small Taxation Claims Tribunal, it is usually because an important legal issue needs to be clarified - for this reason, we generally will fund your client's reasonable costs of the appeal. This is to ensure that taxpayers can take a case to the AAT at low cost without a significant risk that they will then need to pay for a court appeal.
We take into account the capacity of your client to meet legal costs when we decide whether to fund these cases.
We generally offer funding without referring the case to the panel - it is usually provided by consenting to the court awarding costs against us. If we continue to appeal subsequent decisions, we will continue to pay reasonable costs, subject to agreement at each appeal stage about the terms of funding.
Your client may still apply for test case funding under the usual criteria in this situation, as the funding provided under a test case funding deed may be more than the amount that would be paid under a costs order.
If your client decides to appeal against an AAT decision, or any subsequent decision of a court, we will not usually offer funding. They would need to submit an application for test case funding which would be considered through the normal panel process.
Appeals in funded cases
Given the purpose of the program, we generally will extend funding to appeals either by your client or by us in funded cases, at least to the Full Federal Court, if the funding criteria are still met. If cases are approved for funding in state or territory courts, we generally will extend funding to the Court of Appeal or equivalent in the relevant Supreme Court.
Your client doesn't usually need to lodge a new application for funding - we will make a decision on funding taking into account the issue being tested on appeal. In some cases, we may ask for further submissions as to why funding should be continued for the next stage of the appeal process.
Appeals to the High Court and applications we make for special leave to appeal to the High Court
When we seek special leave to appeal to the High Court, and the issues in a case justify it, we may offer to meet your client's costs for the special leave application and the appeal if leave is granted. We do this when it is in the public interest to do so and often don't refer the case to the panel.
These cases are usually funded by us consenting to the court ordering costs against us. The costs provided are the usual reasonable 'party/party' costs calculated under the High Court's rules. If we are given leave to appeal, your client's costs would normally continue to be funded through an order for costs. However, you may contact the funding officer to consider the option of having costs paid under a test case funding deed.
We generally do not agree to fund applications if your client is seeking special leave to appeal to the High Court - this is because we consider that a decision of the Full Federal Court (or the Court of Appeal of a state or territory) achieves the level of law clarification that the program has been established to obtain.
However, if your client obtains leave, the High Court's view of the importance of the issue may provide strong support for an application to fund the substantive appeal under the program. If we agree to fund the appeal, funding would normally be provided by us consenting to the court ordering costs against us or a test case funding deed if requested. The costs of the appeal would usually cover the costs of your client's special leave application.
Issues identified through consultation
We may identify an issue through the public rulings program, through consultation with our internal stakeholders, or through meetings with industry and professional bodies.
For these issues, we may still need to identify an appropriate case and seek the help of a professional or industry body - alternatively, we may be aware of a case underway that could be a suitable test case. Once an issue or a case has been identified by us, we usually provide you with the relevant information to submit an application for funding to be formally considered by the panel.
Issues identified through litigation
We may decide an issue needs testing and look for a suitable case to be litigated as a test case on that issue. If the case is identified through litigation, we ask your client to apply through the usual application process to ensure there is transparency and fairness in our approval process. If your client receives a letter advising them about the program and how to apply for funding, and they choose to submit an application, their application will be considered by the panel against the funding criteria. All applicants must be assessed against the funding criteria before approval is granted.
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When we identify a case or issue and provide you with information about the program and how to apply for funding, this does not increase the likelihood of the case being approved for test case funding. While we have identified an issue that requires clarification, we will need to consider the application against the funding criteria to determine whether your client's case is the best way to test the issue.
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How we consider applications
Although we make the final decision on test case applications, we are guided by the recommendations of the test case litigation panel (the panel). The panel was formed to provide independent views on the merits of cases and on the significance of issues to the community.
The panel consists of accounting and legal professionals and senior tax officers. It considers applications against the funding criteria and recommends whether funding is appropriate. The ATO's Chief Tax Counsel chairs the panel and makes the final funding decision.
The panel generally convenes five times a year. It will accept applications received up to two weeks before each panel meeting - applications received after this date will be considered at the next meeting.
In some circumstances we will make a decision about providing test case funding without referring the case to the panel. If we decide that an issue needs testing and approve funding for a case without referring the case to the panel, we let the panel know of our decision.
For more information about the application process, see the Test case funding flowchart.
Reviews of funding decisions
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If we decline your client's application and further developments in their case mean the reasons for us declining funding no longer apply, they can reapply for funding.
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If your client does not agree with our reasons for declining funding, you can ask us to review the decision.
A senior tax officer who did not make the original decision will conduct the review. We will give you the review decision and our reasons in writing usually within six weeks of receiving your request for review.
Funding arrangements
If we approve funding for your client's test case, we will let you know the name of the funding contact officer for their case. This officer can provide help with any questions about funding. They will not be involved in the conduct of the case - a different officer handles this.
There are three types of funding arrangement under the program:
- a formal agreement to provide funding under a test case funding deed (the most common arrangement)
- a court order under which we agree to pay your client's costs
- a written offer to reimburse your client's costs on specified terms.
Funding starts on the date determined by the program and we will advise you in writing of this date.
Test case funding deed
The test case funding deed is a formal agreement to provide funding subject to specified terms and conditions. We will usually send you or your client's legal representative a draft deed shortly after advising that your client's application has been approved. They should consider the deed carefully.
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Do not rely on this guide to understand the particular deed sent to you - your client should get independent legal advice about the content of the deed.
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Generally, when the case goes to hearing, we will ask the court or tribunal to note that we have provided your client with funding under the program.
In court cases, by consent, the court will make no orders as to costs. Your client's costs will be assessed under the terms of the deed, rather than the usual rules of the court. This is usually done directly between our funding contact officer and your client's solicitor.
In the event of a dispute or doubt about costs, we may get advice from an independent cost consultant. If costs cannot be agreed, the deed provides that the costs will be determined by an independent arbitrator whose decision is binding on all parties.
If your client decides to accept the offer by executing and returning the deed, our funding contact officer will contact you or their legal representative to discuss the funding arrangements.
The deed will specify the rates that we will reimburse your client's costs for the members of their legal team. It will also detail the basis for reimbursing the cost of disbursements.
The deed generally offers funding for reasonable costs incurred at the approved stage of litigation on a solicitor-client basis, subject to certain limits. We will only provide funding for legal teams of a size that is reasonable for the complexity of the case.
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It is recommended that your client gets independent legal advice before responding to our offer or signing the test case funding deed.
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Costs calculated under the deed are generally higher than costs calculated on a 'party/party' basis under the rules of the Federal Court. However, the rates specified in the deed for solicitors and counsel may be less than the commercial rates they charge. As we will only reimburse the amounts specified in the deed, your client may need to pay the balance of their legal advisers' costs.
Subject to the terms and conditions of the deed, your client can be reimbursed for:
- solicitor's fees
- counsel's fees
- disbursements
- non-legal costs in some situations.
The deed will require your client's legal advisers to submit a detailed account for each item of work, including the hourly or daily rate charged. Disbursements must also be itemised clearly, in the same way as a bill of costs submitted in taxable form.
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We generally ask an independent cost consultant to review invoices if it is not clear that we should reimburse the costs. Your client should make sure that all invoices submitted meet the requirements set out in the deed to avoid delays in payment.
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We will reimburse solicitor's fees up to the rate specified in the deed. These rates are based on the rates we pay for legal services.
We will only fund your client for the same number and seniority of counsel that we engage to conduct the case - for example, if we brief one junior counsel, we will only reimburse your client for the cost of engaging one junior counsel to represent them.
We will reimburse your client for counsel fees at the rate approved for their counsel by the Attorney-General's Department. Before briefing a barrister, their solicitor must approach the Office of Legal Services Coordination (OLSC) in the Attorney-General's Department to find out if they have already set a rate for their counsel. If not, then their solicitor, or the barrister they propose to brief, must apply to the OLSC for a rate to be set.
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They can request a rate to be set using the application form on the OLSC's website at ag.gov.au/olsc
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If the fee payable to your client's counsel is higher than the rate approved by the OLSC, we will not reimburse your client for the balance.
Claims for disbursements must be itemised clearly, in the same way as a bill of costs submitted in taxable form with a copy of the invoice evidencing the disbursement. Normal disbursements (such as photocopying, facsimiles and telephone costs) are limited to $500. The deed may also set limits for other disbursements, such as filing fees and witnesses' expenses.
If costs are likely to be higher, it is important to discuss these limits with our funding contact officer before the deed is executed. You or your client's legal representative should also contact the funding contact officer if your client finds, after the deed has been executed, that their costs will exceed these limits.
We can agree to different funding arrangements if the costs are reasonable and necessary for the conduct of the case - but you or your client's legal representative should contact us before your client incurs the costs.
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Funding under the program may not cover all of the expenses that your client has to pay in running the case.
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Generally, test case funding is limited to legal costs - that is, the costs of preparing and conducting a case for litigation. However, when funding has been approved to develop a case for litigation, we will consider funding the costs of preparing objections and private ruling requests - this would usually be the fees that your client has to pay you (as their accountant or tax agent).
This funding is generally capped at a specified amount and the deed will contain conditions on the funding. If the case goes to litigation, we will not usually cover the costs you charge your client as their accountant or tax agent because they should be adequately represented by their solicitors and counsel.
If your client seeks this type of funding, they should include with their application a list of the types of costs they expect to incur and an estimate of the cost of the total work to be done. Any costs that are agreed will be set out in the draft deed we send to them.
We will not cover fees and disbursements that:
- are unreasonably high
- are not reasonably incurred for the conduct of the case
- are higher than the rates or amounts provided for in the deed
- are not directly related to the test case
- relate to your client's application for funding
- are incurred after the decision is handed down for the test case
- relate to some travel costs
- are for the litigation of issues which were not agreed as a basis for funding
- relate to the preparation of bills of costs.
We may suspend or terminate funding at any time if your client does not meet a condition of the funding offer as set out in the deed.
There are many conditions and obligations set out in a deed - your client needs to consider these carefully before agreeing to them. Key conditions and obligations include:
- Your client is expected to take the case that we have funded to its conclusion - they may need to supplement the cost of litigation with their own funds to do this if the funding provided does not fully cover their costs.
- If the case does not proceed on the issues agreed to in the deed due to actions by your client or their legal representatives, we will not provide funding for the case - we may also ask your client to refund money that has already been paid to them.
- Any claim made by your client or their representatives under the program must be for the agreed expenses for the conduct of their case.
- If your client is successful in the test case, they will not seek an order for costs against us, other than orders in the form set out in the deed.
The terms of the deed specify how and when your client can make claims for reimbursement. Generally, once funding has been agreed, claims can be made every six months or immediately after each significant court or tribunal appearance.
We may consider alternative payment arrangements - these should be discussed with the funding contact officer when we make an offer of funding.
Invoices accompanying a claim for funding must be prepared in the prescribed form as set out in the deed. Invoices that do not comply with the prescribed form will lead to delays in the review and assessment of the claim. A bill of costs is not accepted until it is received in the form required by the test case funding deed.
On receiving your client's claim for reimbursement, we may refer their claim to an independent cost assessor who will undertake a review of the claim by considering it in accordance with the terms of the deed. The cost assessor will then provide an assessment of the reasonableness of your client's claim.
When we receive the cost assessor's assessment, we will review the claim and form a final view as to the amount of reimbursement that will be paid to your client.
Cost orders
When a court makes a cost order in tax matters, it is generally taken to be 'party/party' costs (unless the court specifies otherwise). We may meet your client's costs by consenting to the court awarding costs against us. Our liability for costs in this situation will follow the ordinary court process, such as tax of costs where necessary.
Generally, we will meet the costs on the basis of an itemised account submitted to our solicitor or they may be settled by agreement.
Cost orders are made through the relevant court process. If your client needs more information about such orders, they should get advice from their solicitor or counsel.
Written offers
In some situations we will send you a letter offering to reimburse specific costs for your client - for example, we may do this if we provide funding retrospectively after a review process.
Tax consequences
There may be tax consequences if your client claims an income tax deduction for legal costs incurred in objecting or appealing against an assessment or determination we make.
Any money your client receives under the program to reimburse deductible expenditure is assessable income.
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Information about your client's case may be published on the Test case litigation register.
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When your client applies for test case funding, information about their application is published on the register; however, any information that may identify your client is not published.
Once a decision is made in your client's case, information about the case that is publicly available will be included on the register - for example, open court records that may include identifying information about your client.
For more information about the Test case litigation register, see Test case litigation register.
How to apply
If your client wants to apply for test case funding, their application must:
- be in writing
- be signed and dated
- include the name and contact details of the person or organisation lodging the application
- include the name of the taxpayer who will be party to the case, if the case has been identified
- be sent to
Test case litigation program
Strategic Litigation Unit
Australian Taxation Office
GPO Box 4889
SYDNEY NSW 2001
Their application also needs to address the funding criteria on page 5 - addressing the following points will help make sure their application does this. Make sure enough information is provided for the panel to fully appreciate the strength of your client's application against the funding criteria.
1 What is the issue that will be tested?
Provide a brief summary of the issues your client is seeking funding for.
Identify the area (or areas) of law that you expect their case to consider and specify the particular provision or provisions.
2 How does the issue relate to an area of tax law where there is uncertainty or contention?
It is important to explain the particular point of contention or uncertainty and the legal principles to be tested - for example, whether your client's issue has been tested before by the courts or the tribunal, and whether it challenges an established ATO view.
Issues involving questions of fact where there are established legal principles generally will not be funded.
3 Is the issue of significance to a substantial section of the public or does it have significant commercial implications for an industry?
Identify the industry or group of people who would be affected by your client's case, or who will benefit from the law being clarified.
4 Why is it in the public interest for the issue to be litigated?
Indentify any other public interest issues that the panel should consider, other than those identified in question 2 or 3.
5 In which jurisdiction will your case be conducted?
To develop a body of legal precedent, we generally give preference to cases brought before courts rather than the AAT.
6 Will your client's case be litigated through Part IVC of the TAA 1953?
Most cases accepted under the program involve reviews of our decisions on objections to assessments or private rulings, which are litigated through Part IVC of the Taxation Administration Act 1953. These can be appeals to the AAT or Federal Court, including further appeals from an AAT or Federal Court decision. However, we accept other cases if the law involved needs to be clarified - for example, on debt-related issues.
7 How will your client cooperate with us to achieve an early hearing?
To clarify uncertainty in the law as quickly as possible, we expect your client to cooperate with us to avoid delays in the litigation proceedings and to progress the case in a timely manner.
8 Does your client have the financial capacity to pursue litigation without test case funding?
While we take this into consideration, your client will not necessarily be excluded if they have financial capacity.
9 Does your client's case involve something we would consider a tax avoidance scheme?
Generally, we do not fund cases involving tax avoidance schemes or attempts to gain a benefit clearly not intended by the law. However, we will consider these cases for funding if they test the proper meaning of anti-avoidance provisions, or if funding the case is in the public interest.
10 What is the dollar amount of tax involved?
Provide the amount if this is known - otherwise, provide an estimate if possible.
11 How much tax is involved in the relevant industry (if known)?
Provide the amount if this is known - otherwise, provide an estimate if possible.
12 What is the history of this dispute?
Provide a history of the dispute with the ATO regarding the issue your client is seeking funding for. Include information about what stage the dispute is at, such as whether it is at objection, has been appealed from an objection or an AAT or court decision.
13 What are your client's expected costs in this litigation proceedings?
Provide the amount if this is known - otherwise, provide an estimate if possible.
14 What type of funding is your client seeking funding for?
Are they seeking funding for a case which we started or they started or are about to start, or do they want in-principle approval of funding to develop a case or for an issue.
15 Is there any other information your client can provide?
Provide any other relevant information that supports your client's application - for example, if they propose to seek in-principle approval for a case to be funded, provide information about how the issues will be brought forward for testing, an estimate of costs, and what the costs will relate to.
Commonly asked questions
What cases are appropriate for the program?
Cases selected for funding need to involve issues:
- where there is uncertainty or contention about how the law operates
- that are of significance to a substantial section of the public or that has significant commercial implications for an industry
- where it is in the public interest for the issue to be litigated.
No matter how a case is identified under the program, we use the same criteria to decide if it should be funded.
If you believe that your client's case meets these funding criteria and is an appropriate test case, follow the steps at How to apply.
Can cases which have not yet proceeded to litigation be granted test case funding?
Generally, it is matters that are already in litigation that seek test case funding.
However, your client can also apply for funding for:
- a case which is about to start litigation
- in-principle approval to develop a case
- in-principle approval to test an issue.
Applications for in-principle approval for an issue are usually submitted by a professional body.
For more information, see Applications we receive in the 'How cases are identified for funding' section.
What kind of cases will be considered for test case funding?
Most cases involve the review of objection decisions on assessments or private rulings. However, the program will consider issues such as cases on debt-related issues, applications for declaratory relief and judicial review issues where clarification of the law is important.
Who makes the decision on whether to grant test case funding?
We will generally refer your client's application to a test case litigation panel, who will consider if your client's case meets the funding criteria based on your written application and supporting documentation. The panel then makes a recommendation to the panel chair to approve or decline funding.
Although we make the final decision on test case applications, we are guided by the recommendations of the panel - it was formed to provide us with independent views on the merits of cases and on the significance of issues to the community.
What if my client can fund the case themselves?
We take into consideration your client's financial capacity to pursue litigation, although we may still approve funding for applicants who have the capacity to fund their own case.
What if my client has participated in a tax avoidance scheme?
We do not usually fund cases that we consider involve tax avoidance schemes or attempts to gain a benefit clearly not intended by the law. However, we will consider these cases for funding if they test the proper meaning of anti-avoidance provisions or if funding the case is in the public interest.
Can funding decisions be reviewed?
If you think your client's application has not been properly considered, or you do not agree with our reasons for declining funding, your client can ask us to review the decision. A senior tax officer who did not make the original decision will conduct the review. We will give your client the review decision and our reasons for it, in writing. The review process usually takes about six weeks.
What are reasonable costs under a test case funding deed?
In considering what is a reasonable cost, we may compare the work claimed by your client's legal team to the work undertaken by our legal team. We compare the amount of time spent, the seniority of the officer undertaking the task, and whether the task was required to run the case - for example, duplication between members of the legal team or the legal team and instructed counsel, or the researching of court rules and procedures are not generally considered reasonable costs.
Test case funding flowchart
More information
For more information or to provide feedback about the program:
Test case litigation program
Strategic Litigation Unit
Australian Taxation Office
GPO Box 4889
SYDNEY NSW 2001
Last Modified: Friday, 10 May 2013
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