House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 4 General qualifications on disclosure provisions

Outline of chapter

4.1 This chapter outlines:

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qualifications on the disclosure provisions that permit taxpayer information to be disclosed lawfully; and

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authorised disclosures of information lawfully available to the public,

that are common to both taxation officers and non-taxation officers.

Context of amendments

Operation of current provisions

4.2 As noted previously, the current disclosure provisions permit both taxation officers and non-taxation officers to disclose taxpayer information in certain specified circumstances. This recognises that there are circumstances in which the public benefit from disclosure outweighs taxpayer privacy.

4.3 Most of the current disclosure provisions only apply to taxation officers because they require the disclosure to be made by the Commissioner of Taxation (Commissioner) or a person authorised by the Commissioner. However, because the current provisions do not distinguish between taxation officers and non-taxation officers, there are certain qualifications on what would otherwise be a lawful disclosure for both taxation officers and non-taxation officers alike.

4.4 The current secrecy and disclosure provisions provide that taxation officers and other recipients of taxpayer information cannot be compelled to provide taxpayer information to a court unless it is for the purposes of a taxation law.

4.5 Section 16 of the Income Tax Assessment Act 1936 (ITAA 1936) has been interpreted in such a way that any information obtained by the Australian Taxation Office (ATO) from a public source is not caught. Therefore, if the ATO obtains information from a public source, taxation officers (and those who receive the information from them) are not prevented by section 16 from disclosing that information. On the other hand, taxpayer information obtained from ATO sources, may not be disclosed, even if it is otherwise in the public domain.

4.6 Section 16 of the ITAA 1936 has also been interpreted such that the consent of the taxpayer to a disclosure does not, in and of itself, authorise the disclosure of taxpayer information.

4.7 All current secrecy and disclosure provisions contain some prohibition on the disclosure of protected information to ministers (both Commonwealth and State). This recognises the importance of ensuring that taxpayer information is not released in the course of parliamentary proceedings and recognises the separation of the administration of the taxation laws from the Government. However, as a result of the interpretation of various secrecy provisions, disclosures to ministers are currently permitted, in some circumstances, depending on the type of taxation information involved.

4.8 For instance, under the current provisions, there is a blanket prohibition on the provision of indirect tax information to a minister, while income tax information can be disclosed to a minister in the course of a taxation officer's duties.

Summary of new law

4.9 The new framework contained in the Bill largely retains these existing qualifications on disclosure and seeks to clarify and resolve ambiguities in the current law.

4.10 Of note, the new framework removes the requirement that information that is publicly available can only be disclosed where it is sourced from the public. Under the new framework, information that is lawfully available to the public can be disclosed regardless of the source of the information.

4.11 The new framework confirms that a taxpayer's consent to a disclosure does not, in and of itself, authorise that disclosure.

4.12 The new framework overcomes ambiguities as to when information can be provided to a minister, by providing an exhaustive list of circumstances where this can lawfully occur. The list of disclosures largely reflects the circumstances in which taxpayer information can currently be provided to a minister under one or more current Acts.

Comparison of key features of new law and current law

Detailed explanation of new law

Qualifications on disclosure

4.13 The following provides an explanation of the new framework's approach to the consent of the taxpayer to disclosure, limitations on disclosure to courts and tribunals, and disclosures to ministers.

Consent to disclosure not a defence

4.14 While the new framework recognises that there are legitimate circumstances in which a person representing the taxpayer can access that taxpayer's information (for instance, where the taxpayer has appointed another entity to act on their behalf in dealings with the ATO), it is not otherwise a defence that the taxpayer has consented to the record or disclosure. [Schedule 1, item 1, sections 355-35 and 355-160]

4.15 This approach avoids issues of whether the consent is informed and voluntary (as opposed to, for instance, being a precondition for a particular good or service). It also recognises the fact that, if any entity requires the taxpayer's information, the taxpayer is able to obtain that information and pass it on. There is no prohibition on a taxation officer or a non-taxation officer in lawful receipt of taxpayer information from disclosing that information to the taxpayer and there are no limits on what a taxpayer may do with their own information. This approach ensures that the taxpayer knows precisely what information is being provided.

Example 4.1

Amy went to her bank seeking a loan to purchase a residential unit. The bank asked for copies of her last three tax returns. Amy says that she is happy for the bank to obtain that information from the ATO. Amy tells the ATO this. It is an offence for a taxation officer to provide Amy's tax returns to the bank even though Amy has consented to the disclosure. However, a taxation officer may provide that information to Amy (if she requests it), and she could pass it on to the bank.

4.16 Disallowing consent as a defence ensures that the ATO is not treated generally as a central repository of financial information to be accessed for purposes unrelated to the tax system or to government administration.

Limit on disclosures to courts and tribunals

4.17 Under the new framework and consistent with the current law, a taxation officer or another recipient of taxpayer information cannot be compelled to provide information to a court or tribunal. This recognises the significant loss of privacy that would result in the release of a taxpayer's information in an open court. [Schedule 1, item 1, sections 355-75 and 355-205, section 355-280]

4.18 As an exception, however, a taxation officer or another recipient of taxpayer information can be compelled to disclose taxpayer information to a court or tribunal where it is necessary for the purpose of carrying into effect a provision of a taxation law. Such a disclosure is closely aligned with the purpose for which the information is given and recognises that in some circumstances a court's powers to compel the production of information should be invoked to give effect to a provision of a taxation law. [Schedule 1, item 1, sections 355-75 and 355-205, section 355-280]

4.19 Another exception allows a taxation officer to disclose taxpayer information to a court or tribunal for the purpose of investigating a serious offence, enforcing a law, the contravention of which is a serious offence, or for the making or proposed or possible making of a proceeds of crime order. [Schedule 1, item 1, item 1 in the table in section 355-70]

Example 4.2

A taxation officer lawfully discloses taxpayer information to a law enforcement agency officer to establish whether a serious offence prescribed by the taxation law has been committed. In the course of prosecuting the offence, a taxation officer is asked to present this evidence to a court. It is not an offence for a taxation officer to do so.

Disclosure to ministers

4.20 The only circumstances in which taxpayer information can be disclosed by taxation officers and other lawful recipients of taxpayer information to a minister, is where the information is publicly available, or where the Bill specifically provides for it. [Schedule 1, item 1, subsections 355-60(1) and 355-210(1)]

4.21 The disclosure of publicly available information is discussed below. The specific disclosures permitted to ministers are discussed further in the following chapters.

4.22 The general provisions are limited by the provisions governing disclosures to ministers. [Schedule 1, item 1, sections 355-40 and 355-165]

4.23 For instance, it is an offence for a taxation officer to disclose information to a minister unless that disclosure is explicitly authorised as one that can be made to a minister, even if the disclosure is in the performance of their duties as a taxation officer. [Schedule 1, item 1, sections 355-55 and 355-60]

Example 4.3

An article on the front page of a major Australian newspaper discussed the capital gains tax affairs of Mr John Doe, and insinuated that he had been poorly treated by the ATO. The ATO considers preparing a briefing for the Treasurer in relation to the article, to assist the Treasurer to respond to any questions about the article.

As there is no explicit provision allowing for disclosure of taxpayer information to a minister under these circumstances, it is an offence for a taxation officer to make such a disclosure, notwithstanding the fact that Mr Doe may have already provided his own tax information to a major newspaper with the expectation that it would be published.

4.24 These limitations on disclosures to ministers only apply to the extent that the disclosures would otherwise be captured by the offence provision (and would therefore require an exception to the offence to authorise disclosure). As disclosing information to the entity to whom the information relates or to their representative is never an offence, disclosures to ministers in these circumstances can also be made (see paragraph 3.17). As such, the ATO would not be prevented from disclosing to a minister their own information or the information of another entity where that entity has appointed the Minister as their representative. [Schedule 1, item 1, subsections 355-60(1) and 355-210(1)]

Example 4.4

The Minister for Mines and Orchards completed her own tax return early and her husband asked her to complete his tax return as well. After being nominated in the approved form to act as her husband's representative, the Minister rang the ATO to ask for information about her husband's tax affairs. It is not an offence for a taxation officer to provide taxpayer information to the Minister about her husband's tax affairs because she is acting in her capacity as agent for her husband rather than in her capacity as a minister.

Parliamentary privilege and its interaction with disclosures to ministers

4.25 Parliamentary privilege is commonly considered to protect disclosures of information made during parliamentary proceedings. Such privilege also protects disclosures of information for the purpose of such proceedings. For instance, under parliamentary privilege the ATO could, theoretically, currently provide taxpayer information to ministers for the purpose of briefing the Minister to respond to questions in Parliament (in the form of questions on notice and in question time briefs). However, in practice such information is only disclosed rarely, if ever.

4.26 As the Bill provides the only circumstances in which taxpayer information can be disclosed to ministers, the operation of parliamentary privilege is specifically excluded in this respect. The effect of sections 355-60 and 355-201 is to act as a declaration for the purposes of section 49 of the Constitution, and therefore all disclosures of taxpayer information to a minister are guided by the taxation law. [Schedule 1, item 1, sections 355-60 and 355-210]

4.27 The circumstances in which taxation officers and non-taxation officers are permitted to disclose information to a minister are outlined in Chapters 5 and 6 respectively. [Schedule 1, item 1, sections 355-60 and 355-210]

Example 4.5

The Treasurer is asked a question about the tax affairs of a particular taxpayer and seeks to obtain this information for the purpose of responding to that question during the sitting of Parliament. The ATO cannot provide any taxpayer information to the Treasurer for this purpose, because such disclosures are not permitted by the Bill.

4.28 The limitations on parliamentary privilege only apply with respect to the disclosure of information to ministers. There has been no attempt to limit the operation of parliamentary privilege to the extent that it protects the disclosure of information to the Parliament more broadly, notably to committees.

4.29 Maintaining the operation of parliamentary privilege as it applies in relation to disclosures of information to parliamentary committees recognises that these committees have already developed rules and procedures designed to protect the confidentiality of personal and other sensitive information (for further information see Chapter 2 of Odgers' Australian Senate Practice, 12th Edition ).

4.30 Although it is uncommon for ministers to serve on parliamentary committees (see Odgers' Australian Senate Practice, 12th Edition page 376), where this occurs, a taxation officer can still disclose taxpayer information as the Minister is present in the capacity as a member of the committee, not as a Minister of the Parliament.

4.31 Similarly, if a minister is present as a spectator when a taxation officer is providing information to a committee, the restrictions on the operation of parliamentary privilege will not apply as the disclosure by the tax officer is one to the committee and is therefore protected by parliamentary privilege.

General operation of disclosure provisions

4.32 The disclosure provisions in the framework permit taxation officers and non-taxation officers to disclose taxpayer information in certain circumstances. However, they do not require them to do so. For information to be disclosed it must be an authorised disclosure and the entity with the information must exercise their discretion to disclose the information.

4.33 The disclosure provisions described are designed as exceptions to the offence provisions so, in each case, the entity disclosing the information bears the evidential burden in relation to the disclosure. The reason that the burden is placed on the disclosing entity is that the purpose for which the entity made the disclosure (which determines whether it is authorised or not) is a matter that is uniquely within the knowledge of the entity themselves. [Schedule 1, item 1, sections 355-45 to 355-75]

Disclosure of publicly available information

4.34 It is not an offence for a taxation officer or non-taxation officer in receipt of taxpayer information to disclose that information if it is lawfully available to the public (that is, it has not been disclosed as a result of a breach of one of the offence provisions in the framework). [Schedule 1, item 1, sections 355-45, 355-170 and 355-270]

4.35 A publicly available source would include things such as the electoral role, open court records, books, the Internet, newspapers and other material that is generally available to the public. The information does not cease to be 'publicly available' if a member of the public has to pay a fee to access that information.

4.36 While this new framework recognises that taxpayer privacy is paramount, it also recognises that issues surrounding the privacy of taxpayer information are less significant when that information is already available to the public.

4.37 Information that is in the public domain may be disclosed. However, entities will not be able to use non-public taxpayer information to supplement or qualify the information that is publicly available.

Example 4.6

The New South Wales Bar Association has a statutory responsibility under the Legal Profession Act 2004 (NSW) to satisfy itself that a barrister is a fit and proper person to hold a practicing certificate. It is not an offence for a taxation officer to disclose to the New South Wales Bar Association that a NSW barrister has been convicted of a taxation offence in an open court. However, the ATO would not be able to supplement that information with, say, a copy of the barrister's tax return, which was not available to the public.

Example 4.7

Brendan works in the ATO Media Liaison Centre and posts a media release on the ATO website detailing a recent successful prosecution of a taxpayer, Tony, for goods and services tax fraud. The media release also insinuates that Tony may have been involved in tax evasion with respect to which he is still being investigated by the ATO. While Brendan can disclose information that is on the court record in relation to the goods and services tax fraud, it is an offence for him to disclose information relating to Tony's alleged involvement in other possible taxation evasion.