I am no tax lawyer, but wow! An ATO duty of care to taxpayers?

Justice Wigney (Federal Court) has held on Friday that it is at least reasonably arguable that the Commissioner of Taxation (ie #ATO) owed the applicant taxpayer a duty of care at common law.

What does this mean?

  • It allows the taxpayer to press ahead with its case that the ATO was allegedly negligent when it paid tax refunds owed to the taxpayer to a fraudulent account.
  • The fraud was said to arise when the tax accountant nominated a bank account belonging to a company of his, rather than the taxpayer’s account.
  • The ATO in carrying out its investigations, identified the possibility of the fraud, allegedly did not tell the taxpayer, and yet continued to pay refunds into the fraudulent account.

Why the wow?

In the ATO’s own words, no superior Australian court (or other common law country) has ever accepted such a duty could exist against a tax office. Also, the ATO’s only duty is to the Crown (ie Government).

It appears that Justice Wigney thought it at least arguable that you could say that the ATO might owe a duty to a particular taxpayer to exercise care in paying refunds in circumstances where the ATO had reason to suspect a fraud (and potentially just ‘irregularities’).

This case will be interesting to follow.

tax fraud SVVoidables


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