CANBERRA — Three years ago, Australia’s government treated the PwC tax leaks scandal as an outlier, a single firm that had crossed a line. On Wednesday, Treasury made clear it now treats the entire structure of the Big Four as the problem.
Assistant Treasurer Daniel Mulino released a consultation paper proposing to bring Deloitte, EY, KPMG and PwC under the direct purview of the Australian Securities and Investments Commission for the first time, a jurisdictional expansion that would let the regulator act against the firms themselves rather than only the individual auditors registered within them. Reuters reported Mulino saying, “In recent years, we have seen behaviour from some large accounting, auditing and consulting firms in Australia that is not fair and honest.” The paper does not propose a single fix. It lays out two competing ones, either of which would reshape how the Big Four operate in Australia permanently.
The first option is structural separation: forcing each firm to split its audit practice from its consulting arm into genuinely separate businesses, ending the model in which the same partnership signs off on a company’s books while also selling that company advisory, tax and technology work. The second, softer option is operational separation, which would leave the firms structurally intact but bar them from serving the same client with both audit and non-audit services simultaneously, closing the specific conflict of interest that has driven the past three years of scandals without requiring a corporate breakup. Treasury has also floated cutting the cap on partnership size from 1,000 to 400, aligning accounting firms with the tighter structure Australia already imposes on law firms.
The paper’s timing is not incidental. Eastern Herald reported last month that KPMG International redirected its own whistleblower back to the Australian arm he was trying to expose, a decision that has since cost two senior executives their jobs, frozen more than $270 million in federal contracts under review, and triggered a formal ASIC investigation into KPMG audit partners accused of pitching confidential Lendlease board papers to competing clients including Westpac, Dexus and Macquarie Group. That scandal supplied the immediate political cover. The deeper grievance, though, predates it by three years: PwC Australia’s 2023 collapse, in which a partner used confidential government tax policy briefings to help clients get ahead of legislation before it existed, remains the case that first exposed how little power regulators actually held over partnership structures rather than individual registered auditors.
What makes Wednesday’s paper different from the response to PwC is that the reforms under discussion in 2023 were shelved. Mulino has now revived them with KPMG’s crisis as the immediate justification, but the paper frames the problem as recurring rather than isolated, citing “recent conduct” across multiple firms as evidence that Australia’s regulatory framework has a structural gap, not a personnel problem at one company. Greens Senator Barbara Pocock, who has pushed for tougher action throughout the KPMG episode, framed the stakes bluntly: ending what she called the Big Four’s “special treatment” under corporate law.
The 400-partner cap may prove the most consequential detail buried in the paper, because it does not require proving misconduct to bite. Structural separation and operational separation both target the audit-consulting conflict directly, and both would likely draw sustained legal and lobbying resistance from firms arguing the changes destroy efficiencies clients value. A hard partnership cap sidesteps that argument entirely: it simply shrinks the firms, forcing today’s 1,000-partner practices to either split into multiple smaller partnerships or push senior staff out entirely, regardless of whether those partners were ever implicated in a scandal.
None of the four firms has publicly endorsed either separation model, and the consultation period, open until August 12, gives them five weeks to make the case that Treasury is treating a KPMG-specific failure as an industry-wide indictment. That argument carries less weight than it did in 2023, when PwC alone was in the dock. Whatever comes out of the consultation, the firms are negotiating from a position where two separate scandals in three years, not one, are doing the political work of building the case against them. The scrutiny is not confined to accounting either; Eastern Herald has separately reported on the broader wave of regulatory and takeover attention now facing Australian trust and financial-services firms, a climate in which any professional-services deal draws closer examination than it would have a year ago.
What the paper does not settle is whether Treasury actually intends to legislate structural separation or is using its threat as leverage to extract the softer operational split without a fight. Splitting audit from consulting at four global partnerships operating in Australia would be an unprecedented intervention into how the profession is organized worldwide, not just domestically, and no other major economy has yet forced the issue this far. Whether Canberra becomes the jurisdiction that finally does, or settles for the narrower fix once the Big Four’s lobbyists get five weeks to work the consultation, is the question the August 12 deadline exists to answer.
