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2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TREASURY LAWS AMENDMENT (ENHANCING WHISTLEBLOWER
PROTECTIONS) BILL 2017
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Minister for Revenue and Financial Services, the Hon Kelly O'Dwyer MP)
Table of contents
Glossary ................................................................................................. 1
General outline and financial impact....................................................... 3
Chapter 1 Outline of whistleblower reforms ................................... 7
Chapter 2 Improving protection for whistleblowers in the
corporate and financial sectors....................................13
Chapter 3 Better Protections for Tax Whistleblowers ...................65
Chapter 4 Other amendments ......................................................85
Chapter 5 Statement of Compatibility with Human Rights ............87
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ADI Authorised deposit-taking institution
Anti-Money Laundering and Anti-Money Laundering and
Counter-Terrorism Financing Counter-Terrorism Financing Act 2006
Act
AFP Australian Federal Police
APRA Australian Prudential Regulation Authority
ASIC Australian Securities and Investments
Commission
ASIC Act Australian Securities and Investments
Commission Act 2001
ATO Australian Taxation Office
Banking Act Banking Act 1959
Commissioner Commissioner of Taxation
Commonwealth Commonwealth of Australia
Competition and Consumer Competition and Consumer Act 2010
Act
Corporations Act Corporations Act 2001
Data Collection Act Financial Services (Collection of Data) Act
2001
Discussion Paper Review of tax and corporate whistleblower
protections in Australia issued on 20
December 2016
Fair Work Act Fair Work Act 2009
GST Act A New Tax System (Goods and Services Tax)
Act 1999
Human Rights (Parliamentary Human Rights (Parliamentary Scrutiny) Act
Scrutiny) Act 2011
ICCPR International Covenant on Civil and Political
Rights
Insurance Act Insurance Act 1973
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
Abbreviation Definition
ITAA 1997 Income Tax Assessment Act 1997
Legislation Act Legislation Act 2003
Life Insurance Act Life Insurance Act 1995
National Consumer Credit National Consumer Credit Protection Act
Protection Act 2009
NOHC Non-operating holding company
OGNAP Open Government National Action Plan
Parliamentary Committee Parliamentary Joint Committee on
Corporations and Financial Services -
Whistleblower Protections in the corporate,
public and not-for-profit sectors
PID Act Public Interest Disclosure Act 2013
Registered Organisations Act Fair Work (Registered Organisations) Act
2009
Senate Economics References Senate Economics References Committee
Committee into Performance of the Australian Securities
and Investments Commission
Superannuation Industry Superannuation Industry (Supervision) Act
(Supervision) Act 1993
TAA 1953 Taxation Administration Act 1953
TASA 2009 Tax Agents Services Act 2009
2
General outline and financial impact
Improving protection for whistleblowers in the corporate and
financial sectors
The amendments in Part 1 of Schedule 1 to the Bill amend the
whistleblower protections in the Corporations Act so that a single,
strengthened whistleblower protection regime covers the corporate,
financial and credit sectors.
This Part brings the whistleblower laws in other financial system statutes
into the Corporations Act.
Date of effect: The amendments will apply to disclosures made on or after
1 July 2018.
The amendments also apply to conduct in breach of sections 1317AC,
1317AD and 1317AE, and any other provision of Part 9.4AAA 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 made by Part 1 of Schedule 1 to the Treasury Laws
Amendment (Enhancing Whistleblower Protections) Act 2017 had been in
force at the time the disclosure was made.
Proposal announced: The Government committed in December 2016, as
part of the Open Government National Action Plan, to ensure appropriate
protections are in place for people who report corruption, fraud, tax
evasion or avoidance, and misconduct within the corporate sector. To
achieve this, the Government committed to pursuing reforms to
whistleblower protections in the corporate sector.
Financial impact: Minimal.
Human rights implications: This Bill does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 5.
Compliance cost impact: The estimated overall average compliance cost
is $15.4 million per year over ten years.
3
General outline and financial impact
Summary of regulation impact statement
Regulation impact on business
Impact: These amendments will primarily affect companies and other
entities that will be required to develop whistleblower policies and/or
potentially deal with greater whistleblowing activity.
Main points:
There are three policy options available to the Government:
• Option 1: Maintain the status quo;
• Option 2: Reform whistleblower protections in the corporate
sector only;
• Option 3: Reform and consolidate into the Corporations Act
whistleblower protections currently available to
whistleblowers across the financial system under legislation
within the remit of ASIC and APRA and expand protections
to disclosures of corporate misconduct more generally.
Each option is expected to impose the following compliance costs per
year:
• Option 1: no compliance costs;
• Option 2: $15.6 million per year
• Option 3: $15.4 million per year
There are no expected compliance costs for individuals or community
organisations.
Better Protections for Tax Whistleblowers
The amendments in Part 2 of Schedule 1 to the Bill insert a
comprehensive regime into the TAA 1953 for the protection of individuals
who report breaches of the tax laws or misconduct.
Date of effect: The amendments apply in relation to disclosures made on
or after 1 July 2018.
Proposal announced: The Government announced in the 2016-17 Budget
that new arrangements to better protect individuals who disclose
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
information to the ATO on tax avoidance and other tax issues would be
introduced. This announcement was reaffirmed in December 2016 when
the Government committed to the Open Government National Action
Plan.
Financial impact: Unquantifiable.
Human rights implications: This Bill does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 5.
Compliance cost impact: There are no compliance costs from the
implementation of the tax whistleblower regime.
Summary of regulation impact statement
A regulation impact statement was not required in relation to the new tax
whistleblower regime.
5
Chapter 1
Outline of whistleblower reforms
Outline of chapter
1.1 This Chapter describes the broad context for the amendments
made by this Bill.
Context of amendments
1.2 Combating crime and misconduct is a longstanding aim of
corporate, financial and tax law enforcement. Criminal conduct can be
difficult to detect or prove satisfactorily in a court. It can be concealed by a
complex web of transactions and falsified or misleading corporate records,
and a proliferation of entities in corporate structures can make
responsibility opaque.
1.3 Often such wrongdoing only comes to light because of individuals
who are prepared to disclose it, sometimes at great personal and financial
risk.
1.4 To reduce these risks and encourage disclosure of wrongdoing,
Australia and many other countries have statutory whistleblower regimes
with legally enforceable protections for people who make disclosures.
These regimes recognise the critical role whistleblowing can play in the
early detection and prosecution of misconduct in businesses and the
avoidance or evasion of tax liabilities. The existence of strong statutory
protections to encourage whistleblowing can improve compliance with the
law and promote a more ethical culture because individuals know there is a
higher likelihood that misconduct will be reported.
1.5 In Australia's tax laws, no whistleblower protection regime exists.
1.6 The Australian corporate whistleblowing regime was first
introduced in 2004 and expanded in a piecemeal way. It does not cover the
field and has not adjusted to reflect the regulatory remits of ASIC and
APRA. As a result, significant gaps in protection exist. For example, no
statutory protection exists for whistleblowers who report conduct in breach
of consumer credit laws, and the coverage in respect of disclosures
concerning corporate corruption, bribery, fraud, money laundering,
terrorism financing or other serious forms of misconduct is scattered
between the Corporations Act and financial sector laws or is not available.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
1.7 The existing whistleblower regimes present a confusing web for
whistleblowers to navigate, with differences and gaps in the protections
available.
1.8 The private sector whistleblower laws have rarely been utilised by
whistleblowers to seek protection or compensation, or by regulators to
prosecute offences under them.
1.9 While existing protections remain inadequate or unclear, it is
likely that whistleblowers will continue to be discouraged from disclosing
information about wrongdoing. By contrast, protections for whistleblowers
in the public sector are more comprehensive as they were developed in a
unified way after the development of the private sector protections. The
public sector protections have been more widely used.
Proposals for change
1.10 In 2014, the Senate Economics References Committee inquiry
into the performance of ASIC recommended a review of Australia's
corporate whistleblower framework to bring it closer to Australia's public
sector whistleblower framework under the PID Act, and to introduce a
number of amendments to the Corporations Act focusing on:
• extending the definition of whistleblowers by replicating the
PID Act;
• strengthening protections by expanding the scope of
disclosures and victimisation provisions to match the level of
protections provided by the PID Act; and
• including provisions in the Corporations Act that would
ensure ASIC and APRA cannot be required to reveal a
whistleblower's identity without a court or tribunal order.
1.11 Similarly, an independent evaluation of G20 countries'
whistleblowing laws concluded that many G20 countries' whistleblower
protections in the private sector fall short of best practice. According to the
evaluation report only one country with a legal framework comparable to
Australia's had an effective whistleblower oversight body for the private
sector: the United States. For Australia the following areas were identified
for potential reform:
• broadening the definition of whistleblowers and the scope of
wrongdoing covered;
• introducing protections for anonymous complaints;
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Outline of whistleblower reforms
• introducing external reporting channels and requirements for
internal company procedures;
• improving compensation arrangements and protections
against retaliation;
• establishing an oversight agency responsible for
whistleblower protections; and
• improving the transparency of the law.
1.12 In late 2016, the Government released its first OGNAP. The
OGNAP committed the Government to strengthening whistleblower
protections in the corporate sector and harmonising them with those in the
public sector by December 2017.
1.13 The Government's focus of the commitment in the OGNAP was a
specific response to perceived shortcomings of the existing Corporations
Act whistleblowers regime and related financial sector laws. It committed
to immediate public consultation on a range of options and swift reform to
these laws.
1.14 Around the same time, the Government also agreed to the
establishment of an inquiry by a Parliamentary Committee into
whistleblower protections in the corporate, public and not-for-profit sectors.
1.15 The Parliamentary Committee process was an opportunity to
examine the amendments made to the Registered Organisations Act in 2016
to enhance whistleblower protections and, in the light of this, to undertake a
comprehensive review of statutory whistleblowing frameworks across the
private and public sectors. The objective of this process was to achieve an
equal or better whistleblower protection and compensation regime in the
corporate and public sectors as provided for in the Registered Organisations
Act.
1.16 The public response to the Government's consultation process,
which concluded in February 2017, overwhelmingly favoured amendment
of the corporate whistleblower regime. In response, and having regard to its
OGNAP commitment to introduce corporate sector amendments by 2017,
the Government has developed this Bill.
1.17 In September 2017, the Parliamentary Committee finalised its
report. The Committee concluded that whistleblower protections remained
largely theoretical with little practical effect in both the public and private
sectors. The Parliamentary Committee report made 35 recommendations to
strengthen these regimes. The Government is considering the report and
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
recommendations, and has recently appointed an Expert Advisory Panel to
assist its deliberations.
1.18 With regard to the private sector protections, the Parliamentary
Committee recommended:
• introducing a standalone consolidated Whistleblower
Protection Act covering the private sector;
• establishing an independent a Whistleblower Protection
Agency;
• expanding the categories of qualifying whistleblowers;
• broadening the definition of disclosable conduct to include a
contravention of any law of the Commonwealth;
• removing the 'good faith' requirement for whistleblower
protection;
• extending protections for recipients of disclosures;
• allowing anonymous disclosures;
• extending the range of internal and regulatory disclosees, and
allowing for protected disclosures to a registered organisation
or a federal Member of Parliament or their office in certain
circumstances;
• increasing protection, remedies and sanctions for reprisals;
• improving access to compensation;
• expanding the obligations of law enforcement agencies in
their handling whistleblower matters;
• applying the provision of the PID Act that clarifies the
options for courts and tribunals in apportioning liability for
compensation between individuals and organisations to the
private sector;
• introducing a rewards system for whistleblowers;
• consistency between laws covering the public and private
sector on public interest disclosures; and
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Outline of whistleblower reforms
• implementing a statutory requirement for a
post-implementation review of new whistleblower laws.
Changes made by this Bill
1.19 This Bill meets the Government's OGNAP commitment. It also
meets some recommendations made by the Parliamentary Committee,
which the Government could anticipate given the range of shortcomings
previously identified with the corporate sector regime.
1.20 This Bill addresses gaps and uncertainties in the protections and
remedies available to corporate and financial sector whistleblowers by
bringing the whistleblower laws in other financial sector statutes into the
Corporations Act, and creates a new regime for the protection of individuals
who disclose wrongdoing in the tax sphere.
Summary of new law
1.21 This Bill amends:
• the Corporations Act to strengthen and consolidate
whistleblower protections for the corporate and financial
sector; and
• the TAA 1953 to create a whistleblower protection regime
for disclosures of information by individuals regarding
breaches of the tax laws or misconduct in relation to an
entity's tax affairs;
• repeals the financial sector whistleblower regimes and
clarifies transitional arrangements.
1.22 Details of the amendments to the Corporations Act are set out in
Chapter 2.
1.23 Details of the new tax whistleblower regime are set out in
Chapter 3.
1.24 Details of the amendments to the existing financial sector
whistleblower regimes are set out in Chapter 4.
1.25 Chapter 5 contains a statement of compatibility with human
rights.
11
Chapter 2
Improving protection for whistleblowers in
the corporate and financial sectors
Outline of chapter
2.1 This Chapter describes the amendments to the Corporations Act
set out in Part 1 of Schedule 1 to this Bill.
2.2 The amendments create a consolidated whistleblower protection
regime for the corporate and financial sectors.
Context of amendments
Existing laws
2.3 The existing Part 9.4AAA of the Corporations Act confers
protections and remedies on corporate whistleblowers in respect of any
disclosures about actual or potential contraventions of Corporations
legislation.
2.4 These protections and remedies include:
• limited protection from civil or criminal liability for making
the disclosure (for example, for defamation);
• constraints upon employer rights to seek contractual
remedies against the whistleblower (including any
contractual right to terminate employment) arising as a result
of the disclosure;
• prohibitions upon victimisation of the whistleblower;
• a right of the whistleblower to seek compensation if damage
is suffered as a result of victimisation; and
• prohibitions against the revelation of the whistleblower's
identity or the information disclosed by the whistleblower,
with limited exceptions.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
2.5 These protections have been criticised as being limited and overly
complex. Specifically, to qualify for protection a whistleblower must:
• be a current officer or employee of the company in question
or a current contractor:
- this has meant that past employees, contractors for
example, who may have ceased their association with the
company in question for a variety of reasons cannot make
a protected disclosure;
• make the disclosure in good faith:
- this requirement undermines whistleblower protections, as
whistleblowers often have other grievances or motivations
against a company, so may not be protected. The
motivation for making a disclosure is not relevant to the
policy reasons for protecting whistleblowers;
• have reasonable grounds to suspect that either the company,
or some of its officers or staff, have breached (or might have
breached) a provision of the Corporations legislation (that is,
the protections are not available for disclosures relating to
breaches of any other statute);
• this limited coverage means that actual and potential
whistleblowers in the corporate and financial sectors would
need to consult a number of Acts to know whether they are
protected; and
• provide their names before making the disclosure:
- this requirement has meant that anonymous disclosures
are not protected.
2.6 Whistleblower protection regimes are contained in the statutes
administered by APRA (or those where administration is shared with
ASIC), namely:
• the Banking Act;
• the Insurance Act;
• the Life Insurance Act; and
• the Superannuation Industry (Supervision) Act.
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Improving protection for whistleblowers in the corporate and financial sectors
2.7 While these are similar to the protections and remedies set out in
the Corporations Act, there are important differences. Each of the
whistleblower regimes in the above Acts (the financial sector whistleblower
regimes) protects a disclosure of information concerning misconduct or an
improper state of affairs or circumstances in relation to entities regulated
under it.
2.8 Protections apply if the whistleblower considers the information
disclosed may assist the recipient of the information to perform duties or
functions in relation to the regulated entity. The regulated entities are:
• ADIs, authorised NOHCs and subsidiaries of authorised
NOHCs;
• general insurers and authorised NOHCs;
• life companies and registered NOHCs; and
• superannuation entities.
2.9 Under the Banking Act for instance, a person may qualify for
protection if the disclosure:
• relates to misconduct, or an improper state of affairs or
circumstances in relation to an ADI, authorised NOHCs and
subsidiaries of authorised NOHCs; and
• the person considers that the information may assist the
recipient of the disclosure to perform his or her functions or
duties.
2.10 Similar requirements are set out for insurers and superannuation
entities in the Life Insurance Act, the Insurance Act and the Superannuation
Industry Supervision Act, with some minor differences to reflect the role of
actuaries for insurers and superannuation entities as well as the role of
superannuation trustees.
2.11 Currently, there are no whistleblower protections for disclosures
relating to misconduct in relation to the National Consumer Credit
Protection Act or the Data Collection Act.
Summary of new law
2.12 Part 1 of Schedule 1 to this Bill consolidates the existing
whistleblower protections and remedies for corporate and financial sector
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
whistleblowers while strengthening and broadening these protections in a
substantial way. Broadly the amendments fall into four categories:
• the conduct that may be the subject of a disclosure that
qualifies for protection and entities that can be the subject of
such a disclosure;
• individuals who can make a qualifying disclosure;
• persons to whom a qualifying disclosure can be made; and
• remedies and processes available for whistleblowers.
Entities and conduct about which a qualifying disclosure may be made
2.13 The type of entity and the conduct that may be the subject of a
disclosure that qualifies for protection (described hereunder as a 'qualifying
disclosure') have been expanded.
2.14 Entities that may be the subject of a qualifying disclosure now
include all corporations to which paragraph 51(xx) of the Constitution
applies. These entities are defined in the new law as regulated entities.
2.15 The conduct that may be the subject of a qualifying disclosure
includes actual or suspected conduct by a regulated entity that is:
• misconduct, or an improper state of affairs or circumstances
in relation to a regulated entity;
• contravention of any law administered by ASIC and/or
APRA;
• conduct that represents a danger to the public or the financial
system; or
• an offence against any other law of the Commonwealth that
is punishable by imprisonment for a period of 12 months or
more.
Who can make a qualifying disclosure?
2.16 A qualifying disclosure can be made by an individual who is or
has been in a relationship, such as employee, with the regulated entity about
which the disclosure is made. These individuals are defined in the new law
as eligible whistleblowers.
16
Improving protection for whistleblowers in the corporate and financial sectors
2.17 The motivation of the eligible whistleblower is no longer relevant,
nor is the currency of the relationship.
Eligible recipients of a disclosure
2.18 The category of person to whom a qualifying disclosure may be
made has been expanded and now includes a manager or supervisor of the
whistleblower. These persons are defined in the new law as 'eligible
recipients'.
2.19 In certain emergency circumstances a disclosure made to a
member of Parliament or journalist may qualify for protection ('emergency
disclosures').
Protections and remedies for whistleblowers
2.20 The level of protection provided for whistleblowers by the new
law has been increased by:
• strengthening the requirement of confidentiality of a
whistleblower's identity, including:
- no longer requiring whistleblowers to identify themselves
when making a disclosure;
- ensuring that persons, including regulators, cannot be
required to disclose the identity of a whistleblower to a
court or tribunal without a court order;
• strengthening the immunities provided to whistleblowers and
ensuring that information they disclose is not admissible in
evidence against them in a prosecution;
• broadening and clarifying the prohibition against
victimisation of whistleblowers and other individuals who
suffer victimisation in relation to a disclosure, including:
- adding a civil penalty option for prosecution for
victimisation; and
- adding a broad inclusive definition of 'detriment';
• providing that generally a court may not make a cost order
against a whistleblower or other individual seeking remedies
for victimisation, to ensure that such individuals are not
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
deterred from bringing proceedings by potential adverse
costs orders; and
• requiring public companies, large proprietary companies and
registerable superannuation entities to have whistleblower
policies, and to make the policies available to their officers
and employees.
2.21 The remedies and protections available to whistleblowers and
other individuals who suffer detriment or a threat of detriment in relation to
a qualifying disclosure have been expanded to include:
• making it easier for individuals who suffer detriment in
relation to a protected disclosure to claim compensation;
• ensuring bodies corporate that are or were employers of a
whistleblower or other individual who suffer detriment in
relation to a protected disclosure, are liable if they
contributed by act or omission to victimising conduct;
• extending the range of orders a court may make in respect of
whistleblowers and other individuals who suffer
victimisation in relation to the making of a protected
disclosure, including injunctions and apologies;
• clarifying that a court may order reinstatement of a person
whose employment is terminated, or purported to be
terminated, in relation to the making of a protected
disclosure;
• providing that a court may order exemplary damages if it
thinks appropriate; and
• reversing the burden of proof in compensation claims once
the claimant has adduced or pointed to evidence that suggests
a reasonable possibility that a defendant has engaged in
conduct that caused detriment or threatened to do so.
Comparison of key features of new law and current law
New law Current law
The Corporations Act whistleblower Whistleblower protections regimes
protection regime covers all corporate covering corporate and financial
and financial sector whistleblowers in system whistleblowers are found in
entities regulated by one or more of the Corporations Act, the Banking
18
Improving protection for whistleblowers in the corporate and financial sectors
New law Current law
the Corporations Act, the ASIC Act, Act, the Insurance Act, the Life
the Banking Act, the Life Insurance Insurance Act and the Superannuation
Act, the Insurance Act, the Industry (Supervision) Act.
Superannuation Industry There are no whistleblower
(Supervision) Act, the National protections under the National
Consumer Credit Protection Act, and Consumer Credit Protection Act and
the Financial Sector (Collection of the Financial Sector (Collection of
Data) Act. Data) Act.
Consistent protection is provided for Inconsistent protection for
whistleblowers across the corporate whistleblowers.
and financial sectors.
Introduces a single concept of Each whistleblower regime concerns
'regulated entity'. only disclosures about entities
covered by that Act.
Introduces a single concept of Each whistleblower regime concerns
'eligible whistleblower'. different categories of persons who
might make protected disclosures
depending on the entities covered by
that Act.
Introduces a single concept of Each whistleblower regime concerns
disclosable conduct. different kinds of potentially
protected disclosures depending on
the entities covered by that Act.
Introduces a single concept of Each whistleblower regime concerns
'eligible recipient'. different categories of persons who
might receive protected disclosures
depending on the entities covered by
that Act.
Provides for an 'emergency No regime currently permits
disclosure' to a member of disclosure to members of Parliament
Parliament or journalist in specified or journalists under any
circumstances. circumstances.
Expressly allows for disclosures to No regime provides for disclosures to
lawyers for the purposes of obtaining be made to a lawyer for the purpose
legal advice. of obtaining legal advice.
Detailed explanation of new law
Expanding the scope of disclosures qualifying for protection
2.22 The new law broadens the subject matter of disclosures that
qualify for protection, to encompass and enhance those covered under the
existing corporate and financial sector whistleblower regimes. [Schedule 1,
item 2 section 1317AA]
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
2.23 Disclosures may qualify for protection if made by an individual
(whistleblower) who is an eligible whistleblower in relation to the regulated
entity in relation to which the disclosure is made. The entities that are
regulated entities are discussed below. [Schedule 1, items 1 and 2,
section 9 and subsection 1317AA(1)]
2.24 A disclosure may qualify for protection if made to:
• ASIC or APRA (or other Commonwealth body that is
prescribed by regulations) [Schedule 1,
item 2 paragraph 1317AA(1)(b)];
• an eligible recipient (the categories of eligible recipient are
discussed below) [Schedule 1, item 2, subsection 1317AA (2)]; or
• a lawyer for the purposes of obtaining legal advice or
representation on the operation of the new whistleblower
regime [Schedule 1, item 2, subsection 1317AA(3)].
2.25 The matters that may be the subject of a qualifying disclosure, and
the individuals who are eligible whistleblowers in relation to an entity are
discussed below.
Disclosures to ASIC, APRA or prescribed body
2.26 A disclosure by an eligible whistleblower to ASIC, APRA, or
other Commonwealth body prescribed by regulation, qualifies for
protection if it is of information about a disclosable matter. The subject
matters that can be disclosable matters are described below. [Schedule 1,
item 2, paragraph 1317AA(1)(c)]
Disclosures to eligible recipients
2.27 A disclosure by an eligible whistleblower to an eligible recipient
qualifies for protection if it is of information about a disclosable matter. The
categories of eligible recipients in relation to a regulated entity are
discussed below. [Schedule 1, item 2, subsection 1317AA(2)]
Disclosure to a legal practitioner
2.28 A disclosure to a legal practitioner for the purposes of obtaining
legal advice or representation on the operation of the whistleblower regime
qualifies for protection under the new law. [Schedule 1, item 2,
subsection 1317AA(3)]
2.29 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 regulated entity that is the subject of the
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Improving protection for whistleblowers in the corporate and financial sectors
disclosure. This ensures that a whistleblower or potential whistleblower can
safely seek legal advice as to whether and what protections may apply to
them.
Disclosable matters
2.30 A disclosable matter is information the whistleblower has
reasonable grounds to suspect:
• concerns misconduct, or an improper state of affairs or
circumstances in relation to the regulated entity (or if the
regulated entity is a body corporate) a related body corporate;
or [Schedule 1, item 2, subsection 1317AA(4)]
• indicates:
- that the regulated entity (or related body corporate) or its
officer or employee has engaged in conduct that
constitutes an offence against, or a contravention of, the
Corporations Act, the ASIC Act, the Banking Act, the
Data Collection Act, the Insurance Act, the Life Insurance
Act, the National Consumer Credit Protection Act, or the
Superannuation Industry (Supervision) Act, or regulations
made under those laws;
- that an offence against any other law of the
Commonwealth that is punishable by imprisonment for a
period of 12 months or more;
- that represents a danger to the public or the financial
system; or
- as prescribed by regulation.
[Schedule 1, item 2, subsection 1317AA(5)]
2.31 The more specific categories of conduct set out in new subsection
1317AA(5) are not intended to limit the range of misconduct covered by
new subsection 1317AA(4). Rather, they are set out to make clear that
certain forms of conduct, including breaches of the Acts administered by
ASIC and APRA, and serious offences against other Commonwealth laws,
are clearly within the scope of the protections.
2.32 The broad categories of disclosable conduct are also intended to
include conduct that may not be in contravention of particular laws. For
example misconduct, or an improper state of affairs or circumstances in
relation to a regulated entity, may not involve unlawful conduct but may
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
indicate a systemic issue that would assist the relevant regulator in
performing its functions.
2.33 Information that indicates a danger to the public or a danger to the
financial system is also a disclosable matter. This is intended to cover a
broad range of conduct that poses significant risk to public safety or the
stability of, or confidence in, the financial system, whether or not it is in
breach of any law.
2.34 The amendments give the Minister a power to prescribe other
conduct as disclosable conduct in regulations. The 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.
Subjective requirement replaced by objective 'reasonableness'
2.35 The new law addresses conclusions of recent reviews that the
requirement that a whistleblower makes a qualifying disclosure 'in good
faith' creates uncertainty and risk for whistleblowers. It is common for
companies accused of wrongdoing to allege subjective or collateral
motivation of the whistleblower that may defeat a 'good faith' requirement
in whistleblower protection laws.
2.36 The 'good faith' requirement is also inconsistent with the
approach taken in the PID Act and Registered Organisations Act, as well as
with best practice legislative approaches in other countries including the
United Kingdom.
2.37 The amendments remove the concept from the requirements for
making a qualifying disclosure, and ensure the protections and remedies are
based on the objective reasonableness of the whistleblower's grounds to
suspect that information disclosed indicates misconduct or other disclosable
matters. [Schedule 1, item 2, subsections 1317AA((4) and (5)]
Expanding the individuals qualifying for protection
Eligible whistleblowers
2.38 The new law expands the categories of individual who can make a
qualifying disclosure.
2.39 The amendments create a new concept of 'eligible whistleblower'
to define individuals whose relationship with a 'regulated entity' may place
them in a position to identify wrongdoing by that entity. Eligible
whistleblowers include the categories of person identified above, as well as
whistleblowers covered by the existing Banking Act, Life Insurance Act,
22
Improving protection for whistleblowers in the corporate and financial sectors
Insurance Act and Superannuation Industry (Supervision) Act.
[Schedule 1, item 2, section 1317AAA]
2.40 Under the new law, an 'eligible whistleblower' is an individual
who is, or has been, in a relationship with an entity (the regulated entity)
about which a disclosure is made. The listed relationships are intended to
cover individuals likely to have information about misconduct or other
disclosable matters in relation to the entity.
2.41 The following are eligible whistleblowers:
• an officer of the regulated entity;
• an employee of the regulated entity;
• an individual who supplies services or goods to the regulated
entity (whether paid or unpaid);
• an employee of a person who supplies services or goods to
the regulated entity (whether paid or unpaid);
• an individual who is an associate of the regulated entity;
• for a regulated entity that is a superannuation entity
- an individual who is a trustee (within the meaning of the
Superannuation Industry (Supervision) Act), custodian
(within the meaning of that Act), or investment manager
(within the meaning of that Act) of the superannuation
entity;
- an officer of a body corporate that is a trustee, custodian
or investment manager of the superannuation entity;
- an employee of any of the above;
- an individual who supplies services or goods (whether
paid or unpaid) to an individual who is a trustee,
custodian or investment manager of the superannuation
entity or to an officer of a body corporate that is a trustee
custodian or investment manager of a superannuation
entity;
- an employee of a person that supplies services or goods
(whether paid or unpaid) to an individual who is a trustee,
custodian or investment manager of the superannuation
entity or to an officer of a body corporate that is a trustee
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
custodian or investment manager of a superannuation
entity to a trustee, custodian or investment manager or a
body corporate (whether paid or unpaid);
• a relative or dependent of any of the above (this includes a
spouse, parent or other linear ancestor, child or grandchild,
and sibling); or
• an individual prescribed by the regulations in relation to a
type of regulated entity.
Where a superannuation entity is a body corporate, then the eligible
whistleblowers include all of those that are eligible in respect of any other
body corporate. [Schedule 1, item 2, section 1317AAA]
2.42 The categories of eligible whistleblowers are intended to ensure
that the regime targets those individuals that are most likely to have reliable
information about conduct of a regulated entity.
2.43 The Minister is provided with the power to prescribe new
categories of whistleblower in relation to particular types of regulated entity
to protect new categories of whistleblower who may become apparent.
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. [Schedule 1, item 2, section 1317AAA]
Individuals formerly in a relationship with the body corporate or
superannuation entity
2.44 Existing corporate and financial sector whistleblower protections
apply to person in a current relationship with the company or entity about
which the disclosure is made. This presents a gap in current protections, as
it precludes former directors, officers and employees, contractors and
closely related persons from making protected disclosures.
2.45 The amendments described above expand the categories of
protected persons to include a person who was formerly in an eligible
whistleblower relationship with a regulated entity.
[Schedule 1, item 2, section 1317AAA)]
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Improving protection for whistleblowers in the corporate and financial sectors
Expanding the entities about which a protected disclosure may be made
Regulated entities
2.46 The consolidated regime created by the amendments cover
disclosures previously covered by the whistleblower protection provisions
in:
• the existing Part 9.4AAA of the Corporations Act;
• Part 6A, Division 1 of the Banking Act;
• Part 7, Division 5(A) of the Life Insurance Act;
• Part IIIA, Division 4(A) of the Insurance Act; and
• Part 29A, Division 1 of the Superannuation Industry
(Supervision) Act.
2.47 This means that disclosures concerning companies, banks, life
insurers, general insurers, superannuation entities and trustees of
superannuation entities are all covered by the Corporations Act
whistleblower regime. [Schedule 1, item 2, section 1317AAB]
2.48 The new consolidated regime does not alter the regulatory
responsibilities of the regulators administering each of the Corporations
Act, the ASIC Act, the Banking Act, the Life Insurance Act, the Insurance
Act and the Superannuation Industry (Supervision) Act.
Persons and entities to which a qualifying disclosure may be made
2.49 As discussed above, a disclosure may qualify for protection if
made by an eligible whistleblower to an eligible recipient.
Eligible recipient
2.50 The existing corporate and financial sector whistleblower regimes
have differing definitions of the persons to whom a qualifying disclosure
may be made, as appropriate to the entities they regulate. The new
consolidated provisions introduce a new concept of 'eligible recipient' to
describe these persons. [Schedule 1, item 2, section 1317AAC]
2.51 An eligible recipient is generally a person inside the entity about
which a disclosure is made, but may also include an appointed auditor or a
person authorised by the entity.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
2.52 Each of the following is an eligible recipient for a regulated entity
that is a body corporate:
• an officer of the body corporate or related body corporate;
• an auditor, or a member of an audit team conducting an audit,
of the body corporate or a related body corporate;
• the actuary of the body corporate or a related body corporate;
• a person authorised by the body corporate to receive
disclosures that may qualify for protection; and
• the supervisor or manager of a whistleblower who is an
employee of the body corporate.
[Schedule 1, item 2, subsection 1317AAC(1)]
2.53 For a disclosure concerning a superannuation entity, each of the
following is an eligible recipient for the superannuation entity:
• an officer of the superannuation entity;
• an auditor, or a member of an audit team conducting an audit,
of the superannuation entity;
• an actuary of the superannuation entity;
• an individual who is a trustee (within the meaning of the
Superannuation Industry (Supervision) Act) of the
superannuation entity;
• a director of a body corporate that is the trustee (within the
meaning of the Superannuation Industry (Supervision) Act)
of the superannuation entity; and
• a person authorised by the trustee or trustees (within the
meaning of the Superannuation Industry (Supervision) Act)
that may qualify for protection.
Where a superannuation entity is a body corporate, then the eligible
recipients include all of those that are eligible in respect of any other body
corporate. [Schedule 1, item 2, subsection 1317AAC(2)]
Power to prescribe additional eligible recipients
2.54 The amendments give the Minister the power to prescribe
additional persons or bodies as eligible recipients in regulations. The
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Improving protection for whistleblowers in the corporate and financial sectors
regulations are subject to Parliamentary scrutiny through the disallowance
procedure in section 42 of the Legislation Act. This power ensures
flexibility to respond to emerging trends in disclosure of wrongdoing and to
changes in the regulatory environment. It will also ensure that qualifying
disclosures may be made to any new body or statutory officer created or
tasked to administer or investigate whistleblower disclosures in the future.
[Schedule 1, item 2, paragraph 1317AAC(3)]
Emergency disclosure
2.55 The amendments create a new concept of emergency disclosure,
which may be made in certain emergency circumstances.
[Schedule 1, item 2, section 1317AAD]
2.56 In some situations, wrongdoing may be of such gravity and
urgency that disclosure to a journalist or a parliamentarian is justified. To
allow for such circumstances, the amendments provide for protection of an
emergency disclosure made to a such a third party when:
• the whistleblower has previously disclosed the information to
ASIC or APRA (the previous disclosure);
• the whistleblower has reasonable grounds to believe that
there is an imminent risk of serious harm or danger to public
health or safety, or to the financial system, if the information
is not acted on immediately;
• a reasonable period has passed since the disclosure was
made; and
• after the end of the reasonable period, the whistleblower
gives the body to which the disclosure was made a written
notification that includes sufficient information to identify
the previous disclosure and states that he or she intends to
make an emergency disclosure.
[Schedule 1, item 2, subsection 1317AAD]
2.57 This is intended to cover the unusual situation where a
whistleblower has made a disclosure to a regulator about a situation the
whistleblower reasonably believes presents an imminent risk of serious
harm and, after a period that is reasonable in all the circumstances, the
regulator has not taken action to address the risk.
2.58 Emergency disclosures can be made to:
• a member of the Parliament of the Commonwealth or of a
State or Territory parliament; or
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• a journalist, defined to mean a person who is working in a
professional capacity as a journalist for a newspaper,
magazine, or radio or television broadcasting service, that is
operated on a commercial basis and is similar to a
newspaper, magazine or television broadcast.
[Schedule 1, item 2, subsection 1317AAD(2)]
2.59 In some circumstances a disclosure to a member of Parliament
may be protected by Parliamentary privilege. The amendments are not
intended to affect the operation of Parliamentary privilege.
2.60 In providing protection to disclosures to a journalist working in
professional capacity, the amendments make clear that disclosure to any
'journalistic' or 'media' enterprise is not sufficient. This is intended to
ensure that public disclosures on social media or through the provision of
material to self-defined journalists are not covered by the protection.
Enhancing protection of a whistleblower's identity
Allowing anonymous disclosure
2.61 The existing corporate and financial sector whistleblower
protection regimes require that a whistleblower provides his or her name
when making a disclosure in order to qualify for protection. This contrasts
with the Registered Organisations Act and the PID Act, which allow
anonymous disclosures. Internationally, UK and US whistleblower laws
provide for anonymous disclosures.
2.62 Most submitters supported the Discussion Paper's proposal to
extend the Corporations Act protections to anonymous disclosures, and the
Parliamentary Committee recommended that the law explicitly allow, and
provide protections for, anonymous disclosures.
2.63 The amendments remove the requirement that the discloser
provide his or her name when making a protected disclosure. This allows
for anonymous disclosures. A note is included to ensure this is clear
[Schedule 1, item note to, section 1317AAE]
Prohibitions on on-disclosure of whistleblower identity, and clarifying
that disclosure between regulatory agencies is allowed
2.64 The existing corporate and financial sector whistleblower
protection regimes provide for confidentiality of a whistleblower's identity.
They provide that it is an offence for the person to whom a qualifying
disclosure is made to disclose a protected disclosure, the identity of the
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Improving protection for whistleblowers in the corporate and financial sectors
discloser, or information that is likely to lead to the identification of the
discloser.
2.65 The existing Corporations Act, Life Insurance Act, Banking Act,
Superannuation Industry (Supervision) Act, and Insurance Act
whistleblower regimes provide an exception to the offence of revealing a
whistleblower's identity if the disclosure is made to:
• ASIC (Corporations Act);
• APRA (Banking Act, Life Insurance Act; Insurance Act,
Superannuation Industry (Supervision) Act);
• the AFP (Corporations Act; Banking Act, Life Insurance Act,
Insurance Act, Superannuation Industry (Supervision) Act);
or
• someone else with the consent of the whistleblower
(Corporations Act, Banking Act, Life Insurance Act;
Insurance Act, Superannuation Industry (Supervision) Act)
(authorised disclosures).
2.66 Weaknesses and some lack of clarity in the existing protections
have been identified by various reviews. They are:
• The existing offence of disclosing a whistleblower's identity
applies if the offender discloses the information regarding the
suspected or actual primary wrongdoing without necessarily
revealing the identity of a whistleblower
(existing paragraph 1317AE(1)(e)). This has inhibited
sharing and investigation of disclosed wrongdoing by
regulators and law enforcement authorities.
• Existing subsection 1317AE(2) creates an exception to the
offence by authorising disclosures to ASIC, APRA or the
AFP. However, it is unclear whether this information can be
shared between these authorities for the purposes of
investigating that offence.
• There is currently no express provision ensuring that a
recipient of disclosure is not required to disclose information
identifying a whistleblower to a court or tribunal. This
contrasts with the PID Act as well as international
whistleblower regimes.
• Consultation on the Exposure Draft version of this Bill
revealed cases in which an internal whistleblower disclosure
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
of misconduct was not investigated by a regulated entity, on
the basis that such investigation may lead to the identification
of the whistleblower.
2.67 The amendments ensure that:
• it is not an offence, of itself, to disclose the information
regarding the suspected or actual wrongdoing disclosed
without revealing the whistleblower's identity;
[Schedule 1, item 2, paragraph 1317AAE(1)(b)]
• it is not an offence to disclose the identity of a whistleblower,
or information likely to lead to his or her identification to (or
between) ASIC, APRA and the AFP;
[Schedule 1, item 2, paragraphs 1317AAE(2)(a),(b) and (c)]
• it is not an offence to disclose the identity of a whistleblower,
or information likely to lead to his or her identification to a
legal practitioner for the purposes of obtaining legal advice
or representation. [Schedule 1, item 2, paragraph 1317AAE(2)(d)]
2.68 The new law allows for additional persons or bodies to be
prescribed by regulation, to allow for disclosure of the identity of a
whistleblower to ensure that investigation of wrongdoing disclosed by
whistleblowers is not impeded by the confidentiality requirement in future.
Regulations are subject to Parliamentary scrutiny through the disallowance
procedure in section 42 of the Legislation Act. This would allow, for
prescribing a body such as whistleblower protection authority, for the
purposes of assisting a whistleblower or prosecuting victimisation.
[Schedule 1, item 2, paragraph 1317AAE(2)(e)]
2.69 As in the existing law, it is not an offence to disclose the identity
of a whistleblower, or information likely to lead to his or her identification
with the consent of the whistleblower. [Schedule 1, item 2,
paragraph 1317AAE(2)(f)]
2.70 The amendments also ensure that ASIC, APRA and the AFP can
share information, including the identity of the whistleblower, with other
Commonwealth, State or Territory authorities with functions or duties
relevant to the wrongdoing disclosed. This ensures that wrongdoing
disclosed by whistleblowers under the new regime can be properly
investigated or otherwise addressed. [Schedule 1, item 2, subsection 1317AAE(3)]
2.71 With the exception of disclosures to or between regulators, the
prohibition on disclosure of a whistleblower's identity (and the exceptions
there to) applies equally to any person or body that receives the information
following the original disclosure.
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Improving protection for whistleblowers in the corporate and financial sectors
2.72 To ensure that regulated entities that receive a qualifying
disclosure can investigate misconduct disclosed, the new law provides a
further exception to the offence breach of confidentiality of a
whistleblower's identity where:
• information that might lead to the identity of the
whistleblower (the confidential information) is disclosed;
and;
• the disclosure of the confidential information is reasonably
necessary for the purposes of investigating the conduct
disclosed by the whistleblower; and
• all reasonable steps are taken to reduce the risk of the
whistleblower being identified.
[Schedule 1, item 2, subsection 1317AAE(4)]
2.73 The exception does not apply where the actual identity of a
whistleblower is disclosed. [Schedule 1, item 2, subparagraph 1317AAE(4)(a)(i))]
Extending immunities for whistleblowers
2.74 The existing financial sector whistleblower protection regimes,
other than that in the Corporations Act, provide that information disclosed
by a whistleblower is not admissible evidence against him or her other than
in proceedings concerning the falsity of the information.
2.75 These provisions encourage disclosure of wrongdoing by
removing the prospect of whistleblowers themselves being subject to
prosecution for their involvement in that wrongdoing.
2.76 The amendments introduce a provision ensuring that information
that is part of a protected disclosure is not admissible in evidence against a
whistleblower in criminal proceedings or in proceedings for the imposition
of a penalty, other than in proceedings concerning the falsity of the
information. [Schedule 1, item 3, paragraph 1317AB(1)(c)]
Expanding protection from victimisation
Victimisation under the existing law
2.77 The existing Corporations Act provisions prohibit conduct that
intentionally causes detriment to a whistleblower because he or she makes a
protected disclosure. However, few, if any, prosecutions have been brought
for this offence.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
2.78 The existing requirement that the victimiser intended to cause
detriment is inconsistent with the equivalent provisions in the PID Act and
the Registered Organisations Act, which cover conduct engaged in in the
belief or suspicion that the whistleblower proposes to make, or could make,
a protected disclosure. The PID Act and the Registered Organisations Act
do not include a requirement that the victimiser intended to cause detriment
in order to commit the offence.
2.79 The existing offence of threatening to cause detriment applies if
the victimiser intends the victim to fear that the threat will be carried out, or
is reckless as to causing that fear. However the offence of actually causing
detriment, applies only to intentional conduct. That is, it does not apply if
the victimiser did not know, but should have known, that they were causing
detriment.
2.80 The existing offence of actually causing detriment only applies
where the victimiser knows that a disclosure qualifying for protection has
actually been made. It does not apply to victimisation engaged in because of
a belief or suspicion that a person has made or may in the future make such
a disclosure.
2.81 These deficiencies have posed obstacles to charges being laid
under the victimisation provisions of the existing Corporations Act regime.
2.82 In addition, both the Registered Organisations Act and the PID
Act include a non-exclusive list of situations that are included in the
meaning of 'detriment'. The Registered Organisations Act (see subsection
337BA(2) of the Registered Organisations Act; section 13(2) of the PID
Act) defines 'detriment' as including (without limitation) any of the
following:
• dismissal of an employee;
• injury of an employee in his or her employment;
• alteration of an employee's position to his or her detriment;
• 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; or
• damage to a person's reputation.
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Improving protection for whistleblowers in the corporate and financial sectors
The offence of victimisation under the new law
2.83 The amendments create a civil penalty provision to address
victimisation of a person in relation to a qualifying disclosure. A civil
penalty is a punishment for contravention in a civil court under the civil
rules of procedure for the court, and the civil standard of proof applies.
[Schedule 1, item 10, subsection 1317E(1) (after table item 45)]
2.84 The amendments also allow for criminal prosecution of
victimisation. This ensures that the regulator can choose to prosecute
contravention as an offence or as a civil penalty, as appropriate in the
particular circumstances. [Schedule 1, item 6, note at the end of subsections
1317AC(1), (2) and(3)]
2.85 The amendments make clear that the offence applies where a
person (the victimiser, described in the law as the 'first person') engages in
conduct that causes any detriment to any other person in the belief or
suspicion that a person has made, may make, proposes to make, or could
make, a protected disclosure. [Schedule 1, item 5, paragraph 1317AC(1)(c)]
2.86 This clarifies that the offence of victimisation does not require:
• that a disclosure has actually been made,
• that the victimiser has actual knowledge that a disclosure or
such a disclosure. The belief or suspicion that the
whistleblower proposes to make, or could make, a disclosure
is sufficient; or
• that the victimiser intends that the conduct cause detriment.
2.87 The amendments also confirm that the belief or suspicion that a
disclosure may have been made or going to be made does not have to be the
only reason the victimiser engaged in the proscribed conduct.
[Schedule 1, item 5, paragraph 1317AC(1)(d)]
2.88 As is the case under the existing law, the victim may be the
whistleblower or another person who suffers damage because of the
conduct. This may be, for example, a person involved in receiving or
investigating the disclosure, or a colleague, supporter, friend or family
member of the whistleblower.
2.89 The amendments ensure that in civil penalty proceedings, as well
as in proceedings for an offence, for threatening to cause detriment in
relation to a qualifying disclosure, it is not necessary to prove that the
person threatened actually feared that the threat would be carried out.
[Schedule 1, item 7, section 1317AC(5)]
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
Detriment
2.90 The amendments introduce an inclusive definition of 'detriment'
into the victimisation provision in the existing law. This follows the
equivalent definition in the Registered Organisations Act but adds the
additional items of damage to a person's business or financial position any
other damage to a person. [Schedule 1, item 8, subparagraphs 1317AC(6)(i) and (j)]
2.91 Under the new law, detriment includes, but is not limited to, any
of the following:
• dismissal of an employee;
• injury of an employee in his or her employment;
• alteration of an employee's position 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
• other damage to a person.
[Schedule 1, item 8, subsection 1317AC(6)]
Compensation
Compensation under the existing law
2.92 The right to compensation under the existing law has also suffered
from deficiencies. In particular, it is arguably necessary to prove that the
offence of victimisation has been committed before a victim of such
conduct can seek compensation. As the standard of proof required to
establish the offence of victimisation is the criminal standard (beyond a
reasonable doubt), on one interpretation a person seeking compensation
must prove his or her case on this standard.
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Improving protection for whistleblowers in the corporate and financial sectors
2.93 An order could be made under the existing law for reinstatement
of a whistleblower whose employment was terminated on the basis of a
disclosure under the existing law. However this did not apply to other
individuals whose employment may have been terminated because of a
belief or suspicion that a disclosure had been made.
2.94 Remedies that can be sought by a person who suffered damage as
a result of victimisation in relation to a qualifying disclosure under the
existing law are limited.
Compensation and other remedies under the new law
2.95 The new law makes it easier for a whistleblower or other
individual who is victimised in relation to a qualifying disclosure to seek
compensation and introduces a range of other remedies.
2.96 Under the new law, 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 threatens to cause
detriment to another person:
• believing or suspecting that a 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 9, subsection 1317AD(1)]
2.97 This removes obstacles under the existing law to victims seeking
compensation by removing the apparent requirement to prove that the
offence has been committed.
2.98 The first person under this subsection may be an individual or a
body corporate.
2.99 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 9, paragraph 1317AD(1)(b)]
2.100 This Bill removes the requirement under the current law 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. This is justified by the need to ensure
that the provisions not only address victimisation of actual whistleblowing,
but conduct which victimises a person because of the perception of
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
involvement in whistleblowing. [Schedule 1, item 2,
paragraphs 1317AD(1)(b) and (c)]
2.101 If a body corporate is liable under the new subsection 1317AD(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
victimising conduct;
• was in any way, by act or omission, directly or indirectly,
knowingly concerned in, or party to, the victimising conduct;
or
• conspired with others to effect the victimising conduct.
[Schedule 1, item 9, subsection 1317AD(2)]
2.102 The new law also clarifies that a threat to cause detriment need
not be express or unconditional, but may also be implied, or conditional.
[Schedule 1, item 9, subsection 1317AD(3)]
2.103 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 9, subsection 1317AD(4)]
Orders that may be made
2.104 The new law expands the orders that may be made in favour of a
person who has suffered loss, damage, or injury as a result of victimising
conduct. Where a court is satisfied that a person (the first person) has
engaged in victimising conduct and another person has suffered loss,
damage or injury as a result of the victimising conduct, it may make:
• an order requiring the first person to compensate the person
who has suffered the victimising conduct;
• an order where the first person engaged in the victimising
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
victimising conduct or any other person for loss, damage
or injury for part of that loss, damage or injury; or
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Improving protection for whistleblowers in the corporate and financial sectors
- requiring the first person and the first person's employer
jointly to compensate the person who has suffered the
victimising conduct or any other person; or
- requiring the first person's employer to compensate the
person who has suffered the victimising conduct or any
other person for loss, damage or injury for part of that
loss, damage or injury;
• an order granting an injunction to prevent, stop or remedy the
effects of the victimising conduct;
• an order requiring the first person to apologise for engaging
in the victimising conduct;
• where the victimising 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;
• an order requiring the first person to pay exemplary damages;
and/or
• any other order that the court thinks appropriate.
[Schedule 1, item 9, subsection 1317AE(1)]
2.105 The amendments repeal the existing provision for reinstatement of
a whistleblower's employment. The new provision is broader, covering
individuals other than the whistleblower. The new law also covers
situations where there may not have been a disclosure but the individual is
dismissed because of a belief or suspicion that a disclosure, may have been
made, is proposed to be made, or could be made. [Schedule 1, item 9,
paragraph 1317AE(1)(e)]
Onus of proof in compensation proceedings
2.106 In any proceeding where a person (the claimant) seeks an order
under new subsection 1317AD(1) from another person (the other person):
• the claimant bears the onus of pointing to evidence that
suggests a reasonable possibility that other person has
engaged in conduct that has caused detriment or constitutes a
threat of detriment; and
• if the claimant discharges that onus, the other person bears
the onus of proving that the claim is not made out.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
[Schedule 1, item 9, subsection 1317AE(2)]
2.107 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. It also recognises the actual knowledge
of the reasons for, and conduct of, any victimising conduct will lie
exclusively with the defendant in these cases.
2.108 The new subsection 1317AE(2) 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.
2.109 A court must not make an order against a person's employer if the
employer took reasonable precautions and exercised due diligence to avoid
the victimising conduct. [Schedule 1, item 9, subsection 1317AE(3)]
2.110 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 9, subsection 1317AE(4)]
Interaction between civil proceedings, civil penalties and criminal
offences
2.111 For the avoidance of doubt, a person may bring civil proceedings
for compensation or other remedial order, or for a breach of the
victimisation provisions, even if no prosecution for victimisation has been
brought or if such a prosecution cannot be brought.
[Schedule 1, item 9, section 1317AF]
Protecting the identity of whistleblowers and other victims in court
proceedings
Identifying information not to be disclosed to courts
2.112 The amendments ensure 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 identification of the discloser;
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Improving protection for whistleblowers in the corporate and financial sectors
except where it is necessary to do so for the purposes of giving effect to
this whistleblower regime, or where the court thinks it necessary in the
interests of justice to do so. [Schedule 1, item 9, section 1317AG]
2.113 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.
2.114 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.
Costs
2.115 Legal costs can be prohibitive to any person seeking
compensation for damage, and the risk of being ordered to pay the costs of
other parties to the proceedings may deter whistleblowers and other victims
of victimisation from bringing the matter to court.
2.116 The new law addresses this by protecting victims from an award
of costs against them in court proceedings seeking compensation except in
limited circumstances. The limited circumstances where the court may
make such an order are where it is satisfied that:
• the victim instituted the proceedings vexatiously or without
reasonable cause; or
• the victim's unreasonable act or omission caused the other
party to incur the costs.
[Schedule 1, item 9, section 1317AH]
Requirement to have a whistleblower policy
2.117 The existing whistleblower provisions in the Corporations Act do
not require companies to have or to implement internal systems to deal with
whistleblower disclosures.
2.118 The amendments require public companies, large proprietary
companies and proprietary companies that are trustees of registrable
superannuation entities to have a policy with information about:
39
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• the protections available to whistleblowers;
• how and to whom an individual can make a disclosure;
• how the company will support and protect whistleblowers;
• how investigations into a disclosure will proceed;
• how the company will ensure fair treatment of employees
who are mentioned in whistleblower disclosures;
• how the policy will be made available; and
• any matters prescribed by regulation.
[Schedule 1, item 9, subsection 1317AI(5)]
2.119 Transparent internal whistleblower policies are essential to good
corporate culture and governance.
2.120 The requirement applies to all public companies and proprietary
companies that have become large proprietary companies that are trustees
of registerable superannuation entities for any financial year on any day in
any later financial year that is at least six months after the last day of the
first financial year. [Schedule 1, item 9, subsection 1317AI(1)]
2.121 Failure to comply with the requirement to have and make
available a whistleblower policy is an offence of strict liability with a
penalty of 60 penalty units (currently $12,600 for an individual) which will
be enforced by ASIC. [Schedule 1, item 9, section 1317AI(4); Schedule 1, item 13,
insert to Schedule 3]
2.122 The requirement to have a whistleblower and to make it available
to officers and employees, and the penalty that may be imposed for
non-compliance, is designed to improve culture and transparency in relation
to disclosures of wrongdoing in the workplace. Whistleblower policies are
also intended to deter wrongdoing. The maximum penalty reflects the need
to show the importance of the need for whistleblower policies and is
proportional to the seriousness of a failure to implement a whistleblower
policy.
2.123 Whistleblower policies are required to include information about
protections that may be available to whistleblowers. They should also
include those protections provided in the tax whistleblower regime inserted
into the taxation law by Part 2 of Schedule 1 to this Bill. As public
companies, large proprietary companies and registrable superannuation
entities are required under the enhanced Corporations Act provisions to
40
Improving protection for whistleblowers in the corporate and financial sectors
have whistleblower policies, no such requirement is included in the tax
whistleblower provisions.
2.124 The requirement that a proprietary company that is the trustee of a
registerable superannuation entity must have a whistleblower policy does
not refer to public companies because all public companies, including any
public companies that are also superannuation trustees, are already covered
by the requirement in subsection 1317AI(1).
2.125 Additional matters to be included in a whistleblower policy may
be prescribed by regulation. This ensures that the whistleblower policies
can adapt to developments in whistleblower protections and remedies in the
future. Regulations are subject to Parliamentary scrutiny through the
disallowance procedure in section 42 of the Legislation Act.
Whistleblower policy exemption orders - class order for companies
2.126 The amendments provide a power to ASIC to make an order by
legislative instrument in respect of a specified class of company, relieving
companies in the class from the requirement to have a whistleblower policy.
[Schedule 1, item 9, section 1317AJ]
2.127 Only large or public entities are required to have a whistleblower
policy. This is intended to minimise the risk of any disproportionate
regulatory burden that would result from making it a universal company
requirement irrespective of company or business size.
2.128 The rationale for providing ASIC with a power to relieve certain
classes of companies from this requirement is to provide it with flexibility
in making a determination whether in some limited circumstances, the
benefits of this requirement in encouraging good corporate culture and
governance could be outweighed by reduced flexibility and unnecessarily
high compliance costs.
Penalties for Contravention of Whistleblower Protections
2.129 Under the existing law it is an offence to disclose the identity of a
whistleblower under most circumstances (section 1317AE). However, the
prosecuting agency must prove the elements of the offence on the criminal
standard, beyond a reasonable doubt. While evidence may indicate that a
contravention of the law has occurred, this may not be sufficient to mount a
prosecution.
2.130 The amendments make it a civil penalty contravention to disclose
a whistleblower's identity, allowing for proceedings to be brought against
an offender under the civil rules of procedure for the court, and applying the
41
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
civil standard of proof. [Schedule 1, item 10, section 1317E(1) table
items 45A and 45B]
2.131 Contravention of the new section remains an offence. This ensures
that the regulator can choose to prosecute contravention as an offence or as
a civil penalty, as appropriate in the particular circumstances.
2.132 The maximum penalty is $200,000 for an individual and
$1 million for a corporation. These maximum penalties reflect the
seriousness of such disclosures, given the potential risk and detriment 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, item 11, subsection 1317G(1G)]
Application and transitional provisions
2.133 The amendments will apply in relation to whistleblower
disclosures made on or after 1 July 2018, including disclosures about events
occurring before this date. [Schedule 1, item 12, subsection 1644(1)]
2.134 The amendments will also apply to victimisation of
whistleblowers after 1 July 2018, and to a whistleblower's right to
compensation and other remedies, in relation to disclosures that have been
made prior to this date. [Schedule 1, item 12, subsection 1644(2)]
2.135 To allow sufficient time for public companies, large proprietary
companies and registerable superannuation entities dto comply with the
requirement to have a whistleblowing policy, it will apply on and after
1 January 2019, or no later than six months after a proprietary company
first becomes a large proprietary company.
[Schedule 1, item 12, subsections 1644(3) and (4) and item 9, section 1317AI(1)]
REGULATION IMPACT STATEMENT
Background
2.136 The importance of protecting whistleblowers has been recognised
for many years as a means of improving the compliance culture of
corporations and improving detection of corporate crime. However, whilst
legislative protections have formed part of the Corporations Act since 2004,
they have been sparingly used and are increasingly perceived as inadequate
42
Improving protection for whistleblowers in the corporate and financial sectors
given recent advances in whistleblower protections in the public sector and
overseas.
2.137 Independent reviews of corporate sector whistleblowing
provisions in Australia have found that they lag those of the public sector
and those of comparable overseas jurisdictions. An independent evaluation
of G20 countries' whistleblowing laws in 2014, and a separate assessment
of the same laws were undertaken by the Senate Economics References
Committee (the Committee) as part of its Inquiry into the Performance of
ASIC in 2014. They both found that the current corporate whistleblower
protections are overly narrow and make it unnecessarily difficult for those
with information to qualify for protections. The Committee recommended a
comprehensive review of Australia's corporate whistleblower framework to
bring it closer to Australia's public sector whistleblower framework under
the PIDA. Refer to further details in section 1.
2.138 To remedy these inadequacies, the Government committed in
December 2016, as part of the Open Government National Action Plan
(OGNAP)1, to ensuring appropriate protections are in place for people who
report corruption, fraud, tax evasion or avoidance, and misconduct within
the corporate sector. In order to achieve this, the Government committed to
improving whistle-blower protections for people who disclose information
about tax misconduct to the ATO. It also committed to pursuing reforms to
whistleblower protections in in other parts of the corporate sector, with
consultation on options to strengthen and harmonise these protections with
those in the public sector available under the PID Act.
2.139 The commitment in the OGNAP reaffirms the Government's
announcement in the 2016-17 Budget to introduce greater protections for
tax whistleblowers to further strengthen the integrity of Australia's tax
system. Currently, there are no specific protections for tax whistleblowers,
and the range of secrecy and privacy provisions relied upon are incapable of
guaranteeing absolute protection.
2.140 Given the lack of protections for tax whistleblowers and the need
to strengthen protections for other whistleblowers in the corporate sector
the Government is progressing these reforms in parallel, including
introducing them as part of the same legislation. This will ensure
consistency in protections, where it makes sense to do so. Whilst the
proposed protections for tax and other whistleblowers are largely
consistent, there are some differences and so this regulatory impact analysis
focuses on the corporate whistleblower protections only.
1
http://ogpau.pmc.gov.au/2016/12/07/australias-first-national-action-plan-submitted
43
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
2.141 Separately, following the passage of amendments enhancing
whistleblower protections in the Fair Work (Registered Organisations) Act
2014 (RO Act), the Government referred to the Joint Parliamentary
Committee on Corporations and Financial Services an inquiry
into whistleblower protections in the corporate, public and not-for-
profit sectors (Parliamentary Inquiry). This Parliamentary Inquiry examined
the RO Act whistleblower amendments with an objective of implementing
the substance and detail of those amendments to achieve an equal or better
whistleblower protection and compensation regime in the corporate and
public sectors.
Corporate whistleblower protections available under the Corporations
Act and the ASIC Act
2.142 The protections currently offered to corporate whistleblowers
under Part 9.4AAA of the Corporations Act in respect of any disclosure
about an actual or potential contravention of corporations legislation:
• confer statutory immunity on the whistleblower from civil or
criminal liability for making the disclosure;
• constrain employer rights to enforce a contract remedy
against the whistleblower (including any contractual right to
terminate employment) arising as a result of the disclosure;
• prohibit victimisation of the whistleblower;
• confer a right on the whistleblower to seek compensation if
damage is suffered as a result of victimisation; and
• prohibit revelation of the whistleblower's identity or the
information disclosed by the whistleblower with limited
exceptions.
2.143 These protections have been widely criticised as being limited and
overly complex. Specifically, to qualify for protection a whistleblower
must:
• be either a current officer or employee of the company in
question or a current contractor (that is, protections do not
apply to former employees or contractors);
• make the disclosure in good faith to ASIC, the company's
auditor, or nominated persons within the company (that is,
protections rely on a whistleblower's motivation in making
the disclosure);
44
Improving protection for whistleblowers in the corporate and financial sectors
• have reasonable grounds to suspect that either the company,
or some of its officers or staff, have breached (or might have
breached) a provision of the Corporations Act or the
Australian Securities and Investments Commission Act 2001
(ASIC Act) (that is, the protections do not apply for
disclosures relating to breaches of any other act); and
• provide their names before making the disclosure (that is, the
disclosure cannot be made anonymously).
Corporate whistleblower protections available under statues
within the remit of ASIC and APRA
2.144 Currently, there are no whistleblower protections under the
National Consumer Credit Protection Act 2009 (NCCP Act) or the
Financial Services (Collection of Data) Act 2001.
2.145 Similar whistleblower protections to those set out in the
Corporations Act are contained in the statutes within APRA's remit such as:
• the Banking Act 1959;
• the Insurance Act 1973;
• the Life Insurance Act 1995; and
• the Superannuation Industry (Supervision) Act 1993.
2.146 Whistleblower protections are available under these Acts if the
disclosures concern misconduct or an improper state of affairs or
circumstances affecting the institutions supervised by APRA (authorised
deposit-taking institutions (ADIs), insurers and superannuation entities).
Under the Banking Act for instance, a person may qualify for protection if
the disclosure:
• relates to misconduct, or an improper state of affairs or
circumstances in relation to the ADI; and
• the whistleblower considers that the information may assist
the recipient of the disclosure to perform his or her functions
or duties.
2.147 Similar requirements are set out for insurers and superannuation
entities in the Life Insurance Act, the Insurance Act and the Superannuation
Industry Act respectively, with some minor differences to reflect the roles
45
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
of the actuary for insurers and superannuation entities as well as the role of
the trustee of the superannuation entity.
What is the policy problem?
2.148 Combating corporate crime is a longstanding law enforcement and
public policy challenge. Corporate crime is estimated to cost Australia more
than $8.5 billion a year and account for approximately 40 per cent of the
total cost of crime in Australia.2
2.149 Whistleblowing plays a critical role in uncovering corporate
crime. It is a significant means of combating poor compliance cultures, as it
ensures that companies, officers, and staff know that misconduct can be
reported. Furthermore, the opaque and complex nature of corporate crime
makes it difficult for law enforcement to detect misconduct. In many cases,
corporate crime is only detected because individuals come forward,
sometimes at significant personal and financial risk.
2.150 To reduce these risks and encourage disclosures, whistleblowers
are often afforded legal protections in relation to their disclosure. If the
protections are inadequate or unclear, a whistleblower may be discouraged
from sharing information due to fears of personal or professional reprisal.
2.151 Organisational behaviour research tends to show that rates of
reporting and/or other action on wrongdoing go up where organisations are
forced or induced to introduce stronger ethics policies or programs,
including reporting policies, in which employees have confidence, or
employees believe they are subject to legislative protections in which they
have some confidence. This second point is illustrated in Whistling While
They Work 13 where it was found that employee confidence in
whistleblower protection legislation correlated strongly with lower
'inaction' in the face of perceived wrongdoing across 83 public sector
organisations.
2.152 Further, in Whistling While They Work 24 it was confirmed that
employee reporting is the single most important way of wrongdoing being
2
The estimates refer to figures quoted in Attorney General Department, 2016, Improving
enforcement options for serious crime: Consideration of a Deferred Prosecution Agreements
scheme in Australia. Public Consultation Paper (page 4) available at:
https://www.ag.gov.au/Consultations/Documents/Deferred-prosecution-agreements/Deferred-
Prosecution-Agreements-Discussion-Paper.pdf
3
Whistling While They Work 1: Brown, Mazurski & Olsen 2008
4
Whistling While They Work 2: Select Work-in-Progress Results, 13 September 2017
46
Improving protection for whistleblowers in the corporate and financial sectors
brought to light especially on the part of managers and governance
professionals. This is relative to other means, for example audits,
management observation and internal controls. This is based on a sample of
over 11,000 respondents from all employee classes from 38 organisations,
public and private.
National and international evaluations of corporate
whistleblower protections
2.153 The assessment of Australia's corporate whistleblower
protections, undertaken by the Senate Economics References Committee as
part of its Inquiry into the Performance of ASIC in 2014, concluded that "a
strong case exists for a comprehensive review of Australia's corporate
whistleblower framework, and ASIC's role therein."5
2.154 Witnesses to the Inquiry expressed concern over the Corporations
Act's narrow definitions of who might be considered a whistleblower and
the type of disclosures that could attract whistleblower protections; the
absence of any requirement in the Act for internal whistleblowing processes
within companies; and the fact that the Act does not mandate a role for
ASIC in protecting whistleblowers.
2.155 The Committee recommended a review of Australia's corporate
whistleblower framework to bring it closer to Australia's public sector
whistleblower framework under the PIDA and introduce a number of
amendments to the Corporations Act focusing on:
• extending the definition of whistleblowers expand the
definition of a whistleblower to include a company's former
employees, financial services providers, accountants and
auditors, unpaid workers and business partners;
• expand the scope of information protected by the
whistleblower protections to cover any misconduct that ASIC
may investigate;
• allowing anonymous disclosures;
5
Senate Standing Committee on Economics, 2014, Performance of the Australian Securities
and Investments Commission, available at:
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/ASIC/Final_Re
port/index
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• remove the requirement that a whistleblower must be acting
in 'good faith' in disclosing information. Consistent with
PIDA, replace with a requirement that a disclosure is based
on an honest belief, on reasonable grounds, that the
information disclosed shows or tends to show wrongdoing
regardless of what the whistleblower believes;
• strengthening protections by strengthening the victimisation
provisions to match the level of protections provided by the
PIDA and including provisions in the Corporations Act that
would ensure ASIC and APRA cannot be required to reveal a
whistleblower's identity without a court order.
2.156 Similarly, in 2014 an independent evaluation of G20 countries'
whistleblowing laws6 concluded that that although Australia's
whistleblower protections were comprehensive for the public sector, they
lagged international best practice for the private sector. It identified the
following areas for potential reform:
• broadening definition of whistleblowers and the scope of
wrongdoing covered;
• introducing protections for anonymous complaints;
• introducing external reporting channels and requirements for
internal company procedures;
• improving compensation arrangements and protections
against retaliation;
• establishing an oversight agency responsible for
whistleblower protections; and
• improving the transparency of the legislation.
2.157 In November 2016, the Parliamentary Inquiry was established to
review the whistleblower protections in the corporate, public and not-for-
profit sectors with the objective of recommending that the new
whistleblower protections in the RO Act are implemented in the corporate
and public sectors. In many respects the new whistleblower protections in
the RO Act represented the new standard for whistleblower protections in
Australia.
6
Simon Wolfe, Mark Worth, Suelette Dreyfus and A J Brown, 2015, Whistleblower Protection
Laws in G20 Countries: Priorities for Action
48
Improving protection for whistleblowers in the corporate and financial sectors
2.158 Using the whistleblower protections in the RO Act as the
standard, the committee made 35 recommendations to improve
whistleblower protections in the public and private sectors.7 Some of the
key recommendations address inadequacies identified with the existing
whistleblower protections in the following areas:
• protecting whistleblowers from reprisals and holding those
responsible for reprisals to account;
• effectively investigating alleged reprisals;
• whistleblowers being able to seek redress for reprisals; and
• the fragmented and inconsistent nature of whistleblower
legislation. It was found that significant inconsistencies exist
not only between various pieces of Commonwealth public
and private sector whistleblower legislation, but also across
the various pieces of legislation that apply to different parts
of the private sector.
2.159 The reforms described in this regulatory impact statement have
been developed having regard to the recommendations made by the above
national and international evaluations of Australia's corporate
whistleblowing regime.
Why is government action needed?
2.160 Shifting technologies and the global nature of business are
contributing to the increasing complexity and sophistication of corporate
misconduct. In this evolving setting, the knowledge of those working within
an organisation provides an important, and in some cases the only, route to
detection and prosecution of corporate crime.
2.161 As a result of the inadequacies detailed above, the current legal
settings give whistleblowers in the corporate sector little incentive to come
forward with their information.
2.162 In addition, because whistleblower protections are spread across
multiple statutes, their application is complicated and their coverage is
7
Parliamentary Joint Committee on Corporations and Financial Services, 2017, Whistleblower
Protections available at:
http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial
_Services/WhistleblowerProtections/Report
49
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
fragmented. To be certain of protection, a whistleblower is required to
possess sophisticated knowledge of Australia's legal system, specifically,
the precise Act which the organisation has contravened. This potential for
uncertainty is compounded by the fact that, under the current protections,
the whistleblower is unable to seek legal advice while retaining their
statutory protections, as lawyers are not included in the list of persons to
whom a whistleblower can make a protected disclosure. Additionally, there
are categories of people with potentially valuable knowledge who are
excluded from protection; for example, former employees or an
organisation's accountant.
2.163 Government action is needed to ensure that the legislative
settings:
• actively protect whistleblowers;
• encourage them to make disclosures;
• provide an early warning system for regulators;
• facilitate investigation of the disclosures made; and
• afford procedural fairness to those who may be subject of a
disclosure.
2.164 The main objective of this proposal is to remedy these
shortcomings of the current legislation and meet Government's
commitment made as part of the OGNAP to ensure appropriate protections
are in place for people who report corruption, fraud, tax evasion or
avoidance, and misconduct within the corporate sector.8
2.165 Public consultation (held in line with the OGNAP commitment)
seeking stakeholders views on the adequacy of the current protections for
whistleblowers in the corporate sector highlighted an urgent need for a
Government action in this area and overwhelming support for the reforms
proposed (see for more on consultation section 5).
Policy options
2.166 There are three policy options available to the Government.
8
Open Government Partnership - Australia, Australia's First National Action Plan available at:
https://ogpau.pmc.gov.au/2016/12/07/australias-first-national-action-plan-submitted
50
Improving protection for whistleblowers in the corporate and financial sectors
• Option 1 - Maintain the status quo.
• Option 2 - Reform whistleblower protections in the
Corporations Act only.
• Option 3 - Reform and consolidate into the Corporations Act
whistleblower protections currently available to
whistleblowers across the financial system under legislation
within the remit of ASIC and APRA and expand protections
to disclosures of corporate misconduct more generally.
Option 1 - Maintain status quo
2.167 This policy option does not involve a legislative change.
Option 2 - Reform whistleblower protections in the
Corporations Act only
2.168 This policy option involves strengthening protections available to
whistleblowers under the Corporations Act only. The Corporations Act is
amended to:
• expand the categories of whistleblowers qualifying for
protection to include former officers, employees and
suppliers as well as associates of the entity in relation to
which the disclosure is made, and specified family members
of employees, officers and others of a regulated entity;
• eliminating the 'good faith' requirement for disclosures so
that generally the motivation of whistleblowers cannot be
taken into account in determining whether a disclosure ought
to qualify for be protection or not;
• allow anonymous disclosures;
• enhance requirements designed to protect a whistleblower's
identity;
• expanding the range of persons or entities to which a
whistleblower may make a protected disclosure including to
lawyers for the purpose of obtaining legal advice;
• expand the protections and redress for whistleblowers who
suffer reprisal or retaliation in relation to a disclosure;
51
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• improve access to compensation for whistleblowers who are
the subject of such reprisals; and
• introduce a requirement that public companies, large
proprietary companies and superannuation trustees have a
whistleblower policy, which will include company-specific
information about the protections available to
whistleblowers, as well as how the company will ensure fair
treatment of employees who are mentioned in whistleblower
disclosures.
- Transparent internal whistleblower policies are essential
to good corporate culture and governance. It will
encourage whistleblowers to come forward as they will
have confidence that they will be protected for making the
disclosure. It encourages companies to take action to
investigate and resolve reports of misconduct. This
change also aligns the Corporations Act with the PIDA
and the RO Act pursuant to which the development of
such procedures is mandatory.
Option 3 - Reform and consolidate into the Corporations Act
whistleblower protections currently available to
whistleblowers across the financial system under legislation
within the remit of ASIC and APRA and expand protections to
disclosures of corporate misconduct more generally.
2.169 This policy option involves strengthening the Corporations Act
provisions (as in Option 2) and also extending the proposed Corporations
Act protections to other specified statutes falling within the remit of ASIC
and APRA including:
• the Australian Investments and Securities Commission Act
2001;
• the National Consumer Credit Protection Act 2009;
• the Banking Act 1959;
• the Insurance Act 1973;
• the Life Insurance Act 1995;
• the Superannuation Industry (Supervision) Act 1993; and
52
Improving protection for whistleblowers in the corporate and financial sectors
• the Financial Sector (Collection of Data) Act 2001.
2.170 In addition, the scope of protected disclosures is expanded to
include information that the discloser has reasonable grounds to suspect:
• indicates misconduct, or an improper state of affairs or
circumstances, by a whistleblower regulated entity or related
body corporate of a whistleblower regulated entity;
• is an offence against any other law of the Commonwealth
that is punishable by imprisonment for a period of 12 months
or more; or
• represents a danger to the public or the financial system.
2.171 The amendments make it clear that disclosures about the broad set
of serious wrongdoing in a corporation or a financial sector entity are
within the scope of the protection. This could include serious breaches of
any Commonwealth, State or Territory law that are not criminal offences.
Cost benefit analysis of each option and impact analysis
Option 1 - Maintain status quo
2.172 Making no legislative change would result in Australia continuing
to lag behind both domestic and international best practice.
2.173 If protections for corporate whistleblowers remain unchanged,
there are no additional compliance costs for the businesses affected.
However, the current corporate whistleblower protections remain sparingly
used and there remains little to no incentive for insiders to share vital
information with regulators and law enforcement agencies. With very few
insiders stepping forward, the investigation and prosecution of corporate
crime in Australia remains difficult, costing Australia approximately $8.5
billion a year.
Option 2 - Reform whistleblower protections in the Corporations Act
2.174 This policy option involves strengthening protections available to
whistleblowers under the Corporations Act, aligning them with the PIDA
and the RO Act and with what is considered to be international best
practice. The reforms are designed to encourage whistleblowers to come
forward by ensuring protections are in place for people who report such
activities in corporations covered by the Corporations Act. This would in
53
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
turn be expected to reduce misconduct over time (see further discussion
below).
2.175 However, by amending the Corporations Act only (in isolation of
other statutes which relate to banking, insurance and superannuation) the
reforms have very limited scope as they guarantee protections for
whistleblowers making the disclosures in relation to breaches of the
Corporations Act only. Disclosures related to the breaches of the NCCP Act
continue to lack protections. Also, the protections for whistleblowers
available under legislation within APRA's remit remain unchanged. They
would also not cover broader types of misconduct that a regulated entity
may engage in.
2.176 This fragmented legislative setting continues to result in
inconsistent approaches to handling disclosures between different statutes
and regulators and requires whistleblowers to consult a number of statutes
or seek legal advice in order to understand their eligibility for protection.
2.177 Possible outcomes from the implementation of Option 2 include
the following.
• Whistleblowers: will benefit from increased protections and
better access to compensation, but may need to consult a
number of statutes or seek legal advice in order to understand
their eligibility for protection.
• Companies: will bear the costs of developing whistleblower
policies (if they don't already have one) and potentially
dealing with greater whistleblowing activity. However,
companies may benefit from being made aware of
inappropriate behaviour within the company so that they can
take action to investigate and remedy. Also, by better
supporting whistleblowers the company will be able to
demonstrate its commitment to good corporate practices and
improved culture.
• Regulators: will, through a potential increase of valuable
disclosures, be able to more effectively take early action to
investigate and prosecute corporate misconduct.
• Public: may, as investors and customers, face slight
increases in the costs of products and services, if the costs to
companies of developing whistleblower policies are passed
on. However, this is considered unlikely as the estimated
costs calculated in this regulatory impact assessment for an
average company are relatively small. Customers may also
benefit from higher standards of behaviour by companies.
54
Improving protection for whistleblowers in the corporate and financial sectors
Furthermore, the public would be expected to benefit from
potential decreased levels of corporate misconduct over time
and overall increase in confidence in the financial system.
2.178 Most of the proposed reforms (discussed in detail in Section 3 -
Option 2) do not result in any additional compliance cost, as they build on
the existing legislation and correct existing deficiencies. An exception to
this is a requirement for public companies, large proprietary companies and
superannuation trustees to have a whistleblower policy.
2.179 There are approximately 33,000 of these companies in Australia.
We estimate that the whistleblower policy requirement will impose certain
one-off implementation costs on these companies as well as annual training
costs.
2.180 As there is a range in size and complexity of the companies to
whom this will apply, the estimated costs are based on an expected average.
Also it is expected that the average company already has a base structure in
place for compliance and ethics policies and training and so development of
a whistleblower policy in accordance with the proposed reforms will
leverage this base.
2.181 Based on the average company, the estimated costs include the
administrative time required to developing the policy (20 hours), legal
advice in developing the policy (five hours), and the production of
informative materials for staff members (four hours). In addition, it is
estimated that each company with the whistleblower policy requirement
will devote ongoing time to familiarising themselves with this legal
requirement (four hours per year). Following these time estimates and a
standardised labour cost, it is estimated that Option 2 will result in an
overall compliance cost of $15.6 million per year over ten years.
Table 2.1: Average annual regulatory costs (from business as usual)
Change in costs Business Community Individuals Total change in
($ million) organisations costs
Total, by sector $15.6 million $0 $0 $15.6 million
2.182 Given the proposed reforms significantly strengthen the
protections for whistleblowers in the corporate sector, it is not unreasonable
to suggest that there could be a corresponding reduction in the cost of
corporate crime as detection and prosecution of the corporate crime
improves over time. This is due to whistleblowers being more willing to
report misconduct because they feel better protected and are better informed
about a company's whistleblowing policies.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
2.183 Overseas evidence suggests that whistleblowing is important in
uncovering corporate crime. A recent European Commission study9
outlined the economic case for whistleblower protection in the European
Union. It focused on the public procurement sector, a major component of
the economy and an attractive hotspot for corruption. In this context,
whistleblower protection can encourage the reporting of corrupt practices,
resulting in less misuse of public funds. It found that the overall costs for
setting up and maintaining whistleblower protection are quite low in
comparison with the potential benefits.
2.184 This study referenced the 2016/17 Global Fraud Report10 which is
based on a survey and in-depth interviews with senior executives
worldwide about their experience with fraud. It reports that the percentage
of fraud uncovered, thanks to whistleblowers, was equal to 44 per cent in
Canada, 49 per cent in the US, 53 per cent in Italy and 50 per cent in the
UK, against a global average of 44 per cent.
2.185 Using the results of these studies as a guide, and considering that
corporate crime is estimated to cost Australia more than $8.5 billion a year,
it is reasonable to suggest that these reforms to significantly strengthen the
protections for whistleblowers could have a large impact on combatting
corporate crime.
Option 3 - Reform and consolidate into the Corporations Act
whistleblower protections currently available to whistleblowers across
the financial system under legislation within the remit of ASIC and APRA
and expand protections to disclosures of corporate misconduct more
generally.
2.186 This policy option extends the proposed expanded Corporations
Act protections to other specified statutes falling within the remit of ASIC
and APRA as well as corporate misconduct more broadly (as described by
Section 3 - Option 3). The corporate whistleblower protections for
disclosures made with respect to breaches of financial system legislation
within the remit of ASIC and APRA are consolidated into one statue: the
Corporations Act. In addition, the Corporations Act whistleblower
protections will be extended to disclosures that relate to misconduct, or an
improper state of affairs or circumstances, contraventions of any law of the
Commonwealth that is punishable by imprisonment for a period of 12
months or more, or represents a danger to the public or the financial
9
Estimating the Economic Benefits of Whistleblower Protection in Public Procurement, written
by Milieu Ltd July - 2017
10
Kroll, Global Fraud Report 2016-17
56
Improving protection for whistleblowers in the corporate and financial sectors
system. These reforms will reduce the gaps and inconsistencies that
currently exist in the corporate whistleblower protection regime.
2.187 This regime is designed to work for the whistleblower and address
the previously identified issues by creating a less fragmented whistleblower
protection regime with broader protections for disclosures. In addition to all
of the benefits of Option 2, Option 3 ensures a consistent approach to
whistleblower protections in the financial system and more broadly, and
greater certainty of protection for whistleblowers who are guided now by a
single statue when inquiring about their protections. This reduces the risk of
a whistleblower having no statutory protection if he/she discloses
misconduct that is not captured by the existing, fragmented regime.
2.188 It simplifies the existing legislative regime by combining in one
statute (the Corporations Act) the whistleblower protections currently
spread across the statutes listed above. This approach:
• eliminates the gaps in protections in the existing law which
result from this piecemeal approach;
• removes confusion as to which law applies;
• reduces compliance costs for industry; and
• ensures consistency of approach in the financial system as a
whole.
2.189 Possible outcomes from the implementation of Option 3 include
the following.
• Whistleblowers: will benefit, not only from increased
protections and improved access to compensation but also a
greater certainty about their legal position.
• Companies: will bear the costs of developing whistleblower
policies (if they don't already have one) and potentially
dealing with greater whistleblowing activity. However, those
costs may be reduced by the decrease in complexity of
whistleblower protections across the corporate sector.
• Regulators: will, through a potential increase of valuable
disclosures, be able to more effectively take early action to
investigate and prosecute corporate misconduct. ASIC and
APRA may need to process a greater number of disclosures
as they receive disclosures on a broader range of misconduct
from across the corporate and financial sectors. However, the
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
reforms allow for an increased cohesion in approach to
sharing information about disclosures across regulators.
• Public: may, as customers, face slight increases in the costs
of products and services, if the costs to companies of
developing whistleblower policies are passed on. However,
this is considered unlikely as the estimated costs calculated in
this regulatory impact assessment for an average company
are relatively small. Compared to Option 2, more customers
will benefit from higher standards of behaviour by
companies, as whistleblowers can now also make protected
disclosures relevant to the National Consumer Credit
Protection Act (which currently does not provide for
protections) as well as any corporate misconduct more
generally. Furthermore, the public is expected to benefit from
decreased levels of corporate misconduct.
2.190 Similar to Option 2, with an exception of a requirement for public
companies, large proprietary companies and superannuation trustees to have
whistleblower policies, the proposed amendments do not result in any
compliance cost, as they build on the existing legislation and correct
existing deficiencies.
2.191 The compliance cost calculation for Option 3 largely follows
Option 2. However, there is one key difference. Under Option 2, corporate
whistleblower provisions are spread across multiple statutes relating
separately to banking, insurance and superannuation. Option 3 simplifies
this regime by consolidating whistleblower protections across the financial
system and corporate activities more generally. Therefore, for the 33,000
eligible companies, the regime under Option 3 will be easier to interpret and
it is assumed that, compared to Option 2, fewer legal services will be
purchased by companies when developing their policy (four hours of legal
advice in developing the policy compared to five hours). Apart from the
differences in legal services costs, regulatory cost calculations for Option 3
are identical to Option 2. The estimated overall compliance cost is
$15.4 million per year over ten years.
Table 2.2: Average annual regulatory costs (from business as usual)
Change in costs Business Community Individuals Total change in
($ million) organisations costs
Total, by sector $15.4 million $0 $0 $15.4 million
2.192 The slightly lower compliance cost is likely to be accompanied by
a further decline in corporate crime (compared to Option 2), as this policy
option extends the proposed expanded Corporations Act protections to all
58
Improving protection for whistleblowers in the corporate and financial sectors
financial sector statutes falling within the remit of ASIC and APRA as well
as corporate misconduct more broadly. This is because the simplified
legislative regime which combines whistleblower protections that are
currently spread across the number of statutes, as well as providing for
protections for disclosures of corporate misconduct more generally, gives
whistleblowers greater certainty and removes confusion as to which law
applies. As a result, more whistleblowers may make protected disclosures.
Therefore, it is likely that Option 3 will improve the prospects of
prosecution and will potentially further reduce the incidence and cost of
corporate crime.
Consultation plan
2.193 Treasury consulted extensively on this proposal publically and
with each of the key regulatory agencies.
2.194 On 20 December 2016, the Minister for Revenue and Financial
Services released the Review of tax and corporate whistleblower protections
in Australia consultation paper. The paper sought public comment to assist
the Government with the introduction of appropriate protections for tax
whistleblowers and in assessing the adequacy of existing whistleblower
protections in the corporate sector. Thirty-six submissions were received in
response to this consultation; all were generally supportive of the proposals.
2.195 In addition, the Parliamentary Joint Committee on Corporations
and Financial Services undertook an inquiry into whistleblower protections
in the corporate, public and not-for-profit sectors. A vast majority of
seventy-five submissions responding to the Inquiry supported reforms
strengthening the whistleblower regime in Australia.
2.196 In its final report, tabled on 13 September 2017, the Inquiry
concluded that existing whistleblower protections are ineffective and made
35 recommendations to strengthen them. Amongst others, the Parliamentary
Inquiry recommended a single statute for Commonwealth private sector
whistleblowing legislation (including tax).
2.197 The proposed reforms have regard to submissions made to both
consultation processes as well recommendations made by the Parliamentary
Inquiry. They also take into account recommendations made by the national
and international evaluations of Australia's corporate whistleblowing
regime.
2.198 Option 3, in particular, goes a significant way to address the
concern of the Parliamentary Inquiry of the fragmented and inconsistent
nature of whistleblower legislation including across the various pieces of
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
legislation that apply to different parts of the private sector. The tax
whistleblower reforms mentioned earlier this statement are being
progressed in parallel to these corporate and financial sector reforms to
ensure consistency in protections, where it makes sense to do so.
2.199 On 23 October 2017, the proposed reforms were released for
public consultation as the Treasury Laws Amendment (Whistleblowers) Bill
2017. The Bill contains provisions related to both corporate and financial
sector whistleblowers (consistent with Option 3), and tax whistleblowers.
Thirty-nine submissions were received. Submissions were received from a
broad range of stakeholders, including professional and industry bodies,
legal and accounting firms, civil society groups, academics and individuals.
2.200 Feedback to the draft Bill was supportive overall and it was
recognised that strengthened legislative protections for whistleblowers play
an important role in reinforcing corporate accountability and encouraging
whistleblower disclosures. In particular there was support for:
• Streamlining the existing various whistleblower rules
contained in legislation administered by ASIC and APRA
into a single regime contained within the Corporations Act.
Feedback indicated that this would address the issue that
existing whistleblower legislation is disjointed and
unnecessarily complex, rendering it ineffective in
encouraging whistleblowers to come forward and report
misconduct and wrongdoing. For example:
- It was broadly noted that regulated entities are currently
required to observe whistleblower rules under multiple
pieces of legislation, and streamlining the rules will
facilitate ease of compliance and consistency of
application.
• The inclusion of provisions which recognise the need for an
individual to consult with a lawyer and the enforcement of
the anonymity of whistleblowers.
• Introducing a whistleblower policy requirement. Some
comments included:
- A number of stakeholders, including an academic, a law
firm and a large listed company asserted that the
introduction of the mandatory requirement for large
companies to have a whistleblower policy is a positive
reform. This requirement will assist entities in developing
robust corporate governance systems while also providing
60
Improving protection for whistleblowers in the corporate and financial sectors
a mechanism and useful guidance to individuals who may
wish to report suspected or actual illegal activity.
- A law firm noted that there is presently no requirement for
corporations to have an internal policy for dealing with
whistleblowers. Therefore, it is likely that in many cases,
better internal procedures for dealing with whistleblowers
could allow for a more mutually-beneficial outcome for
the whistleblower and the organisation. At the very least,
the requirement to have a whistleblower policy will
ensure that employees are made aware of the protections
available to whistleblowers under the Whistleblowers
Bill.
- One professional body asserted that as a matter of good
practice, all companies should have sound internal
whistleblowing policies and procedures that aim to detect,
address and ultimately prevent corporate wrongdoing.
One of the central goals of the whistleblowing framework
should be to encourage companies to make internal
disclosure easy and safe for whistleblowers. This will help
to ensure that misconduct is addressed as early as
possible, ideally before it becomes the subject of
regulatory intervention. Although it is not necessary to
include a statutory requirement for a whistleblower
policy, the components in the draft legislation are not
unreasonable.
- Another professional body agreed that it is appropriate for
large companies to have a whistleblower policy.
However, extending the requirement to all public
companies is not necessary, given that some public
companies may be very small.
2.201 There was broad support for the draft Bill in expanding the scope
of eligible whistleblowers and of disclosees, as well as improving access to
compensation.
2.202 However, some stakeholders expressed uncertainty regarding how
the new law may be interpreted and how regulated entities would be
expected to handle disclosures. For example, a number of stakeholders
expressed a concern that employees' workplace grievances appeared to be
captured in the draft legislation. This feedback was addressed in the
Explanatory Memorandum by making it clear that workplace grievances are
not within the scope of protected whistleblower disclosures.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
2.203 Other feedback sought clarification as to how large companies
will satisfy the requirement of making their whistleblower policy available
to all eligible whistleblowers. In response to this, the legislation was
amended to require that whistleblower policies are to be made available to
employees and officers only.
2.204 In addition, Treasury conducted targeted consultation with an
experienced industry stakeholder on the regulatory impact of the
whistleblower policy requirement. The regulatory cost estimates were
refined in this statement following these discussions as follows:
• Increase to the estimated average time for staff to familiarise
themselves with the new policy from three hours to four
hours each year; and
• Decrease the estimated average hours to produce materials to
inform employees about the whistleblower policy from five
hours to four hours.
Option selection and conclusion
Preferred option
2.205 Having considered:
• recommendations made by the national and international
evaluations of Australia's corporate whistleblowing regime,
• national and international best practice,
• evidence received and recommendations made by the
Parliamentary Inquiry, and
• results of the Treasury and Parliamentary Inquiry
consultation processes,
2.206 Treasury's preferred option is Option 3.
2.207 This option:
• strengthens protections for whistleblowers and provides them
with greater legal certainty;
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Improving protection for whistleblowers in the corporate and financial sectors
• simplifies the existing legislative regime as it combines in
one statute the financial system legislation within the remit of
ASIC and APRA, as well as expanding protections to
corporate misconduct more generally; and
• meets commitments made publically by the Government.
2.208 Option 3 also results in expected lower compliance costs to
industry compared to Option 2 and is more likely to improve the detection
of corporate crime in Australia.
Implementation, evaluation and review
2.209 Legislation is required to implement this proposal. The reforms
will be introduced as part of the Treasury Laws Amendment
(Whistleblowers) Bill 2017.
2.210 These reforms will address recommendations made by the
Parliamentary Inquiry to strengthen whistleblower protections.
2.211 Prior to introduction of legislation into Parliament in December
2017, the exposure draft legislation was released for public consultation.
Also, the Government established an Expert Advisory Panel to review and
provide feedback on the draft legislation.
2.212 There was broad support for these reforms to strengthen
whistleblower protections. There was a minority view that not all public
companies needed to have a whistleblower policy. However given the broad
support on the requirement to have whistleblower policy, no amendments
were made to reduce the companies in scope. A small amendment was
made to ensure that all superannuation trustees were captured. This did not
materially alter the number of companies in scope upon which the estimated
costings are based.
2.213 The draft legislation was amended to require that whistleblower
policies are to be made available to employees and officers only. No other
amendments were identified as being needed to ensure that the
implementation of the reforms will not impose undue compliance costs for
industry.
2.214 The success of the whistleblower protection reforms will be
identified by:
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• an increase in protected whistleblower disclosures which
instigate or materially assist investigation and prosecution of
corporate crime; and
• better protections for whistleblowers including access to
compensation if they are the subject of reprisal action due to
their disclosure.
64
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;
65
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• 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.
66
Better Protections for Tax Whistleblowers
Comparison of key features of new law and current law
New law Current law
Introduces protections and Any person can make a disclosure
remedies for tax whistleblowers regarding an entity's tax affairs to
who make a protected disclosure the ATO. However there is no
about breaches or suspected specific regime protecting tax
breaches of the tax laws or whistleblowers or providing
misconduct in relation an entity's remedies for individuals who
tax affairs. suffer victimisation or other
damage in relation to making such
disclosures.
Eligible whistleblowers are not The ATO accepts anonymous
required to identify themselves in disclosures.
order to qualify for protection.
Introduces protections to prevent No specific protections of a
disclosure of an eligible whistleblower's identity.
whistleblower's identity.
Eligible whistleblowers are No equivalent.
protected from civil, criminal and
administrative liability in relation
to a disclosure that qualifies for
protection.
It is an offence for a person to No equivalent.
cause detriment to another person
in relation to a disclosure
(including a potential disclosure)
that qualifies for protection.
A court may award compensation No equivalent.
to a person who suffered damage
in relation to a disclosure that
qualifies for protection.
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.
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
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
68
Better Protections for Tax Whistleblowers
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.
Eligible whistleblowers
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 whistleblowers 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
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• 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)]
70
Better Protections for Tax Whistleblowers
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.
Eligible recipients
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;
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Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017
• 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.
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Better Protections for Tax Whistleblowers
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 emergency disclosures
3.36 In contrast to the Corporations Act whistleblower regime, the tax
whistleblower regime does not protect 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 mean
that the 'reasonable period' criterion - which is a precondition to maintain
protection for any disclosure to parliamentarians or journalists under the
Corporations Act amendments in this Bill - would be difficult to meet 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
an imminent risk of serious harm or danger to public health or safety or to
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the financial system that may be prevented by the disclosure. The disclosure
of taxpayer information to a journalist or a member of Parliament would be
unlikely to 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]
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Better Protections for Tax Whistleblowers
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. 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.
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,
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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.
Whistleblower immunities
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)]
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Better Protections for Tax Whistleblowers
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
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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.
Qualified privilege
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 cafés. She
becomes aware that one café is overstating the cost of her cakes in
order to claim a larger tax deduction and makes a protected disclosure
to the ATO. The café 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
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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)]
Detriment
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.
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[Schedule 1, item 15, subsection 14ZZY(5)]
3.66 The detriment may be to the whistleblower or to another person.
Compensation and other remedies for whistleblowers
Circumstances in which an order may be made
3.67 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).
3.68 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)]
3.69 The first person under this subsection may be an individual or a
non-individual entity, such as a body corporate.
3.70 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)]
3.71 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)]
3.72 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:
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• aided, abetted, counselled or procured the conduct or the
making of the threat;
• induced, whether by threats or promises or otherwise, the
victimising conduct; or
• was in any way, by act or omission, directly or indirectly,
knowingly concerned in, or party to, the victimising conduct;
or
• conspired with others to effect the victimising conduct.
[Schedule 1, item 15, subsection 14ZZZ(2)]
3.73 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)]
3.74 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
3.75 The orders that may be made in favour of a person who has
suffered loss, damage, or injury as a result of victimising conduct align with
the Corporations regime once amended. Where a court is satisfied that a
person (the first person) has engaged in victimising conduct and another
person has suffered loss, damage or injury as a result of the victimising
conduct, it may make an order:
• requiring the first person to compensate the person who has
suffered the victimising conduct: [Schedule 1 item 15,
paragraph 14ZZZA(1)(a)]
• where the first person engaged in the victimising 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
victimising 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
victimising conduct [Schedule 1, item 15,
subparagraph 14ZZZA(1)(b)(ii)]; or
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- requiring the first person's employer to compensate the
person who has suffered the victimising 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 victimising conduct; [Schedule 1, item 15,
paragraph 14ZZZA(1)(c)]
• an order requiring the first person to apologise for engaging
in the victimising conduct; [Schedule 1, item 15,
paragraph 14ZZZA(1)(d)]
• where the victimising 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)]
Onus of proof in compensation proceedings
3.76 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 14ZZZA(2)]
3.77 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.
3.78 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.
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3.79 A court must not make an order against a person's employer if the
employer took reasonable precautions and exercised due diligence to avoid
the victimising conduct. [Schedule 1, item 15, subsection 14ZZZA(3)]
3.80 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)]
3.81 A whistleblower's right to compensation and the liability of the
first person is determined by the courts.
Protection of whistleblowers in court proceedings
3.82 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]
3.83 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.
3.84 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.
Costs
3.85 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
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of costs made against them, except in limited circumstances. [Schedule 1,
item 15, subsection 14ZZZC]
3.86 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
3.87 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
3.88 The new law includes a compensation provision to manage
constitutional risk arising from paragraph 51(xxxi) of the Constitution.
3.89 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)]
3.90 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)]
Application
3.91 The amendments will apply in relation to whistleblower
disclosures made on or after 1 July 2018, including disclosures about events
occurring before this date. [Schedule 1, item 16]
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Chapter 4 Other amendments
Amendments to the existing financial sector whistleblower
regimes
Repeals
4.1 As a result of the consolidation of the various existing corporate
and financial sector whistleblower regimes into the Corporations Act, the
Bill repeals provisions dealing with whistleblowers in:
• the Banking Act;
• the Life Insurance Act;
• the Insurance Act; and
• the Superannuation Industry (Supervision) Act.
[Schedule 1, items, 18, 19, 22, 23,26, 27, 30 and 31]
Transitional provisions
4.2 Despite the repeal of these provisions, they continue to apply, at
or after the commencement of the amendments made by Schedule 1 to this
Bill, in relation to:
• disclosures of information made before that commencement;
and
• conduct that causes detriment to another person
(victimisation) engaged in before that commencement
referred to in:
- subsection 52C(1) of the Banking Act;
- subsection 38C(1) of the Insurance Act;
- subsection 156C(1) of the Life Insurance Act; or
- subsection 336C(1) of the Superannuation Industry
(Supervision) Act
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as in force immediately before that commencement, that is engaged in
before that commencement; and
• a threat conduct that causes detriment to another person
(victimisation) engaged in before that commencement
referred to in:
- subsection 52C(2) of the Banking Act;
- subsection 38C(2) of the Insurance Act;
- subsection 156C(2) of the Life Insurance Act; or
- subsection 336C(2) of the Superannuation Industry
(Supervision) Act.
[Schedule 1, items, 20, 24, 28 and 32]
4.3 Notes are added in place of the appealed provisions as signposts
to the new law. [Schedule 1, items, 17, 21, 25 and 29]
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Chapter 5
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill
2017
5.1 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act .
Overview
5.2 Schedule 1 to this Bill amends the TAA 1953 and the
Corporations Act to introduce new tax whistleblower protections and
amend the corporate whistleblower protections.
5.3 The Bill amends the TAA 1953 to implement the Government's
2016-17 Budget announcement on introducing better protections for
individuals who disclose information to the ATO on tax avoidance
behaviour and other tax issues in order to strengthen the integrity of
Australia's tax system.
5.4 The Bill also amends the Corporations Act to respond to recent
independent reviews of the corporate sector whistleblowing provisions, the
Senate Economics Reference Committee's 2014 inquiry into the
Performance of the Australian Securities and Investment Commission and
as part of the Government's commitment to the Open Government National
Action Plan.
5.5 Where the new law applies it will:
• broaden the scope of individuals eligible for protection;
• allow for anonymous disclosures;
• provide protections to the identity of tax and corporate
whistleblowers;
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Treasury Laws Amendment (Whistleblowers) Bill 2017
• broaden the scope of persons eligible to receive a
whistleblower disclosure; and
• improve access to compensation or other remedies as a result
of victimisation following a whistleblower disclosure.
Human rights implications
5.6 This Bill engages the following human rights:
• The right to freedom of opinion and expression - article 19
of the ICCPR;
• The right to a fair hearing - article 14 of the ICCPR; and
• The right not to be subjected to arbitrary or unlawful
interference - article 17 of the ICCPR.
The right to freedom of opinion and expression
5.7 The amendments would engage the right to freedom of opinion
and expression as contained in article 19 of the ICCPR.
5.8 Amongst other things, article 19 states that individuals must have
the 'freedom to seek, receive and impart information and ideas of all kinds'.
Under article 19(3), the right to freedom of expression may be subject to
limitations that are necessary to protect the rights or reputations of others,
national security, public order, or public health or morals. Limitations
prescribed by law, must pursue a legitimate objective, be rationally
connected to the achievement of that objective and a proportionate means of
doing so.
5.9 The amendments in this Bill restrict the right to disclose the
identity of a whistleblower. This restriction is common to existing
whistleblower protection regimes in Australia and internationally. It is
necessary to reduce the risks and detriment suffered by individuals who
expose wrongdoing. The restrictions are proportional to those risks, and to
the importance whistleblowers play in exposing wrongdoing that may
otherwise not be identified by management of an entity or by regulatory
authorities.
The right to a fair hearing
5.10 Article 14 of the ICCPR provides that all persons shall be equal
before the courts and tribunals. Further, in the determination of an
individual's rights and obligations in a suit at law, everyone shall be entitled
to a fair and public hearing by a competent, independent and impartial
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Chapter 1
tribunal established by law. This requires that each party be given the
opportunity to contest the arguments and evidence adduced by the other
party.
5.11 The amendments in this Bill engage this right by ensuring that the
identity of a whistleblower, which is protected for the reasons described
above, cannot be exposed by means of court processes such as discovery of
documents or subpoena. Without this additional protection individuals may
be deterred from exposing wrongdoing within their organisations or to
regulators, for fear of their identity being disclosed, for example, in a
prosecution of the wrongdoer.
5.12 The amendments in this Bill provide that a person shall not be
required:
• to disclose to a court or tribunal
- the identity of the whistleblower, or
- information that is likely to lead to the identity of the
whistleblower; or
• to produce to a court or tribunal a document containing:
- the identity of the whistleblower; or
information that is likely to lead to the identification of
the whistleblower;
except where:
• it is necessary to do so for the purposes of giving effect to the
whistleblower protection regimes amended and created by
the amendments in this Bill; or
• the court thinks it necessary in the interests of justice to do
so.
5.13 The amendments make provision for a court or tribunal to order
disclosure of a whistleblower' identity if it this is necessary in the interests
of justice. This ensures that the restriction can be balanced with the interests
of justice.
5.14 The provisions ensuring that a whistleblower's identity person
cannot be required to be disclosed in legal proceedings are designed to
protect individuals who disclose wrongdoing from risk and detriment, and
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Treasury Laws Amendment (Whistleblowers) Bill 2017
are appropriate and proportional to the objects of the amendments made by
this Bill.
The right not to be subjected to arbitrary or unlawful interference
5.15 Article 17 of the ICCPR provides that:
• No one shall be subjected to arbitrary or unlawful
interference with his privacy, family, home or
correspondence, nor to unlawful attacks on his honour and
reputation.
• Everyone has the right to the protection of the law against
such interference or attacks.
5.16 The amendments made by this Bill enhance the protection of
individuals from arbitrary or unlawful interference with their privacy,
family, home and correspondence, and from unlawful attacks on their
honour and reputation. Such interference and attacks have been identified
by numerous reviews as common responses to the disclosure of
wrongdoing, and it is the object of the amendments to enhance protection
from this harm.
Conclusion
5.17 This Bill is compatible with human rights and the amendments
made by it that human rights issues are appropriate and proportional to the
object of protecting individuals who disclose wrongdoing.
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