Jane Hume (Victoria, Liberal Party) Share this | Hansard source

Thank you for pointing that out, Senator Patrick. Thank you for speaking out, Ms McDow.

Australia's current private sector whistleblower laws are fragmented and confusing. Civil remedies are limited. Claimants are exposed to legal cost risks and have great difficulty in discharging their evidential burden in proceedings for compensation in relation to reprisals. Offences committed against whistleblowers have rarely been prosecuted. Companies have been practically prohibited from undertaking investigations, as they could not share information related to the disclosure, regardless of whether it identified whistleblower or it didn't. Anonymous disclosures were simply not allowed, and neither were emergency disclosures to the media or emergency disclosures to parliamentarians.

So the bill before us today, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017, remedies these deficiencies. The current bill will introduces new protections in two separate acts. The Corporations Act 2001 will be amended to create a single, strengthened whistleblower protection regime that covers the corporate, financial and credit sectors. The Taxation Administration Act 1953 will be amended to add new protections to tax whistleblowers who report tax misconduct.

Part 1 of this bill will strengthen protection for corporate whistleblowers by expanding protections to a broader class of persons and expanding disclosures that can be protected. It will also extend protections to cover third-party disclosures in certain circumstances. It will provide greater protection of whistleblower confidentiality. It will improve access to compensation for whistleblowers and create a new penalty offence so that law enforcement agencies will be better able to take enforcement action. In introducing a whistleblower policy requirement for all large companies, this bill amalgamates the protections that are contained in several acts into the Corporations Act 2001. The consolidation will cover the following: the ASIC Act, the Banking Act 1959, the Insurance Act 1973, the Life Insurance Act 1995 and the Superannuation Industry (Supervision) Act 1993. It will also add protections for the conduct that contravenes the National Consumer Credit Protection Act 2009 and the Financial Sector (Collection of Data) Act 2001, which were not previously covered under the existing law.

Part 2 of this bill will introduce new protections for tax whistleblowers, specifically, in the Taxation Administration Act 1953. These are broadly consistent with the enhanced protections under the Corporations Act and will facilitate disclosures about tax misconduct.

The improved whistleblower protections strike the right balance between encouraging genuine whistleblowers to come forward and removing protections for vexatious complaints. The reforms will facilitate a workable scheme for the industry whilst also providing appropriate protection and access to redress for whistleblowers who choose to come forward despite the personal sacrifice that is often involved. Very broadly, the new whistleblower protections align with the Parliamentary Joint Committee on Corporations and Financial Services report into whistleblower protections in the corporate, public and not-for-profit sectors. The remaining recommendations not covered by the new legislation are still under consideration by the government and will be addressed in due course in the government's response to that report of the Parliamentary Joint Committee on Corporations and Financial Services. The measures in this bill are to commence from 1 July 2018 in accordance with the government's commitments. The whistleblower policy requirement mandated for all public and large priority companies, including registerable superannuation entities, will be effective six months later, from 1 January 2019.

What do whistleblower protections in this legislation actually do?

The bill will strengthen the corporate sector whistleblower protections and introduce new protections for tax whistleblowers. The Corporations Act 2001 is amended, as I said, to create a single strengthened whistleblower protection regime that covers the corporate, financial and credit sectors. The new whistleblower protection regime to be created in the Taxation Administration Act of 1953 will protect those who report breaches or suspected breaches of tax law and also misconduct in relation to an entity's tax affairs. So, very broadly, the corporate tax whistleblower regime will protect the identity of whistleblowers, protect them from reprisals, provide access to remedies and provide eligible recipients of whistleblower disclosures with the ability to take action or investigate the alleged misconduct.

The new whistleblower protections in the taxation law are broadly consistent with the protections under the Corporations Act, but the key difference between the corporations and tax whistleblower regimes is that all types of entities—including individuals, bodies of persons, partnerships and all trusts—are covered by the tax regime. Eligible recipients under the tax regime differ from those under the corporate regime due to the nature of the information that is being disclosed. So, for example, tax and BAS agents of entities are eligible recipients under the tax regime. The tax regime also does not contain equivalent provisions to the corporate regime relating to emergency and public interest disclosures. Also, the tax regime does not explicitly exclude personal work related grievances from protection because the scope of the tax whistleblower regime is already limited to disclosures about tax affairs only.

So how will these new changes, these new whistleblower protections, help whistleblowers and also help companies? Corporate crime is estimated to cost Australia more than $8.5 billion every year and it accounts for approximately 40 per cent of the total cost of crime in Australia. Whistleblowing clearly plays a critical role in uncovering corporate and tax misconduct. Through this legislation, whistleblowers will benefit not only from increased protections and improved access to civil remedies but also from greater certainty about their legal position and their ability to prove claims. So there's no risk of an adverse cost order against them, unless a claim is found to be vexatious. The secondary beneficiaries of these new laws will be Australian businesses themselves as corporate governance and integrity practices will increase with officers, employees and taxpayers aware that there is now a much higher likelihood that misconduct will be reported.

It is important to understand why these whistleblower protections are being introduced now. Whistleblower legislative protections have formed part of the Corporations Act for a considerable period of time—in fact, since 2004—but the protections that have existed since that time have been used very sparingly and, increasingly, they have been perceived as inadequate, given recent advances in whistleblower protections in the public sector and also in overseas jurisdictions. So, to specifically address these issues, the government committed in December 2016, two years ago, as part of the open government national action plan to ensure that appropriate protections are in place for people who report corruption, who report fraud, who report tax evasion or tax avoidance and also who report misconduct within the corporate sector. The commitment in that open government national action plan also reaffirmed the government's 2016-17 budget announcement that it would introduce new arrangements to better protect individuals who disclose information to the ATO on tax avoidance behaviour and also any other tax issues.

The whistleblower protections that are in this legislation incorporate the recommendations of the whistleblower protections report of the Parliamentary Joint Committee on Corporations and Financial Services. The parliamentary inquiry into whistleblower protections delivered its report on 13 September 2017. It concluded that existing whistleblower protections are ineffective in both the public and the private sector. That committee, in its report, made 35 recommendations to strengthen the regime. The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 that we are considering today covers many of the current parliamentary inquiry recommendations. The government, as I said, is considering the remaining recommendations and will respond to all of the recommendations in that parliamentary joint committee report in due course.

It's understandable to question why the government isn't introducing a single private sector whistleblower regime with a whistleblower protection authority. Indeed, this was something that was examined by the parliamentary joint committee. In the 2016-17 budget, the government announced that it would introduce new arrangements to better protect individuals who disclose information to the ATO on tax avoidance behaviour and also on other tax issues. In December 2016, the government also committed to pursuing reforms to whistleblower protections in the corporate sector under the Open Government National Action Plan and reaffirmed its tax whistleblower 2016-17 budget announcement.

The parliamentary inquiry into whistleblower protections report, which was handed down, as I said, in September 2017, recommended a single private sector whistleblower regime, and it also recommended a whistleblower protection authority. The government has given very careful consideration to each recommendation and addresses many of these recommendations in this bill, as I said. But the bill includes an explicit requirement for a post-implementation review of the amended whistleblower laws five years after the amendments commence, which allows the government an opportunity to assess the effectiveness of the legislation and to determine whether any further reforms should be made in the future. The government will respond to those recommendations, as I said, in due course.

It's also understandable to question why the government isn't introducing a rewards system for whistleblowers. I did hear Senator Whish-Wilson mention that before in his contribution. In the 2016-17 budget, the government announced that it would introduce these new arrangements to better protect individuals who disclose information to the ATO on tax avoidance behaviour and on other tax issues, and it committed to pursuing reforms to whistleblower protections. While the parliamentary inquiry did recommend the introduction of a rewards system, the government has carefully considered all of the recommendations, including this one. This bill includes an explicit requirement for a post-implementation review, as I have said. It does not, however, include a reward system for whistleblowers. The government would like an opportunity to assess the effectiveness of the legislation and to determine whether any further reforms should be made in the future. It will respond to the recommendations of that PJC report in due course, and will consider introducing a rewards system after that post-implementation review period.

There has been some concern as to whether introducing these whistleblower protections would impose undue regulatory burden on companies. The corporate whistleblower reforms will not result in any direct cost to companies, as they actually relate to strengthening the existing laws and addressing the legislative gaps in protection. The requirement for public companies, large proprietary companies and registerable superannuation entities to have a whistleblower policy is not expected to have any material or lasting financial impact. The policy must include information about the protections available to whistleblowers, to whom disclosures can be made, how the company will investigate the disclosure and support the whistleblower, and how the company will ensure fair treatment of employees who are mentioned in whistleblower disclosures. The costs imposed for many companies will include one-off implementation costs and also costs for annual training. Direct benefits will be derived for companies that are adopting these changes or adapting their existing whistleblower policies, including promoting internal reporting and investigations in the first instance, which will facilitate much higher quality self-regulation and corporate governance practices, and, of course, will also improve their compliance with the law. The new tax whistleblower regime does not impose any regulatory burden on companies.

To ensure that businesses have sufficient time to understand their legal obligations arising from this legislation, a government amendment to the bill has been made to provide for the whistleblower policy requirement to apply six months after the commencement date of the amendments, instead of 1 January 2019.

Debate interrupted.