House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)

Chapter 7 Information sharing

Outline of chapter

7.1 Schedule 7 enables the sharing and verification of tax file numbers (TFNs) which have been obtained in accordance with a Commonwealth law, between the Commissioner and Commonwealth Agencies.

7.2 All legislative references in this Chapter are to the ITAA 1936 unless otherwise stated.

Context of amendments

7.3 Division 355 in Schedule 1 to the TAA contains the taxpayer confidentiality rules. Subject to certain exceptions, it is an offence for taxation officers to disclose or make a record of 'protected information' in respect of an entity if the information is acquired in their capacity as a taxation officer.

7.4 Protected information is information that is disclosed or obtained under or for the purposes of a taxation law. The information must relate to the affairs of the entity (although not limited to their taxation affairs) and it must identify, or be reasonably capable of being used to identify the entity.

7.5 The prohibition on disclosure does not apply where an exception to the offence applies. These exceptions include disclosures for a range of purposes including for Government purposes relating to social welfare, health or safety.

7.6 TFNs are not subject to the general taxpayer confidentiality laws for 'protected information', on the basis that they are not, in and of themselves, reasonably capable of identifying an entity.

Tax file number offences

7.7 The TAA contains specific offences relating to TFNs. These offences are not just limited to TFNs of individuals, but cover TFNs for all entities.

7.8 One of the TFN offences prohibits a person from recording and maintaining such a record of another person's TFN, using another person's TFN which connects it with the person's identity, or divulging or communicating another person's TFN to a third person.

7.9 A person commits an offence for the unauthorised disclosure and recording of TFNs and faces penalties of up to 100 penalty units or imprisonment for 2 years, or both.

7.10 However, there are exceptions to the offence which allow a person to do the things prohibited, where it is done in connection with the person exercising powers or performing functions under, or in relation to, a taxation law or a specified law of the Commonwealth set out in section 202.

7.11 To some extent, these specified laws of the Commonwealth allow a Secretary of an Agency to require or request a person to provide their TFN to the Secretary, often for the purpose of the Commonwealth Agency making a personal assistance payment or benefit to that person. However some of these specified laws do not allow for the sharing and verification of TFNs between the Commonwealth Agency and the Commissioner. The scope of these powers and functions vary between each Commonwealth law, with no uniformity in the process.

7.12 The lack of consistency and clarity in the existing specified laws of the Commonwealth that are intended to enable the verification and sharing of TFNs have instead significantly inhibited the process.

7.13 These limitations have led to reduced levels of confidence in the matching of personal protected information of individuals permitted between the Commissioner and Commonwealth Agencies. This increases the risk of leakage in the personal assistance payment and social welfare system because of errors or changes in personal information such as name and address as identifiers.

Summary of new law

7.14 The amendments allow a Commonwealth Agency to provide a person's TFN, where they have obtained it under a Commonwealth law, to the Commissioner of Taxation for the purpose of verifying the TFN and enable the Commissioner of Taxation to verify and share a person's TFN with that Commonwealth Agency who has requested the verification.

Comparison of key features of new law and current law

Detailed explanation of new law

Tax file number sharing and verification

7.15 The amendments provides for a uniform process to enable the verification and sharing of TFNs between the Commissioner and Commonwealth Agencies under the taxation law.

7.16 The amendments ensure that the Commissioner and Commonwealth Agencies do not commit a TFN offence relating to the use of TFNs where they are exercising powers and performing functions permitted under a taxation law.

7.17 The changes ensure that a Commonwealth Agency who can legally request the TFN of an individual is able to verify that the TFN actually belongs to that individual by having the number verified by the Commissioner of Taxation. For example, with a verified TFN, Commonwealth Agencies who administer personal assistance payments can undertake data-matching with higher levels of confidence in the properly identifying the correct individual against third party identifiers such as name and date of birth. These changes supplement the existing taxpayer confidentiality rules by enhancing compliance activities to ensure greater accuracy for social welfare payments by:

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Improving Family Tax Benefit accuracy;

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Better upfront compliance activities, minimising the potential for clients receiving social security payments to be overpaid;

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Enhancing debt recovery action by better determining capacity to pay; and

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Enhancing child support payments through accelerating the identification of liable parents who have a change in employment circumstances.

7.18 To use this verification process, a Commonwealth Agency must obtain a TFN of a person in a manner that is in accordance with a law of the Commonwealth, and the Commonwealth Agency. An Agency Head or a relevant SES employee of the Commonwealth Agency must also believe that the TFN belongs to the person who has provided the Commonwealth Agency with the number. [Schedule 7, item 1, subsection 203(1)]

7.19 The TFN could also belong to another person from whom the Commonwealth Agency is entitled to obtain a TFN of. For example, some of the social security laws entitle a Commonwealth Agency to request the TFN of the spouse of a person who is seeking to obtain personal assistance payments.

7.20 An Agency Head or a relevant SES employee of the Commonwealth Agency can issue a notice to request the Commissioner to verify the TFN under these amendments. To ensure that the Commissioner is provided with the necessary identifying particulars, the notice must include the TFN and the full name and date of birth of the relevant person. The Commonwealth Agency may include any additional information that the Commonwealth Agency believes to be relevant to assist in identifying the individual. [Schedule 7, item 1, subsections 203(2) and (3)]

7.21 Only an Agency Head, SES employee or acting SES employee is able to make the request for the TFN verification. This ensures that the power is limited to appropriate officers of the Commonwealth Agency.

7.22 If the Commissioner is satisfied that the information provided in the request matches the TFN recorded by the Commissioner, the Commissioner can notify the requesting Commonwealth Agency whether the TFN can be verified. The Commissioner can confirm whether the TFN is correct or not correct. [Schedule 7, item 1, subsection 203(4)]

7.23 The Commissioner can also share the correct TFN of the relevant person in the notice to the Commonwealth Agency if the Commissioner is satisfied that another TFN (other than the one provided in the request which is an incorrect number) belongs to the relevant person. [Schedule 7, item 1, subsection 203(5)]

7.24 A Commonwealth Agency who receives a correct TFN from the Commissioner is taken to have obtained the number in accordance with a Commonwealth law. [Schedule 7, item 1, subsection 203(6)]

7.25 This change allows a Commonwealth Agency to use, record or disclose the number as though they had obtained it in accordance with a Commonwealth law. This enables the Commonwealth Agency to undertake data matching of personal information and TFNs that is permitted by a Commonwealth law which they administer.

Example 7.1 - verification of a TFN and permitted disclosure of other protected information

Melissa is an SES employee of the Department of Veteran Affairs. The Department of Veteran Affairs has obtained the TFN of David (a client of the Department who is in receipt of a pension) that is in accordance with the Veterans Entitlement Act 1986. Melissa believes that the TFN belongs to David.

Melissa provides a notice to the Commissioner of Taxation requesting for the verification of David's TFN. The notice requesting the verification contains the full name and date of birth of David, as well as his postal address.

Hope is a taxation officer and verifies that the TFN contained in the notice is the correct TFN of David. Hope provides a written notice to the Department that confirms that the TFN has been verified and is correct according to the Commissioner's records.

Hope ascertains that the postal address provided by the Department does not match the current postal address listed for David in the Commissioner's system. Hope also ascertains that David has salary and wages reported for a period by his employer under the Single Touch Payroll rules. Under the taxpayer confidentiality exception for an Agency Head dealing with matters relating to the social security law, Hope is able to disclose to the Department of Veteran Affairs the listed postal address of David as well as his salary and wages according to record of the Commissioner as it is for the purpose of administering a social security law.

Example 7.2 - verification and correction of a TFN

Tristan is an SES employee of the Department of Human Services. The Department of Human Services has obtained the TFN of Emily (a client of the Department who is in receipt of a Centrelink payment) that is in accordance with a social security law. Tristan believes that the TFN belongs to Emily.

Tristan provides a notice to the Commissioner of Taxation requesting for the verification of Emily's TFN. The notice requesting the verification contains the full name and date of birth of Emily.

Chris is a taxation officer and verifies that the TFN contained in the notice is the not correct TFN of Emily. Chris provides a written notice to the Department that confirms that the TFN cannot be verified and is not correct according to the Commissioner's records. Chris is able to provide the correct TFN of Emily in the notice.

7.26 The amendments are not limited and do not limit the application of other provisions in the tax law or laws of the Commonwealth which provide for the sharing or verification of TFNs. [Schedule 7, item 1, subsection 203(7)]

7.27 The amendments make it clear that the notices provided by the Commissioner or a Commonwealth Agency to verify the TFN are not legislative instruments within the meaning of section 8 of the Legislation Act 2003. [Schedule 7, item 1, subsection 203(8)]

7.28 This provision is merely declaring the state of the law, rather than prescribing a substantive exemption from the requirements of the Legislation Act 2003.

Providing information to the Repatriation Commission

7.29 The amendments also broaden disclosures made by a taxation officer to the Repatriation Commission to cover disclosures made for the purpose of a Commonwealth law in relation to allowances or benefits. This is in addition to the existing disclosure exception which covers a Commonwealth law relating to pensions. [Schedule 7, item 2, table item 3 to table 1 in 355-65(2) in Schedule 1 to the TAA]