The ATO are required to follow strict procedures and guidelines when gathering information for civil audit and criminal investigations. Due to the unbridled conduct of some taxation officers and the culture within the ATO, has resulted in rogue taxation officers accessing information that they are not legally able to use. Usually, misconducting taxation officers target small businesses with one or two directors, “low lying fruit”, relying on taxpayers being unaware of the legal rights.
Recently, Treasury issued a consultation paper that sets out the guidelines and legal restrictions for the ATO when accessing taxpayer information, the paper was issued in response to the investigation of PwC.
ATO Response to PwC
Tax regulator Information Gathering Powers Review
In a recent consultation paper published in May 2024 by Treasury titled “Response to PwC Tax Regulator Information Gathering Powers Review”, the Commonwealth sought consultation from various stakeholders about the powers and use of the ATO’s information gathering powers.
The ATO has established information gathering principles to help ensure information is gathered in a fair and professional manner. The ATO’s preference is to seek taxpayers’ cooperation in making information available.
The ATO’s formal notice powers allow the ATO to issue a formal notice that compels an entity to undertake certain actions. A formal notice under the TAA 1953 may require that an entity:
- give information;
- if the entity is a natural person – attend and give evidence; and
- produce documents.
The ATO’s formal notice powers can only be used for the purpose of the administration or operation of a taxation law. Where that purpose is absent the powers are not enlivened.
The ATO’s information gathering powers allow the ATO to properly assess taxpayers’ liabilities or recover debt, and are distinct from other investigative powers in several ways (for example, warrants undertaken in criminal investigations by law enforcement agencies such as state police).
While the ATO does not have the ability to access any type of data made available through the TIA Act, for civil or administrative matters, the ATO can use one of the ATO’s information gathering powers in conjunction with the Telecommunications Act 1997 to request telecommunications data. Telecommunications data obtained through these powers cannot be requested or passed on (e.g., by an auditor) for the purpose of a criminal investigation. Currently, the ATO cannot access stored communications for the purpose of civil and administrative investigations.
Any information gathered by the ATO as part of its formal information gathering powers is subject to taxpayer confidentiality provisions set out in the TAA 1953.11 ATO officials are prohibited from disclosing taxpayer information except in limited circumstances set out in the TAA 1953 or where sharing that information is authorised under the Data Availability and Transparency Act 2022 for the limited purposes set out in that Act. The information is also subject to the ATO Privacy Policy, consistent with the ATO’s obligations under the Privacy Act 1988. ATO officials may not access personal information unless it is while exercising their powers or performing their functions under or in relation to tax, super or other relevant laws. Procedures for disclosing taxpayer information are outlined in Procedures for disclosing protected information.
Collection and use of information obtained under the ATO’s formal powers
The ATO’s powers to obtain information for the purposes of administering the tax and superannuation systems are not limited by the privilege against self-incrimination. It is an offence under the TAA 195312 to refuse to answer a question or produce a record when requested by ATO officials, and the privilege against self-incrimination cannot be used as a defence for failing to answer.
The ATO does not use its formal powers to obtain information for the purpose of a criminal investigation. That said, information that the ATO gathers during a civil or administrative investigation using its formal powers may be shared internally with its criminal investigation teams for intelligence purposes.
The courts have, at their discretion, allowed information gathered by the ATO using its formal powers to be admissible as evidence in criminal matters. This has generally been limited to circumstances where ATO officials encounter criminal conduct inadvertently. This can include false representations to ATO officials in an interview conducted under formal powers.13 It can also include situations where suspected tax crimes are compulsorily disclosed as part of a civil investigation, but criminal search warrant powers are subsequently used to gather evidence of the criminal tax offence. Relevant authority:
- R v Kinghorn [2021] NSWCCA 313
Information obtained by the ATO using its information gathering powers is stored separately to information obtained under a search warrant executed by the Australian Federal Police (AFP) or state or territory police. The latter is stored according to the Evidence Act 1995 and managed in accordance with the Australian Government Investigation Standards 2022.
Civil and administrative investigation powers are broadly fit for purpose
The ATO’s existing formal powers are broadly fit for purpose for conducting its civil and administrative investigations.
The ATO’s existing information gathering powers are broad and long-standing, enabling it to properly and effectively assess all taxpayers’ liabilities. The formal powers are not restricted by claims of confidentiality or privilege against self-incrimination and there are penalties for non-compliance. The ATO’s existing formal powers appear suitable to enable the ATO to conduct civil and administrative investigations.
ATO Information Gathering in Criminal Investigations
The ATO has an important role in undertaking criminal investigations as part of its remit for protecting Australia’s taxation and superannuation systems. Under the Public Governance Performance and Accountability Act 2013 (PGPA Act), the Commissioner, as the accountable authority of a Commonwealth entity, must take all reasonable measures to prevent, detect and deal with fraud relating to the entity. The ATO’s remit is limited to suspected fraud in or on the tax and superannuation systems.
In the context of its criminal investigations, the ATO undertakes investigations into ‘tax-related criminal offences’. The ATO breaks down ‘tax-related criminal offences’ into 3 categories (with increasing seriousness); ‘prescribed taxation offences’; ‘other taxation offences’, and ‘serious taxation crimes’.
The ATO may conduct its own criminal investigations or undertake investigations in conjunction with, or with the support of, law enforcement agencies. Where the ATO requires information to support its criminal investigations, and a search warrant is required, it must engage the assistance of the AFP, or state and territory police.
The ATO, via its Criminal Law Program (CLP), undertakes some law enforcement functions of investigating criminal offences perpetrated against the tax and superannuation laws.
While the ATO investigates a range of TAA 1953 offences (‘prescribed taxation offences’ and ‘other taxation offences’), including offences that carry lower-level sanctions, and has a direct role in investigating and prosecuting serious taxation crimes (serious taxation crimes), the ATO cannot execute search warrants outside of the powers delegated to it under Section 107BA of the Excise Act 1901.
Prosecutions of tax related offences are undertaken through a brief of evidence referred to the CDPP.
Current information gathering powers
The ATO is required to investigate suspected fraud, including investigating some offences contained in the Criminal Code, but it does not have direct access to the same criminal investigation tools as the AFP or state or territory police. It is reliant on other law enforcement agencies, such as the AFP, to obtain search warrants, exercise other information gathering powers on banks and other third-parties, or to access telecommunications data.
Significantly, the ATO does not use its formal information gathering power in criminal investigations, which are otherwise available in its civil and administrative investigations.
Following an investigation, the ATO prepares a brief of evidence which is referred to the CDPP for an independent assessment and decision as to whether to prosecute the matter.
While the ATO can independently investigate criminal matters, it does not have the necessary formal information gathering powers to effectively investigate these matters and gather potentially important information in a timely manner. It must either engage the AFP or state or territory police to support its investigation. This is despite a clear responsibility under the PGPA Act to take all reasonable measures to prevent, detect and deal with fraud against the tax and superannuation systems.
A clear separation between civil or administrative and criminal investigative functions will need to be maintained if criminal investigation powers are granted to the ATO. The ATO has existing mechanisms which should be utilised to ensure that information gathered from civil or administrative and criminal investigations are quarantined and only shared if they meet certain criteria under the TAA 1953.43 For example, information gained during a civil process using the ATO’s formal information gathering powers can be shared with its criminal investigation teams for intelligence purposes only, with the information generally not admissible as evidence.
For criminal matters, the ATO is not currently listed as an enforcement agency under the TIA Act. This means the ATO cannot independently access either telecommunications data or stored communications for the purposes of criminal investigations. This is a result of the recommendations made by the Parliamentary Joint Committee on Intelligence and Security (PJCIS) in 2015 in its Advisory Report on the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014.
Due to the subsequent changes, the ATO can only access telecommunications data and stored communications for the purposes of criminal matters when disclosed by a law-enforcement agency or enforcement agency in certain circumstances.
ATO Submission 37 to Parliament
ATO Submission to the Parliamentary Joint Committee on Intelligence and Security (PJCIS) on the Review of the Mandatory Data Retention Regime further confirms that the Commissioner’s information gathering powers are restricted.
The ATO provided a submission 37 parliament, paragraph 31 says “the ATO criminal investigators do not have the recourse to the ATO’s civil information gathering powers.
Self-Incrimination
As with the ATO’s formal access powers, self-incrimination cannot be used as grounds not to comply with a notice.
The ATO must notify a taxpayer within 2 weeks of a criminal investigation being instigated. Under criminal law, taxpayers have a right to remain silent, and the basis the ATO must comply with the separation of powers between civil audit and criminal investigations.
Summary Finding:
The ATO’s existing formal powers are broadly fit for purpose for conducting its civil and administrative investigations.
The ATO does not exercise formal information gathering powers for criminal investigations. To obtain evidence and information, the ATO relies on voluntary disclosure or applies for a section 3E Crimes Act search warrant to be administered by the AFP or state or territory police.
The ATO cannot access telecommunications data or stored communications for criminal investigations.
References
Available at time of publishing at:
[2] Data Availability and Transparency Act 2022
[3] Telecommunications Act 1997
[4] Data Availability and Transparency Act 2022
[5] Parliamentary Joint Committee on Intelligence and Security (PJCIS) in 2015 in its Advisory Report on the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014.
[6] Public Governance Performance and Accountability Act 2013 (PGPA Act)
[7] Privacy Act 1988
[8] Excise Act 1901
[9] ATO Submission 37 to Parliament – access link: