The Parliamentary Joint Committee on Corporations and Financial Services report Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry noted in the preceding post features a chapter on whistleblowing, replete with conventional pieties
7.1 Whistleblower protection laws provide legal rights and protections to individuals who provide a company, organisation, or regulator information about alleged misconduct and/or breaches of the law inside a company or organisation.
7.2 The threat of whistleblowing acts as a deterrent to wrongdoing by increasing the likelihood that misconduct will be reported.[1] Indeed, the importance of whistleblowers and whistleblowing was emphasised to the committee throughout the inquiry. For example, Ms Catherine Maxwell, General Manager, Governance Institute of Australia (GIA), pointed to the critical role whistleblowing plays ‘in identifying and stopping misconduct’.[2]
7.3 However, the committee also received evidence that the multiplicity of whistleblower protection laws is creating confusion and leading to poor outcomes for whistleblowers and employers. Further, the patchwork legislative approach excludes important sectors of the economy including the large professional services firms.
7.4 Therefore, this chapter explores the adequacy of the current whistleblower protection laws in Australia. It begins by providing a background on public and private sector whistleblower legislation, including the failure to include the audit, assurance and consultancy sector under the provisions of the Corporations Act 2001 (Corporations Act). The chapter then considers the evidence regarding the multiplicity of whistleblower protection laws, and examines proposed reform options. Itconcludes with the committee’s views and recommendations.
Background on public and private sector whistleblower legislation
7.5 Whistleblower protection laws in Australia are legislated through various acts at the Commonwealth, state and territory level, depending on the sector and whether that sector is public or private.
7.6 Evidence to the inquiry identified 17 different federal, state, and territory statutes applying to whistleblowers in Australia: Public Interest Disclosures Act 2013 (Cth); Corporations Act 2001 (Cth); Fair Work (Registered Organisations) Act 2009 (Cth); Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth); Aged Care Act 1997 (Cth); National Disability Insurance Scheme Act 2013 (Cth); Taxation Administration Act 1953 (Cth); Public Interest Disclosures Act 2022 (NSW); Public Interest Disclosures Act 2012 (Vic) (previously titled Protected Disclosure Act 2012 (Vic)); Public Interest Disclosure Act 2010 (Qld); Public Interest Disclosure Act 2018 (SA); Public Interest Disclosure Act 2003 (WA); Public Interest Disclosure Act 2012 (ACT); Public Interest Disclosure Act 2002 (Tas); National Anti-Corruption Commission Act 2022 (Cth); Public Service Act 1999 (Cth); and Independent Commissioner Against Corruption Act 2017 (NT).[3] Public sector whistleblower protections and their relation to officers and employees of consulting firms
7.7 The Public Interest Disclosures Act 2013 (Cth) (PID Act) promotes accountability and integrity within the public service by encouraging the disclosure of information about alleged misconduct and wrongdoing. The objective of the PID Act is to provide support and protection from adverse consequences to individuals who disclose information and provide an avenue for public interest disclosures to be properly investigated and reported.[4]
7.8 Amendments to the PID Act commenced on 1 July 2023, and focused on immediate improvements for public sector whistleblowers and support for corruption disclosures to the National Anti-Corruption Commission.[5]
7.9 On 22 November 2023, further reforms to the PID Act through a staged approach were announced.[6]
7.10T he PID Act can apply to officers and employees of consulting firms when contracted as service providers to the Commonwealth Government. The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia noted that section 69 of the PID Act clarifies that a ‘public official’ whose disclosures may trigger the PID Act includes any individuals who are: a contracted service provider for a Commonwealth contract; or an officer or employee of a contracted service provider for a Commonwealth contract who provides services for the purposes (whether direct or indirect) of the Commonwealth contract.
7.11 Therefore, officers and employee of consulting firms may be covered by the PID Act, irrespective of whether the consulting firm is a body corporate, partnership or individual. However, the joint submission emphasises that misconduct can only be reported to an ‘authorised internal recipient’, which means they can only make a disclosure to the Commonwealth agency who is the party to, or responsible for, the consultancy contract (or to an independent agency like the Ombudsman) and not internally at their consulting firm.
Private sector whistleblower protections and their relation to officers and employees of consulting firms
7.12 Commonwealth whistleblowing laws that apply to the private sector include protections under the Corporations Act and the Taxation Administration Act 1953 (TAA Act).
7.13 Entities subject to regulations under the Corporations Act and TAA Act include companies, superannuation entities or trustees, incorporated associations and bodies corporate that are trading or financial corporations.
7.14 The Corporations Act requires these entities to have a whistleblower policy and to make it available to all officers and employees of the entity.[
7.15 To be eligible for whistleblower protection under the Corporations Act, an individual must be, or have been, in a relationship with the ‘regulated entity’ that the individual is reporting about as set out in section 1317AAA of the Corporation Act.
7.16 In contrast to employees of corporate bodies or other financial licensees or trustees covered by the private sector whistleblower protection legislation under Part 9.4AAA of the Corporations Act, there are substantial inconsistencies and gaps for those employed by consulting firms or other contractors.
7.17 The main accounting firms in Australia, KPMG, Deloitte, EY and PwC, are partnerships in their legal form, even though most employees of the Big Four firms are engaged by service companies owned or controlled by the partnership.
7.18 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia pointed out that partnership-based firms have lesser whistleblower protections because for the purposes of Part 9.4AAA of the Corporations Act: a partnership is not a ‘regulated entity’ (as required by section 1317AAA); a partner is not an ‘eligible recipient’ for protected disclosures of wrongdoing (section 1317AAC), despite being an owner and typically an important leader (unless they happen to also be a director or officer of a service company that employs or instructs the employee blowing the whistle); and a partner may also not themselves be an ‘eligible whistleblower’ (section 1317AA) and capable of benefiting from the protections if they disclose wrongdoing, other than in possibly in a very indirect sense.
7.19 The Treasury expanded on this, stating: As partnerships are not companies, most aspects of the Corporations Act do not apply to partnerships. For example, partnerships are not regulated entities for the purposes of the corporate whistleblower regime. Partnerships are only subject to any state and territory laws that may protect private sector whistleblowers.
2017 committee report on whistleblower protections and subsequent legislative reform
7.20 This committee tabled a report titled Whistleblower protections in 2017 with 35 recommendations aimed at improving whistleblower protection legislation in Australia.
7.21 Following the committee’s report, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 expanded whistleblower protections in Part 9.4AAA of the Corporations Act and Part IVD of the TAA Act, to provide broader protections for the corporate and financial sectors. The amending Act implemented approximately half of the recommendations from the committee’s 2017 report.[19] These amendments are due for statutory review in 2024.
7.22 Although the amendments to the Corporations Act and TAA Act were introduced at the same time, the TAA Actapplies to partnerships and partners while the Corporations Act does not. Under the TAA Act, partners of an entity, company or partnership are eligible whistleblowers and are eligible recipients to receive disclosures
7.23 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia argued that a failure to fully reform the private sector whistleblowing regime has led to substantial issues in the audit, assurance and consultancy sector.
7.24 The Treasury Laws Amendment (Tax Accountability and Fairness) Act 2024 commenced on 1 July 2024 and expanded tax whistleblower protections. The new Act protects individuals blowing the whistle about related entities to the Tax Practitioners Board that may assist the board in performing its duties under the Tax Agent Services Act 2009.
7.25 The joint submission by the Inspector-General of Taxation and the Taxation Ombudsman noted the recently commenced National Anti-Corruption Commission Act 2022 could provide an alternative pathway for disclosures in relation to the audit, assurance and consultancy sector.[24]
7.26 The Accounting Professional and Ethical Standards Board (APESB) noted that the Code of Ethics for Professional Accountants(including Independence Standards) (APES 110) contains provisions for professional accountants, including auditors, to respond to Non-Compliance with Laws and Regulations (NOCLAR). However, APES 110, including the NOCLAR provisions, does not establish whistleblower protections.
Issues with the multiple current whistleblower schemes
7.27 Several inquiry participants drew the committee’s attention to complexities and inconsistencies within Australia’s current whistleblower legislation, the confusion this creates, and the potential constraints it imposes on disclosure.
7.28 Professor AJ Brown, Professor of Public Policy and Law at the Centre for Governance and Public Policy, Griffith University, noted that each state and territory has whistleblower protection legislation covering the public sector and to varying degrees the private sector (see Appendix 4) and that ‘contractors and service providers to government may not be aware of state and territory whistleblowing protection laws’.
7.29 The joint submission by Griffith University, the Human Rights Law Centre and Transparency International Australia stated many of the statutes are ‘out of date and inconsistent with the latest iteration of protections found in the Corporations Act’.
7.30 Ms Maxwell from the GIA argued that the complexities of whistleblower protection in the private sector disincentivise employees from making disclosures: …Australian whistleblower protection laws are a complex patchwork. The area is complex to understand, complex to administer and confusing for anyone contemplating speaking up about unlawful, unethical, or irresponsible behaviour … A whistleblower should not need a nuanced knowledge of the applicable legal and regulatory frameworks to know which regulator or which law enforcement agency they should make their disclosures to, to qualify for protection. It is a strong disincentive to making disclosures if employees or other relevant parties feel that they require legal advice before making any disclosure
7.31 Charted Accountants Australia and New Zealand (CAANZ) shared a similar view: The existence of numerous existing laws relating to whistleblowing regimes and protection in different industries such as banking and finance, taxation, aged care and child protection makes it difficult for an individual to know what protections are available to them and in what circumstances.
7.32 Mr Kieran Pender, Senior Lawyer, Human Rights Law Centre, emphasised the uncertainty experienced by employees of partnership-based firms regarding whistleblower protections: Unfortunately, right now we have a huge gap between law and reality. The law says you can speak up safely, lawfully; it says it’s a crime to take reprisal against a whistleblower. But there are so many loopholes, there are so many complexities…if you’re a whistleblower at one of the Big Four accounting and consulting firms, you need a law degree—you need more than a law degree!—to know whether you’re protected and who to speak up to.
7.33 CAANZ drew attention to the fact that, as a result of partnership-based firms being excluded from the whistleblower protection legislation under the Corporations Act, some firms have created their own whistleblowing policies leading to further inconsistencies: Whilst a number of organisations have voluntarily developed whistleblowing policies and procedures, these are not supported by legislation to ensure consistency in the programs and to adequately protect whistleblowers.
7.34 The GIA highlighted a recent report by Your Call that illustrated the complexities of the current whistleblower legislation in Australia and the impacts of overlapping federal and state and territory legislation: …more than half of the participants at a Workshop said their organisations must comply with four or more separate sets of whistleblowing laws. Attendees also noted…inconsistencies between regimes…‘…when you get a disclosure, it could fall within all three whistleblowing regimes. In reality, we could end up having to do three separate investigations if we were to follow everything to the letter of the law, which just seems kind of ludicrous and…surely that can’t be the intended outcome.’ Another attendee observed: ‘Trying to meet the requirements of both [two laws] can be a challenge while trying to maintain the anonymity of the whistleblower and… if we don't maintain it, that's when we’ll put people off and in the future people won't come forward as whistleblowers if it’s obvious who that person is’.
Options for reform
7.35 This section examines the proposed reform options suggested by witnesses and submitters during the inquiry, including: expansion of current legislation to include partnerships; harmonisation of whistleblower legislation; a whistleblower protection authority; bounty or reward systems; and the whistleblower protection federal roadmap.
Expansion of current legislation to include partnerships
7.36 The committee heard from numerous inquiry participants about the need to improve and strengthen whistleblower protection for partners and partnership-based firms.
7.37 KPMG Australia emphasised its commitment to whistleblower protections and noted that as a partnership, its commitment to whistleblowers is voluntary because ‘adherence is not currently a regulatory requirement under the Corporations Act’. Therefore, KPMG Australia proposed that the professional services sector should be required to commit to these protections under the Commonwealth Procurement Rules.
7.38 EY Australia went a step further and recommended extending the whistleblower protection framework in the Corporations Act to large, registered partnerships.[35] This proposal was endorsed by the Institute of Public Accountants.
7.39 CAANZ supported extending Part 9.4AAA of the Corporations Act to partnerships across all sectors but noted the need for appropriate exemptions for small partnerships.
7.40 Ms Vanessa Chapman, Group Executive, CAANZ, argued that Parliament should consider amending the definition of regulated entity for the purposes of Part 9.4AAA of the Corporations Act: …to bring partnerships or other structures within it…because there are many organisations that are not companies per se, that are not bodies corporate, but that are subject to Part 9.4AAA by virtue of being caught by the definition of regulated entity.
7.41 CAANZ also proposed that the following be considered: whether section 1317AAB of the Corporations Act allows ASIC to prescribe partnerships (whether general, limited liability or other partnerships) as regulated entities for the purposes of Part 9.4AAA; and whether sections 115(1) and (2) of the Corporations Act, which effectively cap the size of partnerships, may provide a basis for bringing partnerships within the ambit of Part 9.4AAA.
7.42 CAANZ pointed out that the Corporations Act treats a member of an audit team as an individual, not an entity, which differs from the treatment of other eligible recipients of whistleblower reports under the Corporations Act. CAANZ expressed concern that: …a junior member of the audit team who receives a protected disclosure may be limited in what they can share with superiors, including their manager or an audit partner. This puts the junior audit team member in a difficult situation as they are unlikely to be best placed to receive the disclosure.[40]
7.43 To address this concern, CAANZ proposed amending section 1317AAC(1)(b) and section 1317AAB to better support members of audit teams who receive qualifying disclosures. However, CAANZ noted that a longer-term solution would be to enact a single law covering all non-government whistleblowers.
Harmonisation of whistleblower protection legislation
7.44 Most inquiry participants supported harmonising whistleblower protection legislation in Australia. Where they differed was over whether it was better to have a comprehensive Whistleblower Protection Act covering all government and non-government entities, or a harmonised set of laws that protect government and non-government entities separately.
7.45 CAANZ preferred harmonising whistleblower protection legislation for all non-government whistleblowers,[42] but considered a single national whistleblower regime unnecessary.
7.46 Deloitte concurred with CAANZ that harmonising whistleblower legislation for the audit, insolvency, tax and legal practitioner sectors would be appropriate.
7.47The GIA concluded that Australia needs a general whistleblower regime in its own act applicable to the private sector.
7.48 By contrast, the joint submission from Griffith University, the Human Rights Law Centre and Transparency International Australia recommended the establishment of a single Whistleblower Protection Act covering all private and not-for-profit entities and employers and entities under Commonwealth legislation or subject to Commonwealth regulation.
Whistleblower protection authority
7.49 Inquiry participants broadly supported the establishment of a whistleblower protection authority with many acknowledging the benefits of having a standalone authority to assist with understanding whistleblower protection legislation.
7.50 The joint submission from Griffith University, the Human Rights Law Centre and Transparency International Australia stated that its ‘top priority remains the establishment of a whistleblower protection authority to oversee and enforce whistleblower protection laws and support Australian whistleblowers’.
7.51 The joint submission noted that the Australian Government issued a discussion paper exploring whether there is a need for a whistleblower protection authority for the public sector but the joint submission emphasises that the need for this authority is not confined to the public sector only.
7.52 The GIA highlighted the need for an independent stand-alone whistleblower protection authority to enforce whistleblower protection legislation, provide support to whistleblowers, and provide guidance to organisations regarding their obligations.
7.53Ms Chapman from CAANZ supported: …a whistleblowing protection agency that can help not only whistleblowers but also organisations, employers, to understand what their obligations are in relation to the protection of whistleblowers within their organisation or to their organisation.[50]
7.54 The Australia Institute observed that a whistleblower protection authority would make it easier for the National Anti-Corruption Commission to receive complaints and referrals.[
7.55 Professor Allan Fels supported ‘a fully independent, impartial whistleblower organisation that people have confidence in and go to’.
7.56 Professor Dale Pinto, President and Chair of Certified Practicing Accountants Australia (CPA Australia), observed that a whistleblower protection authority could provide an alternative disclosure pathway for employees who do not feel comfortable blowing the whistle internally: Sometimes, whether it’s within firms or within organisations, junior staff would be reluctant within the hierarchy to raise an issue that they see. So, part of the information is having a mechanism—and I think Senator Scarr floated the idea previously of an independent whistleblower agency where people could, outside of their own particular entity, make a disclosure of information.
7.57 The Community and Public Sector Union recommended the establishment of a whistleblower protection authority, and a commissioner to oversee the authority.
7.58 Mr Pender from the Human Rights Law Centre noted that a similar system to the Office of the Whistleblower Ombuds in the United States (US)[55] could be an alternative to a whistleblower protection authority: …the US Congress has a dedicated independent body within it that helps members of parliament in the United States engage with whistleblowers, deal with whistleblowers. It helps them with best practice on intaking whistleblowers. It’s called the Office of the Whistleblower Ombuds in the US House. Even something like that, which would only require a small independent team in parliament working with committees, senators and MPs, could be a real game changer for whistleblower protection.
Bounty, rewards or compensation for whistleblowers
7.59 The Institute of Public Accountants argued that the committee should consider the provision of rewards or bounties to whistleblowers whose disclosures lead to the imposition of a penalty on an entity.
7.60 The GIA noted that while it has not previously supported a bounty or rewards system, it will reconsider the system during the next stage of proposed whistleblower reforms.
7.61 Professor Brown argued that it was important to address compensation for the detriment that whistleblowers suffer, as it is rare that they do not suffer detriment.[59] Professor Brown suggested that thresholds for compensating whistleblowers should be reformed to make them more practical and accessible because they are presently onerous, restrictive and inconsistent across Commonwealth whistleblower legislation. Professor Brown argued that the changes are needed ‘so that it actually becomes effective and feasible for people who have suffered detriment to apply to the courts or a tribunal…for compensation and relief’.
7.62 The Human Rights Law Centre noted that under the current legislation, it is very rare for whistleblowers to be able to access compensation: Recently, the Human Rights Law Centre reviewed every whistleblowing case to go to judgement ever in Australia under both the Corporations Act protections and the Public Interest Disclosure Act. There hasn’t been a single successful case. The only case of compensation to a whistleblower for detriment across all of Australia since the first whistleblowing laws came in was a $5,000 compensation award under the Corporations (Aboriginal and Torres Strait Islander) Act. So the laws aren’t working in having that enforcement mechanism.
Federal roadmap
7.63 In November 2022, Griffith University, the Human Rights Law Centre and Transparency International Australia published Protecting Australia’s whistleblowers: The federal roadmap, which provided an overview of the shortfalls of Australia’s whistleblower legislation (Figure 7.1). The roadmap sets out twelve key areas for reform, drawing from previous reviews and inquiry reports.
7.64 Many of the key issues in the roadmap are a response to the committee’s inquiry into whistleblower protections in 2017, including: the establishment of whistleblower protection authority; ensuring a no wrong doors approach for disclosures; the enactment of a single law covering all non-government whistleblowers; the simplification and upgraded proof requirements for remedies and compensation; ensuring easier and consistent access to remedies; the enhancements of information sharing and ability to access support; the expansion of the definition of detriment attracting remedies; the protection of public and third-party whistleblowing; and the exclusion of solely individual employment grievances from PID protections
7.65 The roadmap is supported by numerous inquiry participants, including the GIA, the Australia Institute and CAANZ.
7.66 CAANZ expressed the view that: …Protecting Australia’s Whistleblowers: The Federal Roadmap presents a well thought out and internationally benchmarked set of measures that deserve consideration by Government as the process of reforming relevant law in Australia continues. ...
Committee view
7.67 Whistleblowing matters. It has a crucial role to play in identifying, stopping and deterring misconduct.
7.68 Whistleblower protection laws should provide legal rights and protections to individuals who provide a company, organisation or regulator with information about alleged misconduct and/or breaches of the law. The need for consistent and harmonised whistleblower protection legislation
7.69 The evidence provided to this inquiry revealed the substantial concerns of a range of stakeholders about the complexities, inconsistencies and gaps in current whistleblower protection legislation in Australia.
7.70 This complex patchwork of legislation requires a high level of knowledge on the part of a whistleblower to understand which legislation and regulator covers the misconduct they wish to disclose. Unfortunately, this causes confusion and disincentivises whistleblowers from making a disclosure when they witness misconduct.
7.71 Further, the multiplicity of inconsistent laws burdens employers with additional and unnecessary red tape because multiple pieces of different legislation may apply in any given situation.
7.72 Given the complexities, attendant confusion, and frequent doubling up of resources, there was broad support for harmonising and aligning Australia’s whistleblower protection laws, although most inquiry participants favoured separate Acts for the public and private sectors. The committee recognises the vital importance of greater alignment across the public and private sectors.
