One of the country's top tax officers says it was "most unusual" for him to talk directly to the attorney-general about proposed court action to protect $1.8 billion in taxpayers' money, but denies any pressure to drop the case.
A Senate inquiry is examining Attorney-General George Brandis' handling of the Bell Group liquidation fallout.
The federal government in May won a High Court challenge against WA's legislation to finalise Bell Group matters and distribute assets, despite WA ministers believing they had a deal with Canberra for a hands-off approach.
Senator Brandis told parliament last week there was no deal and letters between then commonwealth treasurer Joe Hockey and his WA counterpart - as well as the fact the court challenge went ahead - supported that position.
Labor has sought to find out whether Senator Brandis was at some point opposed to challenging the WA laws, which would have put him at odds with the then solicitor-general Justin Gleeson who was acting for the Australian Taxation Office in seeking the laws to be overturned in the High Court.
Mr Gleeson quit in October over a falling out with Senator Brandis in regard to him having to get the attorney's approval before responding to all requests for advice.
ATO second commissioner Andrew Mills told an inquiry hearing on Wednesday the office had made a final decision on March 4 to intervene in the case by itself, not as part of a whole of government approach.
The decision came four days before a decision had to made.
Mr Mills said the minister in charge of the ATO, Kelly O'Dwyer, had asked him on March 7 to talk to Senator Brandis on the phone about the ATO's position.
Asked whether it was normal to brief an attorney-general, he said: "That is most unusual but this is a most unusual case."
He said the discussion with Senator Brandis was about "what we were doing, where we were at and what our proposal was".
"My recollection of this ... is that he indicated to me he had not made a decision at the time whether the commonwealth would intervene generally."
But Senator Brandis had not tried to dissuade the ATO against its action.
"Neither the commissioner nor I or nor any other decision maker in the ATO were leaned on by a minister or their office or directed to do anything other than what we did," Mr Mills said.
Senator Brandis and Mr Gleeson met on March 23 to discuss the High Court case, among other issues.
Asked whether the issuing of running dead on the case was raised, department deputy secretary Iain Anderson - who attended the meeting - told the committee: "I'm not aware of any such instruction or direction from the attorney-general to the solicitor-general not to run an argument."
A week later the ATO was advised by the attorney-general the commonwealth would intervene in the case, with Mr Gleeson acting on its behalf.
The hearing was told the ATO believed it was owed approximately $1.8 billion in total, made up of around $460 million in primary tax as well as $1.4 billion in accrued interest from the Bell Group.
Mr Mills said there was an offer - in a discussion involving the Insurance Commission of Western Australia and WA solicitor between August and October 2015 - of $402 million being provided to the ATO.
But the offer was not accepted as the ATO was concerned the amount was not guaranteed in writing or guaranteed in the WA legislation, and any deal would be "useless" if all the creditors were not involved.
Shadow attorney-general Mark Dreyfus said Senator Brandis had told parliament his first personal involvement in the Bell Group litigation issue was on March 3 this year.
However, the ATO told Wednesday's hearing Senator Brandis' office had sought a briefing on it on June 5, 2015 - nine months earlier.
The attorney's office was also issued a notice inviting the commonwealth to intervene in the High Court case contesting the WA legislation on December 1, 2015, and the office was given a briefing on the possible court intervention on January 28 this year.
"It is beyond belief that, with his own office having sought a brief nearly a year earlier, that Senator Brandis would not have been in the loop until March 2016," Mr Dreyfus said.
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