The ATO released its June 2022 final Legal Professional Privilege (LPP) Protocol setting out the ATO's recommended approach for taxpayers to identify LPP communications and making LPP claims to the ATO in response to a formal notice to produce documents.
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The ATO’s Protocol sets out the information and process required of you if you wish the ATO to assess your LPP claims in an informed manner.

You may claim LPP and refuse to provide a document requested by the ATO under formal notice if the document contains privileged communications between you and your lawyer (and with third parties such as accountants and experts assisting your lawyer) for the purpose of your seeking legal advice.

If you adhere to this Protocol, the ATO’s “carrot” is that you may save time and costs by not having to defend against ATO challenges to LPP claims the ATO deems appropriate based on your information. But if you don’t adhere to the Protocol, the “stick” is that the ATO could contest your LPP claims because it doesn’t have the relevant information to assess your LPP claims appropriately.

However, if you choose the “carrot” over the “stick” and comply with this Protocol, you may inadvertently give away too much information which could damage your legal position or constitute an inadvertent waiver of your LPP rights. The ATO has generally assured taxpayers that it would not assert a waiver if you comply with its Protocol, but this assurance doesn’t stop the ATO from asserting a waiver against you in Court if the specific facts warrant the argument.

You could also incur the risk of inadvertently waiving your rights to LPP in responding to informal requests from the ATO.

Therefore, you should, when faced with either a formal or informal request from the ATO to produce documents, seek appropriate legal advice before responding to appropriately preserve your LPP rights.

Feel free to read the full Protocol here and please don’t hesitate to contact us if you wish to discuss further.

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