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The sharing of confidential tax information with bodies or agencies unrelated to tax administration raises “significant concerns about privacy and confidentiality”, The Tax Institute has cautioned.
Changes to tax secrecy laws could pose ‘unacceptable risk’, warns Tax Institute
13 March 2025
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9 minute read
The Tax Institute says that while it supports the government's initiative to expand the tax secrecy exceptions in circumstances where the public interest is at risk, any changes in this area require careful consideration.
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In a recent submission, The Tax Institute raised a number of potential concerns around the sharing of confidential tax information obtained by the ATO and TPB.
"The sharing of such sensitive information with designated bodies or agencies for purposes that are not directly related to tax administration raises significant concerns about privacy and confidentiality," the institute said.
"We advocate for a balanced approach that prioritises protecting sensitive tax data while also meeting the legitimate needs of the public interest."
The Tax Institute stressed that any decision to share protected tax information should be made with great caution and should only be permitted by a legislative change through amendments to the Taxation Administration Act 1953.
The government must also ensure that only relevant and appropriate information is shared and that any sharing of information is accompanied by robust safeguards to prevent misuse of unauthorised access to data, it warned.
"Such caution is vital to uphold taxpayers’ trust in the tax system and ensure that the integrity of the tax system is not compromised," the submission said.
The Tax Institute said that while the prevention of fraud generally justifies the disclosure of information that is directly relevant to such fraud activity, Treasury's consultation paper does not provide a clear framework for how the Tax Office and TPB would identify potentially fraudulent activities.
The proposed oversight mechanism that would be used by the ATO and TPB to classify incidents as potentially fraudulent is ambiguous in the paper, it said.
"The Consultation Paper is also silent on the proposed framework for the Minister in approving fraud prevention programs," it said.
The submission said that given the proposed information sharing includes sensitive personal data such as contact details including mobile, email addresses, member details and financial institution or bank details, data security will be critical.
"Without proper safeguards, this raises concerns about possible breaches of protected information and the systems in place to manage such disclosures," it said.
"Given the involvement of non-government entities in fraud prevention programs, it is essential for stakeholders to understand how the government will maintain oversight post-data sharing, and how such information will continue to be protected."
The submission also said that the emergence of large-scale fraud events such as the GST fraud investigated by Operation Protege demonstrates that there may be potential shortcomings in how the ATO identifies incidents of fraud.
This significant and deliberate illegal behaviour by thousands of entities resulted in fraudulent GST refunds being paid out by the ATO and also led to many prosecutions and referrals to the Serious Financial Crime Taskforce.
"This raises crucial questions regarding the effectiveness and utilisation of the ATO’s detection systems, and reporting and payment regimes by the ATO and other governmental bodies, indicating that there may be shortcomings in their implementation or execution that hinder their intended objectives," it said.
The Tax Institute said that further stakeholder consultation is necessary to design a framework that will enable the ATO and TPB to better identify incidents of potential fraud that warrant the sharing of taxpayer information.
"To ensure transparency, the criteria for fraud protection program approval and detection of potential fraud should be clearly defined, along with the safeguards to be adopted and the oversight mechanisms, in the legislation through amendments to the TAA," it said.
A framework for to monitor and evaluate approved fraud protection programs on an ongoing basis should also be established, it said.
"The ATO should also review the effectiveness of changes in its approach to issuing refunds in light of Operation Protego, and undertake more thorough checks before issuing GST refunds to entities that are newly registered, or have recently made changes to their activity statements, banking details or registered agent," the Institute said.
"While these may be legitimate changes, they may in some cases indicate potentially fraudulent behaviour. Further consultation with stakeholders on current checks and other opportunities for improvement would be beneficial."
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