The Australian Taxation Office sent out a memo to 20,000 staff in December urging them to be aware of workmates' behaviour, reports the BBC.
It encouraged staff to report things like inaccurate timesheets or those who read the newspaper for too long.
Critics have denounced the policy as harmful to workplace culture.
The memo began by asking workers: "See something suspicious?"
"You might have seen it before. A colleague makes a habit of taking long lunches, or regularly leaves early, or spends the first hour at work eating breakfast and reading the paper... Or all of the above," read the memo, now published on the agency's website.
It urged staff to raise suspicious behaviour with the management or internal investigators.
Falsifying work hours constituted "fraud" - something all employees were obliged to help report, the memo said.
However, associate professor Angela Knox, a workplace expert from the University of Sydney, said the policy created a hostile environment.
"This Big Brother-style surveillance is very worrying," she told the BBC.
"If I were an employee I would be thinking that the workplace doesn't trust me and that perhaps I should rethink the trust I have put into the workplace."
(This story has not been edited by Social News XYZ staff and is auto-generated from a syndicated feed.)
