Government must rectify gap in whistleblower protections for breach reporting

The government has been advised to extend the protections available to whistleblowers who make disclosures under the breach reporting obligations under section 30-40 of the TASA.

In a recent submission to Treasury in response to its review into tax and corporate whistleblowing frameworks, the Tax Institute said there is currently an inconsistency between the breach reporting obligations that practitioners must comply with and the scope of the tax whistleblower regime for practitioners.

The institute noted that under the breach reporting rules set out under section 30-40 of the TASA, practitioners are required to report certain conduct by other practitioners.

The submission noted that there is a common belief among practitioners that by making such a report, practitioners are protected under the whistleblower protection rules.

However, the Tax Institute warned that this may not be the case as protections under section 14ZZU of the TAA apply in limited circumstances and do not cover all breach reports.

Section 14ZZU of the TAA states that an individual is an ‘eligible whistleblower’ if the individual is, or has been, any of the following:

• An officer of the entity as defined by the Corporations Act;
• An employee of the entity;
• An individual who provides 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 of the entity as defined by section 318 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936);
• A spouse or child of an individual mentioned in any of the previous categories;
• A dependent of an individual mentioned in any of the previous categories or their spouse; and
• An individual prescribed by the regulations for this purpose in relation to the entity.

Schedule 2 to the 2024 Act amended the whistleblower protection rules by expanding the protection to include disclosures to the TPB, in addition to the existing protection for disclosures made to the Commissioner.

However, the Tax Institute said while recent amendments have expanded protected disclosure channels to include the TPB, they have not broadened who qualifies as an eligible whistleblower.

"The limitations of the existing framework are illustrated by the operation of the associate test in section 318 of the ITAA 1936. Under paragraph 318(1)(b), a partner in a partnership is an associate of another partner in that partnership," the submission said.

"Accordingly, a practitioner who reports a reportable breach by a partner in the same firm may qualify as an eligible whistleblower because they are an associate of the practitioner whose conduct is reported. By contrast, a practitioner who reports a reportable breach by an unrelated practitioner to the TPB or the Commissioner, and who does not otherwise fall within any of the categories listed above, will not be an eligible whistleblower and will therefore not be entitled to whistleblower protections."

The submission warned that this creates an inconsistency in the framework whereby practitioners are subject to the same breach reporting obligations under TASA, but their access to whistleblower protections depends on the nature of their relationship with the practitioner being reported.

"As a result, practitioners who report unrelated practitioners may be required to disclose misconduct without the benefit of the protections that are available when reporting a partner or other associate," it said.

The Tax Institute urged the government to consider extending the scope of the tax whistleblower regime to cover practitioners who make disclosures under the breach reporting obligations in section 30-40 of the TASA.

"This could include disclosures concerning unrelated practitioners, helping to ensure that individuals who are required to report misconduct have access to corresponding whistleblower protections under the TAA," it said.

The submission also called for a number of other improvements for the whistleblower regime, including stronger protections against retaliation and workplace harm.

"Research suggests that whistleblowers whose identities become known may face workplace exclusion, bullying, loss of opportunities, reputational damage and other forms of detriment. While protections against detrimental conduct exist, the practical consequences of being identified may arise before any remedy becomes available," the submission said.

The Tax Institute said the effectiveness of a whistleblower framework therefore depends "not only on protecting anonymity, but also on ensuring organisations take practical steps to prevent retaliation and support whistleblowers where identification risks arise".