Accountants may soon have the option of reporting tax misconduct to the Australian Taxation Office (ATO) under proposed legislation that offers increased protection for whistleblowers.
By Zilla Efrat
Proposed legislation before Parliament, if passed, is set to provide those who blow the whistle on wrongdoing with far better whistleblowing protections and that includes accountants reporting tax misdemeanours.
These changes are contained in the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017. The first part of the Bill extends the corporate whistleblower protection regime in the Corporations Act 2001 to a broader class of people and expands the types of disclosures that will be eligible for protection.
The changes aim to protect whistleblowers who often expose themselves to significant personal and financial risk when speaking out about poor behaviour. They will also make it easier for whistleblowers to bring a claim for compensation if they have been victimised.
In addition, the proposed changes impose new stringent obligations to maintain the confidentiality of a whistleblower’s identity and require all large companies to have a whistleblower policy in place, with penalties for failing to do so.
Clarity for whistleblowers
The second part of the Bill amends the Taxation Administration Act 1953 to introduce tax whistleblower protections that are broadly consistent with the Corporations Act amendments.
Here, the new protections give whistleblowers clarity on who they can make protected disclosures to. Authorised recipients include the ATO and people who are in a position to take action or investigate the alleged misconduct, such as tax agents or senior executive within a company where a breach is believed to have occurred.
However, CPA Australia’s manager – business and investment policy, Gavan Ord, says: “There isn’t a requirement or positive obligation on our members under the law to disclose to the ATO.”
The changes to the Corporations Act allow “emergency disclosures” to be made to parliamentarians and the media in certain circumstances, if preconditions are satisfied. But Ord says these disclosures can’t be made about tax misconduct.
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“If you meet the requirements in the proposed law in your disclosure to the Commissioner of Taxation, that disclosure will be protected from adverse action from the client or former client,” he says.
“But if you do disclose a tax issue to a journalist for example, that will be a breach the confidentiality requirements in the Tax Agent Services Act and the person or company you are disclosing information about could take adverse legal action against you, as could the Tax Practitioners Board.”
Dr John Purcell, CPA’s policy adviser – ESG, describes the changes to the Corporations Act as “quite significant in themselves”, but he says they may not touch too much on the day-to-day activities of public practitioners.
They may, however, affect registered company auditors who, while auditing a company, might receive information or come across suspected breaches of the law during the audit.
This, he says, will intersect with the international ethics standard for auditors and other accountants, NOCLAR (Non-compliance with Laws and Regulations), which will guide them in what actions to take.
“NOCLAR establishes the positive duty of accounting practitioners and auditors in relation to things that they unearth and their obligation to then report them internally and later, externally.”
Purcell adds that certain other disclosures are protected from adverse legal action.
For example, an employer would not be able to take action against an employee for whistleblowing, subject to certain conditions.”
Introducing the Bill to Parliament in December, Minister for Finance, Mathias Cormann, observed that the importance of protecting corporate whistleblowers had been recognised for many years.
“However, legislative protections under the Corporations Act since 2004 have been sparingly used and are increasingly perceived as inadequate, having regard to recent advances in the public sector, other parts of the private sector and overseas,” he said.
If the proposed legislation is passed, it will apply to whistleblower disclosures made on or after 1 July 2018.
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No whistleblower bounty reward in Australia
However, unlike countries such as the UK, Canada or the US, Australia has not moved to introduce a bounty-style reward for whistleblowers.
A bounty-type system, which CPA Australia was opposed to, was recommended last year by the Parliamentary inquiry into whistleblower protections. It would have allowed for whistleblowers to receive a percentage of the penalties imposed or proceeds collected if their reports led to a successful prosecution of corporate or individual wrongdoers.
The reforms at a glance:
The reforms to the Corporations Act include:
The reforms to the Taxation Administration Act 1953:
- expanding the protections to a broader class of people
- expanding the types of disclosures that will be protected under the framework
- allowing disclosures to parliamentarians and the media in certain circumstances, if preconditions are satisfied (this does not apply to tax disclosures)
- imposing new stringent obligations to maintain the confidentiality of a whistleblower’s identity
- making it significantly easier for a whistleblower to bring a claim for compensation where he or she has been victimised
- creating a new civil penalty offence so that law enforcement agencies will be able to take action against companies where the civil standard of proof can be met and
- requiring all large companies to have a whistleblower policy in place, with penalties for failing to do so.
The new whistleblower protections in the taxation law are broadly consistent with the enhanced protections under the Corporations Act and will facilitate disclosures about tax misconduct being made directly to the ATO.
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