House of Representatives

Explanatory Memorandum

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

Chapter 5 Authorised disclosures by taxation officers

Outline of chapter

5.1 This chapter outlines the disclosures that 'taxation officers' are authorised to make under the new framework. These are in addition to disclosures of publicly available information outlined in Chapter 4 and the disclosures able to be made to a taxpayer or their representative outlined in Chapter 3.

Context of amendments

Operation of current provisions

5.2 The current disclosure provisions authorise taxation officers and certain other persons who are recipients of taxpayer information to disclose the information in a range of circumstances. While some of these disclosures are phrased generally so as to apply to both taxation and non-taxation officers, others are more specific in only authorising disclosures by taxation officers (notably, by only permitting the Commissioner of Taxation (Commissioner), Second Commissioner or Deputy Commissioner or a person authorised by them to make the disclosure).

5.3 As noted in the Chapter 4, different taxation laws permit taxation officers to disclose information to ministers in different circumstances and to varying degrees.

5.4 While the various provisions are drafted in a range of different styles, common throughout are provisions authorising officers to disclose taxpayer information in the performance of their duties as an officer. This is a commonly used phrase in Commonwealth laws and has been the subject of judicial consideration.

5.5 The current taxation disclosure provisions also permit a taxation officer who receives taxpayer information under one taxation law to disclose the information to another taxation officer to perform their duties under a different taxation law.

5.6 Specific disclosures for taxation officers are found across the taxation laws. These generally provide for disclosures to be made by the Australian Taxation Office (ATO) to another Government agency in circumstances in which taxpayer information will be used to enable that other agency to fulfil some aspect of its function more effectively.

Summary of new law

5.7 The new framework largely retains the existing permitted disclosures made by taxation officers, with some amendments.

5.8 Taxation officers will continue to be able to disclose taxpayer information in the performance of their duties as a taxation officer. The new framework clarifies some existing ambiguities as to the breadth of such disclosures by providing a non-exhaustive list of disclosures that fall within the 'performance of duties' exception.

5.9 The new framework also introduces some new disclosures in instances where the public benefit in disclosing information outweighs the loss of taxpayer privacy.

5.10 As noted in Chapter 4, the new framework also removes any uncertainty as to when taxpayer information can be disclosed to a minister by providing an exhaustive list of circumstances where such disclosures can be made.

Comparison of key features of new law and current law

Detailed explanation of new law

5.11 The following explanation provides detail on disclosures that taxation officers can make in the performance of their duties, disclosures that can be made to ministers, as well as other disclosures that taxation officers can make to government agencies. The explanation is focused on areas where the new framework differs from the existing law or where there is a need to clarify any current ambiguity as to how the law operates.

Disclosures in the performance of a taxation officer's duties

5.12 Disclosure of taxpayer information by a taxation officer is permitted where the disclosure is made in the course of the taxation officer's duties. Generally, such disclosures facilitate the officer carrying out their responsibilities. For the avoidance of doubt, the new framework provides a non-exhaustive list of disclosures that fall within the scope of such a disclosure. These are further described below. [Schedule 1, item 1, section 355-50] .

5.13 These disclosures are only relevant to current taxation officers. As former taxation officers are no longer performing duties as a taxation officer, they cannot disclose information that they obtained as a taxation officer in the 'performance of their duties'.

5.14 As part of the standardisation process, and to reduce the volume of the taxation laws, some specific disclosure provisions in the existing law have not been replicated as they are captured by the 'performance of duties' exception. Examples of this include subparagraphs 159(3)(c)(iia) and 159(3)(d)(iia) and subsection 159(3A) of the Excise Act 1901 .

Administering a taxation law

5.15 It is not an offence for a taxation officer to disclose taxpayer information for the purpose of administering a taxation law. Taxpayers provide information to taxation officers in order to meet their obligations under taxation laws. It is therefore important that taxpayer information be made available to relevant officers to enable them to administer those taxation laws. [Schedule 1, item 1, subsection 355-50(2), item 1 in the table]

5.16 Information that a taxpayer provides for the purposes of one taxation law can be used to administer another taxation law (or another part of the same law). In this way, taxpayers are not required to provide the same information multiple times and taxation officers can utilise data from different sources effectively.

5.17 Taxpayer information may also need to be disclosed by a taxation officer to non-taxation officers for the purposes of administering a taxation law.

Example 5.1

Leo contacts the ATO in relation to his unclaimed superannuation. He fills out the appropriate forms, which include his name, address, date of birth and details relating to his superannuation, and provides these to the ATO. Megan, a taxation officer working in the superannuation area, provides these forms to the superannuation fund holding Leo's unclaimed money. Megan does this for the purpose of reuniting Leo with his unclaimed money, which is one of the objects of the Superannuation (Unclaimed Moneys and Lost Members) Act 1999 .

Proceeds of crime order related to a taxation law

5.18 It is not an offence for a taxation officer to disclose taxpayer information where it is for the purpose of the making, or possible making, of an order under the Proceeds of Crime Act 2002 that is related to a taxation law. [Schedule 1, item 1, subsection 355-50(2), item 2 in the table]

5.19 Such circumstances include where the ATO provides the Australian Federal Police with information necessary to prevent an individual from profiting from an offence committed under a taxation law. In addition, as the ATO is an enforcement agency for the purposes of the Proceeds of Crime Act 2002 (under the Proceeds of Crime Regulations 2002 ) taxation officers may disclose information in accordance with this role where this is related to a taxation law.

Judicial and administrative proceedings related to a taxation law

5.20 It is not an offence for a taxation officer to disclose taxpayer information for the purposes of proceedings related to a taxation law. Disclosures to Courts, external legal advisers and to the Commonwealth Director of Public Prosecutions in relation to proceedings that are directly or indirectly related to a taxation law are therefore allowed. [Schedule 1, item 1, subsection 355-50(2), item 3 in the table]

Example 5.2

An individual knowingly lodges an incorrect tax return. The ATO decides to prosecute the individual under an offence provision in the Taxation Administration Act 1953 (TAA 1953) and commences an action in the Supreme Court of New South Wales. The disclosure of taxpayer information in the course of these proceedings is not an offence as it is for the purpose of criminal proceedings related to a taxation law.

Example 5.3

Instead of prosecuting the individual for an offence under the TAA 1953, the ATO decides to refer the matter to the CDPP for prosecution under a provision in the Criminal Code Act 1995 . It is not an offence for the ATO to disclose information to the CDPP, even though the offence provision is not in a taxation law, because the proceedings relate to a taxation law.

Example 5.4

In a case between the Commissioner and Mr Doe, Mr Doe's legal team undertake a process of discovery to obtain information about Mr Doe from the ATO. It is not an offence for a taxation officer to disclose information to Mr Doe's legal team if the proceedings are related to a taxation law.

Providing a statement of reasons under the Administrative Appeals (Judicial Review) Act 1977

5.21 A taxation officer is authorised to disclose taxpayer information in the performance of their duties, even where such a disclosure is not directly contemplated by a provision in a taxation law. For instance, it is not an offence for a taxation officer to disclose taxpayer information in response to a request for a statement of reasons by the Administrative Appeals (Judicial Review) Act 1977 . [Schedule 1, item 1, subsection 355-50(2), item 4 in the table]

Example 5.5

In the course of an audit of a taxpayer (in their capacity as an individual), a taxation officer issues an information-gathering notice under section 264 of the Income Tax Assessment Act 1936 (ITAA 1936) to obtain information relevant to the audit. The taxpayer applies, under section 13 of the Administrative Appeals (Judicial Review) Act 1977 , for a copy of the statement of reasons for this decision. The statement of reasons contains information relating to both the taxpayer as an individual and a company of which the taxpayer is a shareholder. In providing this information relating to the company, the taxation officer is not committing an offence because, although the information is requested under an Act that is not a taxation law, the taxation officer is merely fulfilling their duty as a taxation officer under a statutory obligation.

Ex-gratia payments

5.22 Ex-gratia payments are a discretionary compensation mechanism available to the Australian Government under section 61 of the Australian Constitution. Such payments can be used, usually in the absence of any existing legislative compensation scheme, to compensate individuals for a particular loss. While a decision to make such a payment rests with the Prime Minister and/or Cabinet (see disclosures to ministers below), taxation officers may be required to analyse and administer payments that are connected to the taxation law. A payment will be connected to a taxation law when the need to make the payment arises, for instance, as a result of the manner in which the taxation law has been applied. [Schedule 1, item 1, subsection 355-50(2), item 5 in the table]

5.23 This disclosure provides an example of where the impetus for the disclosure lies outside of the taxation law (in this case, the impetus is the discretionary compensation mechanism provided for in the Constitution), but which still falls within a taxation officer's duties.

Example 5.6

The Cabinet meets to decide whether or not to provide an ex-gratia payment to taxpayers that were inadvertently affected to their detriment by a change in a taxation law. In the course of preparing a brief for Cabinet to provide advice on such a payment, a taxation officer discloses information to the Department of the Prime Minister and Cabinet. It is not an offence for a taxation officer to make such a disclosure.

Compliance with obligations under a taxation law

5.24 The new framework recognises that in some circumstances, for a taxpayer to fulfil or to understand their tax obligations, they may require the information of another taxpayer. It is not an offence for a taxation officer to disclose taxpayer information in these circumstances. [Schedule 1, item 1, subsection 355-50(2), item 6 in the table]

5.25 It is important to note that a taxation officer may only disclose information where that information is required by a taxpayer to meet their taxation obligations. It is not sufficient that the information may be of interest to a taxpayer or would be useful for them.

Example 5.7

Tanisha and Ben are joint trustees and are jointly liable for a debt of $10,000 owed to the ATO. Tanisha makes a payment of $3,000 without informing Ben. Ben contacts the ATO to settle the debt. The ATO can inform Ben that Tanisha has paid part of the debt, and the remaining balance is $7,000 as this allows him to understand the extent of his tax obligation (that is, how much is owed) and to satisfy it.

Example 5.8

Anthony and Linda are married. Anthony pays for all the living costs and supports Linda while she is studying. Anthony wants to claim the dependent spouse offset and for this, requires Linda's income. Linda is overseas, cannot be contacted, and has not appointed Anthony as her representative in the approved form. It is not an offence for a taxation officer to provide details of Linda's income to Anthony to enable him to prepare his tax return and claim the offset.

Example 5.9

Raul is licensed under the Excise Act 1901 to manufacture spirits. Tim has an approval issued under section 77FD of the Excise Act 1901 to use spirits for fortifying Australian wine. Tim wants to buy 1,000 litres of spirit from Raul. Raul contacts the ATO to check that Tim's approval allows for 1,000 litres of spirit and that it is still current. The taxation officer is permitted to divulge details of Tim's approval to Raul to allow Raul to fulfil his obligations under the Excise Act 1901 .

Design or amendment of a taxation law

5.26 It is not an offence for a taxation officer to disclose taxpayer information to the Treasury for the purpose of designing or amending a taxation law. This reflects the fact that, under current administrative arrangements, the Government has determined that other agencies (notably the Treasury) are to have the design and amendment responsibilities with respect to taxation laws. [Schedule 1, item 1, subsection 355-50(2), item 7 in the table]

5.27 Treasury does not require identifiable information on individual taxpayers and, accordingly, most of the information provided for purposes related to the design or amendment of the taxation law would not be 'protected information' within the meaning of the new framework. However, in some circumstances, even 'de-identified' information may still be capable of identifying particular taxpayers and would therefore be protected. For instance, where the de-identified information concerns an industry with few participants and is dominated by one or a handful of competitors, it may still be readily apparent that the information relates to a specific entity.

5.28 Contact details and Australian Business Numbers (ABNs) of taxpayers cannot be provided to Treasury in any circumstances. The provisions relating to TFNs also prevent these from being provided.

Example 5.10

The Government has announced a new taxation law that will only apply to certain workers. Treasury requires additional information about these workers in order to prepare drafting instructions for the Office of Parliamentary Counsel. Because there are so few people in Australia who are in this field of work, it is reasonably possible that information about individual workers could be ascertained from any data provided by the ATO. It is not an offence for a taxation officer to disclose information for the purpose of providing drafting instructions for the new legislation, even though that information could be used to identify individual taxpayers. The information cannot include the name, contact details or the ABNs of individual taxpayers.

Boards performing a function or exercising a power under a taxation law

5.29 It is not an offence for a taxation officer to disclose taxpayer information to a board (or any member of a board) so that the board can perform a function or exercise a power under a taxation law. This provision will, for instance, facilitate the disclosure of taxpayer information to the Tax Practitioners Board established under the Tax Agent Services Act 2009 (TAS Act). As noted in paragraph 2.29, although the TAS Act is not an Act administered by the Commissioner of Taxation, it will nonetheless be a taxation law as a consequence of amendments being made by the Tax Agent Services (Transitional Provisions and Consequential Amendments) Bill 2009. [Schedule 1, item 1, subsection 355-50(2), item 8 in the table]

Example 5.11

Kyle, a taxation officer, determines that a taxpayer is not liable to an administrative penalty for failing to lodge their income tax return by the required date. This is because the taxpayer engaged a registered tax agent and the failure to provide the return in time was a result of the carelessness of the agent. Kyle recognises that the evidence of the tax agent's negligence would be relevant to the exercise of the Tax Practitioners Board's functions under the TAS Act. Of note the Board has the function under the Act of investigating conduct of tax agents and to do anything incidental to this.

Kyle provides the information to Bryce, a member of the Tax Practitioners Board so that Bryce can consider whether or not to take any further action relating to the tax agent. It is not an offence for Kyle to provide this information.

Exchange of information under an international tax agreement

5.30 It is not an offence for a taxation officer to disclose taxpayer information for the purpose of meeting the Commissioner's obligations to exchange information under an international agreement. [Schedule 1, item 1, section 355-45(2), item 9 in the table]

Example 5.12

The New Zealand Inland Revenue Department lodges a request with the ATO for income tax information relating to a New Zealand resident (for tax purposes), currently working in Australia. The request is for the purpose of determining how much income tax the resident should pay in New Zealand. Under the agreement with New Zealand, the Commissioner is required to provide this information. It is not an offence to provide the requested information.

Disclosures to ministers

5.31 As noted in Chapter 4, there are particular sensitivities associated with a minister's access to a taxpayer's taxation information and, accordingly, disclosure of taxpayer information to ministers is limited.

5.32 In addition to information that is publicly available being able to be provided, the new framework provides for an exhaustive list of circumstances in which a taxation officer is able to disclose information to a minister. These permitted disclosures are broadly consistent with those permitted under the current law and seek to remove inconsistencies and ambiguities in the current law. [Schedule 1, item 1, section 355-55 and subsection 355-60(1)]

Ministers performing functions under a taxation law

5.33 It is not an offence for a taxation officer to provide taxpayer information to a minister for the purpose of enabling the minister to exercise a power or perform a function under a taxation law. In the majority of cases, the Treasurer will be the minister with specified powers under a taxation law (however, there may be other ministers either within or outside the Treasury portfolio with a function under a taxation law). [Schedule 1, item 1, section 355-55, item 1 in the table]

Example 5.13

Subdivision CB, Part III of Division 3 of the ITAA 1936 provides that the Treasurer may determine that a company is a regional headquarters company and is eligible to claim a tax deduction for certain expenditures incurred. It is not an offence for a taxation officer to provide information about a company to the Treasurer to enable him to determine whether or not that company is a regional headquarters company.

Example 5.14

Under subsection 14(2) of the ITAA 1936, the Minister has the function of tabling a copy of the Commissioner's annual report outlining the operation of that Act. This report may include taxpayer information relating to any breaches of the Act over the course of the year (see subsection 14(1)). It is not an offence for the Commissioner to disclose taxpayer information in the annual report to the Minister as the Minister has the function under a taxation law of tabling that report in each House of the Parliament.

Ministerial correspondence

5.34 Taxpayers who want assistance or clarification in relation to their taxation affairs often write to the Treasurer, or to their local member (who usually forwards such letters to the Treasurer). It is not an offence for a taxation officer to provide information to enable the Treasurer to respond directly to these taxpayer requests, either in writing or in person. [Schedule 1, item 1, section 355-55 ,, item 2 in the table]

Example 5.15

Fred writes to his local member (who is also the Minister for Defence) saying that the ATO has charged him a penalty for late payment, when his payment was only slightly overdue and for a very good reason. His local member forwards the letter to the Treasurer. It is not an offence for a taxation officer to provide information about Fred's tax affairs to the Treasurer to enable the Treasurer to respond to Fred's concerns.

Note that Fred's taxpayer information cannot be provided to his local member. A letter may be provided to Fred's local member noting that the Treasurer has responded directly to Fred, provided that letter does not disclose any taxpayer information about Fred.

Compensation for Detriment Caused by Defective Administration scheme

5.35 The Compensation for Detriment Caused by Defective Administration scheme allows Government portfolio ministers to compensate individuals or other bodies who have experienced losses caused by agencies' maladministration (though in practice this power is often delegated to relevant departments). It is not an offence for a taxation officer to provide taxpayer information to the Treasurer to inform decisions the Treasurer makes under the Compensation for Detriment Caused by Defective Administration scheme. [Schedule 1, item 1, section 355-55, item 3 in the table]

Disclosures to the Finance Minister

5.36 The Financial Management and Accountability Act 1997 allows the Finance Minister, currently the Minister for Finance and Deregulation to make 'act of grace' payments, or waive debts owed to the Commonwealth. An 'act of grace' payment is usually a one-off or periodic payment made, for instance, where an entity has suffered a loss that was unintended as a result of an Australian Government action. Similarly, debts owed to the Commonwealth are waived in circumstances where the debt has been inappropriately imposed or in cases of extreme financial hardship.

5.37 In instances where the Finance Minister is considering making an act of grace payment to compensate an entity that has incurred a loss because of the administration of a taxation law, or where the Minister is considering waiving a taxation debt, it is not an offence for taxation officers to provide the taxpayer's information to the Minister. [Schedule 1, item 1, section 355-55, item 4 in the table]

5.38 This provision does not allow the disclosure of taxpayer information to assist the Finance Minister in making decisions in relation to non-tax debts to the Commonwealth. Nor does it allow the disclosure of taxpayer information to assist with act of grace payments that are unrelated to the administration of a taxation law.

Example 5.16

In a particular instance, the application of a taxation law had an unintended effect on a small group of taxpayers, resulting in economic losses for those taxpayers. The Government amended the legislation on a prospective basis. The Minister for Finance and Deregulation decided to make an act of grace payment under section 33 of the Financial Management and Accountability Act 1997 to those taxpayers who had suffered a loss. It is not an offence for a taxation officer to provide information to the Minister for Finance and Deregulation identifying who the affected taxpayers were and the extent of their losses.

Ex-gratia payments

5.39 If the Prime Minister or Cabinet is considering whether an entity should be entitled to an ex-gratia payment, it is not an offence for a taxation officer to provide them with information about that entity in order to assist their decision-making. Similarly, if the Prime Minister or Cabinet decides that an entity should be entitled to an ex-gratia payment, it is not an offence for a taxation officer to provide information about that entity to the relevant minister in order to facilitate the delivery of the ex-gratia payment. [Schedule 1, item 1, section 355-55, item 5 in the table]

5.40 There is no requirement that the ex-gratia payment be referable to the administration of the taxation law. Information held by the ATO may be relevant to the decision to make ex-gratia payments (or administering such payments) that are themselves unrelated to the taxation law.

Example 5.17

The Prime Minister and Cabinet determine that an ex-gratia payment should be granted to certain family members of former Australian servicemen. The Department of Defence does not have up to date contact information for these individuals and is unable to get in touch with them. The ATO, which does have current contact details for the relevant individuals, is able to provide this information to the Defence Minister to allow these payments to be made.

Disclosures for other Government purposes

Retention of existing disclosure provisions

5.41 While taxpayer information is used primarily by taxation officers for purposes connected with the administration of the taxation laws, such information is also useful for other Government agencies in administering their laws. As noted in Chapter 1 of this explanatory memorandum, taxpayer information can play an integral role in facilitating efficient and effective government administration and law enforcement.

5.42 Over time, various taxation laws have specified a range of circumstances in which taxpayer information may be disclosed to assist with the administration of other laws. These disclosures are usually limited to a particular purpose and reflect situations where Parliament believes that the loss to taxpayer privacy is outweighed by the public benefit resulting from the disclosure.

5.43 These various disclosure provisions have now been combined in a single provision enabling them to be found and understood easily by all relevant stakeholders. In doing so, the framework seeks to provide greater transparency about the circumstances in which taxpayer information can be disclosed. [Schedule 1, item 1, section 355-65]

5.44 Chapter 8 (Finding Tables) provides a comprehensive list of all provisions in the existing law and their corresponding provision in the new framework.

5.45 In moving the disclosure provisions from 18 different taxation law Acts into one provision, there has been some level of harmonisation and standardisation of the disclosures. For instance, under existing taxation secrecy and disclosure provisions, taxation officers are permitted to disclose taxpayer information relating to businesses, employers, indirect tax, superannuation and product grants to the Australian Bureau of Statistics (ABS), for purposes associated with the Census and Statistics Act 1905 . These separate disclosures have all now been combined into a single provision that permits all taxpayer information to be provided to the ABS for the administration of the Census and Statistics Act 1905 . [Schedule 1, item 1, subsection 355-65(1), item 1 in table 7]

5.46 The disclosure explained above provides a good example of where the benefit of disclosure outweighs the impact on taxpayer privacy. By allowing the ABS to access all taxpayer information, the ABS will be able to effectively produce aggregate statistics that are of relevance and use to policy makers and researchers, particularly if taxpayer data is coupled with existing ABS data. Examples of such statistics include regional estimates of income of older Australians, by income and age ranges. Longitudinal studies useful for policy development will also be possible, such as income patterns over time for particular groups. Moreover, by allowing a wide range of taxpayer information to be provided to the ABS, the ABS will be able to reduce the amount of duplicate information it currently collects from Australian individuals and entities.

5.47 Balanced against the public benefit is the impact on an entity's privacy. In this instance, the impact is minimal, as the ABS has strict mechanisms in place for the protection of information it receives in the course of its duties (see section 19 of the Census and Statistics Act 1905 ). Furthermore, the ABS cannot publish statistics that are likely to identify an entity (see subsection 12(2) of the Census and Statistics Act 1905 ).

5.48 In contrast to the ABS example, the disclosure provisions in some circumstances retain a restriction on the type of information that can be disclosed. This is particularly the case where the purposes for which disclosure can be made are wide. It is therefore appropriate to maintain the limitation on the type of information that may be accessed. For example, section 38 of the Superannuation (Unclaimed Moneys and Lost Members Act) 1999 (SUMLA) permits information obtained under that Act to be disclosed to a range of agencies (for instance, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC)) to help them perform their functions. Given the breadth of the purpose of the disclosure, it is appropriate to maintain the limitation that the information be obtained under that Act. [Schedule 1, item 1, subsection 355-65(1), item 3 in table 2 and item 2 in table 3]

References to Secretaries of Departments

5.49 Most of the new disclosure provisions to Commonwealth departments are drafted in such a way that the information must be provided to the Secretary of the relevant department (for instance, the Education Secretary or the Immigration Secretary). This has been done to ensure consistency and to clearly identify who the information can be provided to.

5.50 Often it is not practical to provide the information to the Secretary themselves and it may be provided to a Departmental officer on behalf of the Secretary. This is consistent with general principles of law such as those put forward in Carltona Ltd v Commissioner of Works [1943] 2 All ER560. In practice, the purpose for which the disclosure can be made will also limit the recipients of the information, as the taxation officer can only disclose the information if the purpose tests in law are met. It would be difficult for a taxation officer to argue, for instance, that disclosing information to a Centrelink officer for the purpose of locating persons unlawfully in Australia was authorised under the framework.

Example 5.18

The Department of Immigration and Citizenship requests taxpayer information from the ATO that will enable it to ensure that sponsors of '457' visa-holders comply with their obligations under the Migration Act 1953 . Brendan, a taxation officer, discloses the information to Lavinia, a migration officer working in the sponsorship compliance area of the Department. As the purpose of the disclosure is consistent with an exception in the new framework (which enables taxpayer information to be disclosed to the Immigration Secretary for purposes relating to ensuring compliance by '457' visa-sponsors), the disclosure of information to Lavinia is not an offence.

New disclosure provisions

5.51 The new framework also includes some clearly targeted disclosure provisions not contained in the current legislation. Broadly, these reflect cases where:

•

the taxation secrecy provisions have yet to be updated to take into account changes in administrative arrangements;

•

to facilitate the disclosure of taxpayer information which will be invaluable in the administration of new law enforcement regimes;

•

existing disclosure provisions need to be amended to give effect to the original policy intent of the provision; and

•

otherwise where the public benefit of disclosure outweighs taxpayer privacy.

Disclosure to Australian Securities and Investment Commission in relation to administering superannuation funds

5.52 Under the current taxation secrecy and disclosure provisions, in recognition of the role that the ASIC has in regulating superannuation entities, taxation officers are permitted to disclose relevant taxpayer information to ASIC for the purposes of its administration of the SIS Act. Since the enactment of this provision, however, part of ASIC's role in regulating superannuation entities has shifted to other Acts - notably the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 .

5.53 In recognition of this legislative shift in ASIC's role in relation to superannuation entities, under this Bill it is not an offence for a taxation officer to provide superannuation information to ASIC for the purposes of administering Chapter 7 of the Corporations Act 2001 (relating to financial services and markets) or Part 2 of Division 2 of the Australian Securities and Investments Commission Act 2001 (relating to unconscionable conduct and consumer protection in relation to financial services). [Schedule 1, item 1, subsection 355-65(1), item 3 in table 3]

Disclosure to ASIC to pursue breaches of ASIC-administered legislation

5.54 Under the current taxation secrecy provisions, ASIC is able to obtain taxpayer information to fulfil its role as a law enforcement agency for the purpose of establishing whether a serious offence has taken place or for the making of a proceeds of crime order in relation to a serious offence (see below for further information). The new framework expands the disclosures that can be made to ASIC in order for it to fulfil its law enforcement role. Disclosures will be permitted to ASIC for the investigation or enforcement of a law administered by ASIC that is a criminal law or that imposes a monetary penalty. [Schedule 1, item 1, subsection 355-65(1), item 1 in table 3]

5.55 This new disclosure recognises that the role of ASIC in regulating companies and financial services is integral to maintaining and protecting the integrity of the market. The ATO may provide information to ASIC where it is apparent that breaches of ASIC-administered legislation are occurring. The ability of ASIC to identify and penalise breaches of corporate law discourages corporate mismanagement and significant financial losses to investors and consumers. Information held by the ATO may be invaluable for ASIC in pursuing action against directors who may repeatedly be engaged in fraudulent phoenix activity. Examples of breaches include trading while insolvent, misleading and deceptive conduct and market misconduct such as insider trading.

Disclosures to prevent or lessen serious threats

5.56 The new framework recognises that, where the disclosure of taxpayer information by a taxation officer to another Commonwealth or State government agency would enable that agency to identify and better address a serious threat, that disclosure should not be an offence. [Schedule 1, item 1, section 355-65, item 9 in table 1]

5.57 This new disclosure recognises that the public interest in allowing government agencies to use information where this would prevent harm to an individual or to the public, outweighs any loss of privacy. This disclosure is based on paragraph 1(c) of Information Privacy Principle 11 in section 14 of the Privacy Act 1988 and on a similar provision in Information Privacy Principle 2.1(d) in Schedule 1 to the Information Privacy Principle Act 2000 (Vic).

5.58 One distinction between the approach in the Privacy Act 1988 and the new framework is that there is no requirement in this Bill that the threat to an individual be imminent. In the Privacy Act 1988 , if the threat is not imminent, the consent of the individual concerned can always be obtained to authorise the disclosure of their information. However, as taxpayer consent is specifically excluded under this framework, it is appropriate not to have a requirement for the threat to be imminent.

5.59 The fact that there is a threat is not enough to justify disclosure - the disclosure must be necessary to prevent or lessen the threat. A taxation officer must therefore consider whether the disclosure will have any real impact on the threat or whether there are alternatives other than the disclosure of taxpayer information that could achieve the same result.

5.60 A threat to life or health includes threats to safety and would include bushfires, industrial accidents and direct threats to individuals or groups. Health includes mental as well as physical health, although a threat of stress or anxiety would generally not be sufficiently serious.

5.61 What is a 'serious' threat will depend on the particular circumstances, but would certainly include a threat of bodily harm or assault.

Example 5.19

Aaron, who works in an ATO call centre, receives a call from a disgruntled taxpayer who is angry at the ATO and a number of Government agencies at the perceived injustices he has suffered. The taxpayer tells Aaron that he is going to go down to the nearest Centrelink office with a baseball bat to 'settle the score'. From the conversation Aaron forms the view that the taxpayer is about to carry out the threat. It is not an offence for Aaron to pass on the details of the taxpayer to the Australian Federal Police and Centrelink.

5.62 Threats to public health or safety are those that have the potential to affect the public (both in Australia and overseas) more generally rather than just a specific individual or group of individuals. A possible outbreak of an infectious disease is one such example, and an example of where a threat to the public health or safety would be serious.

Example 5.20

Michael, a taxation officer working in the excise area, obtains information about possible fuel tampering that could pose a serious safety risk if the fuel is used in machinery. While it is not clear that the threat is imminent, as it is a serious threat to public health, Michael can disclose the information to the relevant State and/or Commonwealth authorities.

5.63 The gravity of the outcome and the likelihood of its occurrence are factors to take into account when determining whether there is a serious threat.

Example 5.21

Ray, a taxation officer is asked by a state government department to disclose the names and addresses of taxpayers who live in a certain area given that the department wishes to warn people that there is a potential, but low risk of soil contamination of a type that would cause minor temporary illness. A disclosure would not be lawful in these circumstances as there is not a serious threat to the taxpayers.

Disclosures to Treasury for estimation and analysis

5.64 As noted in paragraphs 5.26 to 5.28, a taxation officer can disclose information to Treasury where this is relevant to the design or amendment of a taxation law as long as the information does not contain the name, contact details or ABN of any entity. In addition, to fulfil its broader role to Government, Treasury also obtains data from the ATO to analyse and predict revenue flows, as well as cost policy proposals that do not necessarily result in the creation of a new taxation law.

5.65 Also as noted above, Treasury does not require information that identifies that taxpayer. In some cases however, aggregate information on classes of taxpayer or a sample of de-identified individual taxpayer information might allow the probable identity of an individual taxpayer to be inferred. As a consequence such information will be protected information and its disclosure limited by this secrecy framework.

5.66 The new framework permits the ATO to provide information to Treasury for the purpose of analysing and predicting revenue flows and costing policy proposals even where there is the chance of deducing the identity of the taxpayer. To make it clear that Treasury does not need to receive, as a general rule, identifying information about individual taxpayers, the name, contact details and ABN are specifically excluded from being able to be provided (TFNs can also not be provided). 'Contact details' refers to the address, telephone, email and other such details of an entity and would not prevent very broad information such as the State or Territory. [Schedule 1, item 1, subsection 355-65(1), item 8 in table 3] .

Disclosures for the purposes of the Foreign Acquisition and Takeovers Act 1975

5.67 The Foreign Acquisition and Takeovers Act 1975 gives the Treasurer powers in relation to certain foreign investment proposals. These powers include prohibiting a proposal on the basis that it is not in the national interest (sections 18 to 21A) or to impose conditions on a proposal to remove any national interest issues (section 25). It also permits the Treasurer to make orders for foreign persons to divest shares, assets or interests in urban land where the acquisition is decided to be contrary to the national interest. What the Treasurer can take into account in determining the 'national interest' is broad.

5.68 Currently, in briefing the Treasurer to make a decision under the Foreign Acquisition and Takeovers Act 1975 , the Treasury forwards foreign investment applications to key Government agencies for comment. While the ATO is one such agency, because of the operation of taxation secrecy provisions, the ATO cannot provide the Treasury with any identifiable information that may be of relevance to the Treasurer's decision, including revenue impacts of a particular proposal. Impacts on the Government revenue was specifically included as one factor to be included in assessing 'national interest' as outlined in 'Guidelines for foreign government investment proposals' released by the Treasurer in Media Release No. 009 of 17 February 2008.

5.69 To overcome these problems, this framework introduces a new disclosure provision that will permit the disclosure of taxpayer information to the Treasury for the purposes of briefing the Treasurer in relation to decisions the Treasurer is empowered to make under the Foreign Acquisition and Takeovers Act 1975 . [Schedule 1, item 1, subsection 355-65(1), item 7 in table 3]

Disclosures for the purposes of the First Home Owner Grant Scheme

5.70 To ensure that those claiming the first home owner grant (FHOG) are indeed eligible (that is, it is genuinely their first home), the existing tax secrecy provisions enable taxpayer information obtained under the First Home Savers Account Act 2009 (FHSA Act) to be provided to the state agencies administering the FHOG scheme.

5.71 In addition to information obtained under the FHSA Act, rental and residential address information obtained under other taxation laws may also be invaluable in assisting state agencies to identify genuine first home buyers. Accordingly, the new framework expands the existing disclosure. [Schedule 1, item 1, subsection 355-65(1), item 2 in table 4] .

Disclosures to ensure compliance with workers' compensation obligations

5.72 The non-compliance of employers under State and Territory worker's compensation laws has been identified as a persistent problem. Accordingly, the new framework includes a limited disclosure provision to assist the workers' compensation bodies responsible for administering such regimes.

5.73 Taxpayer information obtained under the pay as you go (withholding) system will assist workers' compensation authorities identify the salary and wages being paid by employers and therefore determine whether employers are complying with their obligations regarding the payment of workers' compensation premiums. [Schedule 1, item 1, subsection 355-65(1), item 3 in table 5] .

5.74 This new disclosure provision provides an example of the importance of balancing the interests of maintaining taxpayer privacy with the public benefit in disclosure. The information being provided relates to the amounts being withheld from an employee's wage or salary. While on-disclosing the employee's information will obviously have some implications for the privacy of the information, there is a significant public interest, and arguably an interest for the employee, to ensure that employers comply with their workers' compensation obligations.

5.75 Nonetheless, the on-disclosure of information for this purpose obviously entails the use of information for a purpose other than for which it was provided. Accordingly, it is appropriate to limit this provision, clearly specifying the circumstances in which it can be disclosed.

Limited disclosures to the Fair Work Ombudsman

5.76 The Fair Work Act 2009 establishes the Fair Work Ombudsman whose role it is to ensure compliance with Australia's workplace laws under that Act. In many instances, an entity's non-compliance with taxation laws may be an indication of their non-compliance with workplace laws (and vice versa), particularly when it comes to cash payments and superannuation. As a consequence, information about the non-compliance of an entity with taxation laws may assist the Fair Work Ombudsman to target its own compliance program.

5.77 The new framework therefore seeks to facilitate the sharing of compliance information gained by the ATO with the Fair Work Ombudsman. However, it is not the intention of this new disclosure provision to permit disclosure of a broad range of unnecessary taxpayer information to the Fair Work Ombudsman (for example, information on their taxable income or deductions etc). As noted in Chapter 2, while the majority of 'protected information' captured by the framework will be information provided by taxpayers to the ATO, it will also include information generated by the ATO - this would include the ATO's view that an entity is not complying with its obligations under a taxation law. [Schedule 1, item 1, subsection 355-65(1), item 5 in table 7] .

Example 5.22

The Fair Work Ombudsman is preparing to conduct an audit of the building and construction industry with respect to its compliance with obligations under the Fair Work Act 2009 , the Fair Work Ombudsman seeks information from the ATO on entities that the ATO knows or reasonably suspects are non-compliant with their taxation obligations in order to assist it to better target its own compliance program. It is not an offence to provide this information to the Fair Work Ombudsman. However, it is an offence for the ATO to provide additional information, such as the taxable income of the specific entities.

Disclosures for law enforcement and related purposes

5.78 The Bill creates a distinction between the disclosures for various Government purposes as noted above, and certain other disclosures that are made for law enforcement and related purposes. These disclosures are to law enforcement agencies, to multi-agency taskforces set up to combat tax evasion, to the Australian Security Intelligence Organisation (ASIO) and to Commonwealth Royal Commissions and similar State inquiries.

5.79 For an individual, the consequences of these disclosures could potentially be quite significant. In recognition of this, the existing law has additional integrity provisions with respect to these disclosures. The first is the requirement that the Commissioner, under section 3B of the TAA 1953, identify in his annual report the number of times that he was requested by these agencies/bodies to provide information and the number of times information was actually provided. Secondly, the individuals between whom disclosures can be made is more strictly controlled (generally requiring the disclosure to be made by the Commissioner to officers in other agencies that have been specifically authorised to receive information). The new framework retains these additional integrity provisions.

5.80 More information on each of the law enforcement and related disclosures is found below.

Disclosures to law enforcement agencies

5.81 This Bill adopts the current provisions that permit disclosure of information to certain prescribed law enforcement agencies, into the new framework, with some changes.

5.82 Under the existing law, taxpayer information can be disclosed by the Commissioner or an authorised taxation officer to the head of prescribed law enforcement agencies or similarly authorised officers. This can be done for the purpose of establishing whether a serious offence has been or is being committed, or for the making of, or proposed or possible making of, a proceeds of crime order. A 'serious offence' is defined to be an indictable offence and a 'proceeds of crime order' must relate to the commission of a serious offence.

5.83 Moreover, under the existing provisions a law enforcement agency that receives taxpayer information for the purposes of investigating a serious offence cannot use that information for the prosecution of that offence (unless it is a taxation offence).

5.84 The new framework will continue to ensure that such disclosures can only be made by the Commissioner, or taxation officers authorised by the Commissioner, and that the disclosure can only be made to the head of a law enforcement agency, an officer of that agency authorised by that agency head or a court or tribunal. [Schedule 1, item 1, section 355-70]

5.85 One change made by the new framework is removing the limitation on the law enforcement agencies' use of taxpayer information. Under the new framework, law enforcement agencies will be able to access taxpayer information for both the investigation and subsequent enforcement (including prosecution) of serious offence provisions in the law. Moreover, as taxation officers are also authorised to disclose taxpayer information directly to a court or tribunal under the new framework, this will assist in the successful prosecution of serious offences.

5.86 These changes have been made because the public interest in the disclosure of information for this purpose outweighs any corresponding loss of taxpayer privacy. Taxpayer information has proved to be a valuable source of intelligence information for the investigation of activities such as money laundering and social security fraud. Furthermore, such information is also invaluable for and could form the basis of related prosecutions. This broadening of the disclosure also recognises the changing nature of crime and the need for flexible, whole-of-government responses. It will also ensure that law enforcement agencies can rely on the best evidence in a prosecution.

5.87 The new framework also amends the definition of 'serious offence'. A serious offence now means an offence that is punishable by more than twelve months' imprisonment (consistent with the Commonwealth definition of an indictable offence). This is a departure from the current definition of serious offence, that is based on whether an offence is indictable. Whether an offence is indictable changes between jurisdictions, so the move to a definition based on a term of imprisonment ensures greater consistency.

5.88 The new framework expands the list of law enforcement agencies that are able to access taxpayer information to include the Office of Police Integrity Victoria. This Office plays an important role in detecting, investigating and preventing police corruption and misconduct in Victoria. Access to taxation information will provide a significant resource for the Office of Police Integrity Victoria to investigate and prosecute serious criminal offences.

5.89 The new framework amends the definition of 'authorised law enforcement agency officer' to overcome problems associated with only permitting 'officers' to be authorised. The use of the term 'officer' has been interpreted to mean only those individuals employed formally under a public service Act, such as the Commonwealth Public Service Act 1999 . However, there may be instances where individuals not employed formally under such Acts may need to be authorised. For instance, section 4 of the Australian Federal Police Act 1979 defines 'commissioned police officer' to mean 'any member in respect of whom a declaration under s 40D (of the Australian Federal Police Act 1979 ) is in force'. However, not all commissioned Australian Federal Police officers are appointed under the Public Service Act 1999 . [Schedule 1, item 1, paragraph 355-70(3)(b)]

5.90 The new framework introduces an amendment to the definition of a 'proceeds of crime order' to reflect recent Commonwealth initiatives to tackle organised crime. Through the Crimes Legislation Amendment (Serious and Organised Crime) Act 2010 the Government introduced an unexplained wealth regime to enable the restraint and forfeiture of unlawful wealth on the basis that the total wealth of an individual exceeds their lawfully acquired wealth. To obtain an order, the Commonwealth Director of Public Prosecutions needs to show that there are reasonable grounds to suspect that a person's total wealth exceeds the value of the person's wealth that was lawfully acquired.

5.91 Clearly, information provided to the ATO in the course of administering the taxation laws will greatly assist in identifying the source of an individual's wealth. However, as the existing definition of a 'proceeds of crime' order in the taxation law is an order that is referable to the commission of a serious offence, disclosures to law enforcement agencies for the purposes of an unexplained wealth regime would not be permitted (because unexplained wealth orders will not be directly referable to the commission of any offence).

5.92 Accordingly, the new framework amends the definition of a 'proceeds of crime order' to include unexplained wealth orders under the Proceeds of Crime Act 2002 and any equivalent State legislation. [Schedule 3, item 19]

5.93 There is ostensibly some overlap in the disclosure provisions that relate to ASIC in its law enforcement role and with respect to its other roles (for example, superannuation) (see paragraphs 5.54 to 5.55). However, where ASIC obtains information relating to a serious offence as a prescribed law enforcement agency, the information must be disclosed by and to authorised officers (or the head of the agency).

Disclosures to intelligence agencies

5.94 The new framework preserves the existing provisions relating to the disclosure of information by the ATO to an authorised Australian Security Intelligence Organisation officer (section 3EA of the TAA 1953). The Commissioner, or a taxation officer authorised by the Commissioner, can disclose taxpayer information to an authorised ASIO officer for the purpose of enabling ASIO's functions (listed under subsection 17(1) of the Australian Security Intelligence Organisation Act 1979 ) to be performed. [Schedule 1, item 2, subsection 355-70(1), item 2 in table 1]

Disclosure to Project Wickenby Taskforce and other prescribed taskforces

5.95 In 2007 amendments were made to the secrecy and disclosure provisions in the TAA 1953 to allow the Commissioner to disclose taxpayer information to Project Wickenby Taskforce officers and officers in other taskforces that may be established in the future to protect public finances.

5.96 Project Wickenby is a multi-agency taskforce addressing tax avoidance and evasion involving the use of offshore entities. The 2007 amendments allowed the Commissioner to share information with other government agencies in limited circumstances, in order to facilitate concerted enforcement of Australia's laws.

5.97 These 2007 amendments are replicated in the new framework. For a detailed explanation of these provisions refer to the explanatory memorandum accompanying the Tax Laws Amendment (2007 Measures No. 1) Bill 2007. [Schedule 1, item 1, subsection 355-70(1), item 3 in table 1]

5.98 Both the Project Wickenby and 'other taskforce' disclosures rely on Regulations (at least to some extent). The Project Wickenby disclosure allows agencies to be added to the Project Wickenby taskforce by regulation, thereby allowing officers of those agencies to be given access to taxpayer information. The 'other taskforce' disclosure requires the purposes and agencies of that taskforce to be prescribed.

5.99 When these provisions were first enacted in 2007, the reliance on Regulations in this manner was designed to enable the Government to respond quickly to possible future developments and ensure that taxation secrecy provisions do not impede whole-of-government initiatives to address issues relating to the public revenue. As was recognised with the creation of the Project Wickenby taskforce, legislative secrecy provisions can act as an impediment to timely whole-of-government action to respond to significant problems such as the threat to public finances. The ability to prescribe taskforces is not unfettered - a major purpose of any future taskforce must, like Project Wickenby, be the protection of public finances.

5.100 The new framework makes one minor change to the Project Wickenby provision. The time limit in which disclosures will be authorised under these provisions will be extended from 1 July 2012 to 1 July 2013. This reflects the Government's commitment to fund the Project Wickenby taskforce up until this time.

Disclosures to Royal Commissions

5.101 The existing taxation law secrecy and disclosure provisions permit the disclosure of taxpayer information to both Commonwealth Royal Commissions and prescribed State Royal Commissions (as well as prescribed state boards and commissions of inquiry). Paragraph 16(4)(k) of the ITAA 1936 permits disclosure to Commonwealth Royal Commissions for the purpose of assisting them in the conduct of their inquiry and section 3E of the TAA 1953 permits disclosures to both Commonwealth and State Royal Commissions on the same basis as law enforcement agencies (see above).

5.102 These disclosures are replicated in the new framework. [Schedule 1, item 1, subsection 355-70(1), items 5 and 6 in table 1]

5.103 Consistent with the existing provisions, the new framework does not allow all Commonwealth Royal Commissions and State Royal Commissions (and boards and commissions of inquiry) to access taxpayer information. This reflects the fact that not all such Commissions will need taxpayer information and that it is important to determine, on a case by case basis, whether such a need exists.

5.104 This is achieved in two ways. Consistent with paragraph 16(4)(k), a Royal Commission that requires access to taxpayer information to conduct its inquiry must have this specified in the Letters Patent issued by the Governor-General that establishes the Royal Commission. Any State Royal Commission, Board or Commission of Inquiry must be prescribed by the Regulations.

5.105 The disclosures to the Fitzgerald Inquiry that were previously contained in section 16A of the ITAA 1936 are repealed by this Bill because the inquiry is no longer active. [Schedule 2, item 32]