OPINION: The Inland Revenue Department recently published an Operational Statement (OS 13/01) on the commissioner's search and seizure powers under section 16 of the Tax Administration Act 1994, writes Murray McClennan in Taxing Times.
OS 13/01 seeks to provide practical guidance to Inland Revenue officers and taxpayers when the commissioner invokes these powers. The operation statement is both helpful and a useful reminder of Inland Revenue's powers, which exceed those of even the police.
The commissioner has immense powers under section 16, including the power to search any property at any time, and to remove and retain any and all documents and records that the commissioner considers may be relevant to any tax issues.
Where such search is to take place at a dwelling, Inland Revenue either must obtain permission of the occupier to enter or have a District Court warrant.
In recent years, there have been unsuccessful legal challenges on whether: Inland Revenue is allowed access to computer disk drives because these constitute "books or documents" for the purposes of its information-gathering powers; and
Inland Revenue could search premises and copy documents for the Australian Tax Office.
In short, provided Inland Revenue has suitable grounds for a search of premises and seizure of documents, there is little, if anything, a taxpayer can do to stop the search.
Taxpayers have few rights when Inland Revenue arrives to undertake a search and these are effectively restricted to asserting privilege or non- disclosure in respect of documents.
The important things for a taxpayer in this position to do are:
Ensure that Inland Revenue staff have access to the premises and documents;
Ensure that any documents or advice subject to privilege or non-disclosure is not given to Inland Revenue; and
Not obstruct the search by Inland Revenue staff. If a taxpayer destroyed records, he or she could be fined or even imprisoned.
It is prudent to seek appropriate advice, preferably on-site, once Inland Revenue staff arrive to undertake the search. Usually the adviser is able to agree a process applicable to the conduct of the search with Inland Revenue staff whereby the commissioner's rights are secured, as are the taxpayers' non- disclosure rights and privilege.
Often, Inland Revenue staff bring a locksmith with them to unlock doors and cabinets, even briefcases, and computer experts to obtain access to computer systems and/or laptops.
Inland Revenue staff arriving at a taxpayer's premises generally will allow a period of time for the taxpayer to take advice. Experience suggests that the taxpayer should use this opportunity immediately. Who would you contact? Have you ever discussed what with your accountant, tax adviser or lawyer what do to if Inland Revenue turns up on the doorstep? Perhaps you should give it some thought.
» Murray McClennan is director of Tax Central Ltd, a specialist tax consulting firm.
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