When Should You Brief a Tax Barrister?

Tax Matters Suitable for Briefing Counsel.

Knowing when to brief a tax barrister can be important where a taxation matter involves complex legal issues, significant financial exposure or a developing dispute with the Australian Taxation Office (ATO).

For instructing solicitors, involving tax counsel at an appropriate stage can assist in identifying the legal issues, assessing prospects, developing a strategy and determining how the matter should proceed.

A tax barrister may be briefed to provide a written opinion, advise on prospects, confer with the solicitor and client, settle correspondence or pleadings, assist with an ATO objection or review, and appear in taxation proceedings.

Briefing counsel does not need to be confined to matters that have already reached litigation. In appropriate cases, obtaining advice earlier may help clarify the legal position before significant decisions are made or a dispute becomes more difficult to resolve.

Chris Garlick accepts briefs from solicitors in Australian taxation matters and provides advice and advocacy across complex tax issues, ATO disputes and tax litigation.

When a Tax Matter Moves Beyond Tax Compliance

Accountants play an important role in taxation compliance, financial reporting, preparation of returns and dealings with the ATO.

Some taxation matters, however, raise questions that extend beyond accounting treatment and require legal analysis.

This may occur where a matter involves:

• interpretation of taxation legislation;
• competing interpretations of statutory provisions;
• significant potential tax liabilities;
• complex corporate or trust structures;
• questions concerning the legal characterisation of transactions;
• potential penalties;
• an ATO audit or investigation;
• an objection to an assessment;
• administrative review or an appeal; or
• existing or anticipated litigation.

At this stage, a solicitor may consider whether the client would benefit from counsel’s opinion on the taxation issues and the appropriate strategy.

For further information about the distinction between tax compliance and legal disputes, see ATO Tax Disputes Lawyer Australia.

Briefing Tax Counsel Before an ATO Position Becomes Entrenched

There can be advantages in briefing a tax barrister before a dispute reaches litigation.

During an ATO review or audit, the way the taxpayer’s factual and legal position is developed may affect subsequent stages of the matter.

Counsel may assist an instructing solicitor by considering:

• the relevant statutory provisions;
• the available evidence;
• the legal characterisation of transactions;
• potential areas of exposure;
• the strength of competing arguments;
• correspondence proposed to be provided to the ATO; and
• the consequences of different strategic approaches.

The objective is not necessarily to escalate the dispute. In appropriate matters, early advice may assist in identifying the real issues and determining whether the dispute can be narrowed or resolved.

The Australian Taxation Office provides information about its reviews and audits and its information-gathering processes.

Tax Objections and Objection Decisions

An ATO assessment or amended assessment may give rise to questions concerning whether an objection should be lodged and how the taxpayer’s grounds should be formulated.

A tax objection is not simply a statement that the taxpayer disagrees with the Commissioner.

The legal and evidentiary basis for the taxpayer’s position may need careful consideration.

Depending on the matter, counsel may assist with:

• identifying the relevant grounds of objection;
• analysing the legislation and authorities;
• considering evidentiary issues;
• advising on prospects;
• reviewing or settling an objection;
• responding to issues raised by the Commissioner; and
• advising on the next steps following an objection decision.

Where substantial amounts or difficult questions of statutory interpretation are involved, obtaining counsel’s advice before positions are finalised may be appropriate.

When Tax Litigation Is Possible

The case for briefing tax counsel becomes stronger where litigation is reasonably contemplated.

Taxation proceedings can involve detailed statutory construction, extensive documentary evidence, expert material and questions about the legal characterisation of transactions.

The Federal Court of Australia’s Taxation National Practice Area includes tax appeals from decisions of the Commissioner under Part IVC of the Taxation Administration Act 1953, appeals from the Administrative Review Tribunal involving taxation disputes and other proceedings associated with tax disputes.

Where proceedings are contemplated or commenced, counsel may assist with:

• advice on prospects;
• identification of issues in dispute;
• development of the litigation strategy;
• settlement of pleadings and other court documents;
• preparation of evidence;
• conferences with witnesses or experts;
• written submissions;
• interlocutory hearings;
• final hearings; and
• appellate advocacy.

Early involvement may also allow counsel to become familiar with a complex factual record before critical procedural decisions are required.

Complex Division 7A Matters

Division 7A matters can involve difficult questions concerning private companies, shareholders, associates, loans, payments and forgiven debts.

While many Division 7A issues can be dealt with as part of ordinary taxation compliance, legal questions can arise where there is disagreement about the characterisation of a transaction, historical arrangements or the application of the legislation.

This can become particularly important where the ATO has commenced an audit or proposes to treat an amount as a deemed dividend.

For an explanation of how these rules operate, see Can I Borrow Money From My Company? Tax Rules for Company Loans to Shareholders.

Where a Division 7A matter involves significant exposure, disputed facts or competing interpretations of the legislation, a solicitor may consider briefing tax counsel for an opinion.

International Taxation and Cross-Border Matters

International taxation matters can present particular difficulties because Australian taxation law may interact with foreign tax systems, treaties and cross-border business arrangements.

Issues can arise concerning:

• Australian tax residency;
• foreign income;
• double taxation agreements;
• transfer pricing;
• controlled foreign company rules;
• permanent establishments;
• withholding tax;
• offshore trusts and companies;
• cross-border transactions; and
• international business structures.

In these matters, legal analysis may be required not only of domestic taxation legislation but also of treaty provisions and the legal structure of the relevant transactions.

Chris Garlick provides advice on these matters as part of his international taxation practice.

When a Written Opinion May Assist

Not every brief to counsel involves a dispute or court appearance.

An instructing solicitor may seek a written opinion where a client requires greater certainty about the legal consequences of a proposed or existing arrangement.

A written opinion may be useful where:

• the legislation is complex or uncertain;
• significant financial consequences depend on the interpretation adopted;
• a transaction is being contemplated;
• different professional advisers hold different views;
• the client requires an independent assessment of risk;
• the matter may subsequently be scrutinised by the ATO; or
• the solicitor requires counsel’s view before advising on the next step.

The scope of the opinion can be defined by the instructing solicitor so that counsel addresses the particular legal questions requiring determination.

Advice on Prospects

Where a taxation dispute has developed, a solicitor may brief counsel specifically for advice on prospects.

This can assist the solicitor and client in deciding whether to continue challenging the Commissioner’s position, pursue review or litigation, seek to narrow the dispute or consider another method of resolution.

Advice on prospects may involve consideration of:

• the applicable legislation;
• relevant authorities;
• the evidence presently available;
• evidentiary weaknesses;
• the Commissioner’s stated position;
• potential alternative arguments; and
• litigation and commercial risk.

An independent assessment at an appropriate stage can assist the client in making an informed decision about how to proceed.

Conferences With Tax Counsel

A conference with counsel may also be useful where the matter is factually or legally complex.

Depending on the nature of the brief, a conference may involve the instructing solicitor, client, accountant or other relevant professional adviser.

Conferences can assist in clarifying factual matters, identifying missing evidence, testing legal arguments and determining what further work is required.

Where accountants have been involved in the underlying taxation affairs, their knowledge of the client’s financial records and transactions may be particularly important to the briefing process.

What Should an Instructing Solicitor Provide?

The material required will depend on the nature and stage of the matter.

A useful brief will ordinarily identify the questions on which counsel’s advice is sought and provide the documents necessary to understand the relevant facts.

Depending on the matter, this may include:

• a chronology;
• relevant agreements and transaction documents;
• ATO correspondence;
• assessments or amended assessments;
• audit or review documents;
• objections and objection decisions;
• financial statements;
• relevant tax returns;
• accounting material;
• prior professional advice;
• relevant correspondence; and
• court or tribunal documents where proceedings have commenced.

A focused brief can assist counsel in identifying the central issues efficiently and determining whether additional information is required.

When Should You Brief a Tax Barrister?

There is no single point at which every taxation matter should be referred to counsel.

However, solicitors may consider briefing a tax barrister where the matter involves significant financial exposure, complex statutory interpretation, an ATO dispute, an objection or review, international taxation issues, advice on prospects or actual or anticipated litigation.

The appropriate time will depend on the circumstances.

In some cases, counsel may be most useful before a response to the ATO is finalised. In others, the need may arise when an assessment is issued, an objection is being prepared or litigation becomes likely.

The central question is whether independent counsel’s advice or advocacy can assist the instructing solicitor in protecting the client’s position and determining the appropriate course.

Briefing Chris Garlick

Chris Garlick accepts briefs from solicitors in complex Australian and international taxation matters.

Instructions may include:

• written opinions;
• advice on prospects;
• ATO audits and disputes;
• tax objections;
• Division 7A matters;
• international taxation;
• tax residency disputes;
• statutory interpretation;
• conferences;
• settlement of pleadings and submissions;
• Federal Court taxation proceedings; and
• appellate advocacy.

Chris works with instructing solicitors and, where appropriate, accountants and other professional advisers to identify the taxation issues requiring determination and provide advice or advocacy appropriate to the stage of the matter.

For solicitors considering whether a matter is appropriate to brief, Chris Garlick provides advice and advocacy in Australian taxation matters.