House of Representatives

Explanatory Memorandum

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

Chapter 3 Offences

Outline of chapter

3.1 This chapter outlines the basic prohibition on the disclosure of information by both taxation officers and non-taxation officers. Specifically, it provides details on the offence provisions that apply to:

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the unauthorised disclosure of taxpayer information by taxation officers (Subdivision 355-B);

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the unauthorised disclosure of taxpayer information by non-taxation officers who receive information lawfully (Subdivision 355- C); and

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the unauthorised disclosure of taxpayer information by non-taxation officers who receive the information because of another entity's breach of the new framework (Subdivision 355-D).

Context of amendments

Operation of current provisions

3.2 Across the 18 taxation law Acts containing taxation secrecy and disclosure provisions that are being standardised there are numerous offences for the disclosure of taxpayer information. These provisions generally do not distinguish between taxation officers and other Commonwealth and State officers who are in receipt of taxpayer information.

3.3 The offence provisions in the current Acts generally apply to the disclosure of taxpayer information obtained under that particular Act or under a group of tax Acts.

3.4 The current law contains a specific offence provision that prohibits on-disclosure of taxpayer information by non-taxation officers who have received the information because of a breach of the law.

3.5 The penalties imposed where a person has committed an offence vary from Act to Act.

3.6 Under the interpretation of the existing law, taxpayer information can be disclosed to the taxpayer concerned or to their agent.

Summary of new law

3.7 There are three offence provisions in this Bill that together protect taxpayer information. Unlike the current law, no distinction is made as to which taxation law Act the information is obtained. Rather, the offence provisions prohibit the disclosure of all protected information (see Chapter 2 for a further explanation of the definition of 'protected information').

3.8 Also, unlike the current law, the offence provisions in the new framework draw a distinction between disclosures by taxation officers and disclosures by non-taxation officers (see Chapter 2 for a further explanation of the definition of 'taxation officer'). The new framework also retains a discrete offence provision for non-taxation officers who have received taxpayer information because of another entity's breach of a taxation law.

3.9 The new framework prohibits the disclosure of taxpayer information:

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by current and former taxation officers who acquire that information as a taxation officer;

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by non-taxation officers who acquire the information as a result of a lawful disclosure under one of the exceptions in the new framework; and

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by non-taxation officers who acquire the information because of a breach of a provision in the new framework.

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.10 Collectively, these offence provisions ensure that all taxpayer information that satisfies the definition of 'protected information' is indeed protected. The information remains protected even if it has been disclosed outside of the ATO and has been on-disclosed numerous times.

Comparison of key features of new law and current law

Detailed explanation of the new law

3.11 This part of this chapter provides an explanation of common elements of the offence provisions as well as a guide as to how each of the three offence provisions operate.

Common elements of the offence provisions

Offences apply to 'entities'

3.12 The new framework prohibits the disclosure of protected information by an entity, whether that entity is a taxation officer or not. While a taxation officer will generally be an individual, the framework also applies to entities engaged to provide services relating to the ATO, as if they are taxation officers (see Chapter 2).

3.13 The use of the term 'entity' is intended to ensure that the application of the offence provisions is as wide as possible. Whilst the offence provision will generally be directed at the individual offender, the entity that the individual is employed or contracted by or otherwise associated with may be prosecuted where the individual's actions were at the behest of that other entity. While this would not enable entities without a legal personality to be prosecuted under a criminal offence provision (for instance, a partnership could not be prosecuted) there are specific provisions in the taxation law that permit individuals to be prosecuted for an offence committed by an entity in certain circumstances.

For example:

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partners can be prosecuted for an offence committed by the partnership (see section 444-30 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)); and

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members of the Committee of Management of unincorporated associations or bodies can be prosecuted for an offence committed by that association or body (see section 444-5 of Schedule 1 to the TAA 1953).

3.14 As the definition of taxation officer includes both entities engaged to provide services relating to the ATO and individuals employed by those entities, penalties can be imposed upon any legal person involved in any unlawful disclosure of taxpayer information. [Schedule 1, item 1, paragraphs 355-15(a) and (b)]

Example 3.1

Extra Spandy-Clean Cleaning Service Pty Ltd was contracted to undertake cleaning services for a Melbourne office of the ATO. Michael, one of the cleaners engaged by Extra Spandy-Clean Cleaning Services to clean the office had access to some unsecured files and subsequently disclosed publicly a taxpayer's information. As taxation officers, both Extra Spandy-Clean Cleaning Service and Michael can be prosecuted.

Offences relate to the disclosure and the recording of taxpayer information

3.15 The offence provisions apply not only to the disclosure of taxpayer information, but also to the recording of that information. This recognises that it is important not only to ensure that information is not disclosed unlawfully, but that the information is not recorded in another form that can be readily accessed by others. Including a sanction for the recording of information recognises the vast amount of sensitive information that is collected in the course of administering the taxation system and the importance of ensuring the confidentiality of that information is maintained. [Schedule 1, item 1, subparagraphs 355-25(1)(b)(i), 355-155(a)(i) and 355-265(a)(i)]

Example 3.2

In the course of performing his duties as a taxation officer, Brendan found himself working with the taxation files of a musical artist whom he very much admired. Brendan copied some details from the taxation files into his private diary which he though might be useful later, but not for a work related purpose. Even though Brendan has not disclosed that information, he has still committed an offence through the recording of the information for an unofficial purpose.

Penalties for breach

3.16 If an entity breaches an offence provision, a court can impose a penalty of imprisonment of up to two years. For a natural person subsection 4B(2) of the Crimes Act 1914 allows a court to impose a fine up to 120 penalty units (currently $13,200) as well, or instead of, the imprisonment penalty. The Crimes Act also prescribes rules for converting penalties for natural persons into a penalty that applies to a body corporate. [Schedule 1, item 1, sections 355-25, 355-155 and 355-265]

Provision of taxpayer information to the taxpayer

3.17 It is not an offence for a taxation officer to disclose information to the taxpayer themselves. [Schedule 1, item 1, subparagraphs 355-25(1)(b)(ii), 355-155(a)(ii) and 355-265(a)(ii)]

Example 3.3

Brian rings the ATO seeking assistance with his tax affairs. It is not an offence for the taxation officer addressing Brian's inquiry to make available to Brian, after confirming his identity, any information about Brian's affairs that is on ATO files.

Provision of taxpayer information to entities representing the taxpayer

3.18 The existing law has been interpreted to permit the disclosure of taxpayer information to a taxpayer's agent. This is appropriate as there are many circumstances in which the taxpayer cannot deal with their own tax affairs, or otherwise wishes to appoint someone to assist them in doing so (for example, professional agents of the taxpayer, such as a legal representative or a tax agent or a friend or family member). The ATO currently has in place formal procedures to authorise representatives.

3.19 The new framework retains the principle that a representative of a taxpayer should be able to access the taxpayer's information. For non-taxation officers that have received taxpayer information (whether lawfully or otherwise), the framework makes it clear that a disclosure to the entity's agent (in relation to the information) will never be an offence. [Schedule 1, item 1, subparagraphs 355-155(a)(ii) and 355-265(a)(ii)]

3.20 For disclosures by taxation officers, a different approach that does not rely exclusively on the common law concept of agency is adopted. The new framework includes an exhaustive list of entities that can represent a taxpayer and access that taxpayer's information. [Schedule 1, item 1, subparagraph 355-25(1)(b)(ii) and subsection 355-25(2)]

3.21 A taxation officer does not commit an offence if they disclose taxpayer information to such an entity. Moreover, upon receiving the information, such entities are not bound by the on-disclosure restrictions contained in the framework (in the same way as the Bill does not seek to regulate what a taxpayer can do with their own information). However, the representative may have other statutory obligations in the way they treat their client's information and, if acting as an agent, may have fiduciary obligations that limit what they can do with the information.

3.22 The move away from relying on a common law concept of agency is designed to overcome the practical problems of determining whether someone is an entity's agent and what the scope of that agency relationship is. It will also permit disclosures to representatives who might not be considered an agent under the common law, but who otherwise might have a legitimate need to access a taxpayer's information in their capacity as a representative of a taxpayer.

Tax agents and BAS agents

3.23 Many Australians use tax agents (or BAS agents) to assist them comply with their taxation obligations. It is therefore appropriate to enable such representatives to be able to receive taxation information on behalf of their client. [Schedule 1, item 1, paragraph 355-25(2)(a)]

Example 3.4

After several years of submitting his own tax returns, Liam decides to use a tax agent to prepare and submit his tax return for this financial year. Liam signs a change of details form appointing Amelie, a registered tax agent, as his agent to manage all his taxation affairs. Amelie submits this to the ATO. Amelie contacts Will, a taxation officer, to ask for copies of Liam's previous tax returns, in order to ascertain what deductions Liam had previously claimed. It is not an offence for Will to provide information about Liam to Amelie.

Legal practitioners

3.24 In addition to tax agents and BAS agents, taxpayers will often employ the services of legal practitioners such as a solicitor or a barrister, to represent them in the conduct of their tax affairs. [Schedule 1, item 1, paragraph 355-25(2)(b)]

Example 3.5

Sarah appoints Ashley, a solicitor, to act on her behalf in seeking a review of her taxation assessment under Part IVC of the TAA 1953. In the course of preparing for the hearing, it becomes apparent that Sarah has misplaced copies of her assessments for the previous three years which are necessary for the case. Ashley contacts the ATO to obtain copies of Sarah's assessments. It is not an offence for the ATO to provide this information to Ashley.

Insolvency practitioners

3.25 Where an insolvency practitioner (which could include a trustee in bankruptcy, a liquidator, a voluntary administrator, a receiver or an administrator of a deed of company arrangement) is appointed to oversee the affairs of a particular taxpayer, one of their roles is to investigate their affairs. For instance, a trustee in bankruptcy has a duty to investigate the bankrupt's financial affairs (section 19AA of the Bankruptcy Act 1966 ). Where the records of the taxpayer have not been maintained well, the insolvency practitioner may need to access information held by the ATO to fulfil their role. [Schedule 1, item 1, paragraph 355-25(2)(c)]

Example 3.6

Haysnorkels Pty Ltd has become insolvent as a result of a global downturn in haysnorkel demand. Jeremy, a liquidator, is appointed by the Court to wind up the affairs of the company. Jeremy contacts the ATO to request copies of the company's tax returns for the past five years which will enable him to complete his job as a liquidator. The provision of these returns by the ATO is not an offence.

Legal personal representatives and guardians

3.26 The new framework also allows certain representatives such as a legal personal representative (defined by section 995.1 of the ITAA 1997) or guardian to access a taxpayer's information where that taxpayer is unable to appoint a representative. This includes circumstances where the taxpayer is a minor or otherwise has an incapacity rendering them unable, by law, to appoint someone to act on their behalf or where the taxpayer is deceased, is under a legal disability or has granted a general power of attorney. [Schedule 1, item 1, paragraphs 355-25(2)(d) and (e)]

Consolidated and multiple entry consolidated groups

3.27 The taxation law allows wholly-owned groups of companies to consolidate for tax purposes. As a consequence they are treated as a single entity. In recognition of this, rather than requiring each entity in a consolidated (or multiple entity consolidated group) to nominate each other as a representative, the new framework recognises each entity in such a group as the same entity. [Schedule 1, item 1, paragraphs 355-25(2)(f)]

Example 3.7

Company ABC is a member of a tax consolidated group of which Company XYZ is the head company. It is not an offence for the ATO to supply information about Company ABC to Company XYZ as they are, for tax purposes, treated as the same entity.

Representatives appointed by the taxpayer in the approved form

3.28 To ensure that there is sufficient flexibility to enable a taxpayer to appoint a range of entities as their representative, the new framework will permit disclosure of information to anyone that the taxpayer has appointed, in an approved form (see section 388-55 of the TAA 1953), to act on their behalf in relation to their information. This could include friends and family or other professional representatives not otherwise specifically provided for. [Schedule 1, item 1, paragraph 355-25(2)(g)]

Example 3.8

Hans is recovering from an operation at home. He notifies the ATO in the approved form that his son, Frederic, will be completing his tax return for the past financial year. It is not an offence for a taxation officer to provide Frederic with information about Hans that is necessary for Frederic to complete Hans' tax return. However, because Hans has only authorised Frederic to be his representative in completing the past financial year's tax return, it is an offence if a taxation officer provides information about Hans that is not relevant for that tax return.

Example 3.9

Desmond is the taxation manager of a large, well respected, accounting firm XYZ Accounting. The firm completes an approved form for Desmond, permitting him to receive information from the ATO regarding the firm's taxation affairs. It is not an offence for the ATO to disclose information to Desmond.

3.29 A taxpayer could appoint anyone to access their information as their representative in the approved form. This is not the same as allowing an individual to consent to the release of their information to a third party who is not acting at their representative with respect to their information. Under the new framework, a taxpayer's consent to the disclosure of information does not authorise the disclosure of that taxpayer's information. The new framework therefore draws a distinction between providing information to an entity that has been appointed a taxpayer's representative (in which case the disclosure of information would be permitted to the extent of a representative's authority to act for that taxpayer) and to someone who has merely obtained the consent of the taxpayer to access their information (in which case disclosure would not be authorised as the person seeking access is not appointed as the taxpayer's representative). This is discussed further in Chapter 4.

Specific elements of the offence provisions

Relating to taxation officers and former taxation officers

3.30 It is an offence for a taxation officer or a former taxation officer to disclose taxpayer information if they acquired that information as a taxation officer. [Schedule 1, item 1, paragraph 355-25(1)(d)]

Example 3.10

Olivia is a taxation officer, employed in the ATO library. One weekend, she was discussing with her neighbour, Sally, the financial affairs of Sally's new home business. If Olivia were to disclose the information she learned from Sally, it would not be an offence under these provisions because Olivia acquired the information in a private capacity and not in her capacity as a taxation officer (although it may be a common law breach of confidence).

3.31 There will be entities who acquire taxpayer information as a taxation officer, and who then subsequently cease to be taxation officers. However, regardless of their present status, if they acquired information while working as a taxation officer it is an offence to disclose that information. [Schedule 1, item 1, paragraph 355-25(1)(d)]

Example 3.11

Kate worked at the ATO for a number of years before moving on to a lucrative career in the private sector as a real estate agent. If Kate discloses protected information that she acquired as a taxation officer at any time during her life (whether in a work or non-work context) then she is committing an offence unless a relevant exception applies.

Relating to non-taxation officers

3.32 Taxpayer information continues to be protected even when that information has been disclosed to a non-taxation officer. The new framework makes it an offence for a non-taxation officer who has received taxpayer information, either lawfully or unlawfully, to on-disclose that information.

3.33 This does not include non-taxation officers who acquired the protected information while they were a taxation officer. Such people will continue to be subject to the offence provision described above. [Schedule 1, item 1, paragraphs 355-155(1)(c) and 355-265(1)(d)]

Non-taxation officers in lawful receipt of taxpayer information

3.34 It is an offence for a non-taxation officer who has received taxpayer information lawfully (that is, under one of the disclosure provisions in the new framework) to on-disclose that information (unless a relevant exception applies). [Schedule 1, item 1, section 355-155]

Example 3.12

Raul, an employee of the Australian Prudential Regulation Authority, receives taxpayer information from the ATO for the purposes of administering the Superannuation Industry (Supervision) Act 1993 (SIS Act). Raul discloses the information to a journalist and to another Australian Prudential Regulation Authority employee for a purpose that is unconnected to the administration of the SIS Act. In both cases, the disclosure of the information is an offence.

3.35 The on-disclosure of taxpayer information will continue to be subject to this offence even if that information has been on-disclosed by non-taxation officers on numerous occasions. Regardless of how many on-disclosures there are in the chain, any protected information originally disclosed by a taxation officer remains protected. [Schedule 1, item 1, paragraph 355-155(b)]

Example 3.13

Timothy, a taxation officer, discloses information to Jackie, an officer in the Australian Prudential Regulation Authority (APRA) for the purpose of administering the SIS Act. Jackie on-discloses the information to Jim, another APRA officer, also for the purpose of administering the SIS Act. Jim discloses the information to Bob, a barrister, for the purpose of briefing Bob on an upcoming civil proceeding that had arisen under the SIS Act. Though the information has been on-disclosed outside of the ATO a number of times, Jackie, Jim and Bob (as well as Timothy) must all ensure that their disclosure of the information is authorised by the new framework.

Non-taxation officers not in lawful receipt of taxpayer information

3.36 A distinction is made between non-taxation officers who receive information lawfully (that is, under an exception in the new framework) and those who receive the information unlawfully. This is because what such entities can do with the information is different. While it is not an offence to merely receive information unlawfully (though the person disclosing it would have committed an offence), those non-taxation officers who are in receipt of such information are limited in what they can then do with the information. This is discussed further in Chapter 6.

3.37 It is an offence for a non-taxation officer to on-disclose taxpayer information that they themselves have received as a result of a breach of a taxation law. [Schedule 1, item 1, section 355-265]

Example 3.14

Jordan, a taxation officer, discloses taxpayer information relating to the financial affairs of a prominent business person to Ken, a friend of his who is a journalist. This disclosure is unlawful. It is an offence for Ken to disclose or record this information (unless a relevant exception applies).

Transitional provisions relating to offences

3.38 The transitional provisions in the Bill ensure that any protected information disclosed to an entity under a taxation disclosure provision that is being repealed as a consequence of this Bill will continue to be protected. [Schedule 2, item 124]

Example 3.15

In 2007, the ATO provided taxpayer information to the Repatriation Commissioner for the purpose of administering a law of the Commonwealth relating to pensions. Notwithstanding that the original disclosure by the ATO was made before the commencement of the new framework, the information is deemed to have been obtained under the new framework and the Repatriation Commissioner must only disclose or record that information in a manner consistent with the new framework.