Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 10 - Amendments of confidentiality provisions
Outline of chapter
10.1 Schedule 4 to the Bill makes a number of consequential amendments to Schedule 1 to the Taxation Administration Act 1953 (TAA 1953). These amendments support the effective administration of the Bill and the Register of Foreign Ownership of Agricultural Land Bill 2015, which provides for the establishment of a Register of Foreign Ownership of Agricultural Land (Register) to be administered by the Commissioner of Taxation (Commissioner). Schedule 4 to the Bill also makes several other amendments that will assist the Australian Taxation Office (ATO) to perform its functions more effectively by allowing it to share information with the Australian Securities and Investments Commission (ASIC) and the Department of Immigration and Border Protection (DIBP) in a broader range of circumstances than is currently the case.
Context of amendments
10.2 Division 355 of Schedule 1 to the TAA 1953 prohibits the disclosure of information about the tax affairs of a particular entity except in specified circumstances. Consequential amendments to this Division are required to take account of the change in circumstances from one where the Commissioner is providing information to the Treasury (the Department) and the Minister to one where the Commissioner becomes a co-regulator. These amendments ensure that the provisions about confidentiality of information in the Bill and the TAA 1953 are consistent.
Detailed explanation of new law
Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML Act)
10.3 The effect of subsection 125(1) of the AML Act is that the Commissioner and any taxation officer is entitled to access Australian Transaction Reports and Analysis Centre (AUSTRAC) information for any purpose relating to the facilitation of the administration or enforcement of a taxation law.
10.4 The Bill will repeal subsection 125(1) and substitute a provision which enables the Commissioner and any taxation officer to access AUSTRAC information for any purpose relating to the facilitation of the administration of a taxation law or the Act, if the Commissioner or officer is accessing the information because of a delegation to the Commissioner under new section 138 of the Act. [Schedule 4, item 1]
10.5 The amendment to section 125 of the AML Act applies in relation to the access of information on or after the commencement of Schedule 4, regardless of whether the information was obtained before, on or after the commencement of Schedule 4. [Schedule 4, subitem 12(1)]
Income Tax Assessment Act 1997 - definition of 'property right or interest'
10.6 The Bill inserts a definition of the term 'property right or interest' in subsection 995-(1) of the Income Tax Assessment Act 1997. The term is defined to have the meaning given by subsection 354-5(2) in Schedule 1 to the TAA 1953 (that is, a legal or equitable interest in the property or a right, power or privilege in connection with the property, whether present or future and whether vested or contingent). [Schedule 4, item 2]
New Division 354 in Schedule 1 to the TAA 1953 - power to obtain information about rights or interests in property
10.7 A person who has a legal interest in any real or personal property may be given a written notice by the Commissioner which requires the person to give the Commissioner any information the person has about any other property right or interest in the property that the Commissioner requires for the purposes of the administration or operation of a taxation law. 'Property right or interest' means a legal or equitable interest in the property or a right, power or privilege in connection with the property.
10.8 The information a person may be required to give the Commissioner includes details about that person's interest in the property; details (including the name and address) of each other person who has a property right or interest in the property; details of any class of person who has a property right or interest in the property; and details of each property right or interest in the property, including the nature and extent of the right or interest and the circumstances giving rise to the right or interest. If the person does not have the information required by the notice, the person must make all reasonable efforts to obtain the information if another person has the information.
10.9 The notice must give the person at least 14 days to produce the information, unless the Commissioner is satisfied that a short period is necessary, in which case the person must give the information within that shorter period. [Schedule 4, item 3]
10.10 This gives the Commissioner a means to identify the beneficial owners of a property, which in some circumstances is difficult to identify by other means.
10.11 A person who fails to comply with a notice given under this provision may be guilty of an offence against subsection 8C(1) of the TAA 1953. In general terms, a person who refuses or fails, when as required under or pursuant to a taxation to (among other things) give any information or document to the Commissioner or to give the person information to the Commissioner in the manner in which it is required under a taxation law to be given, the person may be guilty of an offence against subsection 8C(1) of the TAA 1953. Subsection 8C(1) of the TAA 1953 is an offence of absolute liability.
10.12 The penalty for an offence against subsection 8C of the TAA 1953 is generally a fine not exceeding 20 penalty units, although in specified circumstances may be higher. [11]
Subsection 355-55(1) in Schedule 1 to the TAA 1953 - disclosure of information contained in the Register to certain Ministers
10.13 Section 355-25 in Schedule 1 to the TAA 1953 makes it an offence for a taxation officer to disclose tax information that identifies any entity, or is reasonably capable of being used to identify an entity, except in certain specified circumstances (the offence provision). Subsection 355-55(1) of Schedule 1 to the TAA 1953 provides that the offence provision does not apply if a taxation officer discloses certain classes of information to a Minister for various specified purposes. The Bill amends this provision so that the offence provision does not apply if a taxation officer discloses information contained in the Register to a Minister responsible for agriculture, industry policy, investment promotion, taxation policy or foreign investment in Australia for the purpose of enabling that Minister to discharge that responsibility. [Schedule 4, item 4]
Subsection 355-65(4) in Schedule 1 (table items 1-4) - disclosure of information to ASIC
10.14 In broad terms, the effect of section 355-65 in Schedule 1 to the TAA 1953 is that the offence provision does not apply if a taxation officer discloses particular classes of information to specified individuals for various government purposes.
10.15 The effect of items 1 to 4 in Table 3 in section 355-65 is that the offence provision does not apply if a taxation officer discloses information to ASIC for various specified purposes, including for the purpose of investigation or enforcement activities relating to a provision of a law that is administered by ASIC and imposes a pecuniary penalty or creates an offence. The Bill repeals items 1 to 4 in Table 3 and substitutes an item which has the effect that the offence provision does not apply if a taxation officer discloses information to ASIC for the purposes of performing any of its functions or exercising any of its powers. This allows the ATO to provide information to ASIC that will enable ASIC to undertake data-matching, thereby further enhancing ASIC's ability to proactively assess whether persons are complying with laws administered by ASIC. [Schedule 4, item 5]
Subsection 355-65(4) in Schedule 1 (table item 7) - disclosure of information for the purposes of the Foreign Acquisitions and Takeovers Act 1975 (Act)
10.16 The effect of item 7 in Table 3 in section 355-65 is that the offence provision does not apply if a taxation officer discloses information to the Secretary for the purpose of briefing the Minister in relation to a decision that the Minister may make under the Act; briefing the Minister in relation to a decision that the Minister may make in accordance with Australia's Foreign Investment Policy (Policy); or briefing an officer of the Department who is authorised by the Minister to make a decision under the Act or the Policy.
10.17 The Bill provides that compliance and investigation functions may be undertaken by the Commissioner for Taxation, while general administration of the Act remains with the Treasurer. For that reason the Bill repeals item 7 of the table in subsection 355-65(4) and replaces it with an item that authorises information to be disclosed to the Secretary of the Department for the purpose of administering the Act. [Schedule 4, item 6]
Subsection 355-65(8) in Schedule 1 (table items 3 and 4) - disclosure of information to the Immigration Secretary or the Australian Border Force Commissioner
10.18 The effect of subsection 355-65(8) in Schedule 1 to the TAA 1953 is that the offence provision does not apply to a taxation officer who discloses particular classes of information to specified individuals for a range of purposes. The ATO is currently able to disclose information to the 'Immigration Secretary' (that is, the Secretary to the 'Immigration Department' which in turns is defined to mean the Department administered by the Minister administering the Migration Act 1958) for the purposes of assisting in locating persons who are unlawfully in Australia and information relating to a holder (or former holder) of a visa or an approved sponsor (or former approved sponsor) for certain narrowly defined purposes.
10.19 The effect of the amendment is that the offence provision does not apply to a taxation officer who discloses information to the 'Immigration Secretary' or the Australian Border Force Commissioner for the purpose of administering any functions or exercising any of the powers administered by the Minister administering the Immigration Department. This amendment enables the ATO and the DIBP to cooperate more effectively in areas of mutual concern, including detecting people who are working in Australia illegally. [Schedule 4, item 7]
Subsection 355-65(8) in Schedule 1 (after table item 6) - disclosure of information in the Register to the Secretary of certain departments
10.20 The effect of subsection 355-65(8) in Schedule 1 to the TAA 1953 is that the offence provision does not apply to a taxation officer who discloses particular classes of information to specified individuals for a range of purposes. The effect of the amendment is that the offence provision does not apply to a taxation officer who discloses information contained in the Register to the Secretary of a Department administered by a Minister responsible for agriculture, industry policy, investment promotion, taxation policy or foreign investment in Australia. [Schedule 4, item 8]
Section 355-75 in Schedule 1 - limits on disclosure to courts and tribunals
10.21 The effect of existing section 355-75 in Schedule 1 to the TAA 1953 is that a taxation officer cannot be required to disclose to a court or tribunal protected information that was acquired by the person as a taxation officer except where it is necessary to do so for the purpose of carrying into effect the provisions of a taxation law.
10.22 Because taxation officers have duties, functions and powers under the Bill, the effect of the amendment to this provision is to make the TAA 1953 provision consistent with the Bill. Where a taxation officer has acquired protected information because of the exercise of duties and functions under the Bill, the taxation officer can be required to disclose that information to a court or a tribunal where it is necessary to do so for the purpose of carrying into effect the provisions under a taxation law or the Act. [Schedule 4, item 9]
Paragraph 355-155(b) of Schedule 1 - on-disclosure
10.23 In general terms, under section 355-155 of Schedule 1 to the TAA 1953 it is an offence for an entity to record information or to disclose information to another entity (sometimes referred to as an 'on-disclosure') if the information was acquired by the entity under certain exceptions in Subdivision 355-B and Subdivision 355-C of Schedule 1 to the TAA 1953. The effect of the amendment to paragraph 355-155(b) of Schedule 1 is that the prohibition on 'on disclosure' does not apply to information disclosed to the Secretary of the Department for the purpose of administering the Act. This is because the Secretary may disclose the information for the purposes authorised by new Division 3 of Part 7 of the Act. [Schedule 4, item 10]
Section 355-205 in Schedule 1 - limits on on-disclosure to courts or tribunals
10.24 The Bill repeals section 355-205 in Schedule 1 to the TAA 1953 and substitutes a new provision. Broadly, section 355-205 currently provides that an entity is not to be required to 'on disclose' protected information to a court or tribunal except where it is necessary to do so for the purposes of carrying into effect the provisions of a taxation law. The new section 355-205 in Schedule 1 is identical to the current provision except that because information is disclosed for the administration of the Act, the limit on on-disclosure to courts or tribunals would not apply for the purposes of carrying into effect the provisions of a taxation law or if the entity has or had duties, functions or powers under the Act. [Schedule 4, item 11]
Application
10.25 The amendments to Division 355 in Schedule 1 to the TAA 1953 made by Schedule 4 to this Bill apply in relation to records and disclosures of protected information made on or after the commencement of Schedule 4, whether the information became protected information before, on or after the commencement of Schedule 4. [Schedule 4, subitem 12(2)]