Thursday, February 16, 2023

The plan to unmask the owners of 3m companies and trusts


The plan to unmask the owners of 3m companies and trusts

Labor has been warned that wealthy Australians will be targeted for identity theft and cybercrime under a plan to make public the names of the “beneficial owners” of more than 3 million private companies, unlisted investment vehicles and trusts.

The federal government wants to create a publicly accessible record of who “owns, controls, and receives benefits from” businesses in a bid to limit complex structures that can help avoid tax and fund crime.

Arnold Bloch Leibler, which has a large high net worth client base, says the proposed register conflicts with the rights of law-abiding people to structure their businesses and financial affairs in a private manner. Dominic Lorrimer

The beneficiaries of Australia’s nearly 1 million trusts could also be made public as part of the second phase of the proposal.

A consultation paper badges the register – backed by unions, churches and tax transparency campaigners – as a measure to tackle multinational tax avoidance, but lawyers and tax advisers have blasted it as an overreach that will unnecessarily capture a large swath of the population, from Rich Listers to family businesses, doctors, tradespeople, farmers and retirees.

Arnold Bloch Leibler, which has a large high net worth client base, says the proposed register conflicts with the rights of law-abiding people to structure their businesses and financial affairs in a private manner.

The personal information that would be made public by the register presented a significant risk to individuals, and identity verification plans in the scheme were an unnecessary cybersecurity threat, a spokesman for the firm said.

The register would allow the public to trace the ownership – defined as anybody with a stake of 20 per cent or more – of privately held businesses, many of which are notoriously secretive.

Honeypot for thieves

While the owners of the biggest unlisted companies are well known, such as Anthony Pratt’s Visy and Gina Rinehart’s Hancock Prospecting, there are thousands of others that fly under the radar.

BDO tax partner Mark Molesworth agreed the register could become a honeypot for cybercriminals and identity thieves.

“The vast number of entities likely to be affected by this proposal, and the significant compliance burden that it will introduce, seems to be an overreach and is out of proportion to the proposed aim of the policy to limit multinational tax avoidance,” he said.

A submission by the Law Council of Australia blasts the proposal as “an enormous overreach in the absence of a compelling rationale” and points to a decision by the European Court of Justice in November that said putting full beneficial ownership information on a public register was incompatible with the European Union right to protection of personal data.

The council’s submission also notes that the consultation paper is titled “Multinational tax integrity” but “it would be fair to say that the measures proposed appear to have very little to do with multinational tax integrity”.

Family trust issues

The Tax Institute says release of personal information as contemplated by the proposal “significantly increases the likelihood of it being abused and could potentially result in individuals being the target of identity theft, fraud, financial and personal crimes”.

But a joint submission by the Tax Justice Network, Australian Council of Trade Unions and the Uniting Church, among others, says the register is long overdue and calls for “severe sanctions” for people who act as a front for beneficial owners.

Under the plan, people with a stake of 20 per cent or more in an entity captured by the rules would be identified by name and month and year of birth. Date of birth and addresses would be collected by authorities but suppressed to minimise identity theft.

The consultation paper says an additional 3 million unlisted entities would be subject to transparency measures under the proposal, which is modelled on a similar disclosure regime in the UK.

The paper seeks feedback on a range of questions, including the regulatory burden on entities captured by the scheme.

Financial advisers and estate planners oppose plans to extend the register to family trusts. There is no mention of whether self-managed superannuation funds would be captured.

The Society of Trust & Estate Practitioners said establishing and maintaining a beneficial ownership register with adequate data protection would place a large and unnecessary burden on the trustees of family trusts.

Mr Molesworth said every private company in Australia would have to analyse its controllers, including anyone directly or indirectly holding at least 20 per cent of various interests in the company.

“The proposal contains no information on the financial gain to the Australian revenue from implementing the measure,” he said.

Institute of Public Accountants general manager for technical policy Tony Greco said he had strongly recommended that Treasury reconsider the burden being placed on companies.

“We are particularly concerned with proprietary companies – and trusts, as contemplated in the second phase of proposed changes – being required to maintain registers of beneficial ownership and for that information to be publicly available,” he said.

“This is a significant and new compliance burden.

“Treasury needs to consider the extent to which the proposed changes strike a balance between the general public interest in disclosing the data to prevent money laundering and terrorist financing, and the beneficial owners’ fundamental rights, such as personal data protection concerns.”

Andrew Leigh, the Assistant Minister for Charities, Competition and Treasury, said Labor had an election mandate to implement a beneficial ownership register.

“As the former Australian head of Transparency International put it, ’Australia is one of the best places to launder dirty money and the reason for that is there is very little scrutiny, there’s very little verification and checking of information,” he said.

“Australia is behind other advanced countries in providing information about who really owns our firms. While other countries have put beneficial ownership registers in place to stop dirty money, Australia has not.”

Tom McIlroy reports from the federal press gallery at Parliament House. Connect with Tom on Twitter. Email Tom at