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14 Oct 2021 Cases Corner

Case summaries

This week, we will reflect on a couple of cases from September 2021 and consider the implications of the decisions.

CUB Australia Holding Pty Ltd v Commissioner of Taxation [2021] FCAFC 171

Federal Court of Australia: Middleton, McKerracher and Griffiths JJ

Date: 21 September 2021

Decision: in favour of the Commissioner

Representation for the Taxpayer: Mr FD O’Loughlin QC with Ms A Lee (instructed by Johnson Winter & Slattery)

Representation for the Commissioner: Mr PJ Hanks QC with Ms M Clarebrough (instructed by the AGS)

The Commissioner of Taxation (the Commissioner) has considerable powers to obtain information to help the Australian Taxation Office (ATO) administer the tax laws. One such power is s 353-10 of Schedule 1 to the Taxation Administration Act 1953 (TAA), which allows the Commissioner to request, among other things, a person provide information, give information in person and/or produce documents they have or control. 

There are limits on the exercise of the Commissioner’s power. One such limit is the doctrine of legal professional privilege (LPP). In broad terms, LPP protects written (and oral) communications between a legal adviser and their client where the dominant purpose of the communications is legal advice or litigation where litigation is taking place or is reasonably anticipated at the time the communication was made. 


In May 2018, the Commissioner served a written notice under s 353-10 requiring CUB Australia Holdings (the Taxpayer) to produce certain documents which were considered to be relevant in determining the Taxpayer’s tax liability. However, the Taxpayer claimed that more than 20,000 documents were protected by LPP.

In March 2020, the ATO issued a further s 353-10 notice requiring the Taxpayer to provide certain information for every document they had claimed was protected by LPP, including:

  • the title of the document or, where the document was an email, the subject line of the email;
  • the name of the author of the document;
  • the name of each person to whom the document was communicated; and
  • where the document was an email, for each person who received the email, whether the email was sent directly to the person or copied to the person.

The Taxpayer claimed that the March 2020 s 353-10 notice had been issued for an improper purpose (and thus it was not valid); namely, to determine the validity of its LPP claims. The ATO, however, claimed that the notice was issued so that they could obtain information to help them decide whether to accept or challenge the LPP claims. 


Win for the ATO 

At first instance, Moshinsky J (in CUB Australia Holding Pty Ltd v Commissioner of Taxation [2021] FCA 43) was not satisfied that the Taxpayer had established that the purpose of the March 2020 s 353-10 notice was for the ATO to determine the validity of their LPP claim (a matter solely for the courts).

On appeal to the Full Federal Court, their Honours held that the notice was valid, agreeing with the primary judge that the Commissioner’s dominant purpose in issuing the s 353-10 notice was to determine whether to accept or challenge the Taxpayer’s LPP claims. The Full Federal Court added that the details requested by the ATO were insufficient for the Commissioner to make a finding of whether the Taxpayer’s claims of LPP were valid.

In unanimously upholding the Federal Court’s decision, the Full Federal Court said:

Taken as a whole, the history reveals the Commissioner pursuing a course of attempting to accumulate additional information in circumstances where he has expressed the view that the claims for privilege made by CUB were opaque. Even if the Commissioner was wrong about that view, such an error would not support a conclusion that he was seeking to determine the validity of the LPP claims.

What does this decision mean?

The Full Federal Court’s judgment highlights the distinction between the Commissioner determining whether an LPP claim is valid (which is outside the Commissioner’s power) and determining whether to accept or challenge an LPP claim (which is permitted). The decision confirms the Commissioner’s power to seek from a taxpayer sufficiently descriptive information to assist the Commissioner to determine whether to accept or challenge the taxpayer’s LPP claim(s). It does not in any way change or curtail taxpayers’ rights to LPP.

Taxpayers should be alerted to the ATO’s increased scrutiny of LPP claims, particularly in circumstances that are similar to the facts of this case.

What about accountants? 

LPP applies to certain communications between lawyers and their clients, and in certain circumstances may apply to communications with third parties where they are made for the benefit of a client. Lines can become blurred for practitioners who hold both legal and accounting qualifications as the question arises as to the capacity in which the advice is provided.

The ATO acknowledges that there is a class of documents which should, in all but exceptional circumstances, remain within the confidence of taxpayers and their professional accounting advisers. An accountants’ concession is provided for this purpose. The ATO’s Guidelines to accessing professional accounting advisers’ papers describe how that acknowledgement applies in practice. You can find the Guidelines here.

Interaction with the ATO’s LPP Protocol

The ATO recently released for public consultation a Draft Protocol setting out their recommended approach to identifying communications covered by LPP and making LPP claims to the ATO. You can find it here.

The current version of the Draft Protocol recommends a three-step approach once a relevant engagement/service has been identified: 

  1. Assess— review and determine the status of each individual communication.
  2. Explain — particularise the basis of your LPP claim, providing the level of detail outlined in the Draft Protocol for standard particulars, and where relevant, additional particulars.
  3. Advise — tell the ATO about the approach you and your adviser(s) took in making the LPP claims, including how you used the Protocol. 

The Taxpayer also claimed that the titles of the documents upon which LPP had been claimed were themselves privileged. This claim will be heard separately, but it should be noted that the Draft Protocol currently recommends that a person claiming LPP should provide the title (or subject line) of the relevant communication. 

In light of stakeholder feedback provided through consultation, the Draft Protocol has evolved over various iterations. We understand that the ATO continues to reflect on feedback in making further revisions to the document. The Tax Institute has been engaged with the ATO in consultation on the Draft Protocol and will be making a written submission reflecting feedback raised by members and potential solutions to some current concerns.

Chief Commissioner of State Revenue v McIntosh Bros Pty Ltd (in liq) [2021] NSWCA 221

NSW Supreme Court – Court of Appeal: Meagher, Payne and White JJA

Date: 16 September 2021

Decision: in favour of the Taxpayer

Representation for the Taxpayer: M Richmond SC with R Mansted (instructed by King & Wood Mallesons)

Representation for the Chief Commissioner: T Lynch SC with A Rider (instructed by the Crown Solicitor)

Land tax is a complicated tax, but it can produce some interesting legal questions.

In this recent NSW Court of Appeal case, the central issue was whether land used independently by four or more persons for primary production purposes was exempt from NSW land tax. The NSW Court of Appeal held the land was exempt.


A dairy farm at Cobbity, NSW, had been owned by the McIntosh family since 1868. It was transferred to McIntosh Bros Pty Ltd (the Company) in 1931. In 1987, when the Company was placed into voluntary liquidation, the land was informally divided into two parts. The Denbigh (west) side was controlled by Jim McIntosh and his family and the Bangor (east) side was controlled by Ron McIntosh and his family.

On the Denbigh side, Jim McIntosh’s son, Ian, grazed his own cattle and agisted the cattle of third parties, including a nearby dairy farmer. On the Bangor side, Ron McIntosh and his son, Richard, conducted a beef cattle operation and Jim Head ran a cattle grazing business.

The Company was assessed for land tax for the 2014 to 2016 calendar years. However, the NSW Civil and Administrative Tribunal (the Tribunal) determined that the primary production exemption in s 10AA(2) of the Land Tax Management Act 1956 (NSW) applied because:

  • the dominant use of the land was for primary production;
  • that use had a significant and substantial commercial purpose or character; and
  • that use was engaged in for the purpose of profit.

(The land was not zoned as ‘rural land’ and therefore the exemption for rural land (under s 10AA(1)) did not apply.)


Win for the taxpayer

After unsuccessfully appealing to the Appeals Panel of the Tribunal, the Chief Commissioner lost his appeal to the NSW Court of Appeal.

The Court agreed with the Tribunal that, although there were four or more independent uses of the land by different persons or entities, each use was a primary production use and that those various primary production uses could be aggregated or consolidated and weighed against the non-primary production uses (which in this case was de minimis). As a result, the dominant use of the land was for primary production.

The Court also agreed that the commerciality and purpose of profit tests in s 10AA(2) were satisfied, taking account of the several activities undertaken on both the Denbigh and Bangor sides of the land (with the exception of two minor agistees).

The Court said that where the dominant use of the land consists of primary production activities conducted independently by a number of users (as in this case), in determining whether the commerciality and purpose of profit tests are satisfied, that use is to be assessed as a whole and taking into account those independent uses. Neither of those tests requires a single subjective purpose to be identified.

Further, in determining whether the primary production use of the land satisfied the commerciality test, the Tribunal was entitled to consider that use within the context of any wider business activity of which it formed part.

The Court also said that agisting cattle on the land fell within the definition in s 10AA(3) of ‘land used for primary production’ (i.e. the maintenance of animals), and that the identity of the person or persons ‘maintaining’ the animals (in this case the dairy farmer) was not relevant.

What does this decision mean?

The decision gives NSW landowners greater certainty when determining whether a parcel of land is predominantly used for primary production purposes where multiple parties are using it independently of one another. This means that landowners do not need to consider each party’s use of the land separately and may instead consider them holistically within the context of any broader arrangements they have in place.

This is particularly relevant to landowners in rural NSW, as it is normal for large parcels of land to be used by various parties for different forms of agriculture and other primary production activities. The decision reduces the uncertainty in situations where some of the users may also be using the land for non-primary production purposes (such as living on the land), albeit that the activities taken as a whole are for primary production.

This decision is also noteworthy to landowners outside of NSW. As the issue has not been directly addressed by the courts or tribunals in the other states, it will be interesting to see whether other states adopt a similar approach to NSW or depart from the views expressed by the NSW Court of Appeal.


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