House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Housing and Assistant Treasurer the Hon Michael Sukkar MP)

Chapter 5 - Disclosure of business tax debts

Outline of chapter

5.1 Schedule 5 to the Bill amends the TAA 1953 to allow taxation officers to disclose the business tax debt information of a taxpayer to credit reporting bureaus when certain conditions and safeguards are satisfied.

5.2 This will allow tax debts to be placed on a similar footing as other debts, strengthening the incentives for businesses to pay their debts in a timely manner and effectively engage with the ATO to avoid having their tax debt information disclosed.

5.3 The amendments will reduce unfair financial advantage obtained by businesses that do not pay their tax on time and contributes to more informed decision making within the business community by enabling credit providers and businesses to make a more complete assessment of the credit worthiness of a business.

5.4 All legislative references in this Chapter are to Schedule 1 to the TAA 1953 unless otherwise stated.

Context of amendments

5.5 In the 2016-17 Mid-Year Economic and Fiscal Outlook, the Government announced a measure to allow taxation officers to disclose to credit reporting bureaus the tax debt information of businesses that do not effectively engage with the ATO to manage their tax debts. This Schedule implements this measure by providing an exception to the general prohibition on taxation officers disclosing protected information contained in Division 355 for disclosures of this kind.

5.6 The legislative framework will ensure that a taxpayer's tax debt information may only be disclosed to credit reporting bureaus where certain conditions and safeguards are satisfied. This will include conditions and safeguards to be set out in a legislative instrument to be made by the Treasurer which establish whether a taxpayer can be subject to the new disclosure arrangements.

5.7 The criteria in the legislative instrument are expected to be broadly in line with the criteria set out in the exposure draft of the instrument released, alongside the exposure draft Bill and accompanying explanatory materials, for public consultation on the Treasury website from 11 January 2018 to 9 February 2018. This generally reflects the criteria to be applied for the purposes of the measure (as announced by the Government in the 2016-17 Mid-Year Economic and Fiscal Outlook) together with some additional safeguards. In the 2016-17 Mid-Year Economic and Fiscal Outlook, the Government announced the measure would initially only apply to business taxpayers with an ABN that have a tax debt, of which at least $10,000 is overdue for more than 90 days. Following consultation, the Government has decided to increase the tax debt threshold from $10,000 to $100,000 to target higher risk tax debts.

5.8 The legislative framework will also include procedural conditions and safeguards that the Commissioner must satisfy before disclosing a taxpayer's tax debt information. This ensures the taxpayer is made aware that the Commissioner is considering disclosing their information and affords taxpayers with an opportunity to engage with the ATO to prevent their tax debt information from being reported. This will be supported by rigorous administrative arrangements that will provide taxpayers with the opportunity to initiate a review process prior to any disclosure or to correct the information proposed to be reported.

5.9 Allowing taxation officers to report tax debt information to credit reporting bureaus in the specified circumstances will:

•

support more informed decision making within the business community by making overdue tax debts more visible;

•

encourage taxpayers to engage with the ATO to manage their tax debts; and

•

reduce the unfair advantage obtained by businesses that do not pay their tax on time.

5.10 Disclosing tax debt information to credit reporting bureaus will allow businesses and credit providers to make a more complete assessment of the credit worthiness of a business. A credit reporting bureau collects, holds and discloses an entity's debt information to other interested parties for a fee, typically in the form of a credit worthiness report. The impact of the rules providing for the confidentiality of taxpayer information is that businesses that regularly assess the creditworthiness of potential commercial partners would usually be unaware of the existence of any overdue tax debt.

5.11 Currently, the first time creditors may learn that a business has an overdue tax debt is after the ATO commences legal action to recover the tax debt. Tax debt information from the ATO may provide a new and significant piece of information which will improve a business's ability to make informed decisions about the risk of providing credit or terms of trade to a business with unpaid debts.

5.12 The tax debt information disclosed by the ATO will not necessarily present a complete picture of a business's outstanding tax debts. Some limitations on the information that may be disclosed will be inbuilt into the legislative framework. Such limitations strike a balance between improving the transparency of tax debt information in the business community and providing fairness for businesses with overdue tax debts. For example, it is expected that tax debt amounts that are being disputed in various forums, and tax debt amounts that are being paid under a payment arrangement, will not be disclosed.

5.13 Another limitation is that only information about tax debts known to the Commissioner can be disclosed. An entity that has outstanding lodgment obligations may have tax debts owed to the Commissioner, which are not known to the Commissioner. Although there will still be limitations on the visibility of tax debt information, the amendments take a significant step towards improving the transparency of overdue tax debts in the business community.

5.14 The amendments reduce the incentive for a taxpayer to prioritise the payment of their non-tax debts over their tax debts given both types of debt may affect the taxpayer's credit worthiness. This increases the incentive for taxpayers to pay their tax debts in a timely manner and will reduce the unfair competitive advantage obtained by taxpayers who do not pay their tax debts on time over taxpayers who comply with their tax obligations. The amendments will also add a further mechanism by which the Government is acting to limit or prevent illegal phoenixing.

5.15 The amendments provide the ATO with additional options to deal with taxpayers that are choosing not to effectively engage with them to manage their tax debts, complementing the ATO's existing debt collection activities and strategies. The ATO already has a comprehensive engagement strategy, which is adapted to different taxpayers based on their previous engagement history and circumstances, to increase the likelihood of the taxpayer engaging with the ATO.

5.16 The ATO's existing debt collection activities may include phone calls, letters, text messages, referral to a debt collection agency or other pre-litigation action. In some cases, more significant action is warranted, including garnishee orders (which involves redirecting money owed to a taxpayer by third parties to the Commissioner to reduce the taxpayer's tax debt) or recovery through the courts.

5.17 The consequences for a taxpayer of having their tax debt information disclosed to credit reporting bureaus can potentially be serious. For example, such information could lead to difficulty accessing finance, which could have broader ramifications for the business. This is similar to the consequences that could arise as a result of other potential debt collection options available to the ATO. For example, where the ATO issues a garnishee order to the taxpayer's bank it can provide a signal to the bank that the taxpayer has a tax debt or where the ATO institutes debt recovery proceedings through the courts, the tax debt information of the taxpayer will become public.

5.18 Given the potential consequences of disclosure for a particular taxpayer, the amendments should motivate some taxpayers to promptly pay their tax debt and voluntarily comply with their tax obligations or encourage taxpayers to engage with the ATO preventing their debts from being reported.

5.19 The procedural conditions and safeguards that the Commissioner must satisfy before disclosing a taxpayer's tax debt information are important features of the legislative framework. In addition, the framework is being designed to ensure the ATO will not disclose the taxpayer's tax debt information if there is an active complaint relating to the Commissioner's intention to disclose a taxpayer's tax debt information or an active dispute involving the underlying tax liability to which the tax debt relates.

5.20 It is expected that the Commissioner will adopt an administrative approach that ensures taxpayers have access to an inexpensive and simple review process prior to their tax debt information being disclosed by the Commissioner. A taxpayer should be able to access an internal ATO review process, as well as a complaints process conducted by the Inspector-General of Taxation. Where possible, existing and well-understood processes for review and complaints will be utilised.

5.21 As the ATO is not compelled to disclose the tax debt information of taxpayers, the ATO is able to temporarily exclude a taxpayer from disclosure while the taxpayer is experiencing exceptional circumstances preventing them from managing their debts. For example, where a taxpayer's ability to pay their tax debts has been affected by a natural disaster.

Summary of new law

5.22 Schedule 5 to the Bill amends the TAA 1953 to allow taxation officers to disclose the tax debt information of a particular entity operating a business to credit reporting bureaus when certain conditions and safeguards are satisfied.

5.23 This will allow tax debts to be placed on a similar footing as other debts, strengthening the incentives for businesses to pay their debts in a timely manner and effectively engage with the ATO to avoid having their tax debt information disclosed.

5.24 The amendments will contribute to reducing unfair financial advantage obtained by businesses that do not pay their tax on time and contribute to more informed decision making within the business community by enabling credit providers and businesses to make a more comprehensive assessment of the credit worthiness of a business.

Comparison of key features of new law and current law

Detailed explanation of new law

Allowing taxation officers to disclose tax debt information to credit reporting bureaus

Overview

5.25 Under subsection 355-25(1), it is an offence (punishable by two years imprisonment) for a taxation officer to disclose or record protected information acquired in their capacity as a taxation officer. This offence protects the confidentiality of taxpayer information, including information relating to a taxpayer's tax debts.

5.26 These amendments ensure that taxation officers will not be liable for an offence for disclosing to a credit reporting bureau the tax debt information of a particular taxpayer, provided that:

•

the disclosure is to a credit reporting bureau; and

•

the record or disclosure is of information that relates to the tax debts of a taxpayer who is within the class of entity whose tax debt may be disclosed, as set out in a legislative instrument to be made by the Treasurer; and

•

the disclosure is for the purpose of enabling the credit reporting bureau to prepare, issue, update, correct or confirm a credit worthiness report in relation to a particular taxpayer; and

•

the procedural conditions and safeguards for disclosure of the taxpayer's information have been met.

[Schedule 5, item 2, subsection 355-72(1)]

5.27 Allowing taxation officers to report protected information relating to a particular taxpayer's tax debts to credit reporting bureaus in the specified circumstances will:

•

support more informed decision making within the business community by making overdue tax debts more visible;

•

encourage taxpayers to engage with the ATO to manage their tax debts; and

•

reduce the unfair advantage obtained by businesses that do not pay their tax on time. For further information see paragraphs 5.9 to 5.18.

5.28 Before initially disclosing a taxpayer's tax debt information, taxation officers must ensure compliance with certain procedural safeguards. The procedural safeguards are to notify the taxpayer whose information is to be reported at least 21 days before disclosure and to consult with the Inspector-General of Taxation prior to disclosure. A taxation officer failing to comply with such conditions or disclosing a taxpayer's tax debt information where the taxpayer did not satisfy the criteria for disclosure commits an offence under subsection 355-25(1). [Schedule 5, item 2, paragraph 355-72(1)(e)]

5.29 After the initial disclosure of a taxpayer's tax debt information, and while that entity remains within the class of entity whose tax debt information may be disclosed, taxation officers may make further disclosures of the taxpayer's tax debt information without the need to satisfy all the procedural conditions. For example, it would be expected that after the initial disclosure, the Commissioner would routinely disclose the balance of a taxpayer's overdue tax debt to allow credit reporting bureaus to maintain accurate and up-to-date information. The balance of a taxpayer's overdue tax debt would be calculated incorporating any new tax debts that become overdue following the initial disclosure or amounts paid.

5.30 The Commissioner may also disclose the tax debt information of an entity which no longer meets the criteria for disclosure set out by the Treasurer in a legislative instrument, where the disclosure relates solely to the reasons why an entity no longer meets the criteria and is for the purpose of enabling a credit reporting bureau to update or correct the information in a credit worthiness report in relation to that entity. Taxation officers need not satisfy all the procedural conditions in relation to updates or corrections. [Schedule 5, item 2, subsection 355-72(4)]

5.31 This allows the Commissioner to promptly notify a credit reporting bureau that a particular taxpayer no longer falls within the class of entities whose tax debt information can be disclosed. In such a situation, it is expected that the Commissioner will, in accordance with the agreements entered into between the Commissioner and credit reporting bureaus, instruct credit reporting bureaus to remove the tax debt information of the taxpayer in a timely manner.

5.32 If such a taxpayer once again falls within the class of entities whose tax debt information can be disclosed, taxation officers must treat the potential disclosure of the taxpayer's tax debt information as an initial disclosure. That is, taxation officers must ensure that all the procedural safeguards have been satisfied prior to any disclosure of the taxpayer's tax debt information.

5.33 Consistent with most of the other exceptions to the confidentiality of taxpayer information provisions in Division 355, the Commissioner is not obliged to disclose the relevant information. In other words, the Commissioner is permitted, but not required, to disclose the tax debt information of a particular taxpayer, once the conditions relating to an exception are satisfied.

Credit reporting bureaus

5.34 The amendments allow taxation officers to disclose information to an entity the Commissioner recognises as an entity that prepares and issues credit worthiness reports in relation to other entities. The amendments define these entities as credit reporting bureaus. [Schedule 5, item 2, subsection 355-72(7)]

5.35 In contrast to the definition of a 'credit reporting body' in the Privacy Act 1988 , the definition of a credit reporting bureau is framed in terms of disclosures of information about the credit worthiness of an entity (rather than about an individual). There may be some entities that are recognised by the Commissioner as credit reporting bureaus that do not prepare credit worthiness reports in relation to individuals (and therefore do not meet the strict definition of a 'credit reporting body' within the meaning of the Privacy Act 1988).

5.36 An entity that is a credit reporting body within the meaning of the Privacy Act 1988 may also be recognised by the Commissioner as a credit reporting bureau for the purposes of these amendments. However, the Commissioner is not obliged to recognise an entity as a credit reporting bureau, despite the entity meeting the definition of a credit reporting body within the meaning of the Privacy Act 1988.

5.37 The Commissioner must publish a list of entities recognised as credit reporting bureaus on the ATO website. [Schedule 5, item 2, subsection 355-72(8)]

5.38 For the avoidance of doubt, the list of credit reporting bureaus is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act 2003 as the action is administrative in character. [Schedule 5, item 2, subsection 355-72(9)]

5.39 As the Commissioner has discretion regarding whether or not to make a disclosure (once the conditions have been satisfied), the Commissioner has flexibility to establish appropriate administrative arrangements to ensure an entity which the Commissioner intends to disclose information to complies with any terms and conditions the Commissioner considers appropriate. For example, the Commissioner may choose to only disclose to a credit reporting bureau that has agreed to maintain particular processes, safeguards and mechanisms to ensure taxpayer information is appropriately managed.

5.40 The Commissioner also has flexibility to decide that a particular credit reporting bureau should no longer receive tax debt information from the Commissioner. The Commissioner may choose to no longer recognise the entity as a credit reporting bureau for the purpose of these amendments.

Disclosure must be for specified purpose and be of tax debt information

5.41 In order to rely on the exception to the offence protecting the confidentiality of taxpayer information, the disclosure must be of information that relates to the tax debts of an entity and be for the purpose of enabling the credit reporting bureau to prepare, issue, update, correct or confirm a credit worthiness report in relation to a particular entity. [Schedule 5, item 2, paragraphs 355-72(1)(c) and (d)]

5.42 This allows credit reporting bureaus to provide their customers with more complete information to improve their ability to make informed decisions about the risk of providing credit or terms of trade to a business with unpaid debts. This may involve the dissemination of a credit worthiness report or a product other than a credit worthiness report, which provides information about an entity's credit worthiness. For further information, see paragraph 5.78.

5.43 It is expected that disclosures of information that relate to the tax debts of a taxpayer and are made for the requisite purpose will include unique identifiers for a business, such as the taxpayer's ABN and legal name, and their disclosable tax debt amount. The disclosable tax debt amount is the balance of the entity's overdue tax debt.

5.44 The information that may be disclosed must relate to a taxpayer's tax debt within the meaning of section 8AAZA of the TAA 1953. This includes primary tax debts such as income tax debts, activity statement debts, superannuation debts and penalties and interest charge debts, and secondary tax debts such as amounts due under a court order.

5.45 Information that corrects an error in the information previously disclosed or updates this information, or provides a reason for the correction or update, may also be disclosed.

5.46 The type of information that may be disclosed as a result of these amendments is referred to in this Chapter as 'tax debt information'.

5.47 These amendments do not authorise the disclosure of an entity's tax file number, as this information is protected under the TAA 1953, the ITAA 1936 and the Privacy (Tax File Number) Rule 2015.

Class of entity whose tax debt information may be disclosed

5.48 The amendments provide that the Treasurer may by (disallowable) legislative instrument determine the class of entity whose tax debt information may be disclosed by the Commissioner. Specifying the class of entity in a legislative instrument provides the Government with flexibility to update the criteria promptly to ensure it delivers the right policy outcome. It also provides an appropriate level of Parliamentary scrutiny around the criteria as the instrument will be disallowable. [Schedule 5, item 2, subsection 355-72(5)]

5.49 Before making the legislative instrument, the Treasurer must consult the Australian Information Commissioner in relation to matters that relate to the privacy functions (within the meaning of the Australian Information Commissioner Act 2010) and that would be affected by the proposed instrument. The Treasurer must consider any submissions made by the Australian Information Commissioner during the consultation. This ensures that privacy considerations are taken into account during the process of making, remaking or amending the legislative instrument. [Schedule 5, item 2, subsection 355-72(6)]

5.50 In order to rely on the exception to the offence protecting the confidentiality of taxpayer information introduced by these amendments, a legislative instrument must be in place. That is, such a legislative instrument must be registered on the Federal Register of Legislation and have commenced before any disclosures of tax debt information can occur. [Schedule 5, item 2, paragraph 355-72(1)(c)]

5.51 A taxation officer must disclose in accordance with the legislative instrument. It remains an offence for the taxation officer to disclose information where they have failed to comply with the requirements in the instrument. However, a taxation officer may disclose the tax debt information of an entity that no longer falls within the class declared in the instrument in only very limited circumstances as specified in the law. For further information see paragraphs 5.30 to 5.31.

5.52 The legislative instrument is expected to specify that an entity is within the class of entity whose tax debt information may be reported if the entity is carrying on a business with an ABN and has a tax debt, of which at least $100,000 is overdue for more than 90 days. This reflects the criteria that will initially be applied for the purposes of the measure, which was announced by the Government in the 2016-17 Mid-Year Economic and Fiscal Outlook and refined following consultation by raising the minimum tax debt threshold. The refinements were announced by the Government in the 2018-19 Mid-Year Economic and Fiscal Outlook.

5.53 In addition, it is expected that the legislative instrument will specify other criteria which ensure that taxation officers cannot disclose the tax debt information of a taxpayer except in certain circumstances. Some further examples of cases of non-disclosure are:

•

where the Inspector-General of Taxation has advised the Commissioner that the Inspector-General of Taxation has an active complaint relating to the taxpayer's tax debt or the disclosure of the taxpayer's tax debt information; or

•

where a taxpayer is effectively engaging with the ATO to manage their tax debt by undertaking specific actions; or

•

where a taxpayer is disputing the calculation of a tax debt through the Administrative Appeals Tribunal or the courts.

5.54 As the Commissioner has discretion regarding whether or not to disclose the tax debt information of a particular taxpayer, the Commissioner may choose to exclude a taxpayer from disclosure for other reasons that are not determined in the legislative instrument. For public transparency, the Commissioner may set out such additional circumstances in ATO guidance.

Procedural safeguards for initial disclosure

5.55 In order to rely on the exception to the offence protecting the confidentiality of taxpayer information, in addition to being for the specified purpose, the initial disclosure of an entity's tax debt information to a credit reporting bureau must meet certain conditions. That is, a disclosure that is not information that simply updates, corrects or confirms information previously disclosed will only be permitted if, at the time of the disclosure, all of the following procedural conditions are met:

•

the Commissioner has notified the taxpayer at least 21 days before disclosure; and

•

the Commissioner has consulted with the Inspector-General of Taxation.

Notification of intention to disclose

5.56 Before a taxation officer can disclose the tax debt information of a taxpayer meeting the class criteria set out in the legislative instrument, the Commissioner must notify the taxpayer in writing at least 21 days before the information is disclosed that the Commissioner intends to disclose their tax debt information. The notice must set out particular information and must be served on the taxpayer. [Schedule 5, item 2, subsections 355-72(2) and (3)]

5.57 This notification requirement does not apply where the information is disclosed to update, correct or confirm the information previously disclosed. This allows corrections to the information to be made quickly and for the ATO to regularly update information previously disclosed. [Schedule 5, item 2, paragraph 355-72(2)(b)]

5.58 It will remain an offence under subsection 355-25(1) for a taxation officer to disclose tax debt information if the taxation officer does not comply with this notification requirement.

5.59 The notice must be served on the taxpayer. The Commissioner may serve a document on an entity in accordance with the rules set out in Division 4 of the Taxation Administration Regulations 2017. These rules allow the Commissioner to serve a document to an entity's preferred address for service, which may include a physical address, a postal address or an electronic address. Section 28A of the Acts Interpretation Act 1901 also provides rules about how documents may be served on individuals and bodies corporate. [Schedule 5, item 2, paragraph 355-72(3)(e)]

5.60 The notice must:

•

set out the type of information to be disclosed, including the balance of the overdue tax debts payable by the taxpayer at the time the notice is given; and

•

explain how a taxpayer may make a complaint in relation to the proposed disclosure of their information.

[Schedule 5, item 2, paragraphs 355-72(3)(b), (c) and (d)]

5.61 The notice will allow a taxpayer to determine whether they need to correct the information that may be reported or otherwise make a complaint in relation to the disclosure.

5.62 It is expected that the notice will set out how the taxpayer can effectively engage with the ATO to manage their tax debt or otherwise take steps to ensure they are excluded from disclosure. As such, the notice will provide the taxpayer with a genuine opportunity to prevent the disclosure of their tax debt information.

5.63 At the end of the 21 day period, if the taxpayer still meets the criteria for disclosure as set out in the Treasurer's legislative instrument, and the other safeguards are met, the Commissioner may disclose the taxpayer's tax debt information to recognised credit reporting bureaus.

Consultation with Inspector-General of Taxation

5.64 Before a taxation officer can initially disclose the tax debt information of a taxpayer, the Commissioner must firstly consult with the Inspector-General of Taxation in relation to the disclosure of the information. This requirement does not apply where the information is disclosed to update, correct or confirm the information previously disclosed. This exception simply allows updates and corrections to information previously disclosed to be made promptly. [Schedule 5, item 2, subparagraph 355-72(1)(e)(i)]

5.65 The Inspector-General of Taxation is a body that is empowered to conduct investigations, including investigations into action affecting a particular entity that:

•

is taken by a tax official; and

•

relates to tax administration matters; and

•

is the subject of a complaint by that entity to the Inspector-General of Taxation.

5.66 The requirement for taxation officers to consult with the Inspector-General of Taxation prior to making a disclosure of an entity's tax debt information is designed as a safeguard to ensure that the Commissioner does not disclose the tax debt information of an entity inappropriately.

5.67 The Inspector-General of Taxation is already empowered to conduct investigations into complaints made by particular taxpayers about the disclosure of their tax debt information as part of the Inspector-General of Taxation's existing functions set out in the Inspector-General of Taxation Act 2003.

5.68 It is anticipated that a taxpayer who has been given a notification of the Commissioner's intention to disclose their tax debt information and is not satisfied with the resolution of the complaint through the mechanisms provided by the ATO may wish to lodge a complaint with the Inspector-General of Taxation.

5.69 Genuine consultation requires taxation officers to notify the Inspector-General of Taxation of the Commissioner's intention to disclose a particular taxpayer's tax debt information. It involves providing the Inspector-General of Taxation with a reasonable timeframe to verify whether any active debt related complaints from the affected taxpayer have been lodged with the Inspector-General and respond to the Commissioner.

5.70 As the Commissioner is required to notify affected taxpayers of the Commissioner's intention to disclose their tax debt information at least 21 days before disclosing the information, it is possible a taxpayer may lodge a complaint with the Inspector-General of Taxation during this 21 day period. Therefore, providing the Inspector-General of Taxation with a reasonable timeframe to verify whether any relevant complaints have been lodged involves waiting until the end of this 21 day period before requesting a response from the Inspector-General of Taxation. Providing a reasonable timeframe also involves the Commissioner taking into account any requests from the Inspector-General for further time to consider the disclosure of a particular taxpayer's information.

5.71 Where the Inspector-General of Taxation responds by making a recommendation about the disclosure of the taxpayer's tax debt information, the Commissioner must have regard to any recommendation when making a final decision about the disclosure.

5.72 It is expected that the legislative instrument declaring the class of entity whose tax debt information may be disclosed by the Commissioner will facilitate the further involvement of the Inspector-General of Taxation in the process. For example, the legislative instrument may only permit a disclosure where the Inspector-General of Taxation has not advised that it is conducting such an investigation relating to the taxpayer's tax debt or the Commissioner's intention to disclose the taxpayer's tax debt information. In order to rely on the exception to the offence protecting the confidentiality of tax information, taxation officers will be required to take reasonable steps to confirm that such an investigation is not underway before making the disclosure.

5.73 The requirement to consult with the Inspector-General of Taxation introduced by these amendments only applies for an initial disclosure of a taxpayer's tax debt information. Any requirements included in the legislative instrument will apply for initial disclosures, as well as disclosures for the purpose of updating, correcting or confirming information previously disclosed.

Allowing third parties to on-disclose tax debt information

5.74 The policy intent of this measure is to allow credit reporting bureaus to use the tax debt information of particular taxpayers to prepare credit worthiness reports, which will be made available to various third parties, such as banks and other businesses seeking to make a more complete assessment of the entity's credit worthiness. For example, a credit reporting bureau may prepare a credit worthiness report which includes a credit score, where that score has been compiled using information from a range of sources including the tax debt information disclosed by the ATO. Other credit reporting bureaus may transform or present tax debt information in other ways on a credit worthiness report or similar product.

5.75 It is intended that customers of credit reporting bureaus (third parties) be permitted to record or otherwise deal with this information in the course of their businesses. This allows them to use the information to make more informed decisions about who they provide credit to.

5.76 It is an offence (punishable by two years imprisonment) under section 355-155 for an entity (other than a taxation officer) to on-disclose or record protected information acquired from a taxation officer.

5.77 A credit reporting bureau will not be liable for an offence under section 355-155 (on-disclosure of protected information by other people) if they record or disclose the protected information for the original purpose, or in connection with the original purpose of the disclosure (see section 355-175). That is, the credit reporting bureau may use tax debt information concerning a particular entity for preparing, updating and issuing a credit worthiness report in relation to that entity. An entity appointed or employed by or otherwise performing services for a credit reporting bureau receiving the information for the credit reporting bureau will also be able to rely on the exception in section 355-175.

5.78 It is expected that credit reporting bureaus will provide a credit worthiness report to their customers for a fee. A credit reporting bureau may also use an entity's tax debt information to prepare and disseminate to interested parties other products which provide information about an entity's credit worthiness. For example, a risk alert is a product that provides updates to entities that have previously subscribed to receive updates about the credit worthiness of a particular entity. This may be a purpose in connection with the original purpose of the disclosure. However, a disclosure for any other purpose by a credit reporting bureau remains an offence.

5.79 Generally, these type of activities are likely to constitute making the information 'publicly available' for the purposes of section 355-170 (which provides an exception to the offence in section 355-155 (on-disclosure of protected information by other people) if the information was already available to the public). However, section 355-170 may not apply to protect third parties where the information is only available to select customers.

5.80 For the avoidance of doubt, these amendments ensure that the customers of a credit reporting bureau and any other third parties subsequently dealing with tax debt information are not exposed to criminal sanctions for recording or on-disclosing the information. [Schedule 5, item 3, section 355-215]

Interactions with privacy law

5.81 The amendments in this Schedule strike an appropriate balance between improving the transparency of tax debt information in the business community and providing fairness for businesses with overdue tax debts. In order to achieve this balance, the legislative framework includes a number of safeguards and procedural conditions which must be satisfied before a taxpayer's tax debt information may be disclosed. Further, the criteria for the lawful disclosure of a taxpayer's tax debt information (to be specified by legislative instrument) will be designed to allow disclosure only when it would be a proportionate response, given the particular entity and the risk their tax debt represents to other businesses.

5.82 In these circumstances, the disclosure of a taxpayer's tax debt information, whilst having impacts on privacy, is considered to be an effective and proportionate means of achieving important policy objectives. Information about the Schedule's engagement with privacy is in the statement of compatibility with human rights.

5.83 The amendments are consistent with the requirements of the Privacy Act 1988.

Consistency with the Australian Privacy Principles

5.84 Schedule 1 to the Privacy Act 1988 sets out the Australian Privacy Principles, which deal with the handling of personal information. Australian Privacy Principle 6 provides that if an APP entity (an agency or organisation) holds personal information about an individual that was collected for a particular purpose (the primary purpose), the entity must not use or disclose the information for another purpose (the secondary purpose). However, this does not apply if the use or disclosure of the information is authorised under an Australian law (refer paragraph 6.2(b) of Schedule 1 to the Privacy Act 1988).

5.85 The Privacy Act 1988 defines 'personal information' as meaning information or an opinion about an identified individual, or an individual who is reasonably identifiable, whether the information or opinion is true or not and whether the information or opinion is recorded in a material form or not.

5.86 To the extent that tax debt information is 'personal information' within the meaning of the Privacy Act 1988 , its use or disclosure is, relevantly, authorised under an Australian law if the use or disclosure is in accordance with the amendments or section 355-175. The amendments allow taxation officers to disclose tax debt information and third parties to on-disclose the tax debt information. Section 355-175 has the effect of allowing credit reporting bureaus to on-disclose tax debt information in connection with the original purpose of the disclosure. [Schedule 5, items 2 and 3, sections 355-72 and 355-215]

Consistency with Part IIIA of the Privacy Act 1988

5.87 Part IIIA of the Privacy Act 1988 deals with the privacy of information relating to credit reporting. This includes rules governing a credit reporting body's collection, use and disclosure of information about individuals. A 'credit reporting body' is defined in the Privacy Act 1988 as an organisation or prescribed agency that carries on a credit reporting business. A credit reporting body may be a recipient of tax debt information disclosed by the Commissioner, where the entity is also considered a credit reporting bureau for the purposes of the amendments.

5.88 Section 20C of the Privacy Act 1988 prohibits a credit reporting body from collecting credit information about an individual unless, relevantly, the collection of credit information is required or authorised by or under an Australian law.

5.89 Credit information is defined in section 6N of the Privacy Act 1988. To the extent that tax debt information is 'credit information' within the meaning of the Privacy Act 1988 , its collection by a credit reporting body is authorised under an Australian law, where that collection is a direct consequence of a disclosure in accordance with the amendments. [Schedule 5, items 2 and 3, sections 355-72 and 355-215]

5.90 Section 20E of the Privacy Act 1988 prohibits a credit reporting body from using or disclosing credit reporting information (it holds) about an individual unless, relevantly, the use or disclosure of credit reporting information is required or authorised by or under an Australian law.

5.91 Credit reporting information is defined in section 6 of the Privacy Act 1988. To the extent that tax debt information is 'credit reporting information' within the meaning of the Privacy Act 1988 , its use or disclosure is, relevantly, authorised under an Australian law where that use or disclosure is in accordance with section 355-175. Section 355-175 has the effect of allowing credit reporting bureaus to on-disclose tax debt information in connection with the original purpose of the disclosure.

Consequential amendments

5.92 This Schedule includes consequential amendments to define 'credit reporting bureau' in section 995-1 of the ITAA 1997 and insert notes to assist users of the legislation. [Schedule 5, items 1 to 3, subsection 995-1(1) of the ITAA 1997 and notes to subsections 355-72(1) and (4) and section 355-215]

Application and transitional provisions

5.93 The amendments apply in relation to records and disclosures of information on or after the day after the Bill receives Royal Assent (regardless of whether the information was acquired before, on or after that day). [Schedule 5, item 4]

5.94 Additionally, the amendments do not authorise records or disclosures of information until a legislative instrument determining the class of entity whose tax debt information may be disclosed by the Commissioner is in force. [Schedule 5, item 2, paragraph 355-72(1)(c)]