Wednesday, June 10, 2026

Australian Taxation Office’s compliance threats are all bluff that pick off low-hanging fruit

After 21 years in this House …


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


The Australian Taxation Office is not the police, but it is responsible for administering the taxation system and enforcing the relevant legislation. The ATO has formal powers under legislation but mostly operates under a “co-operative compliance” model.
Does the ATO have an active deterrent and enforcement presence in the community?
The ATO likes to play a game: pretend you are everywhere when you are not. This game can also be called “bluff”.
Some of the ATO’s weapons of choice are the media release, system mass-generated letters to taxpayers and, at tax time, having some friendly assistant commissioner doing a round of interviews on national morning television.
Audits and reviews are mostly desk-based – conducted by ATO staff in the office without an accompanying field visit. Modern technology is used, including meetings being able to be conducted via video conferencing. 
Field visits are uncommon these days. The ATO terminated many regional field sites in Australia around 2013-14. For example, in Queensland alone the ATO discontinued sites at Toowoomba, Southport, Bundaberg, Rockhampton and Cairns. There had been compliance staff at all these regional field sites who conducted most of their audits and reviews in the field. 
In Queensland now there is an ATO physical presence only in Brisbane and Townsville. 
In addition, itineraries for regional areas to conduct compliance activities such as audit are now uncommon compared with a decade or two ago. For example, a group of ATO auditors would travel to a regional location for a week to conduct compliance activities and audits. This sort of activity provides a visible deterrence. Word certainly gets around regional towns when the ATO is in town. 
The ATO rarely surprises agents, accountants 
and taxpayers because of a lack of boots on the ground.
In recent years, tax agents, accountants and taxpayers are well aware that the ATO is no longer out there and that it commonly results in lower rates of compliance due to a lack of ATO presence. The fact is that to really conduct effective compliance, particularly to combat serious noncompliance, there must be a reasonable field presence. 
A largely desk-based audit program will not be enough. The serious non-compliant taxpayers have contempt for the ATO. Their attitude is “come and get me”. And that is precisely what is required. 
But there are so few itineraries to regional areas these days. The ATO would have you believe that it has adapted its operations to meet the digital age etc. I beg to differ. A big motivating force in this move was just saving costs – costs that are often just blown in another area. 
Compliance staff are frequently informed by management that there are no funds available for regional travel, field visits or itinerary. However, there are always funds available for one type of travel. Senior executive service individuals fly around the country at will to conduct meetings. 
I remember, only about a year ago our SES officer was visiting our Brisbane office from interstate. At a meeting, she informed us that there were funds available for travel. Senior management did not want to lose that funding as the end of the financial year was coming up – the old public service “use it or lose it” action. If you don’t use what is allocated to you in a financial year, then the risk is next year you might get a smaller allocation. 
The SES officer cheerfully informed us that an SES conference would be held in Perth so all the travel funds would be used. Of course, that funding would have been highly useful for audit teams. 
Commissioner for Taxation Rob Heferen and ASIC commissioner Kate O'Rourke. Picture: John Feder
Returning to those three common ATO strategies, they can be useful – up to a point. There needs to be a lot more substance beyond these strategies. 
ATO media releases are frequently used to trumpet some successful ATO action; perhaps there has been an operation to disrupt tax fraud in a regional area. This is fine but it is implied that the ATO is always there to deal with noncompliance.
The truth is that most of the time the ATO is not there. 
The system-based letters to taxpayers are often directed at PAYG employees, who are the low-hanging fruit in revenue collection. Perhaps work deduction claims are high. The implied threat is that there is a high risk of being audited if the taxpayer does not deal with the issue. 
The ATO does not follow up with the vast bulk of these letters, which are attempted compliance by bluff. 
The assistant commissioners on morning TV at tax time provide useful information. The motivation is to ensure that the PAYG taxpayers and other largely compliant groups stay engaged. The low-hanging fruit must be preserved because it is easier than going after the seriously non-compliant taxpayers.
Liam Malone is a former ATO executive.

KPMG preaches ethics to staff while ignoring whistleblower

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.

Find out the inside scoop about Accenture, Deloitte, EY, KPMG, PwC and McKinsey. Sign up to our weekly Professional Life newsletter.

 leads our coverage of the professional services sector. He is based in our Sydney newsroom.Email Edmund at edmundtadros@afr.com.au
Chartered Accountants to probe big four over data leaks

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.

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“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.

Find out the inside scoop about Accenture, Deloitte, EY, KPMG, PwC and McKinsey. Sign up to our weekly Professional Life newsletter.

 leads our coverage of the professional services sector. He is based in our Sydney newsroom.Email Edmund at edmundtadros@afr.com.