Legislation Enhancing Whistleblower Protections Referred to Senate Committee

Wednesday 28 February 2018 @ 9.19 a.m. | Corporate & Regulatory | Taxation

The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (Cth) (the Bill) which was introduced into the Senate on 7 December 2017 has been referred to the Senate Committee on Economics Legislation for review on 8 February 2018. This Bill is intended to improve Australia's corporate and tax whistleblower protections.

A draft of the Bill was released for comment late in 2017.  The Bill was developed from a report on whistleblower protections published by the Parliamentary Joint Committee on Corporations and Financial Services' in September 2017 (the Joint Committee Report). 

Key legislation amended by the Bill is the:

  • Corporations Act 2001 (50 of 2001) 
  • Taxation Administration Act 1953 (1 of 1953)

The Bill also amends the:

  • Banking Act 1959 (6 of 1959)  
  • Insurance Act 1973 (76 of 1973) 
  • Life Insurance Act 1995 (4 of 1995) 
  • Superannuation Industry (Supervision) Act 1993 (78 of 1993)

The Need for Change

In the second reading speech the Minister for Finance indicated that while the importance of offering legal protection to whistleblowers had been long recognised, the existing protections provided by the Corporations Act had been "sparingly used" and were "increasingly perceived as inadequate" especially when, recent advances in the public sector, other parts of the private sector and overseas are considered. Likewise the same applies in the tax area where no specific provisions exist, and the:

". . . reforms will help protect whistleblowers who often expose themselves to significant personal and financial risk in order to help play a critical role in the early detection and prosecution of corporate or tax misconduct."

A further reason for reform is the perception that the reforms will also improve Australian businesses practices, in areas such as, corporate governance and integrity. As the Minister said in the second reading speech:

"Officers, employees and taxpayers will now be aware that there is a significantly higher likelihood that misconduct will be reported."

Corporate and Financial Sector Whistleblowers

The amendments proposed in Part 1 of the Bill are intended to extend the corporate protection regime to a broader class of people, and expand the types of disclosures that will be eligible for protection. The Bill amends the whistleblower protections contained in the Corporations Act 2001 so that a single, strengthened  whistleblower protection regime applies to the corporate, financial and credit sectors. The effect of these changes is that whistleblower laws contained in other financial system statutes will be brought into the Corporations Act 2001. This change is due to take effect and apply to disclosures made on or after 1 July 2018.

The Bill strengthens the whistleblower regime by including provisions designed to prevent companies from using the whistleblower protections as a defence for failure to commence an internal investigation, or to take appropriate action in response to a disclosure. 

Additionally, the Bill makes it easier for a whistleblower to seek redress for detriment or damage that is caused as a result of a disclosure, or a suspected disclosure, and permits anonymous disclosures, which are currently not protected under the existing law. 

Further, the Bill mandates that all large companies have a whistleblower policy and  will, according to the Minister, "...encourage the Australian business community to assess corporate governance frameworks, and to take stock of current whistleblower practices and procedures".

The amendments also apply to conduct in breach of  Corporations Act 2001 sections 1317AC, 1317AD and 1317AE, and any other provision of Part 9.4AAA, namely, the existing provisions dealing with the protection for whistleblowers, to the extent that it relates to those sections, as in force immediately after the commencement time for a disclosure that:

(a) was made before the commencement time; and

(b) would be a disclosure protected by Part 9.4AAA, 

if the amendments proposed to be made by Part 1 of Schedule 1 to the  Bill had been in force at the time the disclosure was made.

Better Protections for Tax Whistleblowers

Part 2 of Schedule 1 to the Bill inserts a comprehensive regime into the Taxation Administration Act 1953 for the protection of individuals who report breaches of the tax laws or misconduct. The amendments apply in relation to disclosures made on or after 1 July 2018 and will be broadly consistent with the Corporations Act amendments discussed above. The reform is aimed at introducing arrangements to protect individuals who report breaches or suspected breaches of taxation law or misconduct in relation to an entity's tax affairs.

The new protections give whistleblowers clarity regarding those to whom they can make protected disclosures - such authorised recipients of information include the Australian Taxation Office and persons who are in a position to take action or investigate any alleged misconduct, such as an entity's tax agent or senior person within the entity whose tax affairs are the subject of disclosure.

The new regime for tax whistleblower is intended to protect the identity of eligible whistleblowers through strict protocols on the sharing of a whistleblower's identity.  Anonymous disclosures can be made under the new regime and it also protects whistleblowers from victimisation and provides them with access to remedies including compensation where they suffer detriment as a result of making a disclosure or if their identity is revealed.

The tax whistleblower regime is intended to encourage whistleblowers to disclose information relating to actual or suspected non-compliance with taxation laws to the ATO and those eligible recipients who are able to take action or investigate the alleged misconduct.

Joint Committee Recommendations Not Adopted

There are two sets of recommendations of the Joint Committee's Report not adopted by the current Bill, namely; the "harmonisation" of whistleblower protections into one piece of legislation (see Recommendation 3.1 of the Report), and the introduction of a "Whistleblower Protection Authority" (see Recommendations 12.1, 12.2, 12.7 and 12.8 of the report).

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