"Garry, if you don't pay me and my family, I will have no hesitation in giving the ATO everything I have on you. You should be very worried," an adviser told his client before leaking his information to the Australian Taxation Office that resulted in a $30 million tax bill that's now been quashed by the Federal Court.

It is the first time Australian Taxation Office agents have been found to have engaged in "conscious maladministration" by using documents subject to legal professional privilege in issuing the multimillion-dollar bill to an Australian businessman Garry John Donoghue. The Tax Office told Fairfax Media it would be appealing the decision.

Union officials say they're "getting complaints about increased workloads, and what we know is that a lot of skilled and experienced officials have left the office and they are leaving gaps." Credit:Michael O'Sullivan

Mr Donoghue, 58, a former Queenslander who is now living in London, ran a string of telecommunications businesses, including as the former managing director of listed mobile-services provider Plus SMS. He took the case to the Federal Court, arguing that his legal adviser, Simeon Moore, angry over alleged unpaid fees, passed on his file to the Tax Office.

Federal Court Justice Logan found that the ATO assessment – issued for tax years 2005 to 2007 and amounting to over $30 million when taking account interest and penalties – was invalid because it was based on information under legal professional privilege, and the ATO had no right to use it.