House of Representatives

Explanatory Memorandum

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

Chapter 1 Introduction to the new framework for the protection of taxpayer information

Outline of chapter

1.1 This chapter:

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outlines the background to the new framework governing the secrecy and disclosure of taxpayer information; and

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provides an overview of the key elements of the new framework.

History and background

Operation of current provisions

1.2 In order to maintain taxpayer privacy and confidence, the secrecy provisions in Australia's tax legislation impose strict obligations on taxation officers and others who receive taxpayer information. Serious sanctions are imposed for breaches of these obligations.

1.3 There is a general rule prohibiting 'officers' from disclosing information that would identify a taxpayer. The prohibition is, however, not absolute. Exceptions to the obligation not to disclose taxpayer information are permitted because information obtained by the Australian Taxation Office (ATO) needs to be used by the ATO to fulfil its role and can often be vital to other arms of government in performing their functions effectively. So, for instance, existing exceptions allow:

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'officers' to use taxpayer information in the performance of their duties;

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law enforcement agencies to use information obtained by the ATO for certain criminal investigations; and

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other government departments and agencies to use taxpayer information for specific purposes.

Problems with the current law

1.4 At present, taxation secrecy and disclosure provisions are found across some 20 different taxation law Acts, contributing to the overall complexity and volume of the taxation law.

1.5 Successive ad-hoc amendments have complicated the application of the existing provisions and increased the volume of the taxation laws. Although certain basic principles have been replicated across the provisions, the use of disparate drafting styles have resulted in inconsistent protection of taxpayer information and uncertainty for taxation officers, other government officers, and taxpayers.

The Review of Taxation Secrecy and Disclosure Provisions

1.6 The Review of Taxation Secrecy and Disclosure Provisions (the Review) undertaken by Treasury in 2006 examined the operation of the various secrecy and disclosure provisions in Australia's taxation laws. The primary objective of the Review was to investigate the potential for standardising the secrecy and disclosure provisions found across the taxation laws into one piece of legislation, to increase certainty for taxpayers and for users of tax information.

1.7 The Review recommended standardising the various secrecy and disclosure provisions in the taxation laws into a single framework.

1.8 The Review also proposed some new disclosures in areas where the existing rules were impeding a legitimate need to access taxpayer information. The proposed new disclosures were:

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to law enforcement and intelligence agencies;

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to third parties where a duty is owed to them; and

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to agencies, such as the Australian Securities and Investments Commission and the Australian Bureau of Statistics, which would otherwise collect the same information directly from the taxpayers concerned.

1.9 Submissions from government agencies, professional associations and the public were sought in response to the Review. Following consultation, some of the proposed disclosures presented in the Review were not pursued and are therefore not included in the new framework. These include:

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disclosures to the Commissioner of Taxation (Commissioner) as an employer; and

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disclosures to third party where a duty is owed to them.

Key elements of the new framework

1.10 The new framework will consolidate the existing secrecy and disclosure provisions found in 18 taxation law Acts and standardise the provisions into a single framework. The Acts and provisions being amended by this Bill are listed in Chapter 8 (along with the provisions in the new framework which replace those provisions being repealed).

1.11 The tax secrecy provisions in two taxation law Acts are being retained - these are the A New Tax System (Australian Business Number) Act 1999 (ABN Act) and the Tax Agent Services Act 2009 (TAS Act). The reasons for this are explained further in paragraphs 1.20 to 1.26.

1.12 Some new disclosures of information are also being introduced in instances where privacy concerns are outweighed by the public benefit of those disclosures.

1.13 The secrecy and disclosure provisions in this Bill are divided into five Subdivisions within Division 355 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953):

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Subdivision A outlines the objects of the framework, how the Division applies to certain entities and sets out some basic principles to guide the consideration of future proposed disclosure provisions.

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Subdivision B contains the provisions governing the disclosure of taxpayer information by taxation officers.

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Subdivision C contains the provisions governing the disclosure of taxpayer information by non-taxation officers where that information was obtained legally.

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Subdivision D contains the provisions governing the disclosure of taxpayer information by non-taxation officers where that information was obtained unlawfully.

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Subdivision E contains provisions relating to the taking of oaths by taxation officers and provisions relating to injunctions.

1.14 The majority of the provisions refer to both the disclosure and recording of taxpayer information. For the purposes of this explanatory memorandum, a reference to the disclosure of taxpayer information is to be taken as a reference to the recording of that information unless the context demonstrates otherwise.

Objectives of the new framework

1.15 The primary objective of the new framework is to protect the confidentiality of taxpayer information. Compliance with taxation laws could be adversely affected if taxpayers thought that their information could be readily disclosed. [Schedule 1, item 1, paragraph 355-10(a)]

1.16 The new framework gives effect to this primary objective by placing a general prohibition on the disclosure of taxpayer information. However, in recognition of the importance that taxpayer information can play in facilitating efficient and effective government administration and law enforcement, disclosures of taxpayer information are permitted in certain specified circumstances. As a guide for future policy consideration, the disclosure of taxpayer information should be permitted only where the public benefit associated with the disclosure clearly outweighs the need for taxpayer privacy. [Schedule 1, item 1, section 355-1 and paragraph 355-10(b)]

1.17 In determining this balance, a range of factors may need to be considered. These include

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the purpose for which the information is to be used;

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the potential impact on the individual from the disclosure and subsequent use of the information;

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the nature and amount of information likely to be provided under any new provision;

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whether the information can be obtained from other sources;

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whether the new disclosure would represent a significant departure from existing disclosure provisions; and

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whether not providing the information would significantly undermine the ability of Government to effectively deliver services or enforce laws.

1.18 In terms of framing new disclosure provisions, where the purpose for the disclosure is remote or disconnected from the reason that a taxpayer provided the information in the first place (for example, for use in locating people who are unlawfully in Australia), then the disclosure provision should generally be very precisely targeted, allowing for the disclosure of taxpayer information only for a strictly defined purpose. On the other hand, where a disclosure is closely aligned with or connected to the purpose for which the Commissioner obtained the information in the first place (for example, for use in administering a taxation law), then the disclosure provision can be framed more broadly.

1.19 While the framework broadly retains the existing level of disclosures, it seeks to clarify ambiguities in the current law. Moreover, the standardisation and harmonisation of different provisions across the taxation law will necessarily involve some changes to current disclosures. These changes are discussed in detail in the following chapters.

Exclusions from the new framework

1.20 While there are 20 taxation law Acts containing taxation secrecy and disclosure provisions, the new framework replaces only 18 of these, with the provisions in the ABN Act (section 30) and the TAS Act (section 70-35) being retained.

Maintaining the secrecy and disclosure provisions in the A New Tax System (Australian Business Number) Act 1999

1.21 The ABN Act establishes the Australian Business Register (the Register) on which all Australian Business Numbers (ABNs) are recorded. The Register and ABNs were introduced as a whole-of-government initiative to make it easier for businesses to interact with government agencies across all levels of government. This is reflected in the very broad disclosures that are permitted under the ABN Act.

1.22 While the Commissioner currently oversees the Register and ATO staff administer ABNs, these roles are intended to be quite separate from the roles that the Commissioner and ATO staff fulfil under other taxation laws. As a consequence of this and the fact that the broad disclosures in section 30 of the ABN Act are largely at odds with the more restrictive provisions in other taxation laws, it is appropriate for section 30 of the ABN Act to remain separate.

1.23 As a result, taxation officers involved in administering the ABN Act will therefore be able to disclose information as a taxation officer in line with the provisions in the new framework (see Chapter 5), as well as under section 30 of the ABN Act. Note, however, that section 30 of the ABN Act only permits the disclosure of information or documents that are protected within the meaning of that Act. This Bill amends this provision to include both documents and information that were obtained under or for the purposes of the ABN Act. [Schedule 2, item 2]

Maintaining the secrecy and disclosure provisions in the Tax Agent Services Act 2009

1.24 The TAS Act establishes a new regime for the regulation and registration of tax agents. It also creates the Tax Practitioners Board which has the general administration of the TAS Act. Despite the general administration of the TAS Act not being vested in the Commissioner, the TAS Act will, with the enactment of the Tax Agent Services (Transitional Provisions and Consequential Amendments) Bill 2009, also be a taxation law.

1.25 In developing the TAS Act, there has been a greater emphasis placed on the independence of the Tax Practitioners Board from the ATO. This is reflected in the Board being set up under legislation over which it has the general administration. As a consequence of this greater independence, it is appropriate for the Board to be treated as a separate entity from the ATO (and therefore keep its own secrecy and disclosure provisions). As such officers (who may be ATO officers provided by the Commissioner to assist the Board) performing services under the TAS Act will be subject to the secrecy provisions contained in that Act rather than this consolidated framework.

1.26 As the existing TAS Act secrecy provisions currently link into other secrecy provisions in the taxation law that will be repealed as a part of this Bill, it is necessary to update the TAS Act accordingly. This also provides an opportunity to amend the TAS Act secrecy provisions so that they are drafted in a manner that is consistent with the consolidated framework in this Bill. [Schedule 2, items 92 to 95]

Tax file numbers

1.27 While the taxation laws include a number of provisions designed to ensure the security of tax file numbers (TFNs) (see Subdivision BA of Division 2 of Part III of the TAA 1953) the protection of TFNs does not form part of the framework. This is because TFN offences are drafted very differently from other taxation secrecy and disclosure provisions due to the manner in which TFNs are transmitted. Normally taxpayer information is not protected until it comes into the ATO. However, TFNs need to be protected in the hands of employers, banks, superannuation funds, etc, before they reach the ATO. Consequently, the format of the new framework would not provide an appropriate level of protection for TFNs. Therefore, TFNs will continue to be protected by the existing provisions in the taxation laws and through the legally binding guidelines on the use, disclosure and storage of TFNs that are issued by the Office of the Privacy Commissioner.

Interaction with other laws

1.28 This Bill complies with Australia's obligations under:

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the Organisation for Economic Co-operation and Development Guidelines for the Protection of Privacy and Transborder Flows of Personal Data ;

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the Asia-Pacific Economic Cooperation Privacy Framework ; and

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the United Nations International Covenant on Civil and Political Rights .

1.29 While the provisions in the new framework provide overarching protection of taxpayer information, that information is also protected in other ways. For instance, personal information is also protected under the Privacy Act 1988 (Privacy Act) and by the Office of the Privacy Commissioner. Of note, both the National Privacy Principles (which apply to certain private sector organisations) and the Information Privacy Principles (applying to Government agencies) enable organisations and agencies to use and disclose personal information where this is authorised under law. As a consequence, where this new framework authorises the disclosure of information, such a disclosure will also be consistent with obligations under the Privacy Act.

1.30 While the ATO also has its own administrative procedures for staff, that restrict access to taxpayer information on a need-to-know basis, unauthorised access to taxpayer information will also continue to be an offence under section 8XA of the TAA 1953.

1.31 The amendments in this Bill contain the main circumstances in which taxpayer information may legally be disclosed [Schedule 1, item 1, section 355-1] . There are, however, a number of non-taxation Acts that effectively override the secrecy and disclosure provisions contained in the framework. These permit other Commonwealth entities such as the Auditor-General or the Inspector-General of Taxation to obtain taxpayer information, or access such information, in certain clearly defined circumstances.

Examples include:

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sections 32 and 33 of the Auditor-General Act 1997 ;

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section 15 of the Inspector-General of Taxation Act 2003 ;

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section 9 of the Ombudsman Act 1976 ;

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section 44 of the Privacy Act; and

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Schedule 6 to the Anti-Terrorism Act (No. 2) 2005 .

1.32 The Parliamentary Privileges Act 1987 , can also operate to protect the disclosure of information. The Act authorises disclosure of information where it is relevant to parliamentary proceedings. This Bill, however, imposes limitations on the operation of parliamentary privilege in the context of disclosures to Ministers.

1.33 Most of these provisions have the effect that, if a taxation officer or another entity in receipt of taxpayer information is compelled to provide taxpayer information, they cannot be prosecuted for any offence contained within the framework.