Revised Explanatory Memorandum(Circulated by authority of the Assistant Treasurer, the Hon. Stuart Robert MP)
Chapter 3 Better Protections for Tax Whistleblowers
Outline of chapter
3.1 Part 2 of Schedule 1 to this Bill will insert a comprehensive regime for the protection of individuals who report breaches or suspected breaches of the tax law and/or tax misconduct.
3.2 All legislative references in this Chapter are to the TAA 1953 unless otherwise indicated.
Context of amendments to the tax law
3.3 In the 2016-17 Budget, the Government announced that it will introduce new arrangements to better protect individuals who disclose information to the ATO on tax avoidance behaviour and other tax issues. Currently there is no specific legislative regime for the protection of such individuals (tax whistleblowers).
3.4 The new tax whistleblower regime is intended to encourage individuals to disclose such information by providing them with protections that are broadly consistent with those that will be provided by the Corporations Act after the amendments described in Chapter 2 come into force. The new regime is not intended to encourage individuals to make frivolous or vexatious disclosures, or to disguise personal or professional grievances as disclosures qualifying for protection.
Summary of new law
3.5 Part 2 of Schedule 1 to this Bill amends the TAA 1953 to create a regime to protect and compensate individuals who report breaches or suspected breaches of the tax law or misconduct in relation to an entity's tax affairs. This may include non-compliance with tax laws or tax avoidance behaviour.
3.6 The new regime sets out the circumstances in which such disclosures will qualify for protection, including:
- the kinds of disclosures that will qualify for protection;
- who can make a protected disclosure (eligible whistleblower);
- protections for disclosures to the ATO or a legal practitioner;
- other entities (eligible recipients) to which an eligible whistleblower may make a disclosure that qualifies for protection;
- protections to maintain the confidentiality of a whistleblower's identity, including:
- protections provided to a whistleblower (or other person who suffers damage) in respect of court proceedings; and
- the circumstances in which a person commits the offence of disclosing a whistleblower's identity.
- the protections provided to a whistleblower from legal action for making a disclosure that qualifies for protection;
- the offence of causing or threatening to cause detriment to a whistleblower or another person in the belief or suspicion that a disclosure has been made (or may have been, proposes to or could be made), and the types of conduct that constitute detriment;
- the remedies available for conduct that causes damage to a whistleblower or other person due to a disclosure or belief of a disclosure being made, including compensation for damage suffered, and the onus of proof in proceedings claiming compensation;
- protections to ensure that information that might reveal the identity of a whistleblower is not required to be disclosed to a court or tribunal; and
3.7 protection against costs orders for a whistleblower or other claimant seeking compensation or other remedies in court proceedings. Except where otherwise stated, the new tax whistleblower regime provides parallel protections, remedies and offences to those set out in the Corporations Act as amended by Part 1 of Schedule 1 to this Bill. In some cases the language of the law differs because of the legislative context.
Comparison of key features of new law and current law
|New law||Current law|
|Introduces protections and remedies for tax whistleblowers who make a protected disclosure about breaches or suspected breaches of the tax laws or misconduct in relation an entity's tax affairs.||Any person can make a disclosure regarding an entity's tax affairs to the ATO. However there is no specific regime protecting tax whistleblowers or providing remedies for individuals who suffer victimisation or other damage in relation to making such disclosures.|
|Eligible whistleblowers are not required to identify themselves in order to qualify for protection.||The ATO accepts anonymous disclosures.|
|Introduces protections to prevent disclosure of an eligible whistleblower's identity.||No specific protections of a whistleblower's identity.|
|Eligible whistleblowers are protected from civil, criminal and administrative liability in relation to a disclosure that qualifies for protection.||No equivalent.|
|It is an offence for a person to cause detriment to another person in relation to a disclosure (including a potential disclosure) that qualifies for protection.||No equivalent.|
|A court may award compensation to a person who suffered damage in relation to a disclosure that qualifies for protection.||No equivalent.|
Detailed explanation of new law
3.8 Part 2 of Schedule 1 to this Bill amends the TAA 1953 to create a regime for protecting and compensating individuals who report information indicating non-compliance with the tax law or tax misconduct.
3.9 The new tax whistleblower regime is set out in Part IVD of the TAA 1953.
Disclosures qualifying for protection
3.10 The new tax whistleblower regime sets out the circumstances in which a disclosure of information by an individual will qualify for protection.
3.11 The disclosure must be made by an eligible whistleblower (in relation to an entity), to the Commissioner or to an eligible recipient. These terms are discussed below.
Subject matter of disclosure eligible for protection
3.12 A disclosure to the Commissioner qualifies for protection if the eligible whistleblower considers that the information may assist the Commissioner to perform his or her functions or duties under a taxation law in relation to the entity about which the disclosure is made (or an associate of the entity). [Schedule 1, item 15, subsection 14ZZT(1)]
3.13 A 'taxation law' is an Act of which the Commissioner has the general administration (section 995-1 of the ITAA 1997), a legislative instrument made under such an Act, or the TASA 2009 or regulations made under the TASA 2009. This includes, for example, income taxes (including capital gains tax), the Goods and Services Tax and the Fringe Benefits Tax.
3.14 A whistleblower may also make a disclosure qualifying for protection to an eligible recipient. These can generally be described as recipients who are in a position to take some action in relation to the issues raised in a disclosure.
3.15 In order to qualify for protection under the tax whistleblower regime, the eligible whistleblower must have reasonable grounds to suspect that the information indicates misconduct or an improper state of affairs or circumstances, in relation to the tax affairs of the entity, and may assist that eligible recipient to perform their functions or duties in relation to those tax affairs. [Schedule 1, item 15, paragraphs 14ZZT(2)(c) and (d)]
3.16 Tax affairs is defined only for the purposes of section 14ZZT as affairs relating to all taxes imposed by or under, or assessed or collected under, all laws administered by the Commissioner. It is useful to note that the ITAA97 definition of tax affairs will not apply. [Schedule 1, item 15, subsection 14ZZT(4)]
3.17 This framework ensures that an eligible whistleblower need not have knowledge of specific taxation laws or particular duties or functions of the Commissioner or an eligible recipient in order to make a protected disclosure.
3.18 All that is required is that an eligible whistleblower has reasonable grounds to suspect that the relevant information indicates tax misconduct and that it would assist the Commissioner or the eligible recipient in performing their duties if they knew about it. This would not include information about purely workplace related issues that do not suggest misconduct or an improper state or affairs or circumstances in relation to the entity's tax affairs.
3.19 Such information may include details of non-compliance with a tax law, tax evasion, a scheme set up to avoid tax, unexplained wealth, or any other tax-related misconduct.
3.20 An individual (eligible whistleblower) qualifies for protection in relation to a disclosure he or she makes about an entity, or an associate of the entity, by reference to his or her current or former relationship with the entity. [Schedule 1, item 15, section 14ZZU]
3.21 'Entity' is broadly defined (see section 960-100 of the ITAA 1997), and includes for example individuals, companies, partnerships, trusts and superannuation entities. The following individuals are eligible whistleblowe rs in relation to a particular entity:
- an officer of the entity (within the meaning of the Corporations Act);
- an employee of the entity;
- an individual who supplies services or goods to the entity (whether paid or unpaid);
- an employee of a person who supplies services or goods to the entity (whether paid or unpaid);
- an individual who is an associate (within the meaning of section 318 of the ITAA 1936) of the entity;
- a spouse or child of any individual referred to above;
- a dependant of an individual referred to above or a dependant of the individual's spouse; and
- an individual prescribed by the regulations in relation to the entity.
[Schedule 1, item 15, section 14ZZU]
3.22 The categories of eligible whistleblowers are intended to ensure that the regime targets those individuals who are most likely to have reliable information about the tax affairs of an entity.
3.23 The power to prescribe new categories of eligible whistleblower in relation to a type of entity is provided so that categories of individual not currently included in the categories of eligible whistleblowers, but whose relationship with a type of entity may put them in a position to identify and disclose wrongdoing, can be protected.
3.24 Regulations are subject to Parliamentary scrutiny through the disallowance procedure in section 42 of the Legislation Act. This power ensures that the law can respond promptly to protect disclosures of emerging categories of wrongdoing.
3.25 An individual does not have to be a current employee, officer, contractor, associate, spouse, etc. to qualify as an eligible whistleblower. The law also applies to protect individuals who make disclosures in relation to entities with which they had a prior relationship. [Schedule 1, item 15, section 14ZZU]
3.26 Individuals who supply services or goods to the entity will cover a registered tax agent or BAS agent of the entity. Volunteers, interns and other unpaid workers qualify as eligible whistleblowers in circumstances where they supplied services or goods to the entity. [Schedule 1, item 15, paragraph 14ZZU(d)]
3.27 An 'associate' of an entity is defined broadly in section 318 of the ITAA 1936). Associates are included in the categories of eligible whistleblower to ensure that a wide range of such individuals are protected if they make a disclosure in relation to an entity. For example, this will cover shareholders of a company and beneficiaries or unitholders of a trust. [Schedule 1, item 15, paragraph 14ZZU(e)]
3.28 The law provides a regulation-making power to add categories of persons to the list of eligible whistleblowers in the future. This allows the law to adapt to accommodate emerging categories of individuals who may be able to identify and disclose potential tax wrongdoing. Regulations are subject to Parliamentary scrutiny through the disallowance procedure in section 42 of the Legislation Act. [Schedule 1, item 15, paragraph 14ZZU(h)]
Example 3.1 : Eligible whistleblower has a previous association with the entity Greg previously supplied services to William Rays, a high wealth individual. During his time working for Mr Rays, Greg became aware of conduct undertaken by Mr Rays that he suspects is designed to avoid GST. One year after working with Mr Rays, Greg decides to disclose the information to the ATO.Greg qualifies for protection as he is a former contractor of the subject of the disclosure and he considers that the information may assist the Commissioner to perform his or her functions or duties under a taxation law.
Example 3.2 : Protected disclosure about an associate of the entity Lyn is an employee of Company A. Company A is an associate of Company B because Company A is reasonably expected to act in accordance with the wishes of Company B. Company A is not involved in the day-to-day running of Company B, the companies lodge separate tax returns and have separate auditors. Lyn becomes aware that Company B is not correctly reporting its sales income, in breach of the taxation laws. Lyn discloses this information to a member of Company A's audit team.Lyn is eligible for protection in respect of this disclosure.
3.29 A disclosure made by an eligible whistleblower may qualify for protection if it is made to an eligible recipient. [Schedule 1, item 15, section 14ZZV]
3.30 Eligible recipients are generally internal to the entity about which the disclosure is made, or have a relationship with that entity that is relevant to its tax affairs. An eligible recipient may be:
- an auditor, or a member of an audit team conducting an audit, of the financial or tax affairs of an entity. This would include both internal and external auditors but would not include, for example, auditors engaged in auditing an entity's compliance with environmental laws;
- a registered tax agent or BAS agent who provides services to the entity;
- a person authorised by the entity in relation to the operation of the whistleblower regime;
- a person or body prescribed in the regulations;
- if the entity is a body corporate, a director, secretary or senior manager of the body corporate or other employee or officer who has functions or duties in relation to the entity's tax affairs;
- if the entity is a trust, a trustee of the trust or a person authorised by the trustee to receive whistleblower disclosures; or
- if the entity is a partnership, a partner or a person authorised by the partner to receive whistleblower disclosures.
[Schedule 1, item 15, section 14ZZV]
3.31 The categories of eligible recipient are intended to ensure that, in addition to making disclosures to the Commissioner, disclosures can be made to other persons that are in a position to take appropriate action, including recipients appointed by an entity to receive disclosures from whistleblowers. This is designed to give eligible whistleblowers the opportunity to raise their concerns 'internally' if they so choose.
3.32 Enabling all entities to authorise persons to be eligible recipient provides flexibility for external entities to be authorised eligible recipients of disclosures. This recognises that some entities may contract out the receipt of disclosures to third parties. [Schedule 1, item 15, subsections 14ZZV(1)(c), (2) and (3)]
3.33 A single disclosure of particular information can be made to any one or more of the eligible recipients in no particular order. The best person or entity to receive and act on the disclosure will depend on the circumstances and the wishes of the whistleblower.
Example 3.3 : Body corporate eligible recipient Kathryn is an employee of a large multinational corporation. She possesses information that she believes on reasonable grounds shows that the corporation has been avoiding tax by understating its sales in Australia.Kathryn discloses the information to the senior manager of the entity and so is eligible for protection. Kathryn later decides to also disclose the information to the ATO. The second disclosure also qualifies for protection.
Disclosure to a legal practitioner
3.34 The new law also permits an eligible whistleblower to make a disclosure qualifying for protection to his or her lawyer for the purposes of obtaining legal advice or representation in relation to the operation of the tax whistleblower regime. This is not intended to have any effect on legal professional privilege [Schedule 1, item 15, subsection 14ZZT(3)]
3.35 The disclosure does not have to be about a disclosable matter to be protected, and the individual does not have to be an eligible whistleblower in relation to a entity that is the subject of the disclosure. This ensures that a whistleblower or potential whistleblower can safely seek legal advice as to whether and what protections may apply to them.
Example 3.4: Disclosure to a legal practitioner Di lives in the same street as Fiona who operates a small local business. This business has operated for many years and appears to make a modest income.Recently Fiona purchased two new prestige motor vehicles and took her family on an expensive holiday in the Bahamas. These events are uncharacteristic for Fiona and Di suspects that Fiona may not be complying with the tax laws in relation to the operation of her business.Di would like to make a disclosure to the ATO and seeks advice from her lawyer as to how the whistleblower protection provisions would apply to her. Although Di does not meet the test for an eligible whistleblower, her identity would still be protected by these provisions.Di's disclosure to her lawyer and her identity would remain protected by these provisions regardless of whether or not she decides to proceed with a disclosure to the ATO.
No provision for public interest or emergency disclosures
3.36 In contrast to the Corporations Act whistleblower regime, the tax whistleblower regime does not protect public interest or emergency disclosures to a journalist or a Member of Parliament.
3.37 The tax secrecy laws would prevent a whistleblower from knowing whether the ATO had acted on the disclosure. This would make any provision equivalent to the public interest disclosure provision in the Corporations Act amendments difficult to apply in practice.
3.38 The provision for emergency disclosure in the Corporations Act whistleblower regime is intended to operate only in situations where there is a substantial and imminent danger to the health or safety of one or more persons or to the natural environment that may be prevented by the disclosure. The disclosure of taxpayer information to a journalist or a Member of Parliament would not meet these conditions.
3.39 The confidentiality of taxpayer information is a critical element of the tax system and public disclosures could compromise complex investigations by the ATO and other enforcement bodies. They could also cause the release of commercially sensitive, misleading or incomplete information into the public domain, and unwarranted reputational damage for entities and shareholders if, following an investigation, no breach of tax laws or under-payment of tax is found. The possibility of misleading information being disclosed is particularly relevant in relation to disclosures based on limited or incomplete information about entities with complex tax affairs.
3.40 In addition, providing protection for disclosures of taxpayer affairs to a journalist or a Member of Parliament may encourage vexatious disclosures, particularly in relation to taxpayers who are individuals.
Example 3.5: Disclosures to third parties Andrew believes his current employer, a multinational enterprise, is avoiding tax through the use of artificial arrangements involving related offshore entities, and has disclosed this to the ATO.Andrew regularly contacts the ATO seeking updates on the action taken in response to his disclosure. However, the taxpayer confidentiality laws prevent the ATO from divulging taxpayer information to Andrew. Andrew decides to provide the relevant information to a newspaper which subsequently publishes it. As a consequence Andrew loses his job and is unable to get another job in his field because his former employer won't provide him with a reference.Andrew's disclosure to the media is not eligible for protection under the tax whistleblower protection laws, and he is unable to use those laws to seek compensation.
Protections for whistleblowers
Confidentiality of the whistleblower's identity
Offence to disclose whistleblower's identity
3.41 Under the tax whistleblower regime it is an offence for a person to disclose an eligible whistleblower's identity or information that is likely to lead to the identification of the whistleblower (confidential information). [Schedule 1, item 15, section 14ZZW]
3.42 This protection is designed to protect eligible whistleblowers from victimisation, career damage, or other harm as a result of making a protected disclosure, and is common to most whistleblower laws. It is also consistent with the policy intent of permitting anonymous disclosures.
3.43 The prohibition on disclosure of a whistleblower's identity (and the exceptions thereto) applies equally to any person or authority who receives the information following the original disclosure.
3.44 The penalty for this offence is imprisonment for 6 months or 30 penalty units, or both. Following the commencement of the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018, this penalty will increase to 60 penalty units or imprisonment for 6 months, or both. These maximum penalties reflect the seriousness of such disclosures, given the potential risk to which the whistleblower could be exposed. The penalties are intended to deter unauthorised disclosure of the identity of individuals who disclose wrongdoing. [Schedule 1, items 15, 36 and 38, subsection 14ZZW(1)]
Exceptions to offence of disclosing whistleblower's identity
3.45 Disclosure of a whistleblower's identity is not an offence in the following limited circumstances:
- if it is made to the ATO or the AFP;
- if it is made to a legal practitioner for the purposes of obtaining legal advice or legal representation in relation to the operation of the tax whistleblower regime;
- if it is made to a person or body prescribed by regulation; or
- if it is made with consent of the whistleblower.
[Schedule 1, item 15, subsection 14ZZW(2)]
Example 3.6: A whistleblower's consent to share their identity Simon is a senior manager in the claims section of Imy Insurance Ltd. In the past few months he has undertaken additional responsibilities and has noticed suspicious transactions with Imy Insurance Ltd and Livy Finance Pty Ltd (an associated entity). Simon suspects that Imy and Livy are undertaking arrangements to avoid their tax obligations.Simon would like to make a disclosure to Imy's internal auditor. Before meeting with the internal auditor, Simon asks Andrew, another manager from the section, to attend the meeting with him for support.Simon can give consent for the discussion to take place with Andrew in the room.
3.46 The ATO, AFP or other authorised person or body must treat the disclosure as if they were the original receiver of the information. That is, they must protect the identity of the whistleblower and treat the information disclosed as confidential. This does not prevent on-disclosures between these bodies, because such on-disclosures fall within the exception contained in subsection 14ZZW(2).
3.47 In addition, a narrow exception to the offence is provided to ensure that entities that receive a disclosure are not inhibited from properly investigating the information provided by the whistleblower. [Schedule 1, item 15, subsection 14ZZW(3)]
3.48 This exception does not allow a person to directly disclose the identity of an eligible whistleblower as part of such an investigation, as his or her identity should not be necessary for the purposes of investigating the substance of the disclosure. [Schedule 1, item 15, subparagraphs 14ZZW(3)(a)(i) and (ii)]
3.49 However, the investigation may require circulating information that could indirectly reveal an eligible whistleblower's identity. For example, a disclosure may contain information known only to a small number of people within an organisation. The exception is intended to apply in these circumstances as long as reasonable steps have been taken to reduce the risk that the whistleblower's identity will be revealed. [Schedule 1, item 15, subparagraph 14ZZW(3)(a)(ii)]
Example 3.7: Internal investigation of disclosure while protecting the identity of whistleblower Following on from example 3.6 above, the internal auditor decides to investigate the information provided by Simon.Given Simon's recent change in responsibilities, which made him aware of transactions between Imy Insurance Ltd and Livy Finance Pty Ltd, there is a possibility that his identity may be revealed by the investigation.The internal auditor is therefore required to take all reasonable steps to reduce the risk that Simon's identity will be revealed. To ensure this outcome, the internal auditor commences an audit of all related finance entities.
Disclosure that qualifies for protection not actionable
3.50 The new law ensures that eligible whistleblowers are not subject to any civil, criminal or administrative liability (including disciplinary action) for making the disclosure, and that no contractual or other remedy may be enforced against them on the basis of the disclosure. [Schedule 1, item 15, paragraphs 14ZZX(1)(a) and (b)]
3.51 This protection is commonly provided by whistleblower protection laws to ensure that an individual making a disclosure cannot be sued by an entity (such as his or her employer), for example, for a breach of a confidentiality clause in a contract. Providing immunity from administrative liability (including disciplinary action) will ensure that a registered tax agent or BAS agent that makes a protected disclosure about a client's tax affairs will not be sanctioned for breaching the confidentiality obligations contained in the Code of Professional Conduct (contained in Division 30 of the Tax Agent Services Act). [Schedule 1, item 15, paragraph 14ZZX(1)(a)]
Information provided in the disclosure not admissible against the whistleblower
3.52 The new law provides a 'use immunity' for individuals by preventing potentially incriminating information that is part of their disclosure from being admissible in evidence against them in criminal proceedings or in proceedings for the imposition of a penalty. This immunity applies only in relation to disclosures made to the Commissioner. [Schedule 1, item 15, paragraph 14ZZX(1)(c)]
3.53 An exception to the immunity allows the information to be used in evidence against the person in proceedings in respect of the falsity of the information. [Schedule 1, item 15, paragraph 14ZZX(1)(c)]
3.54 The immunity does not prevent the Commissioner from issuing an assessment of taxation or imposing an administrative penalty in respect of an eligible whistleblower's own tax liability - in cases where the disclosure also reveals information about the whistleblower's personal tax affairs.
3.55 In such cases, the Commissioner may treat the disclosure as a voluntary disclosure for the purpose of imposing an administrative penalty.
Example 3.8: Voluntary disclosure impacting a whistleblower's own tax affairs Brian is studying accounting and works casually as a chef at Winnie's Restaurant for which he gets paid cash in hand.Winnie asks Brian to help her with the business accounts for the restaurant. Looking at Winnie's accounts Brian learns the restaurant is avoiding personal income tax and company tax, and is in breach of its superannuation guarantee scheme obligations. Brian decides to disclose the information to the ATO, including the income he earned as a chef (which he did not include in his own tax return).As Brian's disclosure qualifies for protection the information he disclosed is not admissible against him in criminal proceedings or proceedings for the imposition of a penalty. However, as he disclosed his untaxed income voluntarily the ATO may treat his disclosure as a voluntary disclosure in determining his liability for penalties in respect of the unpaid tax.
3.56 To ensure protection for whistleblowers against defamation proceedings, the new law provides eligible whistleblowers with qualified privilege in respect of the disclosure. This means that the whistleblower is not, in the absence of malice, liable to an action for defamation in respect of the disclosure. [Schedule 1, item 15, paragraph 14ZZX(2)(a)]
Contracts may not be terminated for disclosure
3.57 The tax whistleblower regime protects an eligible whistleblower from the termination of his or her employment or of another contract to which he or she is a party. The new law expressly provides that a contract to which an eligible whistleblower is a party may not be terminated on the basis that his or her disclosure constitutes a breach of the contract. [Schedule 1, item 15, paragraph 14ZZX(2)(b)]
Example 3.9: Contract protections for whistleblowers Isabel is contracted to supply cakes to a number of local caf é s. She becomes aware that one caf é is overstating the cost of her cakes in order to claim a larger tax deduction and makes a protected disclosure to the ATO. The caf é manager becomes aware of Isabel's disclosure and tries to terminate the contract on the grounds that the disclosure constitutes a breach of the contract.The court may apply 14ZZX which prohibits a contract from being terminated on the grounds that the act of making a disclosure constitutes a breach of the contract.
Victimisation of whistleblowers prohibited
3.58 Prohibiting victimisation is a key feature of whistleblower protection law best practice. It recognises the important role whistleblowers play in exposing wrongdoing, and the significant personal detriment that they may suffer as a result of their disclosures. [Schedule 1, item 15, section 14ZZY]
3.59 As well as the whistleblower, other people such as those involved in the disclosure or investigation of the disclosure, or who assist or support a whistleblower, may also suffer detriment as a result of victimisation.
3.60 It is an offence for a person to victimise a whistleblower or another person by engaging in conduct that causes detriment, where the conduct is based on a belief or suspicion a person has made, may have made, proposes to make or could make a disclosure that qualifies for protection. This ensures that the offence applies where the belief or suspicion was the reason, or part of the reason for engaging in the conduct. [Schedule 1, item 15, subsection 14ZZY(1)]
3.61 Consistent with the compensation provisions discussed below, conduct is intended to include both actions and inaction and also apply to entities whose employees victimise a whistleblower.
3.62 The offence of victimisation also covers threats to cause detriment to the whistleblower, or a person who assists or supports a whistleblower. The threat may be express or implied, conditional or unconditional. [Schedule 1, item 15, subsections 14ZZY(2) and (3)]
3.63 In a prosecution for the offence of victimisation, it is not necessary to prove that the person threatened actually feared that the threat would be carried out. [Schedule 1, item 15, subsection 14ZZY(4)]
3.64 The new tax whistleblower regime defines 'detriment' broadly, consistently with the Corporations Act provisions as amended by the amendments described in Chapter 2.
3.65 'Detriment' includes, but is not limited to:
- dismissal of an employee;
- injury of an employee in his or her employment;
- alteration of an employee's position or duties to his or her disadvantage;
- discrimination between an employee and other employees of the same employer;
- harassment or intimidation of a person;
- harm or injury to a person, including psychological harm;
- damage to a person's property;
- damage to a person's reputation;
- damage to a person's business or financial position; and
- any other damage to a person.
[Schedule 1, item 15, section 14ZZZ]
3.66 The detriment may be to the whistleblower or to another person.
3.67 The penalty for this offence is imprisonment for two years or 120 penalty units, or both. Following the commencement of the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018, this penalty will increase to 240 penalty units or imprisonment for two years, or both. These penalties reflect the seriousness of conduct that victimises a whistleblower. [Schedule 1, items 15, 37 and 38, subsections 14ZZY(1) and (2)]
Compensation and other remedies for whistleblowers
Circumstances in which an order may be made
3.68 The new tax whistleblower regime provides for compensation and a range of other remedies for a whistleblower or other individual who is victimised in relation to a disclosure qualifying for protection (qualifying disclosure).
3.69 Under these provisions, a person can seek compensation for loss, damage or injury suffered because of the conduct of a person (the victimiser, described as the first person), where:
- the first person engages in conduct that causes any detriment to another person or constitutes the making of a threat to cause detriment to another person (the second person);
- when the first person engaged in the conduct, the first person believed or suspected that the second person or any other person made, may have made, proposes to make, or could make, a qualifying disclosure; and
- the belief or suspicion is the reason, or part of the reason, for the conduct.
[Schedule 1, item 15, subsection 14ZZZ(1)]
3.70 The first person under this subsection may be an individual or a non-individual entity, such as a body corporate.
3.71 As for the offence of victimisation discussed above, the victim may be the whistleblower or another person who suffers damage because of the conduct. [Schedule 1, item 15, paragraph 14ZZZ(1)(b)]
3.72 There is no requirement that the victimiser had actual knowledge of a disclosure. A belief or suspicion that a person has made, may have made, proposes to make, or could make a qualifying disclosure is sufficient. [Schedule 1, item 15, paragraphs 14ZZZ(1)(b) and (c)]
3.73 If a body corporate is liable under subsection 14ZZZ(1), and an officer or employee of the body corporate is involved in the victimisation, the body corporate can be liable for conduct that has:
- aided, abetted, counselled or procured the conduct or the making of the threat;
- induced, whether by threats or promises or otherwise, the detrimental conduct; or
- was in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the detrimental conduct; or
- conspired with others to effect the detrimental conduct.
[Schedule 1, item 15, subsection 14ZZZ(2)]
3.74 A body corporate may also be liable if it is under a duty to prevent, or to take reasonable steps to prevent, a third person from engaging in conduct that causes any detriment to an actual or suspected whistleblower.
3.75 A court may make an order against the body corporate if:
- the third person engages in conduct that does cause detriment or constitutes the making of a threat to cause detriment to a whistleblower;
- any part of the reason for engaging in the conduct was a belief or suspicion that a whistleblower has made, may have made, or proposes to make a protected disclosure; and
- the body corporate was under a duty to prevent the third person from engaging in the detrimental conduct or to take reasonable steps to ensure that person does not do so; and
- the body corporate fails in part or whole to fulfil that duty.
[Schedule 1, item 15, subsection 14ZZZ(2A)]
3.76 For example, the third person may be an officer or manager of the body corporate, who engages in conduct that victimises and causes detriment to an actual or suspected whistleblower. If the body corporate is under a duty to prevent this conduct, and fails to fulfil that duty, it may be subject to a court order.
3.77 A threat to cause detriment need not be express or unconditional, but may also be implied, or conditional. [Schedule 1, item 15, subsection 14ZZZ(3)]
3.78 In addition, it is not necessary for a person seeking an order to prove that he or she actually feared that the threat will be carried out. [Schedule 1, item 15, subsection 14ZZZ(4)]
Orders that may be made
3.79 The orders that may be made in favour of a person who has suffered loss, damage, or injury as a result of detrimental conduct align with the Corporations regime once amended. Where a court is satisfied that a person (the first person) has engaged in detrimental conduct and another person has suffered loss, damage or injury as a result of the detrimental conduct, it may make an order:
- requiring the first person to compensate the person who has suffered the detrimental conduct: [Schedule 1 item 15, paragraph 14ZZZA(1)(a)]
- where the first person engaged in the detrimental conduct in connection with his or her position as an employee:
- requiring the first person and the first person's employer each to compensate the person who has suffered the detrimental conduct for loss, damage or injury for part of that loss, damage or injury [Schedule 1, item 15, subparagraph 14ZZZA(1)(b)(i)]; or
- requiring the first person and the first person's employer jointly to compensate the person who has suffered the detrimental conduct [Schedule 1, item 15, subparagraph 14ZZZA(1)(b)(ii)]; or
- requiring the first person's employer to compensate the person who has suffered the detrimental conduct for loss, damage or injury for part of that loss, damage or injury; [Schedule 1, item 15, subparagraph 14ZZZA(1)(b)(iii)]
- an order granting an injunction to prevent, stop or remedy the effects of the detrimental conduct; [Schedule 1, item 15, paragraph 14ZZZA(1)(c)]
- an order requiring the first person to apologise for engaging in the detrimental conduct; [Schedule 1, item 15, paragraph 14ZZZA(1)(d)]
- where the detrimental conduct wholly or partly consists of termination of employment, an order that a person be reinstated in his or her position or a position at a comparable level; [Schedule 1, item 15, paragraph 14ZZZA(1)(e)]
- an order requiring the first person to pay exemplary damages; or [Schedule 1, item 15, paragraph 14ZZZA(1)(f)]
- any other order that the court thinks appropriate. [Schedule 1, item 15, paragraph 14ZZZA(1)(g)]
3.80 If the detrimental conduct involved terminating a person's employment (including detrimental conduct that forces or forced the person to resign), the court ordering compensation must consider the period, if any, the person is likely to be without employment. This is a standard consideration a court would be required to make in these circumstances. This amendment does not limit the matters the court can consider when making an order. [Schedule 1, item 15, subsection 14ZZZA(1A)].
Onus of proof in compensation proceedings
3.81 In any proceeding where a person seeks an order under subsection 14ZZZA(1) from another person:
- the person seeking the order bears the onus of adducing or pointing to evidence that suggest a reasonable possibility that the other person has engaged in conduct that has caused detriment or constitutes a threat of detriment; and
- if that onus is discharged, the other person bears the onus of proving that the claim is not made out.
[Schedule 1, item 15, subsection 14ZZZ(2B)]
3.82 For example, a defendant may seek to establish that any detrimental conduct (or threatens such conduct) was not in any way a result of a belief or suspicion that the alleged victim was an actual or potential protected whistleblower. In evaluating these claims, a court may, for example, consider whether:
- any protected disclosure or potential protected disclosure was in any way a factor in the causation of the detriment;
- the same acts or omissions as caused the detriment would have been taken for independent and legitimate reasons in the absence of the any protected disclosure ever having been made or any issue about a potential protected disclosure ever arising; and
- if the actions are alleged to be taken for independent and legitimate reasons, a significant step in those actions had been taken prior to the disclosure issue arising.
3.83 If the claim is based on a failure of a body corporate to fulfil a duty to prevent the detrimental conduct, or a duty to take reasonable steps to ensure another person does not engage in it, the claimant also needs to point to evidence that suggests a reasonable possibility that the body corporate is under that duty. [Schedule 1, item 15, subparagraph 14ZZZ(2B)(a)(iii)]
3.84 If the existence of a duty to take reasonable steps to prevent a person engaging in detrimental conduct is established, a body corporate may seek to establish that there were no reasonable steps that could have been taken to avoid the detrimental conduct that occurred. The court will consider whether any of the detriment could have been prevented or avoided by the reasonable fulfilment of the duty. A body corporate may also seek to establish the claim is not made out more generally (see paragraph 3.82).
3.85 This reversal of the onus of proof recognises the well documented propensity of organisations that are the subject of a disclosure of wrongdoing to accuse and victimise the whistleblower, citing reasons other than the disclosure for their actions.
3.86 The reversal of onus will mean that an entity that engages in such conduct, rather than the victim, will bear the onus of proving that the disclosure was not in any part a reason for their conduct.
3.87 In deciding whether to make an order in relation to an employer because of the conduct of their employee, the court may have regard to:
- whether the employer took reasonable precautions and exercised due diligence to avoid the detrimental conduct;
- if the employer has a whistleblower policy (see paragraphs 2.139 to 2.150), the extent to which the employer gave effect to the policy; and
- any duty the employer was under to prevent the detrimental conduct, or to take reasonable steps to ensure the detrimental conduct was not engaged in.
[Schedule 1, item 15, subsection 14ZZZA(3)]
3.88 Although an entity is not required to have a whistleblower policy under these amendments, public companies and large proprietary companies are required to have these policies under the amendments to the Corporations Act. If an entity has a whistleblower policy - either because of a requirement under the Corporations Act or on a voluntary basis - any failure to comply with the policy may be relevant in the context of a disclosure about the entity's tax affairs.
3.89 These matters are not intended to limit the matters the court may take into account in deciding whether to make an order. For example, in considering whether an employer took reasonable precautions and exercised due diligence to avoid the detrimental conduct, the following matters may be relevant:
- any applicable industry standard, guidelines or policies relating to whistleblower support and protection;
- any relevant International Organization for Standardization or Australian Standard dealing with the protection of whistleblowers;
- any guidance published by ASIC or other relevant regulatory agencies.
3.90 If the court makes an order requiring a person and the person's employer jointly to pay compensation, the person and the person's employer are jointly and severally liable to pay the compensation. [Schedule 1, item 15, subsection 14ZZZA(3)]
3.91 A whistleblower's right to compensation and the liability of the first person is determined by the courts.
Protection of whistleblowers in court proceedings
3.92 Consistent with the enhanced Corporations Act whistleblower protections described in Chapter 2, the new law ensures that a person is not to be required to:
- disclose to a court or tribunal the identity of a whistleblower, or information that is likely to lead to the identification of the discloser; or
- produce to a court or tribunal a document containing the identity of a whistleblower or information likely to lead to the identity of the discloser;
except where it is necessary to do so for the purposes of giving effect to this whistleblower regime, or the court thinks it necessary in the interests of justice to do so. [Schedule 1, item 15, section 14ZZZB]
3.93 Under the common law and the Evidence Act, the general starting position concerning evidence is that relevant evidence should be admissible. The purpose of the exception to this principle is to ensure that the protection of a whistleblower's identity afforded by the law cannot be extinguished by discovery of documents or other processes in the context of court proceedings.
3.94 This provision reflects the protection of whistleblower identity in court proceedings in section 21 of the PID Act, and ensures that the identity of corporate and financial sector whistleblowers is aligned with those for public sector whistleblowers.
3.95 As in the enhanced Corporations Act whistleblower protections described in Chapter 2, the new law protects a person (the claimant) who is seeking an order under the compensation provisions from having an award of costs made against them, except in limited circumstances. [Schedule 1, item 15, subsection 14ZZZC]
3.96 The limited circumstances where the court may make such an order are where it is satisfied that:
- the claimant instituted the proceedings vexatiously or without reasonable cause; or
- the claimant's unreasonable act or omission caused the other party to incur the costs.
[Schedule 1, item 15, subsection 14ZZZC(3)]
Interaction between civil proceedings and criminal offences
3.97 For the avoidance of doubt, a person may bring civil proceedings for compensation or other remedial order even if no prosecution for victimisation has been brought or if such a prosecution cannot be brought. [Schedule 1, item 15, section 14ZZZD]
Compensation for acquisition for property
3.98 The new law includes a compensation provision to manage constitutional risk arising from paragraph 51(xxxi) of the Constitution.
3.99 If the legal immunity provisions of the tax whistleblower legislation are found to constitute an acquisition of property, otherwise than on just terms, the Commonwealth will be obliged to pay reasonable compensation, the quantum of which can be determined by a court. A corresponding provision already exists in the Corporations Act. [Schedule 1, item 15, section 14ZZZE subsections (1) and (2)]
3.100 Any payments under this section are to be made out of money appropriated by Parliament by another Act. The amendments confirm that such a payment is not a payment the Commissioner is required or permitted to pay out of the Consolidated Revenue Fund. [Schedule 1, item 15, subsections 14ZZZE(3) and (4)]
3.101 The amendments will apply in relation to whistleblower disclosures made on or after commencement (see paragraph 2.160), including disclosures about events occurring before this date. [Schedule 1, item 16]
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