Small business litigation funding may fund a portion of your legal costs.
Small Business Litigation Funding
If the ATO takes you to the Small Business Taxation Division of the AAT and gets legal counsel, then the ATO will automatically offer you small business litigation funding.
In this episode, Adam Ahmad, a tax lawyer in Sydney, will tell you how this all worked out for him and how much or how little the small business litigation fund actually paid him.
Here is what we learned but please listen in as Adam explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Small Business Litigation Funding
The ATO has a web page where they explain the process of their small business litigation funding. So after reading this, please google it. We don’t give you the link here, since links to ATO web pages tend to break with time.
You can apply for funding of reasonable costs if you self-represent in the AAT against the ATO and the ATO has legal counsel. To create a level playing field.
Reasonable Costs
The devil of course is in this term ‘reasonable costs’. But what is ‘reasonable’?
What the ATO thinks is reasonable might not be what you actually incur in costs. And you will hear from Adam that this was a big issue.
Only Legal Fees
The small business litigation fund is only for legal counsel, for solicitor fees. So it doesn’t cover accountant or tax agent fees. In fact, those are specifically excluded. So if your input is required, you might bill the solicitor who then bills the fund.
Who Covers the Gap?
The lesson from all this is that if the ATO takes your client to the AAT – the Administrative Appeals Tribunal – or to be more specific the Small Business Taxation Division of the AAT – and the ATO then offers your client to get legal representation financed by the Small Business Litigation Fund, then you know to warn your client.
You need to ask them, “Who covers the gap?” Because there will be a gap. The solicitor you talk to might suggest that your client pays the solicitor in full and then gets reimbursed by the fund. So you need to warn your client that the refund might be just 10 or 20 percent of the actual cost.
Adam Ahmed made it to 40 percent because another lawyer well-versed in legal costs helped him.
And that is just the legal costs. Then there are your fees to support the solicitor and client as the accountant or tax agent. Who pays for your time?
So make sure all this is clear when one of your clients has to go to the Small Business Taxation Division of the AAT. So that everybody knows what payments are coming their way.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 28 March 2023
