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Section 264 notices

I have blogged previously about the ATO’s powers to force taxpayers to hand over documents and give evidence*. Recently I have applied the very narrow limitations imposed by the ANZ case in a number of s264 notices.

 

The powers of the ATO to issue these notices are very wide, but the ATO must get the wording of the notices right.  If the notice is vague, or uncertain, or in the words of the Full Federal Court if the notice “leaves too much of its meaning and application to be worked out by [the recipient]” then the notice will be invalid.
 
Objecting to a s264 notice on these grounds is not a final remedy.  The ATO can always re-issue a notice, even assuming that they agree with your argument that the notice is too unclear.  Furthermore, you must have very strong grounds because if you are wrong the ATO has the option to prosecute you for failing to comply.  Multiple offences can lead to imprisonment.
 
The broader issue is one of a recurring nature. The government has handed the ATO with an extremely large stick for investigating taxpayers, and for that matter, their advisers and service providers such as banks. The ATO can, and often does, use s264 notices for fishing expeditions. They are specifically allowed to do so. Because of their virtually unfettered power, in some cases the ATO officers are sloppy and lazy when drafting s264 notices.  The ANZ case makes it clear that because of the seriousness of the consequences of failing to comply with a s264 notice (ie jail time) the ATO must make the notices clear.  If the recipient has to guess at the ATO’s meaning, this is not good enough.
 
This is particularly so where the ATO is asking information of an accountant or lawyer with respect to their clients. If the adviser has to guess at the meaning of the s264, and guesses wrong (i.e. gives more information than the notice intended to the client’s detriment), it is likely the client would have a claim against the adviser for breach of express or implied duties of confidentiality.
 
If you receive a s264 notice and you are concerned as to its meaning and your duty to respond to it, please feel free to get in contact with me to discuss it.

* under section 264 of the Income Tax Assessment 1936 and section 353-10 of the Taxation Administration Act 1953
 

Posted in: Tax & ATO News Australia at 22 March 13

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Author: David Hughes

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