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  • Test Case Litigation Program

    The Test Case Litigation Program (test case program) funds cases that have broader implications beyond the individual dispute with the ATO.

    The test case program provides financial assistance to taxpayers to help them meet some or all of their reasonable litigation costs that are associated with clarifying tax, superannuation and in some instances debt-related issues.

    The following information and practical examples may assist you decide whether to make an application for test case funding and explain:

    Criterion and expectations

    Before deciding to make an application for test case funding you should view the following:

    Next steps:

    • To make an application for test case funding you need to fill in the Test case test case funding application form.
    • Note that applications close three weeks prior to each Test Case Litigation Panel (Panel) meeting  
      • 16 July 2019 meeting – closing date for applications is 25 June 2019
      • 24 September 2019 meeting – closing date for applications is 3 September 2019
      • 3 December 2019 meeting – closing date for applications is 12 November 2019.
       

    Criterion

    Cases we fund need to involve issues where there is uncertainty or contention about how the law operates and must be in the public interest to be litigated.

    Uncertainty or contention about how the law operates means that the law is ambiguous with little or no judicial clarification on the issue, or where there is disagreement on what the law means or how it operates. It does not include disputes that depend solely on questions of fact.

    Expectations

    The case is in the public interest to be litigated, and in addition to meeting the test case test case funding criterion:

    • Your case must have significance to a substantial section of the public or have significant commercial implications for an industry.  

    This means that there should be a number of taxpayers affected or there are industry and or community views that the issue is uncertain or contentious.

    • You must demonstrate willingness to progress the dispute in a timely manner by cooperating with us to avoid delays - any indication that this may not occur (based on past or current behaviour) will be considered before an application is approved.
    • Your case must be likely to provide legal precedent as a principle of law capable of being used to decide other cases with similar facts giving certainty and clarity for taxpayers.
    • Your case must not involve a tax avoidance scheme unless it tests the proper meaning within the legal framework of the anti-avoidance provisions.
    • Your case must not appear to be an attempt to gain a windfall or an outcome contrary to the intent of the legislation and public policy.

    Examples of cases that we may fund

    Example 1

    The issue is whether goods and services tax (GST) is payable on properties that were leased before being sold. This issue was uncertain after a judicial decision was handed down which led to law clarification being required. The issue affects a significant section of the public and the case is likely to provide precedent as it is in the High Court.

    There is no judicial precedent in relation to this new legislation and despite it involving a tax avoidance scheme; it will test the proper meaning of the provision.

    End of example

     

    Example 2

    The issue is what ‘direct aid’ for fringe benefits tax (FBT) means. There is contention as to the meaning in the relevant FBT provision between the taxpayer and the ATO and there is no relevant judicial precedent. 

    End of example

     

    Example 3

    The issue is the application of civil penalties in relation to promotion of tax schemes.

    End of example

    Examples of cases that we may not fund

    Example 4

    The issue is whether the taxpayer has demonstrated special circumstances regarding their liability to pay superannuation excess contributions tax (ECT). A decision will be limited to the specific facts of the taxpayer and therefore would not affect a significant section of the public.

    End of example

     

    Example 5

    A taxpayer has applied for test case funding but has failed to comply with court timetables and/or has engaged with processes that seek to delay the progression of the case. This would indicate an unwillingness to progress the dispute.

    End of example

     

    Example 6

    This issue is the exemption of capital gains tax (CGT) on the sale of a property claimed as a main residence. The taxpayer’s CGT liability will be determined on the facts of the case and therefore will not provide judicial guidance that will assist in other CGT cases.

    End of example

     

    Example 7

    A taxpayer is seeking test case funding for an issue but has raised arguments that contradict the intent of the relevant legislation which if accepted, would result in an outcome that was not intended and or may appear to be seeking a windfall gain.

    End of example

    The Test Case Litigation Panel

    The Panel considers applications for test case funding. It is made up of the chair and deputy chair who are senior ATO officers, and external members from the legal and accounting professions. In certain instances, cases will be considered for test case funding without an application being submitted. These cases will generally be considered separately by the chair or deputy chair of the Panel.

    We are guided by their recommendations. The Panel was formed to provide independent views on the merits of the cases seeking test case funding and on the significance of issues to the community.

    In certain instances, cases will be considered for test case funding without an application being submitted. These cases will generally be considered separately by the chair or deputy chair of the Panel.

    The current Panel members are:

    • Jeremy Geale – Deputy Commissioner, Review and Dispute Resolution and Chair, ATO
    • Grahame Tanna – Assistant Commissioner, Review and Dispute Resolution and Deputy Chair, ATO
    • Hon Kevin Lindgren AM QC – former Judge of the Federal Court of the Australia
    • Peter Poulos – Partner, Tax Controversy, Minter Ellison
    • Graeme Wade – former President of CPA Australia

    How cases are considered for test case funding

    There are two ways cases are considered for test case funding.

    Applications we receive

    If you send us an application for test case funding we will first check you have provided all the information we need to consider. We will then seek comments from internal stakeholders and provide these comments with the application and any other information required for the Panel to consider.

    After the Panel considers the application against the test case funding criterion and expectations, it then recommends whether test case funding is appropriate.

    The chair of the Panel makes the final test case funding decision.

    The Panel generally convenes five times a year. The test case program accepts applications received up to three weeks prior to each Panel meeting. Applications received after this date will be considered at the next meeting. However, should an application be urgent, we will consider making a decision outside of scheduled meetings, usually by seeking the Panel's comments on the relevant application.

    Cases we identify

    Should we consider test case funding your case without requesting an application, it will be because your case may meet one of our test case funding policies, criterion and expectations. The test case funding policies are:

    • We appeal against an AAT decision    
      • When we appeal an AAT decision to the Federal or Full Federal Court it is usually because an important issue needs to be clarified. This ensures that you can take your case to the AAT at minimal cost without a significant risk that you will need to pay all the associated costs of a court appeal.
      • We will generally offer this type of test case funding without referring the case to the Panel. A decision will usually be made by the deputy chair or chair.
       
    • Continued test case funding for a case already funded    
      • We may extend test case funding to appeals by the ATO or by you in funded cases to the Full Federal Court or equivalent Court of Appeal if the criterion and expectations are still met. We may require a new application explaining how the criterion and expectations are still met if we think the decision of the lower Court has achieved the law clarification that the test case program has been established to obtain.
      • We will generally offer this type of test case funding without referring the case to the Panel. A decision will usually be made by the deputy chair or chair.
       
    • We make an application for special leave to the High Court    
      • We will usually fund an application that we make to the High Court and any subsequent decision by the High Court to grant the application for special leave.
      • We will not fund applications for special leave by a taxpayer unless we do not agree with the decision of the Full Federal Court or Court of Appeal of a state or territory. This is because we consider the decision of the Full Federal Court or Court of Appeal by a state or territory achieves the level of law clarification that the test case program has been established to obtain.
      • If you obtain leave to appeal to the High Court, we will consider providing test case funding as the High Court view of the importance of the case may provide strong reasons for it. If test case funding is provided, the costs of the appeal would also usually cover the cost of the application for special leave.
      • We will generally offer this type of test case funding without referring the case to the Panel. A decision will usually be made by the deputy chair or chair.
       
    • Where we identify a case that meets the criterion and expectations, but does not meet one of the above test case funding policies, the chair or deputy chair may refer the case to the Panel for consideration.

    If you are approved for test case funding we will contact you to discuss your case.

    See also:

    Cases that are declined for test case funding

    We will notify you on the day the Panel makes the decision on test case funding. We will also send a letter outlining the reasons why test case funding was declined.

    If you do not agree with our reasons for declining your application, you can ask for a review of the decision by completing the request for review of test case funding decision form. You should provide any additional information (that you have not previously submitted with your application for test case funding) that you would like the reviewing officer to consider.

    A senior ATO officer, who did not make the original decision to decline test case funding, will conduct the review. The officer will make a recommendation to the Panel or the chair at the conclusion of their review.

    We will give you the review decision with reasons in writing, within two weeks of receiving the request form.

    Next step:

    Cases that are approved for test case funding

    Expectations

    Test case funding is only approved for the specified issue or proceedings. We will discuss with you which expenses may or may not be funded by the test case program.

    Regardless of whether you submit an application or we make a decision to provide you with test case funding without an application, funding will cover your reasonable legal costs.

    Importantly, acceptance of your case into the test case program is not an undertaking to meet your full legal costs. Costs paid by the test case program are a contribution towards your legal costs.

    Test case funding deed

    The test case funding deed is a formal agreement between you and the ATO to provide funding subject to specified terms and conditions. All cases approved for test case funding will require a deed. We will send you the deed relevant to your case once test case funding is approved. The deed will contain information about:

    • the test case funding issue
    • the requirement of a costs estimate
    • terms of test case funding and payment.

    Tax consequences

    There may be tax consequences in relation to payments made to you under the test case program as reimbursement of expenditure, or payments made to third parties in respect of services provided to you.

    If you are approved for test case funding, we recommend that you obtain advice from your legal representative.

    Costs

    We will contact you about what reasonable legal costs you can claim if your case is approved for test case funding.

    If approved for test case funding, you will need to provide a costs estimate for your case to allow the test case program to track expected costs.

    What is the date that test case funding begins?

    In most instances costs will be paid from the date of the appeal or application to the Court or AAT.

    How often will I be paid?

    You can choose to submit your invoices monthly. We will seek to pay your invoices within 30 days of receipt. If we are unable to pay your invoices within this timeframe, we will let you know.

    Large or complex invoices may be referred to an independent cost consultant for review which the test case program will pay for.

    What costs do we pay?

    • Reasonable legal costs according to the venue or, if the case is pre-litigation, at a rate capped under the deed.
    • Solicitor's fees will be payable with reference to the Federal Court or High Court rules. The amount we pay for solicitor's fees may be less than the rates they may charge.
    • Counsel fees will be payable with reference to the National Guide to Counsel Fees. The amount we pay for counsel fees may be less than the commercial rates counsel may charge.
    • Disbursements including expenses such as photocopying, transcripts, couriers and some travel costs where appropriate.
    • Other costs for those cases approved for pre-litigation such as tax agent costs in relation to preparing an objection or private ruling will be capped under the deed.

    If you are unsure about what costs you can claim you should contact us to discuss before incurring the cost.

    What costs don’t we pay?

    • Expenses that relate to the administration of the test case program as it is applicable to the matter approved for test case funding.
    • Costs that relate to the preparation of bills of costs for reimbursement.
    • Costs that are incurred prior to the test case funding date or after termination of the deed (for example the commencement and conduct of any appeal).

    A full explanation of what costs we do and don’t allow will also be provided in the deed.

    How do I submit a claim for test case funding?

    You should provide all your invoices for solicitors, counsel and disbursements for the relevant period together if possible which will assist with the payment of all your invoices together. Invoices should be itemised and provide an explanation of the expense so that they can be assessed properly. Information about what is required in the invoices can be found in the deed.

    What if I disagree with the assessment of my costs made by the test case program?

    We will try to resolve any dispute regarding costs with you and may seek further information about the costs you have claimed. We may refer the dispute to an independent cost consultant to resolve. The costs of engaging consultant will be met by the test case program.

    If you disagree with an assessment of costs, you should contact us.

    The following table shows the test case funding process once you are approved for funding.

    Step

    Action

    Further information

    1

    A decision is made to fund a case

     -

    2

    The test case program) advises the court or AAT that the matter is funded

     -

    3

    The test case program makes contact the with the taxpayer or their representative

    A letter is sent advising test case funding is approved, enclosing a deed and requesting a costs estimate

    test case program will call the taxpayer or their representative and discuss test case funding explanations

    4

    Taxpayer signs the deed

    If the taxpayer does not sign the deed the matter is finalised.

    5

    Taxpayer submits invoices to the test case program

     -

    6

    The test case program reviews the invoices

     -

    7

    The test case program makes a payment or adjusted payment and advises the taxpayer

     -

    8

    Test case funding claim is finalised

     -

    9

    The test case program seeks feedback from the taxpayer

     -

    The following table shows the process followed if a taxpayer disputes a payment.

    Step

    Action

    Further information

    1

    Taxpayer disputes payment or adjusted payment received from the test case program

     -

    2

    The test case program discusses with taxpayer

    If the test case program and taxpayer discuss the invoice and come to a mutual agreement the test case funding claim is finalised

    3

    Cost consultant reviews bills

    If the test case program and taxpayer are still in dispute over the invoice the matter is referred to a cost consultant

    4

    Outcome of review

    Pursuant to the deed the cost consultant will provide their Opinion to the test case program and the test case program will provide this to the taxpayer

    5

    Payment is made to the taxpayer

     -

    6

    Test case funding claim finalised

     -

    7

    The test case program seeks feedback from the taxpayer

     -

    Small business litigation funding

    Where you are self-represented in the Small Business Taxation Division of the Administrative Appeals Tribunal (SBTD AAT), and the ATO engages external legal representation, the ATO will cover reasonable costs to engage an equivalent level of legal representation to act on your behalf in the SBTD AAT. Find out more about Small business litigation funding

    Confidentiality

    Information about cases considered for test case funding may be published on our web page and in our Test case litigation register.

    The register includes information about applications we receive for test case funding and approved cases. The particulars of each case are not published on the register unless the information is in the public domain.

    Contact us

    For more information about test case program funding:

    Test Case Litigation Program
    Australian Taxation Office
    GPO Box 4889
    Sydney  NSW  2001

    If you do not speak English well and need help from the ATO, phone the Translating and Interpreting Service on 13 14 50.

    If you are deaf or have a hearing or speech impairment, phone us through the National relay service (NRS) on the numbers listed below:

    • TTY users, phone 13 36 77 and ask for the ATO number you need
    • speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
    • internet relay users, connect to the NRS on relayservice.com.auExternal Link and ask for the ATO number you need.
    Last modified: 04 Jul 2019QC 27175