Asic boss James Shipton stands aside as Treasury investigates $118,000 tax advice payment

The chairman of the corporate regulator, James Shipton, stood aside on Friday while Treasury investigates payments of more than $118,000 made to KPMG for tax advice he received.

Fringe benefits tax of more than $78,000 was also charged on the advice, bringing the total cost to the Australian Securities and Investments Commission to almost $200,000.

Treasury is also investigating a $750 a week relocation payment made over two years to Asic’s head of enforcement and deputy chair, Daniel Crennan QC, totalling almost $70,000.

In a letter to the treasurer, Josh Frydenberg, the auditor general, Grant Hehir, said the payments may have exceeded limits set by the remuneration tribunal, which sets pay for public sector workers, and said he was also worried that the payments to KPMG did not follow procurement guidelines.

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Both men have agreed to pay back the money.

Frydenberg said the former senior public servant Vivienne Thom will conduct the investigation, which he expected to be finished by the end of the year.

“Following the review, Treasury will advise me on the findings of the review and any further course of action that may be appropriate,” he said.

Shipton said: “I have advised the treasurer this afternoon that, in the circumstances, it is appropriate to stand aside pending the outcome of the review.”

“Whilst I believe that I have acted properly and appropriately in this matter, I hold myself to the highest possible standard.”

Before taking the top job at Asic in early 2018, Shipton worked at global investment bank Goldman Sachs and as a regulator in Hong Kong. His last position before coming to Asic was at Harvard University where he was executive director of the international financial system program at the university’s law school.

In 2017, Asic agreed to pay KPMG a total of $8,000 to provide advice to Shipton, as part of the new chairman’s recruitment package.

However, Hehir said that by August last year KPMG had billed $118,557, which the accounting firm told Asic was “due to the complexity of the tax affairs being managed”.

“In addition to the invoiced amounts paid by Asic, fringe benefits tax of $78,266 was paid by Asic in relation to these benefits,” Hehir said.

“As well as the agreed tax briefing and completion of Australian and US tax returns, the KPMG invoices describe the services rendered as encompassing ‘tax advice on personal investments’, ‘optimisation of the Australian taxation of foreign exchange gain or loss in foreign bank accounts’ and ‘assistance in respect of resolution of Massachusetts State tax notices and penalties due to late filing of 2017 Massachusetts state tax return,’” Hehir said in the letter.

“Taxation support services were rendered to the chair as late as March 2019.”

Hehir said the Australian National Audit Office was unable to obtain any documentary evidence that KPMG confirmed the services that were provided before Asic paid the bill.

“Asic asserts that discussions were held with the chair to confirm that the amounts invoiced represented the services provided,” he said.

“No evidence was available to support that the approval of services to be provided on behalf of the chair was subject to any additional advice or consideration prior to approval nor supported by a formalised policy on executive officer relocation costs and benefits.”

Appearing before a parliamentary committee on Friday, Asic’s other deputy chair, Karen Chester, said the first time the full commission of the regulator knew there was a problem with the payments was on 10 September, when it met to sign off on the full year financial accounts.

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“At that stage the ANAO was seeking to finalise the end of year audit of our full-year financial statements,” Chester told parliament.

“It wasn’t until that commission meeting that the commission became aware of the seriousness of the ANAO’s concerns.”

She said Asic had overhauled its systems for examining executive pay as a result of the imbroglio and would be far quicker to report any problems if they arose in the future.

“They will not take a year, going forward,” she said.

Crennan and KPMG have been contacted for comment.