Australian Taxation Office’s compliance threats are all bluff that pick off low-hanging fruit
Australia’s tax enforcers have swapped boots on the ground for media releases and morning TV – and a former ATO executive says the bluff and bluster no longer works.
Liam Malone
June 9, 2026
The tax office talks tough but in reality compliance measures mostly target small PAYG taxpayers, while the real problems are in the too-hard basket The tax office talks tough but in reality compliance measures mostly target small PAYG taxpayers, while the real problems are in the too-hard basket Back in the day, I was pounding the beat as a 19-year-old rookie cop on the streets of Fortitude Valley, Brisbane. I was part of a highly visible deterrent enforcement strategy
KPMG rolled out workshops in ethical decision-making for its audit division last year while top executives faced a whistleblower complaint they later admitted failing to properly investigate for two years.
The 2025 review of the audit division’s culture made 10 recommendations including strengthening the skills of leaders and managers, increasing the support for new staff and workshops in ethical decision-making that included “peer-led” ethics conversations.
Thirteen current and former KPMG partners have been called to appear at a hearing on June 19. Bethany Rae
The review was conducted by the firm’s people and inclusion team after an earlier probe by external consultant Principia Advisory, which was triggered by a scandal involving auditors cheating on internal tests.
The efficacy of the two cultural reviews is under a cloud following a whistleblower’s complaint of widespread data misuse within the audit division. The firm has now commissioned Principia to do a new review, this time into its “speak-up culture”.
The whistleblower – a former audit director – alleged partners misused confidential Lendlease board papers to pitch for Westpac and Dexus audit contracts. Inside information was also allegedly used to secure work from Macquarie Group and Westpac. The local firm and KPMG International refused to grant the whistleblower legal protection and failed to properly investigate the matter for two years.
The firm has also investigated an additional allegation, not previously reported, that audit partners secretly recorded at least one conversation with a Telstra executive.
The whistleblower claims at least one conversation with an executive at Telstra, which was then a consulting client of the firm, was recorded in 2023 or 2024 and circulated internally without the knowledge of Telstra.
However, KPMG said it had investigated the allegations and concluded they were unsubstantiated, noting that while artificial intelligence can be used to record meetings, its systems always ask for permission. This allegation will be re-investigated by the firm as part of a new probe into the whistleblower’s claims.
The new Telstra claim is one of 17 allegations notified to KPMG in an August 2025 email exchange between the whistleblower and the firm, which has been described to The Australian Financial Review.
Almost half of the allegations in the email relate to the way the firm treated the whistleblower following the disclosures, while another six claims, including the new Telstra allegation, relate to data misuse accusations that were raised in parliament in March.
The remaining allegations relate to alleged ethical issues such the firm’s failure to act over exam cheating and other disclosure failures.
KPMG has reduced its active debt by $35 million, bringing its total borrowings down to $258 million – well below its $600 million credit limit. The firm, which posted $2.1 billion in net revenue for 2024-25, defended the debt as standard practice for funding growth and acquisitions.
A spokesman for KPMG said the firm had put in place all the recommendations of the 2021 Principia, “including introducing a firm-wide survey platform with all employee survey questions, results, and responses visible across the business.”
He also said the 2025 internal culture review had provided insight into “ethical issues within the division, identifying the need to broaden our approach on ethics beyond a compliance lens.”
This review led to 10 “focused actions” – including leadership capability, onboarding, support for lateral hires, and stronger ethical dialogue – that were being put in place.
The spokesman said Principia’s current work is focused on “assessing the effectiveness of our whistleblowing processes and identifying opportunities for immediate improvement.”
Scandal started two years ago
KPMG’s audit leaks crisis began when the whistleblower made a formal report in May 2024, alleging confidential client information was misused.
After failing to get legal protections from KPMG Australia, the whistleblower tried KPMG International, the firm’s independent directors, professional body Chartered Accountants ANZ and corporate regulator the Australian Securities and Investments Commission before contacting Labor senator Deborah O’Neill.
O’Neill raised the allegations in parliament in March 2026 and the following day announced the joint committee she chaired would hold a June 19 hearing into the matter.
Following O’Neill’s speech, KPMG said it asked the whistleblower on more than 20 occasions for more information, but failed to mention it had also repeatedly asked the individual to sign a non-disclosure agreement and refused to provide legal protection.
In May 2026, Yates and head of audit Julian McPherson resigned over the fallout from the scandal. Internal pressure is mounting for the early exit of local chairman Martin Sheppard and former chief operating officer Eileen Hoggett.
Also under perceived pressure to depart are other senior leaders, including Capon, deputy chair Carmel Mortell and head of human resources Dorothy Hisgrove. All were involved in aspects of the firm’s earlier responses to the allegations.
At the end of May, KPMG Australia has apologised to the whistleblower and admitted its three earlier investigations were inadequate. The firm announced a fourth inquiry to be conducted by Allens, the law firm that produced an earlier report dismissing most of the allegations.
The June 19 hearing has called 13 current and former partners, along with senior executives from Lendlease, Ashurst and Allens. Australian Securities and Investments Commission officials will also appear at the June 19 hearing of the parliamentary joint committee on corporations and financial services.
Those called include Yates, McPherson, Hoggett, Sheppard, incoming global chairman and former Australian CEO Gary Wingrove, and global general counsel Anne Collins.
Other KPMG personnel called include interim chief executive Stan Stavros, head of audit Scott Guse, general counsel Louise Capon, executive director James McClelland and head of human resources Dorothy Hisgrove. Audit partners Paul Rogers and Suzanne Bell will also be called, as will senior employees who oversaw internal KPMG investigations into the matter.
More on the KPMG audit leaks
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Chartered Accountants ANZ has launched an investigation into how big audit firms handle confidential information, widening the potential fallout from a mishandled whistleblower complaint at KPMG Australia.
The “quality practice review”, ordered by the industry body’s chief executive Ainslie van Onselen, will also examine ethical practices at KPMG, Deloitte, EY, PwC and four other large firms.
Chartered Accountants Australia and New Zealand chief executive Ainslie van Onselen ordered the new investigation. Alex Ellinghausen
The accounting body is already investigating three KPMG partners over one of the whistleblower’s allegations of client data misuse and is examining a registered company auditor from the firm who used artificial intelligence to cheat on internal AI training.
“CA ANZ conducts quality practice reviews of major firms on a regular three-year cycle, the most recent of which was completed in FY26,” said a spokeswoman for the accounting body.
“The CEO-directed reviews announced today are separate to and over and above that regular cycle, directed at specific ethical standards.
“These targeted reviews have been issued to the eight largest Australian accounting firms.”
The body has more than 140,000 members, who are bound by ethical and professional obligations, including the need to keep client data confidential.
Individuals can be stripped of their ability to practise by the body’s disciplinary arm, while firms face fines of $250,000 for breaching professional rules. Big four professionals represent about 10 per cent of the body’s membership.
The complaint that triggered the new investigation relates to allegations that partners misused client data to win work.
The whistleblower – a former KPMG audit director – alleged that partners misused confidential Lendlease board papers to pitch for audit contracts with Westpac and Dexus.
Inside information was also allegedly used to secure work from Macquarie Group and Westpac.
KPMG Australia and KPMG International refused to grant the whistleblower legal protection and failed to properly investigate the matter for two years.
The claims became public in March when Labor senator Deborah O’Neill raised them in the Senate.
The following day O’Neill said the joint committee she chaired would hold a hearing on June 19 into the allegations. Representatives of CA ANZ, including van Onselen, have been called to testify.
Former execs set to testify
KPMG has since conceded there were three incidents of client data being misused.
In May 2026, former chief executive Andrew Yates and former head of audit, Julian McPherson resigned amid the fallout from the scandal, as internal pressure mounted for the early exits of local chairman Martin Sheppard and former chief operating officer Eileen Hoggett. All have been called to testify at the hearing.
The firm also apologised to the whistleblower and admitted its three earlier investigations had been inadequate, before announcing a fourth inquiry by Allens, the law firm that previously dismissed most of the allegations.
Federal Assistant Treasurer Daniel Mulino has launched an inquiry into whistleblower laws and said the government would reopen an examination of how large partnerships were governed.
The Australian Securities and Investments Commission and the Tax Practitioners Board are also investigating aspects of the allegations.
While governments are reviewing KPMG contracts. Lendlease will also replace KPMG as its auditor next year, after almost seven decades.
CA ANZ has repeatedly called for partnerships to be captured by whistleblower laws to close a gap in existing legislation.
More on the KPMG audit leaks
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