• Litigation - our costs

    Litigation is a small but important part of the tax and superannuation system, and the ATO recognises taxpayers’ rights to have ATO decisions independently reviewed.

    Litigation involving taxation and superannuation decisions can be undertaken through the:

    • the Administrative Appeals Tribunal (AAT) or the Federal Court, under Part IVC of the Taxation Administration Act 1953
    • the Federal Court under section 39B of the Judiciary Act 1903 and the Administrative Decisions (Judicial Review) Act 1977.

    If a taxpayer or the ATO is dissatisfied with a decision of the AAT, they may appeal to the Federal Court and in some instances, directly to the Full Federal Court. There is an automatic right of appeal from a final decision of the Federal Court to the Full Federal Court.

    If the parties still dispute the decision of the Full Federal Court, they can seek special leave to appeal to the High Court. There is no further avenue of appeal once a High Court decision is handed down.

    Being a model litigant

    The ATO is subject to the Legal Services Directions issued by the Attorney-General. These include the obligation for the ATO to act as a model litigant.

    Taxpayers and their representatives are advised of our model litigant obligations at the commencement of litigation. External legal service providers and counsel representing the ATO are also informed of their model litigant obligations at the time they are engaged to represent the ATO.

    In 2012-13 the ATO received and reported 15 new allegations of breach of the Legal Service Directions. Investigation of 29 alleged breaches were finalised (including allegations from earlier years), with only two breaches identified. The two breaches were specific to the cases in question and did not suggest any broader systemic issues. The Office of Legal Services Coordination (OLSC) within the Attorney-General’s Department confirmed these findings and was satisfied with how these matters were being managed by the ATO.

    Legal expenditure

    As litigation is expensive, we seek to resolve disputes as early as possible to minimise costs.

    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 FOI. Legal services expenditure by the Tax Practitioners Board (TPB) is also included in the ATO’s legal services expenditure.

    Figure 1: Expenditure on legal services

    Figure 1: Expenditure on legal services

    Expenditure on test cases

    In 2012-13 we increased funding for test case litigation.

    Figure 2: Expenditure on test case funding

     Figure 2: Expenditure on test case funding

    Costs awarded

    There is no consistent trend in the expenditure for costs awarded against the ATO. In 2012-13 over $10 million of the costs awarded was attributed to four cases.

    Figure 3: Costs awarded

     Figure 3: Costs awarded

      Last modified: 19 May 2014QC 40182