Dispute Resolution Instruction Bulletin

DR IB 2013/6

Authorisation of EL2 and EL1 Dispute Resolution officers to settle Tax Resolution litigation

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Purpose:

To provide guidance to Dispute Resolution staff on the authorisation of EL2 and EL1 officers to settle Tax Resolution litigation

Stream:

Tax Resolution Practice

Background

1. Within the Tax Resolution (formerly Part IVC) stream, the power to conclude settlements in accordance with the Code of Settlement Practice rests with officers at the Senior Executive (SES) level, EL 2 level and EL 1 level. The authority for EL2 officers in Dispute Resolution (DR) to settle Tax Resolution litigation subject to a monetary limit of $1million^[1] and the authority for EL1 Officers to settle Part IVC litigation matters subject to a monetary limit of $250,000^[2] are under the approval of the First Assistant Commissioner Law and Practice.

2. This instruction bulletin provides guidance as to the circumstances in which EL2 and EL1 officers are authorised to settle Tax Resolution litigation and the importance of discussing the options for, and parameters of, a potential settlement with business line officers and the relevant SES. The need for transparency in establishing the ATO position for settlement negotiations and determining whether proposals can be accepted, modified or rejected demands that internal discussions are clearly and unambiguously recorded.

Considerations for Settling Tax Resolution litigation

3. Where a settlement (which may or may not arise out of alternative dispute resolution) is considered appropriate, DR EL2 and EL1 officers have authority within monetary limits so long as the relevant SES has been consulted. (See Appendix 1 and Appendix 2). The considerations which may be relevant to the decision to settle Tax Resolution litigation are set out in:

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Corporate Management Practice Statement PS CM 2003/02 Risk and Issues Management

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Law Administration Practice Statement PS LA 2007/5 which prescribes the mandatory use of the Code of Settlement Practice by all officers in the settlement of taxation disputes

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Law Administration Practice Statement PS LA 2009/9 which explains at paragraph 47 that "where Tax Counsel is not involved in litigation DR will be the final decision maker on all issues arising in the course of the litigation".

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Law Administration Practice Statement PS LA 2009/9 (Annexure G) Risk Management in Litigation

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Law Administration Practice Statement PS LA 2007/23 Alternative Dispute Resolution (ADR), which provides instruction on what policies and guidelines must be followed when attempting to resolve or limit disputes by means of ADR.

4. It is expected that EL2 and EL1 DR officers involved in settlements will have appropriate skills in ADR and negotiation and knowledge of the relevant ATO Policy documents when assessing the risks in a particular matter.

5. Where changes occur in evaluating the risk assessment in Tax Resolution litigation, EL2 DR officers are authorised to exercise their authority under the Instrument of Authorisation dated 12 August 2008 to conclude settlements of Tax Resolution litigation in accordance with the $1m limit outlined in Appendix 3 - Delegation and Authority to Settle Part IVC Litigation 25 June 2008. EL1 DR officers are authorised to exercise their authority under the Instrument of Authorisation dated 25 August 2011 to conclude settlements of Part IVC litigation in accordance with the $250,000 limit outlined in Appendix 4 - Authority to Settle Part IVC Litigation 25 August 2011. Where possible these changes should be discussed with the relevant BSL SES prior to concluding settlement, however this may not be possible if the changes arise during an ADR.

6. Officers should also be aware of the Commonwealth's obligation to act as a model litigant as set out in the Legal Services Directions 2005. This includes at sub-paragraph 2(e)(iv):

"ensuring that arrangements are made so that a person participating in any settlement negotiations on behalf of the Commonwealth or an agency can enter into a settlement of the claim or legal proceedings in the course of the negotiations"

At settlement negotiations:

7. DR officers attending are required to be fully familiarised with the case and ensure that they have fully determined all factors that may change the risk or decision to settle

8. DR officers should ensure that they either have the appropriate authorisation to settle the matters on the day or they have:

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clear instructions on the possible acceptable terms of settlement

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arrangements have been made to have an authorised person contactable by phone so an in-principle agreement can be made between the parties.

9. At least one other person from the litigation team should also attend. This could include the BSL decision maker with delegated authority, TCN or the BSL case officer

10. Whilst recognising that it is important to have sign-off from the BSL delegate on the parameters for settling a case, situations may arise where it is not possible or practical to contact the BSL delegate. In such circumstances the EL1, EL2 or SES Dispute Resolution officer should, acting within their level of authority exercise their own judgment in deciding whether to accept the terms of settlement being offered.

Authority to Remit General Interest Charge ('GIC')

11. The ATO policy governing the remission of GIC is set out in Law Administration Practice Statement PSLA 2011/12 - Administration of general interest charge (GIC) imposed for late payment or under estimation of liability.

12. Where a remission of GIC is considered appropriate on the basis of circumstances outlined in PSLA 2011/12 the Commissioner has delegated authority to remit GIC, as part of his delegated authority to settle debt recovery litigation (See Appendix 2 - Delegation and Authority to Settle Debt Recovery Litigation).

13. It is expected that EL1 and EL2 DR officers involved in tax resolution litigation will have the appropriate skills and exercise the appropriate degree of care in considering remission of GIC. This includes knowledge of the relevant ATO policy documents when making a decision to remit GIC as part of a settlement of litigation. However, where possible, all DR officers should consult with their BSL officer including the Debt business line in any decision or assessment to remit GIC.

Alternative Dispute Resolution (ADR)

14. The Tax Office recognises and supports the use of ADR in appropriate cases as a cost effective, informal, consensual and speedy means of resolving disputes. In addition to the relevant court rules and AAT practice directions that provide guidelines on the conduct of litigation; the Legal Services Directions 2005 require litigation to be conducted in accordance with The Commonwealth's Obligation to Act as a Model Litigant. DR Tax Resolution officers must be familiar with the model litigant obligation and in particular for ADR processes paragraph 5.2 of Appendix B of the Legal Services Directions:

"When participating in alternative dispute resolution, the Commonwealth and its agencies are to ensure that their representatives:

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participate fully and effectively

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subject to paragraph 2(e)(iv), have authority to settle the matter so as to facilitate appropriate and timely resolution of a dispute."

15. The following procedures are to be undertaken by DR staff in ADR Tax Resolution litigation processes where settlement is being considered:

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Before the ADR date is agreed, ensure:

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the Tribunal or Court and parties in the ADR process are advised of the limitations imposed on Tax Officers in exercising authorised powers, i.e. the authorisation must be exercised in accordance with monetary limits and in accordance with ATO policies such as the Code of Settlement Practice

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sufficient time is allowed so that all appropriate information can be obtained and reviewed. The ATO should not ordinarily agree a time for ADR until the litigation team is in a position to participate fully and effectively. If the ATO requires a delay in the time of the ADR the court or tribunal and the taxpayer and/or their representatives must be advised in writing and informed of the reason for the delay.

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Before the ADR session:

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ensure proper consultation has occurred with the relevant BSL delegate and TCN if they are involved

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ensure the relevant BSL delegate has agreed to the parameters of a settlement

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the BSL should indicate whether they will take responsibility for any settlement decision and attend the ADR session.

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At ADR, the Tax Office representatives are required to participate fully and effectively in the process, therefore:

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DR officers attending the ADR are required to be fully familiarised with the case and ensure that they have fully considered all factors that may change the risk or decision to settle

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An DR EL1 or EL2 officer should attend the ADR session so that a decision can be reached on whether to accept the terms of settlement being offered

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Where an DR EL1 or EL2 officer is not available to attend the ADR session in person:

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an DR EL1 or EL2 officer must be available to be contacted by telephone (or if practicable a video conference) during the ADR session

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a second DR EL1 or EL2 officer must also be available should the first become unavailable

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the AAT Member or Federal Court Judge at the ADR session must be advised that the officer authorised to decide whether to accept the terms of settlement being offered is available by telephone (or if practicable a video conference) .

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Where the ADR session is attended by the BSL delegate with the authority to decide whether to accept the terms of settlement being offered an DR EL1 or EL2 officer should still be available to be contacted by telephone (or if practicable a video conference) during the ADR session.

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Where the ADR session is attended by a BSL officer without authority to decide whether to accept the terms of settlement being offered:

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a BSL delegate with authority to decide whether to accept the terms of settlement being offered must be available to be contacted by telephone (or if practicable a video conference) during the ADR session

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a second BSL delegate with authority to decide whether to accept the terms of settlement being offered must also be available to be contacted by telephone (or if practicable a video conference) should the first become unavailable

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an DR EL1 or EL2 officer must also be available to be contacted by telephone (or if practicable a video conference) during the ADR session

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the BSL officer attending the ADR session must have approval from their SES to agree to a settlement based on new facts and evidence.

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DR officers should ensure that the other parties involved in the ADR session, including the AAT member or Federal Court judge, are advised in writing beforehand if the Tax Office representatives in attendance will not have the authority to accept the terms of settlement being offered

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DR officers should ensure that a decision on any settlement proposal is made at the ADR session

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Where new facts, evidence and/or settlement proposals are put forward at the ADR session:

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officers with authority to decide whether to accept the terms of settlement being offered may advise the Tribunal or Court that further time is required to consider any new facts, evidence, and/or settlement proposals put forward at the ADR session

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the Court or Tribunal should be advised that a response will be provided once any new facts, evidence and/or settlement proposals have been fully considered

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where there is no officer with delegated authority in attendance at the ADR session, DR officers must assess whether it is appropriate that the new facts, evidence and/or settlement proposal be fully considered by telephone (or if practicable a video conference), and advise the Tribunal or Court appropriately should the new facts, evidence and/or settlement proposal require further time to be considered.

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Where there is no officer with delegated authority in attendance at the ADR session, DR officers who have assessed that further time is required to fully consider the new facts, evidence and/or settlement proposal should not contact the DR EL1 or EL2 officer available by telephone to consider the new facts, evidence and/or settlement proposal.

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Where further time is required to fully consider the new facts, evidence and/or settlement proposal DR officers should ensure that the Tribunal or Court is not advised that further time is required by reason of non-attendance of an officer with delegated authority.

Documentation

16. Prior to any settlement negotiations (including ADR) a memorandum of the issues discussed and agreed with the BSL delegate including the legal basis for the settlement options and the parameters of the range of disputed liability or entitlement upon which settlement might reasonably be based should be prepared and agreed by the litigation team. The BSL is responsible for preparing any summaries of tax in dispute and liability or entitlement.

17. DR officers are responsible for accurately recording minutes of the conduct of the settlement negotiations and its outcomes. The positions adopted by each of the parties in the course of discussing the facts and issues should be clearly documented as should concessions by the parties and the principles of any settlement achieved. If the parties cannot settle their dispute but there is a narrowing or clarification of the facts and issues it should be clearly recorded. The minutes should be agreed by each of the ATO parties attending.

18. PS LA 2007/23 deals with documents drafted in the course of ADR (paragraphs 56 and 57). Documents drafted during the ADR process must be clear, definite and unambiguous.

19. Where it is not possible to conclude settlement on the day in-principle agreement can be made and the terms clearly documented by the parties.

Code of Settlement

20. Paragraph 67 of the code of Settlement Practice requires the decision maker on a settlement that falls within the Code to complete a Statement of Compliance.

21. Where that person is an DR officer they will need to ensure that they complete the Statement of Compliance. It will remain the responsibility of the BSL to complete the Settlement Register.

Appendix 1 - Office Minute dated 11 June 2008

On 11 June 2008, the Commissioner approved a recommendation to authorise EL2 officers in Legal Services to settle Part IVC matters to a limit of $1 million.

Authorisation of EL2s in Legal Service to settle Part IVC matters in dispute

Appendix 2 - Office Minute dated 17 August 2011

The FAC Law and Practice approved the office minute of 17 August 2011 to authorise EL1 officers in Legal Services to settle Part IVC matters to a limit of $250,000.

Authorisation of EL1s in Dispute Resolution to settle Part IVC matters

Appendix 3 - Delegation and Authority to Settle Part IVC Litigation

On 25 June 2008 the Commissioner delegated his authority to conclude settlements (which include settlements of Tax Resolution litigation) to a number of Senior Executive staff, including the First Assistant Commissioner Law and Practice. On 12 August 2008 the First Assistant Commissioner Law and Practice authorised EL2 staff in the Debt Resolution and Tax Resolution streams of Dispute Resolution to conclude settlements of Part IVC litigation.

Settlement Delegation 25 June 2008

Settlement Authorisation

Appendix 4 - Delegation and Authority to Settle Part IVC Litigation

On 25 August 2011 the First Assistant Commissioner Law and Practice authorised EL1 staff in the Part IVC streams of Dispute Resolution to conclude settlements of Part IVC litigation.

Instrument of authorisation settlement powers EL1

Approved by:

Assistant Commissioner, Dispute Resolution

Amendment History

Date of decision:  Immediate

Date of publication:  28 May 2013

Other References:
 PS CM 2003/02 [ATO internal link]

Related Practice Statements:
PS LA 2007/5
PS LA 2009/9
PS LA 2007/23
PS LA 2011/12