Suing negligent Australian tax officials – recent judicial developments and possible future directions

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Abstract

In 'Farah Custodians Pty Limited v Commissioner of Taxation (No 2)', (Farah 2) the Federal Court of Australia refused to strike out a taxpayer negligence claim against the Commissioner of Taxation. This is a significant interlocutory finding. In Australia, taxpayer negligence actions against the Commissioner of Taxation are uncommon and are typically summarily dismissed. None have proceeded to a full hearing. 'Farah' stands out, not just as an example of a rare interlocutory finding in favour of a taxpayer claiming negligence by Australian tax officials, but for the judicial reasoning of the Federal Court in reaching that decision. 'Farah 2' is the first time an Australian superior court has applied general Australian tortious principles for determining novel negligence claims against public officials to a tax case. This article examines this judicial approach and the insights it provides into the nature and scope of any possible tortious duty of care owed to taxpayers by Australian tax officials. The analysis extends to medium-term and long-term assessments on how future negligence claims against tax officials might play out, extrapolated from the reasoning in 'Farah 2' and from cases in broadly comparable jurisdictions such as Canada where there is a much more developed body of case law concerning taxpayer negligence claims against tax officials. These assessments are included with a view to isolating the key judicial challenges likely to be encountered in determining such claims in future and providing guidance for prospective future litigants concerned to understand the limits of potential tax officer exposure to common law suit.
Original languageEnglish
Pages (from-to)191-212
Number of pages22
JournalAustralian Tax Forum
Volume35
Issue number2
Publication statusPublished - 2020

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