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Australia’s response to Glencore, legal professional privilege and the CCIV regime

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Australia responds to Glencore, the CCIV regime and LPP

Jun Au of DLA Piper Australia provides an overview of tax developments in Australia including the ATO’s response to the Glencore decision, improvements to the corporate collective investment vehicle regime and legal professional privilege.

ATO responds to the Glencore decision

The Australian Taxation Office (ATO) has recently issued a draft decision impact statement (DIS) in response to the Full Federal Court decision in FCT v Glencore Investment Pty Ltd [2020] FCAFC 187. This follows the High Court’s decision to refuse the Commissioner’s application for special leave to appeal the decision. 

In what was a major victory for the mining giant, the Full Federal Court had earlier found in favour of Glencore, and held that the terms operating between the Glencore Australian subsidiary and its Swiss trader parent to calculate the price at which the Australian mine sold its entire copper concentrate production were within an arm’s-length range for transfer pricing (TP) purposes. 

In the DIS, the ATO sets out its views on how it does not accept that the Glencore decision narrows the extent by which a comparable hypothesis is to be personalised, nor that it sets a standard for ‘depersonalisation’. The ATO also outlines how the totality of evidence should be examined to best establish the arm’s-length consideration or the arm’s-length conditions in the relevant circumstances. 

Although the opinion of an expert was accepted by the Full Federal Court as to what independent parties in the same industry might have been expected to be done, the ATO said that that may not be considered to be sufficient to discharge the taxpayer’s onus of proof depending on the totality of evidence available. 

In forming such a view, the ATO relied on the Full Federal Court’s observation that evidence about the Glencore group's policies or its risk appetite might also have been relevant had it been before the court. 

Further, the ATO agreed with the Full Federal Court's conclusion that the Commissioner was not impermissibly restructuring or reconstructing the relevant contract. Moreover, the Commissioner agreed that there is no justification in the statutory language to limit the terms and conditions that can be substituted under the relevant TP provisions (i.e. Division 13 and Subdivision 815-A) to only those that ‘define the price’.

CCIV regime

The government has recently released updated exposure drafts for the implementation of tax and regulatory components of the corporate collective investment vehicle (CCIV) regime in August 2021. The first version of the proposed legislation was first released in 2019. 

The main driver behind the CCIV regime is to introduce an investment vehicle that foreign investors are more familiar, in order to drive the export of financial services and to attract more funds management/investment, particularly retail investors to Australia. Broadly, where a CCIV sub-fund satisfies the attribution managed investment trust (AMIT) requirements, it will automatically be treated as an AMIT for tax purposes. 

In this new version of the exposure drafts, there have been several significant improvements to the earlier 2019 version, which reflect the government’s adoption of industry submissions. These improvements include the continued treatment of a sub-fund as a non-AMIT trust for tax purposes (and not as a company), where that sub-fund does not qualify as an AMIT; and the maintenance of the current operation of the AMIT rules in the CCIV regime, unlike the previous versions which proposed that the threshold for which penalties could be triggered for unders and overs would be lowered. 

The latest draft tax legislation represents a leap forward for the CCIV regime towards a promised July 2022 start date, and reflects Treasury’s commitment to address the changes needed from a tax perspective to bring to market a commercially competitive CCIV regime. 

Legal professional privilege

The boundaries of legal professional privilege (LPP) continue to be tested, and this is illustrated in the recent Full Federal Court decision in CUB Australia Holding Pty Ltd v. FCT [2021] FCAFC 171, as well as in the ATO’s newly released consultation draft of the ‘Legal Professional Privilege Protocol’ (LPP Protocol). 

In this case, CUB claimed LPP over a large number of documents pursuant to a Section 353-10 TAA notice issued by the Commissioner during an audit. Subsequently, the Commissioner then issued a further notice requesting for more specific details of these documents. 

The crux of CUB's case was that the Commissioner's purpose in issuing the notice was "to determine the validity of CUB's LPP claims". CUB contended that this was an improper purpose, because only the courts have the power to determine an LPP claim, not the Commissioner. 

In a unanimous decision, the Full Federal Court dismissed CUB’s appeal and reinforced the powers of the Commissioner to request information from taxpayers for the purposes of evaluating an assertion of LPP by the taxpayer. 

The judgment of the Full Federal Court coincides with the newly released draft Protocol by the ATO. The draft Protocol sets out the ATO's recommendations on how taxpayers and their legal advisers should approach claiming LPP over documents in response to information requests, and what the ATO expects to see by way of process and particulars when a taxpayer makes a claim of LPP.

LPP claims continue to be a topical issue and taxpayers should be alert to the possibility of a challenge from the Commissioner, particularly where LPP claims are made over a large quantum of documents or where the engagement involves non-legal persons or firms.  


Jun Au

Senior associate, DLA Piper Australia


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