Litigation is expensive, so we continue to seek to resolve disputes as early as possible.
This section only refers to the ATO's legal costs as we do not have information on taxpayers' costs or those of the tribunals and courts. Also, these costs include other legal services work. We have not been able to do a precise breakdown of tax and superannuation litigation costs, so these statistics are just a broad indicator.
The ATO engages external legal providers for litigation and legal advisory work in relation to revenue collection, tax and superannuation law interpretation, and non-tax law matters such as employment law and freedom of information. Tax Practitioners Board legal services expenditure is also included.
Last year we spent about $81 million on these legal costs - about $34 million on our staff costs and over $54 million was spent on external legal services. The ATO recovers some legal costs each year. In 2010-11, the total amount of costs recovered was over $7 million, see figure 6.1.
The decline in costs of test case funding reflects the decline in matters being approved for funding as many applications do not meet the published criteria for receiving test case funding, see figure 6.2.
Trends 1 July 2007 to 29 February 2012
Figure 6.1 Expenditure on legal services (including provision of advice, litigation and related services)
* Professional fees include fees charged by external legal services providers for the work undertaken by their solicitors.
Figure 6.2 Expenditure on test cases