New tax whistleblower laws came into effect on 1 July. Here's what you need to know about disclosure.
At a glance
- New laws relating to tax whistleblower protection came into effect on 1 July 2019.
- Eligible recipients include company directors, senior managers, auditors, registered tax agents, trustees and officers with functions related to an entity’s tax affairs.
- Eligible whistleblowers are protected from any civil, criminal or administrative liability.
By Elinor Kasapidis
On 1 July 2019, the tax whistleblower protections contained in the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 came into effect. The new laws introduce protections and remedies into the Taxation Administration Act 1953 – with wide-reaching effects.
When engaging in normal, everyday work activities, individuals may sometimes come into possession of information that raises concerns about an entity’s tax affairs.
Directors, senior managers, auditors, registered tax agents, trustees, partners and employees or officers with functions that relate to an entity’s tax affairs are all defined as “eligible recipients” of tax whistleblower disclosures under the new laws. This means that a tax whistleblower has many contact points within and external to an organisation to make disclosures.
It is important to be aware of this new legislation, including the protections and remedies, because one day, you could be approached by individuals with tax-related concerns.
What is a disclosure? The definition is expansive, and to summarise, a disclosure can be made if:
- there are reasonable grounds to suspect that the information indicates misconduct or an improper state of affairs or circumstances, in relation to an entity or associate’s tax affairs and
- the information may assist the eligible recipient to perform functions or duties in relation to those tax affairs
When a whistleblower reports any form of reasonably suspected impropriety – be it accepting undocumented cash payments or backdating tax documents, through to large-scale tax fraud – they are potentially eligible for protection.
For a disclosure to be protected, the individual needs to be an “eligible whistleblower”. This includes officers and employees of an entity or its suppliers, and associates, spouses, children and dependents are also covered. Again, the law casts a wide net and provides protection to those who are most likely to have access to sufficient information to give them reasonable grounds for suspicion.
Eligible recipients must provide protection to eligible tax whistleblowers, including taking all reasonable steps to ensure their identity is kept confidential. The information contained in the disclosure can only be disclosed by the eligible recipient to the extent that it is reasonably necessary to address the misconduct or impropriety of the tax affairs, and all reasonable steps must be taken to reduce the risk that the tax whistleblower will be identified.
CPA Australia Resource:
CPA Australia’s policy bulletin on tax whistleblower protections is now available. Download now.
On-disclosures to the commissioner of taxation, the Australian Federal Police or with consent from the tax whistleblower are excepted, as are disclosures made to legal practitioners to obtain legal advice.
Further, eligible whistleblowers are protected from any civil, criminal or administrative liability. There is also explicit protection against contractual or other actions being taken in response to the disclosure. This means disciplinary action cannot be taken against the tax whistleblower as a result of the whistleblowing event.
What gives these laws real teeth are the potential civil and criminal legal consequences that apply if the tax whistleblower isn’t adequately protected. There are criminal offences for breaching confidentiality or victimising the tax whistleblower that may come with terms of imprisonment as well as financial penalties.
Civil action can also be taken to receive compensation or other remedies where detriment has been caused, or threats to cause detriment have been made. Employers may also be liable where an employee, in connection with their position, caused detriment to the tax whistleblower.
Protection for tax whistleblowers
If you find yourself on the receiving end of concerning information in relation to tax, ask yourself:
- Am I an eligible recipient?
- Is the whistleblower an eligible whistleblower?
- Does their disclosure qualify for protection?
If the answer to all three is yes, you’ll need to consider your legal obligations to protect the tax whistleblower. CPA Australia members should also consider what their obligations are under APES 110 Code of Ethics for Professional Accountants, which contains provisions relating to responsibilities with respect to Non-Compliance with Laws and Regulations (NOCLAR).
If you’re unsure about your obligations or whether you have any, we recommend seeking legal advice to figure out your next steps.
We also note that the new laws do not include mandatory reporting. That is, the laws focus on enhancing whistleblower protections as opposed to changing the reporting regime.
It is good to know that if an eligible recipient on-discloses to the commissioner of taxation or other authorised recipients, they are also entitled to protection.
While tax whistleblower disclosures may be few and far between, or perhaps unfortunately more common than we’d expect, an awareness of your responsibilities may save you (and your employer) from negative repercussions and even help identify and fix tax issues before they become a far bigger problem.
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