Senator Nick Xenophon is in the process of finalising the terms of reference for a Senate inquiry into foreign investment in strategic assets. Credit:Kate Geraghty Fairfax Media has uncovered what two senators concede is an apparent "embarrassing" case of astroturfing in the low-profile – and ultimately successful – campaign to shoot down a plan to make large Australian companies disclose how much tax they pay. The Family Office Institute Australia, whose submission informed large parts of a Senate report recommending the government shield privately owned companies from increased transparency, actually has no members, it can be revealed. The institute was established in August by two lawyers and a Canberra lobbyist who represent Australia's ultra-rich in disputes with the Australian Tax Office. Their purpose was to support the Coalition's "Better Targeting the Income Tax Transparency Laws" bill, which was introduced to Parliament in August.

Then-assistant treasurer Josh Frydenberg spoke of 'real concern' that wealthy business owners would be targeted for kidnap if the public became aware of how wealthy they were. The term "better targeting" could easily have been replaced with "exempting" as the bill's only effect would be to pardon up to 1000 of Australia's biggest privately owned companies, including those owned by James Packer, Gina Rinehart, Lindsay Fox and 7-Eleven owner Russ Withers. In 2013, the ATO said disclosure by companies with revenue of more than $100 million would "discourage large corporate tax entities from engaging in aggressive tax avoidance practices". Greens senator Peter Whish-Wilson. Credit:Alex Ellinghausen The first sign the Coalition would dispense with the disclosure requirement came when then-assistant treasurer Josh Frydenberg told the joint partyroom of a "real concern" that wealthy business owners would be targeted for kidnap if the public became aware how wealthy they were.

University of NSW accounting lecturer Jeffrey Knapp said the alleged kidnap danger was the "stupidest excuse for non-disclosure I've ever heard". Billionaire Frank Lowy. Credit:Rob Homer I wasn't aware of the history of the so-called Family Office Institute and I should have been. Senator Nick Xenophon In June, Fairfax Media revealed the government had sought no security advice to verify a kidnap risk existed before pushing forward with exempting private companies. The Australian Federal Police, the Attorney-General's Department and the ATO held no records of advice being sought, a freedom of information request revealed. The transparency bill was introduced on August 20 and a Senate committee was asked to scrutinise the legislation.

Gina Rinehart is looking to bid with Chinese interests for Kidman & Co, the pastoral empire. Credit:Bloomberg The inquiry was unusual for the lack of submissions – just nine (seven in favour, two against) – for a bill that had supposedly caused such widespread angst in the business community. Senator Cory Bernard's "halal inquiry" received more than 1300 submissions, the "nanny state" inquiry 418 and the corporate tax avoidance inquiry 120. In giving the bill the green light to proceed, the Economics Legislation Committee quoted most extensively from the submissions of the Law Council of Australia and the Family Office Institute of Australia, which argued the law was "discriminatory", would make Australia an "outlier" on global tax laws and would leave companies at a competitive disadvantage. New SocietyOne board member Brett Clegg is managing director of News Corp Australia's Community Publishing division. Credit:Nic Walker But what is the Family Office Institute and why should its views help justify dismantling disclosure laws?

Registration documents held by the Australian Securities Investment Commission show the institute was established on August 6 this year – six days after the bill was introduced to Parliament and a fortnight before it was referred to the Senate committee. Two of its three directors – Malcolm Stewart and Daniel Appleby – work for the low-profile law firm Speed & Stracey, a specialist tax advisory. The firm, located on Macquarie Street in Sydney, boasts on its website of representing "a substantial number of BRW 'Top 10' and 'Top 200' individuals and their family and related ... businesses". But by far its biggest client is billionaire Frank Lowy and his family. One of the firm's founders, Robin Speed, is the longtime secretary of the Lowy Institute for international policy. He also established the Rule of Law Institute, which patrols the corridors of power for legislation that may threaten the interests of business. Its board members include Malcolm Stewart and David Lowy.

Mr Appleby has represented Mr Lowy in tax disputes with the ATO, according to reports in the Australian Financial Review and the Sydney Morning Herald. Mr Appleby confirmed the Family Office Institute had no members but insisted that the support was there for the institute to be established. Its submission did state that the institute had been "recently created" and the bill before Parliament was "one of the drivers" for its creation. "[The institute] represents the views of many family offices we have spoken to directly but we're not established in the same way something like the Property Council is," Mr Appleby said. "There are no members at this stage, we're going through the process." The institute's submission said: "interest in the institute by family offices has been significant and every family office we have spoken to has expressed concern about the current tax disclosure regime."

Mr Appleby denied the institute was a case of astroturfing or that it was a front for a handful of very high-wealth individuals. But he did say some business people would have baulked at making a submission as it would have effectively "outed" them as being in the crosshairs of the transparency law. "I am familiar with astroturfing but we needed to get it started. It is not run out of here on behalf of selected clients," he said. "The Lowy family are clients of this firm and they would certainly be aware [of the Family Office Institute] but it's not their mouthpiece and it was not created for them." Two members of the Senate committee, independent senator Nick Xenophon and Greens senator Peter Whish-Wilson, both said they were "embarrassed" to learn evidence had been accepted from an institute with no members. "I wasn't aware of the history of the so-called Family Office Institute and I should have been," Senator Xenophon said.

"Normally at Senate inquiries, we hear from genuine grassroots organisations as matter of course. This seems to be what the Americans call astroturfing. In fact, it looks like astroturf that has been through a drought." Senator Whish-Wilson said: "It is very concerning to me if good public policy gets hijacked by special interests and it angers me that the committee did not pick this up. We have all got egg on our faces." He said the Tax Justice Network, which is a genuine coalition of non-vested interests in tax transparency, had fought for 10 years for the disclosure law but "senators on the crossbench were prepared to listen to the arguments of a few narrow interests". In a further intriguing connection, Mr Appleby fronted the committee at a public hearing into the bill on September 22, where he represented the Law Council in arguing that family companies should be exempted. He is a member of the Law Council's tax committee. The third director of the Family Office Institute is Richard Gilbert, a Canberra lobbyist whose clients include Speed & Stracey, Perpetual and the National Australia Bank.

A former head of the Investment and Financial Services Association, he also spent three years as chief executive of the Rule of Law Institute. Mr Gilbert said the institute may end up having "supporters" rather than members but he stands by the submission. Mr Stewart said he had not taken an active role in the Institute's submission but said there was significant support from family offices to remain private and the issue had galvanised them. He also said print journalists were "hopelessly conflicted" on the issue because they wanted "easy access" to information for stories. Liberal senator Sean Edwards, who chaired the committee and signed off on the report, declined to comment.