The whistleblower at the centre of court action against the Australian Taxation Office over allegations she was bullied for lodging a complaint about ATO maladministration is now personally suing the Commissioner of Taxation Michael D’Ascenzo and three other senior ranking officials in the Federal Court that threatens to expose a possible bullying culture within the upper echelons of the organisation.

This action is precedential in Australia as a whistleblower has not previously held individual public officials personally accountable under the Public Service Act 1999.

Serene Teffaha, a senior ATO lawyer engaged as a tax technical specialist, last week lodged a statement of claim in the Federal Court alleging the Commissioner of Taxation, acting on behalf of the ATO, may be vicariously liable for the wilful misconduct and culpable negligence of his public officials that include fellow respondents to the claim, first assistant Commissioner David Diment, assistant Commissioner Margot Rushton and Susanna Lombardi, national director of the small and medium enterprises division.

In 2011, Teffaha and four other senior colleagues lodged the whistleblower complaint with David Diment alleging various maladministration issues associated with the ATO’s high-profile pursuit of high-wealth individual Australians worth between $100 million and $250 million a year. The complainants believed taxpayers were being disadvantaged by not having their objections to assessments dealt with in a fair and professional way.

Some of the explosive new allegations raised in the statement of claim include:

  • The ATO issued staff a formal target of ensuring taxpayer objections to audit decisions were upheld in less than 20% of cases, irrespective of merit (that is, the target was to disallow 80% of taxpayers’ objections)
  • Original decision makers of audits exerted influence over the ATO officers with responsibility for determining objections, with the intention of procuring disallowance of these objections
  • Teffaha and others were instructed by Susanna Lombardi that the ATO’s audit decisions should receive a “tick and flick” and affirm those decisions without appropriate consideration of the merits of each individual taxpayer’s objection.

These are serious allegations that strike at the heart of our democratic tax system. Taxpayers have a right under the law to object against their assessment if they believe it is wrong. What Teffaha is alleging is the ATO introduced targets for their staff to disallow objections and to “tick and flick” original decisions made by audit officers.

Crikey has obtained the ATO document confirming the targets. This action would have severely disadvantaged thousands of small business taxpayers; it’s possible some could seek recourse through the ATO, the Inspector-General of Taxation, the Ombudsman and the courts due to this document now coming to light.

Claims David Diment interfered with the whistleblower complaint investigation — coupled with the alleged damage by Susanna Lombardi to Teffaha’s professional reputation and emotional and mental wellbeing, and Margot Rushton’s directions to Teffaha to attend a medical examination with a psychiatrist — will be the focus of the misfeasance in public office, breach of statutory duty and negligence actions outlined in the statement of claim.

Another area Teffaha’s lawyers will focus on is why ATO officers referred her to a psychiatrist — in documents also obtained by Crikey — within two weeks of lodging her whistleblower complaint, without her knowledge. “Until I received the documents I requested under the Freedom Of Information Act I had absolutely no knowledge that they wanted to send me to a psychiatrist so soon after lodging my complaint,” Teffaha told Crikey.

JA James holds legal qualifications and specialises in public policy, and studied public sector whistleblowing and workplace bullying during her postgraduate studies last year before creating the website She told Crikey: “The compulsory medical referral powers under the Public Service Regulations have been abused by senior APS officials in an attempt to discredit whistleblowers’ mental state, undermine their whistleblowing complaint and inflict grave emotional distress. This pernicious practice is masked by the APS as a form of ‘compassion’. Such spin automatically puts whistleblowers on the backfoot.”

Crikey reported in September the ATO had offered Teffaha a $250,000 cash settlement to walk away from the litigation. She was prepared to accept the offer and release the commissioner of taxation from his vicarious liability as long as she was not barred from pursuing the senior public officials personally for their misconduct against her. The ATO refused to settle on that basis.

“My motivation is not money — just accountability,” she said. “It is perplexing the lengths the Commonwealth will go to, to protect the wrongdoers. Unfortunately for the Commonwealth, they are now risking a whole lot more than just money.”

Two recent court cases indicate D’Ascenzo (who will leave the role at the end of this year, to be replaced by Chris Jordon) and the government should be concerned about the latest development in the Teffaha case. The James Ashby and Peter Slipper affair provides a clear example that the courts are no longer willing to allow public officials to hide behind the Commonwealth and its agencies. Last month after Ashby settled with the Commonwealth, Slipper attempted to run the argument he had no case to answer given the release that Ashby was entering into with the Commonwealth. Justice Steven Rares said Slipper was mistaken if he believed the case would just go away as he could not dismiss the case against him:

“I can’t do that Mr Slipper — there’s a complaint against you that you s-xually harassed Mr Ashby and that is at the moment unresolved. I can’t dismiss that case that is unresolved. I can’t get rid of them just because Mr Ashby and the Commonwealth [may] settle. You are locked in this.”

The Commonwealth spent well over $770,000 in fighting Ashby and supporting Slipper. Ultimately they settled Ashby’s claims, but not without great expense to the taxpayer.

And the landmark decision of the New South Wales Supreme Court earlier this month in the Gillian Sneddon case provides another example of how courts may make the tax chief vicariously liable for the actions of his officers. Sneddon was the whistleblower in the former Labor minister Milton Orkopoulos child s-x case. The Court of Appeal ruled the government was liable for Orkopoulos’ conduct as it occurred while he was “in the service of the Crown”.

The ATO can’t comment on a case before court. Crikey put a number of questions to David Bradbury, the Assistant Treasurer with parliamentary responsibility for administrative matters relating to the ATO, on the objection targets that could disadvantage small business taxpayers and the use of public money to fund the legal fees for the alleged wrongdoers. A spokesperson said: “Administrative and operational matters within the ATO are a matter for the Commissioner.”