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Law-breakers will face eye-watering penalties and regulators will get sweeping new powers in what is being called the “biggest crackdown” on tax misconduct in the nation’s history.

The federal government has touted the overhaul as a response to the “severe shortcomings” in regulatory frameworks, exposed by the scandal engulfing beleaguered consultancy giant PwC Australia.

The firm is facing multiple probes – including a federal police investigation – after it was revealed former taxation partner Peter Collins had leaked sensitive and confidential government information to fellow partners and clients.

PwC has been in crisis mode since then – axing a raft of senior partners and announcing their own internal review into the leaks.

Mr Collins is now banned from acting as a tax practitioner.

“The PwC scandal exposed severe shortcomings in our regulatory frameworks that were largely ignored by the Coalition, and we’re taking significant steps to clean up the mess,” Treasurer Jim Chalmers said.

“We’re cracking down on misconduct to rebuild people’s faith in the systems and structures that keep our tax system and capital markets strong.”

Under the changes, advisers and firms who promote tax exploitation schemes now face fines of over $780m.

That’s a 10-fold increase from the current penalty of $7.8m.

Red tape surrounding regulator actions will also be slashed, with the tax office and Tax Practitioners Board (TPB) to be given new powers to refer ethical misconduct by advisers to professional associates for disciplinary action.

In addition, new legislation to buff the TPB’s powers will be introduced to parliament.

Another $30m funding boost for the board will also be allocated in the upcoming October budget.

The other changes include stronger protections for whistleblowers, increased investigation scopes for the TPB and a host of treasury reviews into tax system fraud, the regulation of consulting, accounting and auditing firms and the information-gathering powers of the tax office, among others.

Limitations in the tax secrecy laws which were a barrier to regulators acting in response to PwC’s breach of confidence will also be scrapped.

In a joint statement with Finance Minister Katy Gallagher, Attorney-General Mark Dreyfus and Assistant Treasurer Stephen Jones, Mr Chalmers said: “The current tax promoter penalty laws have remained largely untouched since their creation in the 2000s and have only been applied six times.”

“Bigger penalties will reduce incentives to use confidential government information to help clients avoid tax,” Mr Chalmers said.

Until the scandal broke, the government-consulting operations arm of PwC was responsible for about 20 per cent of the firm’s revenue in the 2023 financial year.

The firm’s internal probe found “specific examples” where professional standards had been breached regarding the misuse of confidential information and other ATO-related matters.

Former chief executive Tom Seymour was among the eight senior partners let go in response.

In June, the company announced it will sell off its government operations to a private equity firm for just $1.

The scandal has already attracted the ire of multiple parliamentary committees who are looking into the matter.

Mr Chalmers said the PwC scandal showed some regulatory frameworks were
“not fit for purpose.”

He said it had raised questions about the adequacy of regulations “applying to large consulting, accounting and auditing firms and how this misconduct was able to occur and go undetected without consequence for so long.

“This includes whether there are appropriate governance obligations on these firms in areas such as transparency, executive responsibility, management of conflicts of interest and dealing with misconduct,” Mr Chalmers said.

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By Rahul

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