Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Tax Agent services bill 2008
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 New legislative regime for the provision of tax agent services
7
Chapter 2 Registration of tax agents and BAS agents 19
Chapter 3 The Code of Professional Conduct 47
Chapter 4 Civil penalties and injunctions 69
Chapter 5 The Tax Practitioners Board and its role 91
Chapter 6 Regulation impact statement 123
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|AAT |Administrative Appeals |
| |Tribunal |
|ATO |Australian Taxation Office |
|BAS |Business Activity Statement |
|Board |Tax Practitioners Board |
|CGT |capital gains tax |
|Code |Code of Professional Conduct |
|Commissioner |Commissioner of Taxation |
|Corporations Act |Corporations Act 2001 |
|Criminal Code |Criminal Code Act 1995 |
|Federal Court |Federal Court of Australia |
|FBT |fringe benefits tax |
|FMA Act |Financial Management and |
| |Accountability Act 1997 |
|GST |goods and services tax |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
|TAA 1953 |Taxation Administration Act |
| |1953 |
|R&D |research and development |
|state Boards |state Tax Agents' Boards |
|the Minister |relevant Treasury Portfolio |
| |Minister |
General outline and financial impact
Regulation of the provision of tax agent services
This Bill ensures that tax agent services are provided to the
public in accordance with appropriate professional and ethical
standards.
The key elements of the Bill are:
. the establishment of a national Tax Practitioners Board
(Board) to replace the existing state-based boards;
. the registration and regulation of entities providing
Business Activity Statement (BAS) services (ie, BAS
agents) in addition to tax agents;
. a legislated Code of Professional Conduct (Code) to govern
tax agents and BAS agents;
. a wider and more flexible range of disciplinary sanctions
which may be imposed by the Board; and
. civil penalties and injunctions to replace criminal
penalties for certain misconduct by agents and
unregistered entities.
Date of effect: Most of the provisions in the Bill will commence
on a single day to be fixed by Proclamation, within nine months of
the Tax Agent Services (Transitional Provisions and Consequential
Amendments) Bill receiving Royal Assent. Some of the provisions in
the Bill (in particular those relating to the establishment of the
Board) will commence on the day on which this Bill receives Royal
Assent. These dates of effect are outlined in paragraphs 1.25 to
1.29 in Chapter 1 of this explanatory memorandum.
Proposal announced: These proposals were announced by the
Assistant Treasurer and Minister for Competition Policy and
Consumer Affairs in Media Release No. 039 of 29 May 2008.
Reform of the existing regulation of tax agents was first announced
in 1998.
Financial impact: The revenue impact of the measure is as follows:
. It is expected that the impact of replacing criminal
penalties with civil penalties will result in a small gain
to revenue. This gain is not expected to exceed $1
million over four years.
. There is expected to be a cost associated with the
introduction of 'safe harbour' provisions which exempt
taxpayers from administrative penalties in certain
circumstances when they use a tax agent or BAS agent,
however this cost is unquantifiable.
Compliance cost impact: Transitional compliance costs of the
measure are estimated to be:
. small for tax agents and BAS agents with the appropriate
qualifications for registration purposes; and
. potentially large for those individuals seeking
registration as a BAS agent who do not currently meet the
minimum standard of educational qualifications.
Ongoing compliance costs of the measure are estimated to be:
. nil/minimal for tax agents; and
. small, at $1 million per annum, for BAS agents
(approximately $67 each per annum).
Summary of regulation impact statement
Regulation impact on business
Impact: The Bill improves the regulatory environment for the
provision of tax agent services for a fee or other reward by
increasing the consistency in registration and providing
appropriate, but flexible, regulation and greater certainty for
agents.
Main points:
. The establishment of a national Board will benefit tax
agents and BAS agents by providing nationally consistent
regulation. It will enable the Board to allocate and use
its resources more efficiently, and is expected to
increase certainty for agents in the way in which the
legislation will be administered.
. Registration and regulation of tax agents and BAS agents,
including the introduction of the enforceable Code, will
provide certainty and clarity for agents as to what is
expected of them, and is therefore expected to reduce
compliance costs. BAS agents will face certain barriers
to entry, but will benefit from the clarity provided by a
move away from the partially regulated but unenforced
arrangement in place currently. This will improve
taxpayer confidence in the industry.
. The introduction of a wider range of more constructive and
educative administrative sanctions which may be imposed by
the Board will encourage agents to comply with the Code
and will improve their performance.
. Replacement of criminal penalties with civil penalties and
injunctions will benefit agents and the integrity of the
tax system, by providing appropriate consequences for
misconduct and by providing effective disincentives to act
inappropriately.
Chapter 1
New legislative regime for the provision of tax agent services
Outline of chapter
1. This chapter outlines the background to the new legislative regime
for the provision of tax agent services and the key elements of the
regime.
2. Division 1 of Part 1 of this Bill provides for the short title and
commencement of the Bill, the Bill's application to external
territories and the general administration of the Bill.
3. Division 2 of Part 1 of this Bill provides for the object of the
Bill and general guide to each Part of the Bill.
4. Division 3 of Part 1 and Division 80 of Part 8 of this Bill provide
for the explanation of the use of defined terms and the rules for
interpreting the Bill.
5. Section 70-55 of this Bill provides for the regulation-making power
under the Bill.
Background to and key elements of the new legislative regime
Background
6. The current regime for regulating tax agents appears in Part VIIA
of the Income Tax Assessment Act 1936 (ITAA 1936) and was
originally introduced in 1943. Since then the tax environment has
changed and a much larger proportion of taxpayers use tax agents to
lodge their returns and help them comply with their tax
obligations. In recent years, approximately 74 per cent of
individuals and over 95 per cent of businesses used a tax agent
to prepare and lodge their tax returns.[1]
7. The current regime includes:
. a registration process for tax agents and their nominees
(but not Business Activity Statement (BAS) agents);
. provisions which provide that only tax agents are entitled
to supply certain tax agent services for a fee;
. separate state Tax Agents' Boards (state Boards)
responsible for registration of tax agents; and
. administrative penalties for taxpayers for making a false
or misleading statement resulting in a shortfall amount,
or for late lodgment, irrespective of whether they engaged
a tax agent to prepare and/or lodge the document.
8. Broadly, the new legislative regime to govern the provision of tax
agent services is intended to ensure that tax agent services and
BAS services provided to the public are of an appropriate ethical
and professional standard. The regime does so by:
. requiring providers of tax agent services and BAS services
to be registered and to comply with a code of professional
conduct; and
. establishing an independent national board to register tax
agents and BAS agents, and to monitor and enforce
compliance with those standards.
9. Although the new legislative regime was initially announced to
commence on 1 July 1999, its introduction was delayed at the
request of the tax profession, to allow practitioners to focus on
preparing for the reforms introduced with A New Tax System from 1
July 2000. The Treasury has progressed the proposals to create the
new legislative regime since mid-2002.
10. Confidential consultation on a detailed discussion paper occurred
in 2005 and confidential consultation on draft legislation took
place with professional bodies representing tax agents and
bookkeepers during 2006.
11. Draft legislation and explanatory materials were exposed for public
comment for three months during mid-2007 and for four weeks in mid-
2008.
12. The 2006-07 Budget contained additional funding to the Australian
Taxation Office of $57.5 million over four years for the
implementation of the new legislative regime.
Key elements of the new legislative regime
13. The key elements of the new legislative regime are set out under
the following subheadings.
The establishment of a national Tax Practitioners Board
14. The Tax Practitioners Board (Board) has responsibility for
registering tax agents and BAS agents, ensuring that agents
maintain appropriate skills and knowledge, investigating complaints
against agents and ensuring that unregistered entities do not hold
themselves out to be agents.
A wider scope of application
15. Under the new arrangements, BAS agents will be governed in the same
way as tax agents, but will only be able to provide a limited range
of services relating to the taxation laws relevant to a BAS
provision in the law.
Registration requirements
16. Meeting the fit and proper person test, as well as minimum
educational qualifications and relevant experience requirements,
will be required in order to obtain registration to provide tax
agent services for a fee or other reward. The minimum educational
qualifications and relevant experience requirements are set at a
less demanding level for registration as a BAS agent than for
registration as a tax agent, in recognition of the narrower scope
of services provided by BAS agents.
17. To allow for the registration of 'specialist' tax agents and BAS
agents, the Board may impose conditions on registration.
Conditions limit the scope of the services that an agent may
provide to a single area of the taxation laws or a single type of
tax agent service. These limitations correspond to the prescribed
qualifications and relevant experience of an individual agent or,
in the case of an agent that is a partnership or company, to
correspond to the prescribed qualifications and relevant experience
of the individuals who work for the agent.
18. While registration is restricted to individuals, partnerships and
companies, there is flexibility for a registered entity to conduct
its business through a trust structure. The registered entity
needs to be a trustee of the trust and must ensure that the work
produced by the trust on behalf of the trustee is of a competent
standard.
The introduction of a Code of Professional Conduct
19. A Code of Professional Conduct (Code) governs the ethical and
professional standards of tax agents and BAS agents. The Code is
set out as a statement of principles and the Board may issue
binding written guidelines for the interpretation and application
of the Code.
20. A formal legislated code has been a key aspect of the new
legislative regime since it was first recommended in 1994 by the
Report of the National Review of Standards for the Tax Profession,
Tax Services for the Public. This report recommended that any such
code should be made binding through legislation to enable the Board
to impose sanctions for breaches and thereby to enforce compliance
with the code.
A range of sanctions for breaches of the Code of Professional
Conduct
21. Under the new arrangements, if a tax agent or BAS agent has
breached the Code, the Board has a range of options. The Board may
caution the agent, require the agent to complete a course of
training, subject the agent to practising restrictions, require the
agent to practise under supervision, or suspend or terminate the
agent's registration. (Currently, the state Boards are only able
to suspend or terminate registration.)
22. The Board may also apply to the Federal Court of Australia (Federal
Court) for an order to pay a pecuniary penalty for certain serious
misconduct, or seek an injunction to prevent an entity from
engaging in, or compel an entity to undertake, certain conduct.
23. Such a wide range of sanctions allows the Board to tailor its
response according to the severity of the misconduct.
Safe harbour from penalties
24. A taxpayer who uses a tax agent or BAS agent will benefit from a
safe harbour from certain administrative penalties in certain
circumstances. Penalties will no longer apply:
. where a false or misleading statement is made carelessly,
provided the taxpayer has taken reasonable care to comply
with their tax obligations by giving their tax agent or
BAS agent the information necessary to make the statement;
and
. where a document (such as a return, notice or statement)
is not lodged on time in the approved form due to the tax
agent's or BAS agent's carelessness, provided the taxpayer
gave the agent the necessary information, in sufficient
time, to lodge the document on time and in the approved
form.
Detailed explanation of new law
Commencement of the Bill
25. Certain provisions in the Bill commence on the day on which the
Bill receives Royal Assent, while others commence on a single day
to be fixed by Proclamation. [Section 1-5]
26. The Proclamation date must be on or after the day on which the Tax
Agent Services (Transitional Provisions and Consequential
Amendments) Bill receives Royal Assent, but no later than nine
months after that Bill receives Royal Assent. Otherwise, if no
Proclamation is made, these provisions of the Bill commence on the
first day after the end of that nine-month period. (If the
provisions commence in this way, the relevant Treasury Portfolio
Minister must make an announcement, by notice in the Commonwealth
of Australia Gazette, of the day on which the provisions
commenced.) [Section 1-5]
27. Broadly, the Board will need to be established as early as possible
on or after Royal Assent and before the regulatory arrangements
commence, to enable it to prepare for its role of registering tax
agents and BAS agents and regulating compliance with the
legislation. (This is detailed further in paragraphs 5.26 and 5.27
in Chapter 5 of this explanatory memorandum.) In order for the
Board to be established from Royal Assent, certain other provisions
in the Bill need to commence at the same time, such as the
introduction to the Bill and the Dictionary and interpretation
provisions.
28. The following provisions in the Bill commence on the day on which
the Bill receives Royal Assent:
. Part 1, which provides the introduction to the Bill
including the commencement provisions, application
provisions and the general administration of the Bill, the
object clause and explanation of the use of defined terms;
. sections 60-1 to 60-90, which provide for the
establishment, functions and powers of the Board, the
appointment of Board members, Board procedures and
committees;
. sections 70-25 to 70-45, which are miscellaneous
provisions relating to the Board, in particular immunity
from legal action and delegation by the Board, and
miscellaneous provisions relating to the protection of
information obtained under the Bill (ie, the secrecy and
disclosure provisions); and
. Part 8, which provides for the rules for interpreting the
Bill and the Dictionary applicable to the Bill.
[Subsection 1-5(1), items 1, 3, 5 and 7 in the table]
29. The following provisions in the Bill commence on a single day to be
fixed by Proclamation:
. Part 2, which provides for the eligibility and process for
registration under the Bill;
. Part 3, which provides for the Code and the administrative
sanctions applicable for failure to comply with the Code;
. Part 4, which provides for the grounds and process for
terminating registration;
. Part 5, which provides for the civil penalties applicable
for certain conduct;
. sections 60-95 to 70-20 and sections 70-50 to 70-55, which
are:
- the provisions relating to investigations conducted by
the Board;
- the provisions relating to the public reporting
obligations of the Board; and
- miscellaneous provisions relating to applications by the
Board to the Federal Court for injunctions, applications
to the Administrative Appeals Tribunal for review of
certain Board decisions, trustees and partnerships,
legal professional privilege and the making of
regulations by the Governor-General.
[Subsection 1-5(1), items 2, 4 and 6 in the table]
Application of the Bill
30. The Bill extends to every external Territory. [Section 1-10]
General administration
31. The Board has the 'general administration' of the Bill. As such,
the Board has the power to do all things necessary in connection
with the administration of the legislative regime to fulfil the
purpose of the provisions in the Bill. [Section 1-15]
32. The Tax Agent Services (Transitional Provisions and Consequential
Amendments) Bill will amend subsection 995-1(1) of the Income Tax
Assessment Act 1997 (ITAA 1997) to include the Tax Agent Services
Bill and regulations to be made under that Bill within the
definition of 'taxation law'.
33. While the Bill will form part of the taxation laws, the Board (and
not the Commissioner of Taxation) has the general administration of
the Bill.
Object of and general guide to the Bill
Object of the Bill
34. The object of the Bill is to ensure that tax agent services are
provided to the public in accordance with appropriate standards of
professional and ethical conduct. This is achieved by (among other
things):
. establishing the national Board to register tax agents and
BAS agents;
. introducing the Code for tax agents and BAS agents; and
. providing for sanctions to discipline tax agents and BAS
agents.
[Section 2-5]
General guide to each Part of the Bill
35. Part 2 of the Bill provides that an entity needs to be registered
to provide tax agent services for a fee or to engage in other
conduct connected with providing tax agent services. It sets out
the requirements for registration. [Subsection 2-10(1) and section
20-1]
36. Part 3 of the Bill sets out the Code with which entities registered
under the Bill must comply. [Subsection 2-10(2) and section 30-1]
37. Part 4 of the Bill sets out the circumstances in which an entity's
registration can be terminated. [Subsection 2-10(3) and section 40-
1]
38. Part 5 of the Bill provides for civil penalties aimed at ensuring
compliance with the Bill. [Subsection 2-10(4) and section 50-1]
39. Part 6 of the Bill establishes the Board and sets out the Board's
functions and powers. The Board may investigate breaches of the
Bill and has certain reporting obligations. [Subsection 2-10(5)
and section 60-1]
40. Part 7 of the Bill contains miscellaneous provisions, mainly
administrative and machinery provisions relating to the operation
of the Bill. [Subsection 2-10(6) and section 70-1]
41. Part 8 of the Bill contains the Dictionary, which lists most of the
terms that are defined in the Bill and sets out the meaning of some
important concepts and provides rules on how to interpret the Bill.
[Subsection 2-10(7)]
Interpretation of the Bill
Explanation of the use of defined terms in the Bill
42. Many terms used in the Bill are defined in the Dictionary to the
ITAA 1997, starting at section 995-1 in that Act. Therefore
expressions in the Bill have the same meaning in the Bill as in the
ITAA 1997 (other than the expression 'this Act'). Some terms used
in the Bill are only defined in the Bill. [Subsections 3-5(1) and
90-1(2)]
43. Most terms that are defined in either the ITAA 1997 or in the Bill
are identified by an asterisk at the start of the term, for
example, 'BAS service'. [Subsection 3-5(2)]
44. In the following circumstances, a defined term is not identified by
an asterisk:
. Once a defined term has been identified by an asterisk,
later occurrences of the term in the same subsection are
not usually asterisked [subsection 3-10(1)].
. Defined terms are not asterisked in the Guides, headings
or notes in the Bill [subsection 3-10(2)].
. If a term used in the ITAA 1997 is used in the Bill and
the term is not identified with an asterisk in the ITAA
1997, then the term is also not identified with an
asterisk in the Bill. Refer to subsection 2-15(3) of the
ITAA 1997 for expressions in that Act that are not
identified with an asterisk [subsection 3-10(4)].
. Throughout the Bill, the term 'Board' is not identified
with an asterisk because of the frequency with which the
term appears in the Bill [subsection 3-10(3)].
Rules for interpreting the Bill
45. The following form part of the Bill:
. the headings to the Parts, Divisions and Subdivisions of
the Bill;
. the Guides;
. the headings to the sections and subsections of the Bill;
and
. the notes and examples that follow the provisions of the
Bill.
[Subsection 80-1(1)]
46. Asterisks are used to identify defined terms. These asterisks form
part of the Bill. However if a term is not identified by an
asterisk, that fact should be disregarded in deciding whether or
not to apply a definition or another interpretation provision to
that term. [Subsection 80-1(2)]
47. As mentioned above, Guides form part of the Bill. A Guide consists
of sections under a heading indicating that what follows is a Guide
to a particular Division, Subdivision, etc. [Subsections 80-5(1)
and 90-1(1)]
48. Although forming part of the Bill, Guides are kept separate from
the operative provisions in the Bill, and are usually presented in
a box as the first provision in each Division. In interpreting an
operative provision, a Guide may only be considered:
. in determining the purpose or object underlying the
provision;
. to confirm that the provision's meaning is the ordinary
meaning conveyed by its text taking into account its
context in the Bill and the purpose or object underlying
the provision;
. in determining the provision's meaning if the provision is
ambiguous or obscure; or
. in determining the provision's meaning if the ordinary
meaning conveyed by its text, taking into account its
context in the Bill and the purpose or object underlying
the provision, leads to a result that is manifestly absurd
or is unreasonable.
[Subsection 80-5(2)]
Regulations
49. The Governor-General may make regulations prescribing matters that
are required or permitted by the Bill or matters that are necessary
or convenient to be prescribed for the purpose of carrying out or
giving effect to the Bill. The regulations prescribed under this
general regulation-making power are the proposed Tax Agent Services
Regulations. [Subsection 70-55(1)]
50. The regulations are proposed to address matters such as:
. the details of the educational qualifications and relevant
experience requirements for registration of an individual;
. the fees for application for registration; and
. the appointment and duties of the secretary to the Board.
51. Regulations may be made in relation to transitional matters
relating to the enactment of the Bill and the repeal of Part VIIA
of the ITAA 1936. [Subsection 70-55(2)]
52. It is appropriate for these matters to be dealt with by regulations
rather than in the Bill itself because they are matters of
technical or procedural detail which support the provisions in the
Bill and do not themselves impose obligations on entities or impact
significantly on individuals' rights and liberties.
Chapter 2
Registration of tax agents and BAS agents
Outline of chapter
1. Part 2 of this Bill provides for the requirements and process for
registration as a tax agent or Business Activity Statement (BAS)
agent. Sections 90-5 and 90-10 provide for the meanings of 'tax
agent service' and 'BAS service'.
2. Subdivision 30-C of Part 3 of the Bill provides for the obligation
for tax agents and BAS agents to notify the Tax Practitioners Board
(Board) of a change in circumstances.
3. Part 4 of the Bill provides for the grounds for termination of
registration, and notice and effect of termination of registration.
4. Subdivision 70-B of Part 7 of the Bill provides that registration
and termination of registration decisions of the Board are
reviewable by the Administrative Appeals Tribunal (AAT).
Context of amendments
Operation of current provisions
Definitions of tax agent service and BAS service
5. The current law does not define 'tax agent service'.
Subsection 251L(1) of the Income Tax Assessment Act 1936
(ITAA 1936) contains a list of services for which unregistered
entities are prohibited from charging a fee. Subsection 251L(6)
states that certain specified unregistered individuals may provide
a BAS service for a fee. (The definition of 'BAS service' is given
in subsection 251L(7).)
Registration of tax agents
6. Divisions 3 and 4 of Part VIIA of the ITAA 1936 specify the
requirements (and process) for registration as a tax agent or as a
nominee of a tax agent. For an individual, the registration
requirement is that the individual must be a fit and proper person
to prepare income tax returns and transact business on behalf of
taxpayers in income tax matters, and must not be an undischarged
bankrupt.
7. Under section 251BC of the ITAA 1936, a person is not a fit and
proper person to prepare income tax returns and transact business
on behalf of taxpayers in income tax matters if they do not hold
the prescribed qualifications, are not a natural person, are not
above 18 years of age, are not of good fame, integrity and
character, have been convicted of a serious taxation offence during
the previous five years or are under a sentence of imprisonment for
a serious taxation offence.
8. However, individuals who were registered as a tax agent or nominee
immediately before 1 November 1988 can be fit and proper persons
without holding the prescribed qualifications.
9. Currently, there is no separate registration requirement for the
provision of a BAS service for a fee, although there are
restrictions on who, other than tax agents, can provide those
services. Under subsection 251L(6) of the ITAA 1936, an
unregistered individual may provide a BAS service (as defined under
subsection 251L(7)) for a fee in limited circumstances, for
example, if they are a member of a recognised professional
association, or if they are a bookkeeper working under the
direction of a tax agent.
Suspension or cancellation of registration
10. Section 251K of the ITAA 1936 specifies the grounds on which the
current state Tax Agents' Boards (state Boards) must or may suspend
or cancel a tax agent's or nominee's registration, including where
the agent or nominee is convicted of certain offences, ceases to
meet the registration requirements or is guilty of certain
misconduct.
Rationale for major changes
Definitions of tax agent service and BAS service
11. The Bill contains positive principled definitions of 'tax agent
service' and 'BAS service' to ensure that the scope of the services
being regulated is clear and sufficiently flexible to include newly
emerging services as the tax system evolves.
Registration of BAS agents
12. The scope of registration has been widened to include BAS agents in
order to ensure the appropriate ethical and professional standards
of entities providing BAS services, in recognition of the important
role such entities play in the tax system.
Termination of registration
13. For clarity, the Bill separates the grounds for termination of
registration into:
. ceasing to meet the registration requirements, breaching
registration conditions or surrendering registration
(which are dealt with under Part 4); and
. breaching a provision of the Code of Professional Conduct
(Code) (which is dealt with under Part 3 - refer to
Chapter 3 of this explanatory memorandum).
Summary of new law
Definitions of tax agent service and BAS service
14. To provide a tax agent service or a BAS service for a fee or other
reward, an entity must be registered, otherwise the entity may
contravene a civil penalty provision. (The requirement to register
and the civil penalties that may apply in cases of contravention of
a civil penalty provision are explained in Chapter 4 of this
explanatory memorandum.)
15. A tax agent service is any service that relates to:
. ascertaining or advising about the liabilities,
obligations or entitlements of an entity under a taxation
law; or
. representing an entity in their dealings with the
Commissioner of Taxation (Commissioner) and,
that is provided in circumstances where it is reasonable to expect
that the entity will rely on it to satisfy liabilities or
obligations under a taxation law or to claim entitlements under a
taxation law.
16. Taxation law is defined in section 995-1 of the Income Tax
Assessment Act 1997 (ITAA 1997) to mean an Act (including a part of
an Act) of which the Commissioner has the general administration,
or regulations under such an Act. Note that the scope of the
taxation laws will be broadened to include the Bill and the
regulations under the Bill - refer to paragraphs 1.32 and 1.33 in
Chapter 1 of this explanatory memorandum.
17. A BAS service is any service that relates to:
. ascertaining or advising about the liabilities,
obligations or entitlements of an entity under a BAS
provision; or
. representing an entity in their dealings with the
Commissioner relating to a BAS provision,
that is provided in circumstances where it is reasonable to expect
that the entity will rely on it to satisfy liabilities or
obligations under a BAS provision or to claim entitlements under a
BAS provision.
18. BAS provisions is defined in section 995-1 of the ITAA 1997 to
mean:
. collection and recovery of tax provisions in Part VII to
the Fringe Benefits Tax Assessment Act 1986;
. the indirect tax law (which means the goods and services
tax (GST) law, the wine tax law, the luxury car tax law or
the fuel tax law, as defined in section 995-1 of the ITAA
1997); and
. Parts 2-5 and 2-10 of Schedule 1 to the Taxation
Administration Act 1953 (TAA 1953) (the pay as you go
system).
19. As 'taxation law' includes 'BAS provisions', by definition 'tax
agent services' include 'BAS services'.
Registration
20. Individuals (including those acting in the capacity of a trustee),
partnerships and companies (including those acting in the capacity
of a trustee) may apply to the Board for registration as a tax
agent or BAS agent. The Board must grant registration where all
eligibility requirements have been satisfied.
21. To be eligible for registration, an entity must satisfy the Board
that it has met the registration requirements, which broadly
consist of the following two elements:
. a fit and proper person test; and
. prescribed qualifications and experience requirements (for
individuals), or the requirement to have a sufficient
number of individuals who are registered (for companies
and partnerships).
22. The Bill preserves the special registration criteria for
individuals who were registered either as a tax agent or a nominee
immediately before 1 November 1988 (pre-1988 tax agents or
nominees). Pre-1988 tax agents or nominees who were also
registered immediately before the commencement of all of the
provisions of the Bill are eligible for registration without
satisfying the prescribed qualifications and experience
requirements under the Bill. The Board must register pre-1988 tax
agents or nominees as tax agents provided that the Board is
satisfied that they comply with the other registration
requirements.
23. The Board has a period of six months from receiving an application
for registration in which to decide whether to grant or refuse
registration. If the Board has not made a decision within this six-
month period, the Board is taken to have rejected the application.
This time limit provides certainty and finality for entities
seeking to be registered and allows an entity who has not been
granted registration to have their application reviewed by the AAT
- refer to paragraphs 2.66 to 2.68 for further information about
AAT review of Board decisions.
24. The Board may impose or vary a condition of registration. Any such
condition limits the tax agent services that an agent may provide
to an area of the taxation laws or a type of service for which:
. in the case of an individual, the agent has the prescribed
qualifications and relevant experience; or
. in the case of a partnership or company agent, the
registered individuals who work for the agent have the
prescribed qualifications and relevant experience.
Termination of registration
25. The Board has discretion to terminate the registration of a tax
agent or BAS agent if:
. it no longer meets the registration requirements;
. it breaches a condition of registration; or
. if it is an individual or a company - an event affecting
continued registration happens to the agent.
26. The Board must terminate registration:
. upon the death or dissolution of a tax agent or BAS agent;
or
. when an agent surrenders their registration.
27. The majority of the decisions of the Board under Parts 2 and 4 of
the Bill are reviewable by the AAT.
Comparison of key features of new law and current law
|New law |Current law |
|A tax agent service is |There is a list of |
|any service that relates |services, including |
|to ascertaining or |preparing or lodging a |
|advising about the |return on behalf of a |
|liabilities, obligations |taxpayer, or giving |
|or entitlements of an |advice about a taxation |
|entity under a taxation |law, for which an |
|law, or representing an |unregistered person or |
|entity in their dealings |partnership is prohibited|
|with the Commissioner, |from charging a fee. |
|provided in circumstances| |
|where it is reasonable to| |
|expect that the entity | |
|will rely on it to | |
|satisfy liabilities or | |
|obligations, or to claim | |
|entitlements, under a | |
|taxation law. | |
|A BAS service is any |The definition of BAS |
|service that relates to |service contains a list |
|ascertaining or advising |of services for which |
|about the liabilities, |unregistered individuals |
|obligations or |may charge a fee in |
|entitlements of an entity|limited circumstances, |
|under a BAS provision, or|including preparing or |
|representing an entity in|lodging a BAS on behalf |
|their dealings with the |of a taxpayer, or giving |
|Commissioner in relation |advice about a BAS |
|to a BAS provision, |provision. |
|provided in circumstances| |
|where it is reasonable to| |
|expect that the entity | |
|will rely on it to | |
|satisfy liabilities or | |
|obligations, or to claim | |
|entitlements, under a BAS| |
|provision. | |
|The prescribed minimum |No equivalent requirement|
|educational |for BAS agent |
|qualifications and |registration. |
|relevant experience |Unregistered individuals |
|requirements, as well as |can provide a BAS service|
|the fit and proper person|for a fee under limited |
|test, must be met to be |circumstances - for |
|registered as a tax agent|example, if they are a |
|or BAS agent. |member of a recognised |
| |professional association |
| |or if they are a |
| |bookkeeper working under |
| |the direction of a tax |
| |agent. |
|An application for |No requirement for the |
|registration must be |state Boards to make a |
|decided by the Board |decision to register a |
|within six months of its |tax agent or a nominee of|
|receipt. |a tax agent within a |
| |specified time. |
|A change in the |Where a partnership is |
|composition of the |registered as a tax agent|
|partnership does not |and there is a change in |
|affect the continuity of |the constitution of the |
|the partnership. |partnership, registration|
|However, a partnership |is taken to be terminated|
|must notify the Board of |from the time of that |
|any change in the |change. |
|composition of the |However, where the |
|partnership, or if an |registration of a |
|event affecting continued|partnership has been |
|registration happens in |terminated, there is a |
|respect of a partner in |mechanism in which former|
|the partnership. Where a|partners of the original |
|partnership fails to |partnership can be |
|notify the Board of any |registered as a successor|
|change in the composition|to the original |
|of the partnership, the |partnership, either as an|
|partnership exposes |individual or a partner |
|itself to a sanction for |in a new partnership. |
|a breach of the Code. | |
|There is no registration |The registration |
|requirement setting |requirements for |
|percentages of directors |companies include that |
|to be qualified. To be |qualified director/s must|
|registered, companies |have at least 25 per cent|
|must be able to |ownership of the company.|
|demonstrate that they |Each qualified director |
|have a sufficient number |must be a fit and proper |
|of registered individuals|person (including holding|
|to provide tax agent |the prescribed |
|services or BAS services |qualifications). |
|to a competent standard, | |
|and to carry out | |
|supervisory arrangements.| |
Detailed explanation of new law
Definitions of tax agent service and BAS service
Definition of tax agent service
28. A tax agent service is any service that relates to:
. ascertaining the liabilities, obligations or entitlements
of an entity that arise, or could arise, under a taxation
law;
. advising an entity about the liabilities, obligations or
entitlements of the entity or another entity that arise,
or could arise, under a taxation law; or
. representing an entity in their dealings with the
Commissioner and,
that is provided in circumstances where it can reasonably be
expected that the entity will rely on it to satisfy liabilities or
obligations that arise or could arise under a taxation law, or to
claim entitlements that arise or could arise under a taxation law.
[Subsections 90-5(1) and 90-1(1)]
29. A tax agent service includes, but is not limited to:
. preparing or lodging a return, notice, statement,
application or other document about a taxpayer's
liabilities, obligations or entitlements under a taxation
law;
. preparing or lodging on behalf of a taxpayer an objection
under Part IVC of the TAA 1953 against an assessment,
determination, notice or decision under a taxation law;
. applying to the Commissioner or the AAT for a review of,
or instituting an appeal against, a decision on an
objection under Part IVC of the TAA 1953;
. giving a taxpayer advice about a taxation law that the
taxpayer can reasonably be expected to rely upon to
satisfy their taxation obligations; or
. dealing with the Commissioner on behalf of a taxpayer.
30. A tax agent service relates to services provided under a taxation
law. A taxation law has the same meaning as in subsection 995-1(1)
of the ITAA 1997, namely, any Act (including a part of an Act)
which the Commissioner has the general power to administer, and any
regulations under such an Act. (Note that the scope of 'taxation
law' will be broadened to include this Bill and the regulations
under the Bill - refer to paragraph 1.32 in Chapter 1 of this
explanatory memorandum.) Consequently, the new provisions extend
the concept of 'tax agent services' beyond income tax matters.
31. Tax agent services only include those services that involve the
application or interpretation of a taxation law (and therefore
require the provider to have a certain level of knowledge and
experience in the taxation laws), and those services which involve
representing an entity in their dealings with the Commissioner.
For example, advising or assisting an entity on tax concessions for
expenditure incurred on research and development (R&D) activities
are tax agent services, where the service involves the application
of the taxation laws.
1.
Lorenzo describes himself as an 'R&D consultant'. Lorenzo
assists his clients to identify which of the activities
undertaken by them will meet the definition of 'R&D
activities', for the purpose of assisting them in making
claims under the R&D tax concession provisions in the
ITAA 1936.
Lorenzo advises his clients on which activities are
eligible, and helps them to prepare their registration forms
to be lodged with Innovation Australia, in respect of these
activities. This registration form includes a description
of the eligible R&D activities and the technical objectives
of those activities, as well as a break up of the
expenditure claimable in respect of those activities.
Registration with Innovation Australia is a pre-requisite to
making a claim for the expenditure on those activities under
the R&D tax concession.
The work performed by Lorenzo falls within the definition of
'tax agent service' as the service provided and advice given
relate to the ascertaining of clients' entitlements under
the R&D tax concession provisions in the ITAA 1936 and the
services are provided in circumstances in which Lorenzo's
clients could reasonably be expected to rely on them to
claim the entitlement.
2.
Jessica is a quantity surveyor who provides reports that
detail depreciable items in a building to enable her clients
to calculate deductions for decline in the values of
depreciating assets.
Jessica is providing a tax agent service as she would need
to have certain knowledge of the relevant taxation laws to
determine the depreciable nature of the assets to provide
the service and it is reasonable to expect her clients to
rely on the service to claim an entitlement under the
taxation laws.
32. The definition of 'tax agent service' does not include services
that do not involve the interpretation and/or application of the
taxation laws.
1.
Tom is an asset valuer and provides opinions on the value of
assets.
Tom often assists clients in determining the market value of
assets for tax purposes. There are many provisions in the
taxation laws where the tax position depends upon the value
of an asset or transaction, for example, ascertaining the
tax consequences of non-arm's length transactions.
Tom would not ordinarily be providing a tax agent service as
the provision of this service does not normally involve the
interpretation and/or application of the taxation laws to
ascertain clients' tax positions.
33. The definition of 'tax agent service' does not include services
provided in circumstances where it is not reasonable to expect that
they would be relied upon to satisfy liabilities or obligations
under a taxation law, or to claim entitlements under a taxation
law.
1.
Tanto Ltd is a car dealer. While selling cars, Tanto Ltd
often gives its clients suggestions on the tax implications
of car purchase transactions, but includes with its advice
that because it is not a tax expert, clients should consult
their tax agent. Because Tanto Ltd does not hold itself out
as a tax advisor or as having expertise in tax, and,
further, caveats its advice, it is not reasonable to expect
the tax advice provided by Tanto Ltd to be relied upon by
its clients for the purpose of satisfying their liabilities
or obligations under a taxation law, or claiming
entitlements under a taxation law. As such, the tax advice
provided by Tanto Ltd is not a tax agent service.
34. Most tax related services that tax agents or BAS agents outsource
to an unregistered entity would not be tax agent services. This
could be because the service does not involve the interpretation or
application of the taxation laws, or because the relationship
between the agent and the contractor is such that it is not
reasonable to expect the agent to rely on the service provided by
the contractor to satisfy its clients' tax obligations or to claim
entitlements under the taxation laws.
1.
Ace Accounting is a partnership which is registered as a tax
agent. Acme Services Trust provides professional and
administrative support personnel to Ace Accounting. The
personnel supplied remain employees of Acme Services Trust,
and as such, they are Ace Accounting's contractors.
Ace Accounting instructs and directs the contractors, and
provides the relevant steps and review processes that the
contractors must adhere to. Ace Accounting specifies in its
engagement letters with clients that it may use contractors
or other entities to deliver contracted services with their
authorisation, but that it is responsible for the conduct
and activities of all persons that it uses in delivering the
contracted services.
In these circumstances, the services provided by the
contractors are not tax agent services because it is not
reasonable to expect that Ace Accounting would rely on the
services to satisfy its clients' liabilities or obligations,
or claim entitlements, under a taxation law.
35. If tax agents or BAS agents contract a tax expert to provide
specialised tax advice in an area that they are not familiar with
and therefore cannot review for accuracy, the tax advice would
normally be a tax agent service.
1.
Joe is a registered tax agent who sometimes contracts the
services of Wilma, a specialised tax agent who has
particular expertise in the area of capital gains tax (CGT).
In this case, Wilma, in providing the specialised CGT
services, is providing a tax agent service to Joe, as it is
reasonable to expect that Joe would rely on the services
provided by Wilma to satisfy his clients' obligations under
the taxation laws.
36. Where it is reasonable to expect that advice is to be relied upon
for purposes other than to satisfy tax obligations (eg, for the
preparation and lodgment of a return), such as making an informed
financial or business decision, assessing risks or determining
income tax provisions in an audited account, the advice is not a
tax agent service. This applies to, for example, certain advice
provided by a financial services licensee under the Corporations
Act 2001 (Corporations Act) on the tax implications of financial
products or financial transactions, or advice relating to
ascertaining tax liabilities for the purpose of calculating a
future income stream. It would also include advice provided by an
actuary on a risk assessment of a particular product or entity that
takes into account the tax implications.
1.
Angelia is licensed under the Corporations Act to provide a
range of financial services. In accordance with the scope
of her financial services licence, Angelia recommends to her
client, Adam, a gearing strategy as a way to accumulate
wealth over the long term. In determining whether Adam has
the cash flow to afford the interest costs on borrowed
funds, Angelia estimates Adam's cash flow taking into
account the potential tax deductibility of interest costs,
the taxable nature of the dividends, the impact of franking
credits on Adam's income tax position and his eligibility
for certain tax offsets.
Merely taking into account the tax consequence of Adam's
circumstances in estimating his future cash flow does not
constitute a tax agent service. This is incidental to the
financial advice being provided and it is reasonable to
expect that the advice would only be relied upon by Adam for
the purpose of deciding whether to adopt the recommended
financial strategy.
2.
Erica is licensed under the Corporations Act to provide a
range of financial services. Caroline seeks financial
advice from Erica regarding long-term wealth accumulation
and an appropriate asset allocation.
Erica assesses Caroline's risk profile and recommends an
asset allocation that is consistent with that profile. As
part of this process, Erica recommends that Caroline sells
some of her existing shares and uses the proceeds for
investment in managed funds to increase diversification of
her investments. In assessing which shares Caroline should
sell, Erica alerts Caroline to the fact that selling certain
shares could potentially raise CGT liabilities. This would
not ordinarily be a tax agent service because it is provided
for the purpose of advising Caroline about an appropriate
asset allocation that fits her risk profile. However, if,
while alerting Caroline to the CGT consequences of selling
particular shares, Erica also assures Caroline that the tax
advice she provides is accurate and can be relied upon
without further consulting a tax agent, then Erica would be
providing a tax agent service.
3.
Oliver & partners is an audit firm and a registered company
auditor under the Corporations Act. As part of its audit
work, Oliver & partners is required to calculate income tax
provisions to be included in its clients' audited accounts.
Oliver & partners is not providing a tax agent service as it
is reasonable to expect that its clients' would only rely on
the service to satisfy the statutory requirements for their
audited accounts.
1.
Norma is licensed under the Corporations Act to provide a
range of financial services. In addition to providing
advice about the tax implications of decisions about
financial products, Norma provides extensive analysis of her
clients' tax positions and details of the relevant entries
into her clients' tax returns that would result from
adopting certain financial product decisions.
She includes a disclaimer in her product disclosure
statement stating that the tax advice she provides cannot be
relied upon for the purpose of satisfying obligations or
claiming entitlements under the taxation laws. Despite the
disclaimer, because the advice is extensive and sufficiently
detailed to be able to be reflected in her clients' tax
returns, it is reasonable to expect her clients to rely on
the advice to satisfy their obligations under the taxation
laws. As such, Norma is providing a tax agent service.
37. Given the broad definition of a 'taxation law', a regulation-making
power is provided in the Bill to give the Parliament the
flexibility in the future to specify particular services that do
not fall within the definition of 'tax agent service'. A similar
power is provided in relation to the definition of 'BAS service'.
[Subsections 90-5(2) and 90-10(2)]
Definition of BAS service
38. A BAS service is a type of tax agent service. It is a tax agent
service that relates:
. particularly to ascertaining the liabilities, obligations
or entitlements of an entity that arise, or could arise in
the future, under a BAS provision;
. particularly to advising an entity about the liabilities,
obligations or entitlements of the entity or another
entity that arise, or could arise in the future, under a
BAS provision; or
. to representing an entity in their dealings with the
Commissioner relating to a BAS provision and,
that is provided in circumstances where it can reasonably be
expected that the entity will rely on it for the purpose of
satisfying liabilities or obligations that arise, or could arise,
under a BAS provision, or to claim entitlements that arise, or
could arise, under a BAS provision. [Subsections 90-10(1) and 90-
1(1)]
39. A BAS provision is any one of the provisions defined as
BAS provisions in section 995-1 of the ITAA 1997. This means:
. collection and recovery of tax provisions in Part VII to
the Fringe Benefits Tax Assessment Act 1986;
. the indirect tax law (which means the GST law, the wine
tax law, the luxury car tax law or the fuel tax law, all
as defined in section 995-1 of the ITAA 1997); and
. pay as you go withholding and instalments provisions in
Parts 2-5 and 2-10 of Schedule 1 to the TAA 1953.
40. A BAS service therefore includes:
. preparing or lodging an approved form about a taxpayer's
liabilities, obligations or entitlements under a BAS
provision;
. giving a taxpayer advice about a BAS provision that the
taxpayer can reasonably be expected to rely upon to
satisfy their taxation obligations; or
. dealing with the Commissioner on behalf of a taxpayer in
relation to a BAS provision.
41. As with tax agent services, BAS services only include those
services that involve the application or interpretation of a BAS
provision (and therefore require a certain level of experience and
knowledge of BAS provisions), and those services which involve
representing an entity in their dealings with the Commissioner in
relation to a BAS provision. Administrative duties such as
entering data, paying tax and record-keeping are not BAS services.
1.
Leonard provides classroom and onsite training about the
installation/configuration and the use of off-the-shelf
accounting software including the use of the software to
determine liabilities under a BAS provision. The training
he provides is of a general nature. Leonard does not
provide specific advice about his clients' liabilities nor
does he help to establish appropriate default codes for GST
purposes in the accounting software.
Leonard is not providing a BAS service because he is not
interpreting a BAS provision and is not providing advice to
his clients about their liabilities under a BAS provision in
a circumstance where it can reasonably be expected to be
relied upon by them to satisfy their liabilities or
obligations under a BAS provision, or to claim entitlements
under a BAS provision.
If, however, Leonard helps his clients to determine the
appropriate default GST codes for certain transactions when
configuring the accounting software, then he is providing a
BAS service as the provision of advice regarding which GST
codes are to be used requires Leonard to interpret and apply
a BAS provision and therefore have a certain level of
knowledge of the GST law.
42. Not all items of work from the recording of a transaction to the
preparation of an approved form (eg, a BAS) are BAS services.
Entering data, coding transactions based on instructions provided
and processing payments or preparing bank reconciliations are not
BAS services because they do not require the interpretation or
application of a BAS provision.
1.
Francisca is a bookkeeper. She follows instructions from
Chris, a registered BAS agent, in coding tax invoices and
transferring data onto a computer programme for her clients.
Francisca's work is then reviewed by Chris to check its
accuracy. The tasks that Francisca is performing do not
constitute BAS services.
2.
Penny operates a mobile bookkeeping service for a number of
clients. The services she provides include setting up
commercial accounting software for clients, entering and
coding clients' transactions into these software programmes
and generating a variety of reports (including those that
assist clients in determining their BAS liabilities) from
these software programmes.
Penny's clients rely on the information she provides to
complete their regular BASs. They do not expect to have to
re-work reports and are paying Penny to provide a service
that allows them to complete the BAS with the information
she provides. While installation and configuration of
accounting software (without determining the default GST
codes) does not constitute a BAS service, the coding of
clients' transactions in this situation, where clients do
not expect to have to re-work the reports generated,
constitutes the provision of a BAS service as it requires
the interpretation and application of a BAS provision where
the service can be expected to be relied upon by clients for
the purpose of satisfying obligations under a BAS provision.
Registration
Registration requirements
43. Individuals who are aged 18 or over (including those acting in the
capacity of a trustee), partnerships and companies (including those
acting in the capacity of a trustee) are eligible for registration
as a tax agent or BAS agent if the Board is satisfied that they
meet the tax practitioner registration requirements. While
trustees can apply for registration, trusts are not entities that
can apply for registration. [Subsection 90-1(1) and sections 20-5
and 70-15]
1.
Amy, Betty and Cathy are trustees of ABC Trust and only Amy
is a registered tax agent. While ABC Trust is not eligible
for registration as a tax agent and therefore cannot provide
tax agent services for a fee in its own right, ABC Trust can
provide tax agent services for a fee on Amy's behalf
provided that Amy ensures that the services provided by ABC
Trust are provided competently.
44. The registration requirements consist of the following two
elements:
. the fit and proper person test (which applies to
individuals and partners/directors of
partnerships/companies); and
. prescribed qualifications and experience requirements for
individuals, or having a sufficient number of registered
individuals (thereby demonstrating appropriate
organisational qualifications and experience) for
partnerships/companies.
[Section 20-5]
Element 1: Fit and proper person test
45. To be eligible for registration, the Board must be satisfied that
an applicant is a fit and proper person. The fit and proper person
requirement applies to individuals, each individual partner (for
partnerships) and each director of a company (for
partnerships/companies). [Paragraphs 20-5(1)(a) and 20-5(3)(a) and
subparagraphs 20-5(2)(a)(ii) and 20-5(2)(b)(i)]
46. The Board, in deciding whether an individual is a fit and proper
person, must have regard to whether the individual is of good fame,
integrity and character and, in particular, but without limiting
those characteristics, whether an event affecting the individual's
continued registration happened to the individual in the past five
years, whether the individual had the status of an undischarged
bankrupt at any time during the previous five years, and whether
the individual had served any part of a term of imprisonment during
the previous five years. [Section 20-15]
47. An event affecting an entity's continued registration occurs if the
entity:
. is convicted of a serious taxation offence;
. is convicted of an offence involving fraud or dishonesty;
. is penalised for being a promoter of a tax exploitation
scheme (under subsection 290-50(1) of Schedule 1 to the
TAA 1953);
. is penalised for implementing a scheme that has been
promoted on the basis of conformity with a product ruling
in a way that is materially different from that described
in the product ruling (under subsection 290-50(2) of
Schedule 1 to the TAA 1953);
. becomes an undischarged bankrupt or goes into external
administration (as defined in the Corporations Act);
and/or
. is sentenced to a term of imprisonment.
[Section 20-45]
1.
Three years ago, Melissa was convicted of dangerous driving
causing serious injury under section 319 of the Crimes Act
1958 (Vic) and received a two-year suspended prison
sentence. Being sentenced to a term of imprisonment in the
previous five years is an event that the Board must consider
in deciding whether Melissa is a fit and proper person for
registration purposes.
2.
Seven years ago, William became bankrupt and was not
discharged until three years ago. Although William became
bankrupt more than five years ago, having the status of an
undischarged bankrupt at any time during the past five years
is a factor that the Board must consider in deciding whether
William is a fit and proper person for registration
purposes.
48. Broadly speaking, a serious taxation offence is a certain type of
taxation offence or any one of a series of specified offences
outlined in the Schedule to the Criminal Code Act 1995 (Criminal
Code) that relates to a tax liability, as described below.
[Subsection 90-1(1)]
49. A taxation offence is defined in section 8A of the TAA 1953 as an
offence against any taxation law. A 'serious taxation offence' is
an offence that is a 'taxation offence' that is punishable on
conviction by a fine exceeding 40 penalty units, or imprisonment,
or both. [Subsection 90-1(1)]
1.
Fernando maintains a bank account in a false name and omits
the interest from his income tax return. If convicted, the
offence is punishable by a fine of up to 50 penalty units.
This is a serious taxation offence, irrespective of the
penalty actually imposed by the court upon conviction.
50. A 'serious taxation offence' also refers to those offences outlined
in the Criminal Code which relate to:
. obtaining property by deception (section 134.1 of the
Criminal Code);
. obtaining financial advantage by deception (section 134.2
of the Criminal Code);
. general dishonesty with respect to obtaining a gain,
causing a loss or influencing a Commonwealth public
official (section 135.1 of the Criminal Code);
. obtaining a financial advantage (section 135.2 of the
Criminal Code); and/or
. conspiracy to defraud with respect to obtaining a gain,
causing a loss or influencing a Commonwealth public
official (section 135.4 of the Criminal Code),
if the offence relates to a tax liability within the meaning of the
TAA 1953. [Subsection 90-1(1)]
51. An event affecting an entity's continued registration includes
conviction of an offence involving fraud or dishonesty. The
offence of dishonesty takes its ordinary meaning. Under section
130.3 of the Criminal Code, dishonest is defined as dishonest
according to the standards of ordinary people in circumstances
where the defendant is aware of these standards. Consequently, the
scope of 'dishonest' is determined by community standards.
1.
Patricia was convicted of theft and was fined $1,500. To
convict an individual for theft, a court must find that the
individual has dishonestly appropriated property belonging
to another with the intention of permanently depriving the
other person of the property. Consequently, theft is an
offence of dishonesty and the Board must consider this in
determining whether Patricia satisfies the fit and proper
person test for registration.
53. In addition to the fit and proper person requirements for
individuals, the following requirements apply to partnerships and
companies (including companies which are partners in a partnership
seeking registration), as appropriate:
. each partner who is an individual must be aged 18 years or
more;
. the company must not be under external administration; and
. the company must not have been convicted of a 'serious
taxation offence' or an offence involving fraud or
dishonesty during the previous five years.
[Subparagraphs 20-5(2)(a)(i), 20-5(2)(b)(ii) and (iii) and
paragraphs 20-5(3)(b) and (c)]
Element 2: Prescribed qualifications and experience
Prescribed qualifications and experience (for individuals)
52. An individual is required to satisfy the prescribed requirements in
order to register. The requirements prescribed in the regulations
include minimum educational qualifications and relevant experience.
[Paragraph 20-5(1)(b)]
53. The regulations may provide a system to allow the Board to accredit
professional associations, including tax and accounting
professional associations, associations of bookkeepers and legal
professional associations, for the purpose of recognising
professional qualifications and experience for registration
purposes. [Section 20-10]
Sufficient number of registered individuals (for
companies/partnerships)
54. In order to be registered, companies and partnerships must satisfy
the Board that they have a sufficient number of registered
individuals to provide services to a competent standard and to
carry out necessary supervisory arrangements, as follows:
. in the case of registration as a tax agent, such
registered individuals must be registered as tax agents;
and
. in the case of registration as a BAS agent, such
registered individuals must be registered as BAS agents or
tax agents.
[Paragraphs 20-5(2)(c) and 20-5(3)(d)]
55. This requirement ensures that a company or a partnership has
sufficient organisational qualifications and experience to provide
tax agent services or BAS services competently. The registered
individuals that a company or partnership are required to have in
order to satisfy this requirement may include partners, directors,
employees, contractors and staff provided under service trust
arrangements.
1.
NXW Ltd applies to the Board for registration as a tax
agent. To satisfy the Board that it has a sufficient number
of individuals who are registered tax agents to ensure that
the tax agent services it provides are provided competently
and that provision of services is appropriately supervised,
NXW Ltd lists in its application for registration both its
employees who are registered tax agents and the registered
individuals supplied by JMD Trust (a service trust).
56. There is no set formula for determining the number of registered
individuals that a company or partnership is required to have to
satisfy this requirement. The Board may provide further guidance
on adequate staffing and supervision from time to time. The
factors that the Board may take into account in providing such
guidance may include the size of the business, the services being
offered, the conditions that may be imposed on the
company/partnership's registration (based on the qualifications and
experience of its personnel - refer to paragraph 2.69 for the
Board's ability to impose conditions on an entity's registration)
and the supervisory arrangements (eg, quality control practices) in
place.
Pre-1988 tax agents and nominees
57. Individuals who were registered as a tax agent or a nominee under
Part VIIA of the ITAA 1936 immediately before the commencement of
section 39 of the Taxation Laws Amendment Act (No. 2) 1988 on
1 November 1988 and remain registered immediately prior to
commencement of all of the provisions of the Bill are eligible for
registration as tax agents even if they do not meet the prescribed
educational qualifications and relevant experience requirements for
registration. (They must, however, meet the other registration
requirements.) This rule governing pre-1988 tax agents and
nominees preserves the special treatment provided in the current
law. [Subsection 20-5(4)]
Registration process
Application for registration
58. Individuals, partnerships or companies may apply to the Board for
registration, including renewal of registration, as a tax agent or
BAS agent. [Subsection 20-20(1)]
59. An application for registration must be in the form approved by the
Board, accompanied by the prescribed application fee and any
documents that are required by the Board. [Subsection 20-20(2)]
60. The Board must give the application fee to the Commissioner who
receives the fee on behalf of the Commonwealth. If the applicant
decides to withdraw an application for registration, the
application fee will be refunded if the withdrawal occurs within 30
days after the day on which the application was made and before the
application has been granted or refused. [Subsections 20-20(3) and
(4)]
Decision by the Board to register the applicant
61. If the Board is satisfied that the applicant meets all of the
registration requirements, the Board must grant registration.
Otherwise, the Board must reject the application for registration.
[Subsection 20-25(1)]
62. The Board has a period of six months from receiving an application
for registration in which to decide whether to grant or refuse
registration. Where the Board has not made a decision on a
registration application within six months of receiving the
application, the Board is taken to have rejected the application
unless the rules for renewal of registration apply. [Subsections
20-25(2) and (3)]
63. Under the rules for renewal of registration, if a tax agent or BAS
agent applies for renewal at least 30 days prior to the expiration
of registration, or such shorter period as the Board allows, the
agent's registration is taken to continue until their application
has been decided. [Subsections 20-50(1) and (2)]
64. An entity whose registration has been suspended may apply for
renewal of registration during the period of suspension.
[Subsection 20-50(3)]
65. Both the Board's decision to reject an application for registration
and its deemed decision to reject an application as a result of its
failure to determine an application within six months of receiving
the application are reviewable decisions, for which the applicant
can make an application to the AAT. [Subparagraph 70-10(a)(i)]
66. The right to apply for review by the AAT allows those entities that
have been affected by a decision of the Board to question the
Board's exercise of its powers before an independent administrative
body. For the reviewable decisions in the Bill, the Board is
required by section 27A of the Administrative Appeals Tribunal Act
1975 to give a notice to the affected entity/entities stating that
a decision was made and that the entity has the right to have that
decision reviewed. Under section 28 of that Act, the Board is
required, upon request, to provide a written statement setting out
the findings on material questions of fact, referring to the
evidence or other material on which those findings were based and
giving the reasons for the decision. A request for the review of a
Board decision must be lodged directly with the AAT, generally by
the twenty-eighth day after the day on which the terms of the
decision are given to the affected person.
67. A decision by the Board refusing to grant the applicant a shorter
period in which to lodge their application for renewal of
registration is also a reviewable decision against which the
applicant can apply to the AAT for review. [Paragraph 70-10(d)]
68. The Board may impose one or more conditions on an entity's
registration to limit the scope of services that the entity may
provide to a particular type of tax agent service (such as
providing advice as opposed to compliance work) or a particular
area of the taxation laws (such as GST). [Subsections 20-25(5) to
(7)]
54. In determining whether any limitations should be placed on an
entity's registration:
. for an individual, the Board must have regard to the
individual's qualifications and relevant experience; and
. for a company or partnership, the Board must have regard
to the conditions that have been imposed on the
registrations of the individuals working for that company
or partnership. It would be inappropriate, for example,
for a partnership to provide general income tax related
services if the registered individuals working for it and
supervising the provision of services are restricted under
their own registrations to providing fringe benefits tax
related advice.
[Subsection 20-25(7)]
69. This allows individuals with extensive experience in a specialised
area of the taxation laws or in a particular type of tax agent
service to be eligible for registration as agents provided all of
the other registration requirements are satisfied.
70. A tax agent or BAS agent may apply to the Board to vary a condition
imposed on their registration. The application must be in a form
approved by the Board and supported by information or documents
required by the Board. If the Board is satisfied that it is
appropriate to vary a condition, then it may decide to vary it
accordingly. [Section 20-40]
71. The Board may issue guidelines (which are legislative instruments -
refer to paragraph 5.35 in Chapter 5 of this explanatory
memorandum) to specify training courses for the purpose of varying
or removing a condition placed on a registration. For example, the
Board may specify that an agent must satisfactorily complete a
specified course in preparing tax returns in order to remove a
condition on a registration preventing them from doing so.
72. The Board's decisions to impose a registration condition and to
refuse to vary a condition are reviewable decisions, for which the
applicant can make an application to the AAT for a review.
[Subparagraph 70-10(a)(ii) and paragraph 70-10(c)]
73. The Board must notify an applicant of its decision to register or
refuse to register within 30 days of that decision being made. If
the Board grants an entity's application, it must notify the entity
of the period of registration and any conditions imposed on the
registration. If the Board refuses to register an entity, it must
furnish the entity with reasons for the decision. However, failure
by the Board to comply with these requirements does not affect the
validity of the Board's decision. [Subsection 20-30(1)]
74. The Board must also notify the Commissioner of the Board's decision
to register or refuse to register an entity. This will facilitate
the Commissioner's administration of the Australian Taxation
Office's (ATO) electronic interfaces with tax agents and BAS agents
(eg, the tax agents' portal). [Subsection 20-30(2)]
75. The Board may, by written notice, require a tax agent or BAS agent
to maintain professional indemnity insurance as specified in the
notice, which may include requirements as to the level and
essential terms of the insurance policy. The notice may be given
at any time during the agent's registration. [Subsection 20-30(3)]
76. Tax agents and BAS agents are professionals who hold themselves out
as having a special skill on which members of the community can
rely. As they are agents for the client, they can be liable for
any financial loss or damage which their clients suffer through
failure or mistake. The requirement to have appropriate
professional indemnity insurance cover ensures that those people
who are exposed to the risks of financial loss resulting from
agents' conduct are adequately protected and compensated.
77. In determining the appropriate type or level of professional
indemnity insurance for tax agents and BAS agents, the Board may
refer to the insurance level standards currently imposed by
recognised professional associations, and the Commonwealth
legislative framework regarding the capping of liabilities for
damages, for guidance.
78. The Board has discretion not to impose additional professional
indemnity insurance requirements on those tax agents and BAS agents
who are already required to take out insurance by virtue of their
membership with a relevant professional association.
79. In addition, the Board has discretion to exempt a tax agent or BAS
agent from having to hold professional indemnity insurance if the
entity can satisfy the Board that it has other satisfactory
insurance arrangements in place.
1.
SupaTax is a franchisee and a registered tax agent. The
franchise agreement specifies that SupaTax must take the
professional indemnity insurance arrangement organised by
the franchisor who is a foreign company. The franchisor
purchased, at an industry standard, professional indemnity
insurance cover overseas for the whole franchising group
including SupaTax. In this case, as SupaTax already has an
industry standard professional indemnity insurance
arrangement in place, the Board may choose not to specify
further requirements.
80. The Board's decision to require professional indemnity insurance is
a reviewable decision, for which a tax agent or BAS agent can make
an application to the AAT for a review. [Paragraph 70-10(b)]
Commencement and duration of registration
81. A tax agent's or BAS agent's registration commences on the date
specified in the notice that the Board gives to the agent informing
it of the Board's decision to grant its application for
registration. For a renewal of registration, the agent's
registration commences on the day after the expiry date of the
previous registration. [Paragraph 20-35(a)]
82. Registration is valid for a period of at least three years. The
Board has the power to determine a period longer than three years.
Registration expires at the end of the period determined by the
Board unless it is terminated before that time. [Subsection 20-
25(4) and paragraph 20-35(b)]
Notification of a change in circumstances
83. A tax agent or BAS agent must notify the Board, in writing, of a
change in circumstances that results in failure to continue to meet
any of the registration requirements, or if an event affecting
their continued registration happens to an agent that is an
individual, or to a partner or director of a partnership/company
agent (including a director of a corporate partner in a registered
partnership) - refer to paragraph 2.47 for an outline of events
affecting continued registration. [Section 30-35]
84. A tax agent or BAS agent who is a partnership must notify the Board
when an event affecting continued registration happens to a partner
or a director of a company that is a partner in the partnership.
In addition, the partnership must notify the Board if the
composition of the partnership changes. A tax agent or BAS agent
who is a company must notify the Board if an event affecting
continued registration happens to a director of the company, if one
or more directors cease to be a director, or if one or more persons
become a director of the company. [Paragraphs 30-35(2)(b) and (c)
and 30-35(3)(b) and (c)]
85. For the purposes of the Bill, a change in the composition of a
partnership does not affect the continuity of the partnership. In
terms of registration, this means that a partnership's registration
does not lapse every time a partner leaves or a new partner is
admitted, provided the partners of the registered entity continue
to comply with the partnership registration requirements, including
the fit and proper person test. [Section 70-20]
86. A tax agent or BAS agent must notify the Board within 30 days of
the day on which they became or ought to have become aware of the
occurrence of any of these events. Failure to notify within the
time frame is a breach of the Code (which may attract an
administrative sanction) and/or an offence under section 8C of the
TAA 1953 for failure to comply with requirements under a taxation
law. [Subsection 30-35(4)]
Termination of registration
Grounds for termination
87. The Board may terminate registration if an agent breaches the Code
(this is explained in Chapter 3 of this explanatory memorandum), if
an agent ceases to meet the registration requirements, if the agent
breaches a condition imposed on their registration, or, if they are
an individual or a company, an event affecting the agent's
continued registration happens to them - refer to paragraph 2.47
for an outline of events affecting continued registration.
[Paragraph 30-15(2)(d) and subsections 40-5(1), 40-10(1) and 40-
15(1)]
88. For a tax agent or BAS agent who is a partnership or company, where
an event affecting continued registration happens to a partner or a
director of a company that is a partner of a registered
partnership, or a director of the registered company, as an
alternative to a decision to terminate the registration, the Board
may decide to require:
. the registered partnership to remove the partner, or the
company that is a partner in the partnership to remove the
director from its board of directors; or
. the registered company to remove the director from its
board of directors.
[Subsections 40-10(1), (3) and (4), and 40-15(1) and (3)]
89. If the Board directs the removal of a partner/director from a
partnership/company, it must do so by notice in writing that
specifies a period within which the partnership/company must remove
the partner or director. In determining a suitable period for the
removal of a partner, the Board must have regard to the
requirements of any law of the Commonwealth, a state or a territory
in relation to the removal of partners from partnerships.
Similarly, when determining a suitable period for the removal of a
director of a company, the Board must have regard to any
requirement of the Corporations Act in relation to the removal of
directors. [Subsections 40-10(3) to (5), and 40-15(3)]
90. Failure to follow the Board's direction in these circumstances may
amount to a breach of the Code or may result in termination of
registration. [Subsections 40-10(3) and (4) and 40-15(3)]
91. The Board may terminate the registration of a tax agent or BAS
agent if the agent breaches a condition on their registration.
[Paragraphs 40-5(1)(c), 40-10(1)(b) and 40-15(1)(c)]
1.
XXZ Co. is a registered tax agent. XXZ Co.'s tax agent
registration is subject to a condition that it may only
provide advice about indirect taxes for a fee, given that
registered individual tax agents working for XXZ Co.
specialise in providing indirect tax advice and are
therefore restricted by conditions on their registrations to
providing only such advice. To expand its business, XXZ Co.
starts to accept work relating to income tax (eg, providing
income tax advice and preparing income tax returns) and
starts to recruit personnel who are registered tax agents
without conditions. Unless XXY Co. applies to the Board to
vary its registration condition and the Board decides to
make the variation, XXZ Co. is in breach of its registration
condition. This exposes XXZ Co. to a risk that its
registration may be terminated.
92. The Board must terminate an agent's registration:
. if the agent surrenders its registration to the Board by
notice in writing; or
. upon the death or dissolution of the agent.
[Subsections 40-5(2), 40-10(2) and 40-15(2)]
1.
SmallTax Pty Ltd is a registered tax agent with a single
director and four employees. SmallTax Pty Ltd has decided
to merge its business with SupaTax Ltd, another registered
tax agent. SmallTax Pty Ltd closes down its business and
surrenders its registration to the Board. The Board must
terminate the registration of SmallTax Pty Ltd.
Notice and effect of termination
93. Where the Board has terminated a registration, it may specify a
period of up to five years during which the agent is prohibited
from making a fresh application for registration, except in the
following circumstances where the termination is not related to the
agent's character:
. where registration was terminated because the agent
surrendered their registration by notice in writing; or
. where registration was terminated because the agent became
an undischarged bankrupt or went into external
administration.
[Section 40-25]
94. The exceptions listed above avoid the potentially unfair outcome
that an agent who becomes an undischarged bankrupt or goes into
external administration (eg, if they agree to be a guarantor for a
loan) may be subject to a time period in which they cannot make an
application for registration. Similarly, an agent who surrenders
their registration of their own volition should not be prevented
from re-applying for registration at any time in the future.
95. Where the Board has terminated the registration of a tax agent or
BAS agent, the Board must notify the agent in writing of the
decision and the reasons for the decision within 30 days of the
decision being made. The Board must also notify the agent in
writing of any determination of a period during which they are not
eligible to apply for registration, within 30 days of the
termination decision being made. However, failure by the Board to
comply with this requirement does not affect the validity of the
Board's decision. [Subsection 40-20(1)]
1.
The Board decides to terminate Kate's registration as she no
longer meets the fit and proper person test for registration
purposes, but does not notify Kate of its decision within
the 30-day time limit. Despite the Board's failure to
notify, its decision is still valid.
96. The Board must also notify the Commissioner of its registration
termination decisions and reasons for the decisions. As noted in
paragraph 2.76, notifying the Commissioner of certain decisions
will facilitate his administration of the ATO's electronic
interfaces with agents. [Subsection 40-20(3)]
97. The date of effect of the Board's decision to terminate a tax
agent's or BAS agent's registration is the date specified by the
Board in the termination notice. Rather than termination taking
effect immediately, the Board must specify a termination date that
is at least 28 days after the date of the notice. [Subsection 40-
20(2)]
98. The fact that a decision to terminate a registration does not take
effect until at least 28 days after a tax agent or BAS agent being
notified of the decision allows sufficient time for the tax agent
or BAS agent to apply to the AAT for a stay of the decision if they
intend to apply to the AAT for a review. The absence of an upper
limit for the period between the date of notice and the date of
effect gives the Board flexibility to specify a date in the future
to allow an agent to wind up their business and inform their
clients.
99. Decisions by the Board to:
. terminate the registration of a tax agent or BAS agent;
and
. determine a period during which a tax agent or BAS agent,
whose registration has been terminated, may not make an
application for registration,
are reviewable decisions for which the agent may apply to the AAT
for a review. [Paragraphs 70-10(e) and (h)]
Chapter 3
The Code of Professional Conduct
Outline of chapter
100. Part 3 of this Bill provides that tax agents and Business Activity
Statement (BAS) agents are required to comply with a legislated
Code of Professional Conduct (Code) and that failure to comply with
the Code may attract administrative sanctions imposed by the Tax
Practitioners Board (Board).
101. Subdivision 70-B of Part 7 of the Bill provides for decisions of
the Board to impose administrative sanctions to be reviewable by
the Administrative Appeals Tribunal (AAT).
Context of amendments
Operation of current provisions
Code of Professional Conduct
102. The current law does not have a comprehensive code to govern the
conduct of tax agents and BAS agents. Section 251K of the Income
Tax Assessment Act 1936 (ITAA 1936) provides that a tax agent's or
a nominee's registration may be cancelled or suspended for certain
specified conduct, for example, the intentional preparation of a
false return.
103. Currently, some - but not all - tax agents have to comply with a
code of conduct through their membership of a professional
association. Each association has a separate code and not all tax
agents are members of a professional association. Consequently,
tax agents who do adhere to a code currently adhere to slightly
different professional and ethical standards.
Administrative sanctions
104. The only administrative sanctions that are currently available to
the state Tax Agents' Boards (state Boards) are suspension or
cancellation of registration. This can leave the state Boards
without an effective response to conduct that is not desirable, but
does not warrant depriving a person of their livelihood.
105. Subsection 251K(1) of the ITAA 1936 provides that the state Boards
must suspend or cancel the registration of a tax agent or nominee
if they have been convicted of a specified offence.
106. Subsection 251K(2) of the ITAA 1936 provides that the state Boards
may suspend or cancel the registration of a tax agent or nominee if
the state Board is satisfied that:
. any return prepared by the tax agent is false in any
material particular;
. the tax agent has neglected the business of a principal;
. the tax agent has been guilty of misconduct; or
. the tax agent or the nominee of a tax agent is not a fit
and proper person to prepare income tax returns and
transact business on behalf of taxpayers.
107. A state Board must cancel the registration of a tax agent under
subsections 251K(3C) and (4) if:
. for individuals:
- the tax agent has become an undischarged bankrupt and/or
permanently ceases to carry on a business as a tax
agent;
. for partnerships:
- there is no partner registered as a nominee of the
partnership, any partner becomes an undischarged
bankrupt, or the partnership permanently ceases to carry
on a business as a tax agent; and
. for companies:
- there is no employee registered as a nominee of the
company, the company goes into liquidation, or the
company permanently ceases to carry on a business as a
tax agent.
Negligence
108. Section 251M of the ITAA 1936 currently provides that a tax agent
is liable to pay a fine, penalty or interest charge that a taxpayer
has incurred due to the negligence of the tax agent. The amount
that is recoverable from the tax agent does not take into account
any contributory negligence of the taxpayer.
Rationale for major changes
Code of Professional Conduct
109. A new legislated code sets out the conduct expected of tax agents
and BAS agents, thereby giving taxpayers greater confidence that
they are dealing with agents who have, and maintain, appropriate
ethical and professional standards.
Administrative sanctions
110. The Bill provides the Board access to a graduated range of
administrative sanctions for breaches of the Code, so that the
Board is able to respond to breaches appropriately.
Negligence
111. The Bill removes the special statutory cause of action allowing
taxpayers to recover a penalty, fine or interest charge incurred
due to the negligence of their tax agent. This provision of the
current law does not allow contributory negligence of the taxpayer
to be taken into account. It is also out of step with state laws
that cap liability for negligence at common law. Although these
issues could have been addressed by amending the provision, this
would add significant complexity. Moreover, the new regime
addresses the concerns that gave rise to the old provision in a
more direct way.
112. First, the income tax law with respect to interest charges has
changed considerably since the statutory remedy was originally
enacted. Now, under the Shortfall Interest Charge, interest
charges for tax shortfalls are four percentage points lower than
the General Interest Charge. The reduced Shortfall Interest Charge
therefore does not contain a penalty element, but merely seeks to
neutralise the loan benefit that taxpayers might typically receive
from the temporary use of the shortfall amount. Consequently,
errors of any type by tax agents will not generally have a penalty
impact on taxpayers.
113. Secondly, under the new regime certain administrative penalties
will no longer be imposed on taxpayers for the carelessness of
their tax agent or BAS agent.
114. Taxpayers retain a cause of action at common law to recover damages
from their tax agent or BAS agent for the negligence of their agent
and a cause of action under section 52 of the Trade Practices
Act 1974 to recover damages from their agent for engaging in
conduct that is misleading or deceptive or is likely to mislead or
deceive. Note that the primary tax cannot be recovered under a
statutory negligence claim, but may be recovered under a common law
negligence claim in certain situations.
Summary of new law
115. The ethical and professional standards required of tax agents and
BAS agents in the provision of tax agent services for a fee or
other reward are set out in the Code, which governs the conduct of
all tax agents and BAS agents. ('Tax agent service' includes 'BAS
service' - refer to paragraph 2.19 in Chapter 2 of this explanatory
memorandum.)
116. If the Board finds that an agent has breached the Code, it may
impose one or more of a range of graduated administrative
sanctions. The sanctions the Board may impose include:
. cautioning the agent;
. requiring the agent to complete a course of training;
. subjecting the agent to specified restrictions when
conducting their practice;
. requiring the agent to practise under supervision; and/or
. suspending or terminating the agent's registration.
Comparison of key features of new law and current law
|New law |Current law |
|The Code governs the |There is no equivalent, |
|conduct of tax agents and|comprehensive code to |
|BAS agents. The Code |govern the conduct of tax|
|establishes the |agents and BAS agents. |
|professional and ethical |Section 251K of the |
|standards required of |ITAA 1936 provides that a|
|agents. |tax agent's or a |
| |nominee's registration |
| |may be cancelled or |
| |suspended for certain |
| |specified misconduct, for|
| |example, the intentional |
| |preparation of a false |
| |return. |
|In addition to suspension|The state Boards may |
|and termination of |suspend or cancel |
|registration, the Board |registration, or take no |
|may impose one or more of|action. |
|a range of administrative| |
|sanctions. | |
|No statutory action in |An entity is entitled to |
|negligence against a tax |recover the amount of the|
|agent or BAS agent. |fine, penalty or interest|
| |charge from a tax agent, |
| |nominee or an exempted |
| |person under section 251L|
| |of the ITAA 1936, if the |
| |reason they are liable to|
| |pay that amount is a |
| |result of the negligence |
| |of the tax agent, nominee|
| |or the exempted person. |
Detailed explanation of new law
Code of Professional Conduct
Application of the Code
117. The Code governs the conduct of all tax agents and BAS agents.
[Section 30-5]
118. The purpose of having a legislated code is to establish clearly the
professional and ethical standards required of tax agents and BAS
agents, whether or not agents are members of a professional
association. The Code outlines the duties that agents owe to their
clients, the Board and other agents.
119. The introduction of the Code, together with mechanisms for
enforcing it, will ensure that tax agents and BAS agents possess
appropriate skills and knowledge. The Code will not, however,
place an additional burden on competent agents. Rather, it adopts
existing best practices, reflecting what is required of
professionals under the codes of conduct of related professions,
such as the accounting and legal professions.
Principles of the Code
120. The Code consists of a list of core principles. A single instance
of a particular conduct may amount to a contravention of more than
one of these principles.
121. The principles are set out under five categories:
. honesty and integrity;
. independence;
. confidentiality;
. competence; and
. other responsibilities.
122. The Board is responsible for administering the Code, and has the
power to issue guidelines (which are legislative instruments -
refer to paragraph 5.35 in Chapter 5 of this explanatory
memorandum) to explain how elements of the Code apply in practice.
Agents may rely on the guidelines issued by the Board to apply the
Code to their circumstances.
Honesty and integrity
123. Tax agents and BAS agents must behave honestly and with integrity.
[Subsection 30-10(1)]
1.
Jack maintains a bank account in a false name and omits the
interest from his income tax return. Jill, a registered tax
agent, assisted Jack to set up this account. The Board may
conclude that such behaviour calls into question Jill's
honesty and integrity.
124. Tax agents and BAS agents must comply with the taxation laws in the
conduct of their personal affairs. [Subsection 30-10(2)]
125. The definition of a 'taxation law' in section 995-1 of the Income
Tax Assessment Act 1997 covers those Acts (or parts of Acts) of
which the Commissioner of Taxation (Commissioner) has the general
administration, and any regulations under those Acts. (Note that
the definition of 'taxation law' will be amended to include the
Tax Agent Services Bill 2008 and associated regulations - refer to
paragraph 1.32 in Chapter 1 of this explanatory memorandum.)
126. An agent would ordinarily comply with the taxation laws when they
take a position in interpreting the law that is reasonably
arguable. This applies even if the Commissioner subsequently
interprets the law differently from the position the agent has
taken.
127. Tax agents and BAS agents must properly discharge their own
personal tax obligations, including lodging their personal income
tax returns and activity statements on time.
1.
Mukesh is a registered tax agent. For the past two years,
Mukesh has failed to lodge his own income tax return. Each
failure to lodge his tax return amounts to a breach of the
Code as Mukesh has failed to comply with a taxation law in
the conduct of his personal affairs.
128. Agents' personal affairs include affairs relating to the agent's
tax agent or BAS agent practice. This would encompass, for
example, the agent's duties and obligations with regard to
maintaining their registration.
1.
Tyler & Associates is a partnership and a registered tax
agent. If Tyler & Associates is required under the taxation
laws to notify the Board of changes to the composition of
the partnership within 30 days of the event, and it fails to
do so, it would be in breach of the requirement to comply
with the taxation laws in the conduct of its personal
affairs.
129. Tax agents and BAS agents must account for money or other property
they receive on trust from or on behalf of their clients. This may
include money received from a client in advance for the provision
of tax agent services. Where money or other property has been
received and is held on trust, agents must account for it to their
client and may only disburse the money or property in accordance
with their client's instructions or as otherwise authorised by the
operation of the law. For example, a tax agent or BAS agent may
disburse money or property from the trust account if the
Commissioner issues a notice under section 260-5 of Schedule 1 to
the Taxation Administration Act 1953 (TAA 1953) requiring the agent
to pay to the Commonwealth the money held in their client's trust
account to satisfy a tax related liability of the client.
[Subsection 30-10(3)]
130. To comply with this requirement, agents must establish a trust
account separate from their general business operating account to
receive money on trust. This is consistent with good practice as
set out in the accounting professional standards of the recognised
professional associations and relevant state laws such as the Legal
Profession Acts and trust accounts Acts in various Australian
jurisdictions. In addition, the Board may issue guidelines that
provide further guidance on this requirement.
1.
Anthony, a registered tax agent, receives money on trust
from his clients. To account for all the trust money he
receives from clients, Anthony sets up a separate trust
account with an authorised deposit-taking institution.
Other than where the law requires him to do so, Anthony is
only permitted to disburse the money in the trust account at
his clients' instruction.
Independence
131. Tax agents and BAS agents must always act lawfully in the best
interests of their client. [Subsection 30-10(4)]
132. As tax agents and BAS agents are agents of their clients, they must
act in the best interests of their clients. However, tax agents
and BAS agents also operate as an intermediary between taxpayers
and the tax administration and therefore owe duties not only to
their clients but also to the community. As such, their
obligations to their clients must be subject to the law.
1.
Michael works in the hospitality industry. He engages
Rahul, a registered tax agent, to prepare and lodge his
income tax return. He instructs Rahul to claim a deduction
for work clothing for the black trousers he is required to
wear. Although Michael might believe it is in his best
interest to reduce his taxable income, Rahul is aware that
Michael cannot claim the cost of his work clothing as an
allowable deduction because the trousers are not protective
or specific to his occupation. Rahul advises Michael
accordingly and must not act in accordance with Michael's
instruction.
133. Tax agents and BAS agents must ensure that they have adequate
arrangements in place to manage any conflicts of interest that may
arise, wholly or partially, in relation to the provision of tax
agent services. [Subsection 30-10(5)]
134. Tax agents and BAS agents are required to ensure that their
objectivity is not impaired by an actual or potential conflict of
interest. In some circumstances, regardless of the arrangements
put in place, the agent will not be able to remain objective, and
therefore should not perform the services for the client.
135. The adequacy of conflict management arrangements depends on the
nature, scale and complexity of the agent's business, the nature of
the service provided and the information obtained by the agent.
Some effective ways of managing conflicts of interest may be
through the use of ethical walls or through disclosure of a
conflict of interest (and/or informed consent to it) in the form of
a waiver signed by the client/s where the disclosure is
specifically authorised or otherwise permitted (eg, see paragraph
3.37).
1.
James and Margie, recently divorced, have used the same
registered tax agent, Sally, for the past 10 years. In
preparing their returns post divorce it became apparent to
Sally that the claiming of a deduction by James would have
prevented the claiming of a deduction by Margie. Although
Sally's professional judgment was that the deduction was
more properly claimable by James, she was in a position
where her duty to Margie was in conflict with her duty to
James. Sally discloses the conflict and receives a waiver
from both clients. She is not in breach of the Code.
Confidentiality
136. Tax agents and BAS agents are only permitted to disclose a client's
confidential information to a third party where they receive
specific authority from their client, or where there is a legal
duty to disclose. [Subsection 30-10(6)]
1.
Lilly & Co. is a large accounting firm and a registered tax
agent. To minimise its operating costs, Lilly & Co. enters
into an agreement with a bookkeeping/data processing firm in
Hong Kong, Zheng & Co., that Zheng & Co. will perform the
bookkeeping and data processing work for Lilly & Co.'s
clients. In order to send the clients' information to Zheng
& Co. for processing, Lilly & Co. is required to disclose
its arrangement with Zheng & Co. to its clients and obtain
its clients' explicit permission.
2.
The Australian Taxation Office (ATO) is conducting an audit
on Patricia's income tax return from the previous financial
year, but Patricia does not have all of her receipts and
payment summaries. As her registered tax agent, Edward,
completed her tax return, the ATO has issued a notice under
section 264 of the ITAA 1936 for Edward to provide it with
all relevant information regarding Patricia's income tax
return from the previous financial year. Although Edward is
required to maintain the confidentiality of Patricia's
information, the notice creates an overriding legal
obligation. Edward must therefore provide the ATO with the
information requested in the notice.
137. A third party is an entity other than the client to whom the
information relates. Specific authority is required to disclose
information relating to one entity within a service trust structure
to another entity within the same structure unless the client is
defined, for example in the engagement letter, as the whole
structure.
Competence
138. Tax agents and BAS agents must ensure that a tax agent service they
provide, or that is provided on their behalf, is provided
competently. [Subsection 30-10(7)]
139. This requirement prevents tax agents and BAS agents with narrow,
specialised knowledge from providing tax agent services that are
outside of their area of expertise.
140. Tax agents and BAS agents must not provide a tax agent service or
BAS service if they do not have sufficient knowledge, skill or
resources to ensure that the service provided by them or on their
behalf is provided competently. To ensure competent provision of
services, an agent may:
. obtain expert advice and assistance;
. obtain knowledge and skill through private study and
research; or
. inform the client of the likely delay and cost to acquire
the requisite knowledge and skill to provide the service
competently and obtain the client's voluntary consent to
the tax agent or BAS agent providing the service.
1.
Matilda is a registered tax agent. The majority of the tax
agent services that Matilda provides involves the
preparation and lodgment of income tax returns for small
businesses in the suburb in which she practises. Matilda's
client, Thom, seeks tax advice on some mergers and
acquisitions transactions that his company is contemplating.
Provision of this advice involves areas of the taxation
laws with which Matilda is not familiar. Matilda may be in
breach of the Code if she provides the tax advice to Thom
for a fee unless she can otherwise satisfy the Board that
she is competent to give that advice.
2.
Peter is an Australian legal practitioner and obtained
(unconditional) tax agent registration based on his
experience of providing tax agent services (other than the
preparation and lodgment of returns) as a legal
practitioner. Peter breaches this requirement of the Code
if he prepares and lodges returns on behalf of his clients
for a fee unless he can satisfy the Board that he is
competent to do so, for example, if he has undertaken
private study of materials published by the ATO and
available on its website and/or has completed certain
courses on return preparation.
141. Tax agents and BAS agents are also accountable for tax agent
services provided on their behalf. Entities that agents may engage
to provide tax agent services on their behalf are not limited to
individuals who are their employees or under their supervision and
control.
142. To ensure that services provided on their behalf are provided
competently, tax agents and BAS agents must ensure that the
provider of the service has appropriate skills and experience, and
that their work is adequately supervised or otherwise reviewed.
143. The adequacy of supervision depends on factors such as the
educational qualifications and extent of experience of the
provider, the actual service being provided and the structures or
processes in place within an organisation to facilitate the
competent provision of tax agent services.
1.
Wayne is a registered tax agent. Wayne outsources payroll-
related services to Leigh who is not a registered agent.
While direct supervision and control by Wayne is not
possible in the circumstances, Wayne must ensure that the
payroll services provided on his behalf by Leigh are
provided competently by reviewing Leigh's work to ensure its
accuracy.
If Leigh is a registered BAS agent whose expertise is in
payroll services, then Wayne may meet this requirement of
the Code without reviewing Leigh's work.
144. A tax agent or BAS agent must maintain up-to-date knowledge and
skills relevant to the tax agent services they provide. In this
regard, tax agents and BAS agents are required to maintain and
improve their knowledge and skill in the areas of the taxation laws
and tax administration which relate to the tax agent services they
provide. Keeping up-to-date with developments in the relevant
taxation laws and tax administration may require agents to undergo
a certain minimum number of hours of tax related continuing
professional education per year as determined by the Board.
[Subsection 30-10(8)]
145. The Board may issue a guideline listing the training that is
available in the market (including face-to-face training courses,
distance learning and online courses) as being sufficient for
continuing professional education purposes for this principle of
the Code. For this purpose, any person or organisation can make a
recommendation to the Board to have their training courses listed.
The courses are not restricted only to those offered by recognised
professional associations, recognised BAS agent associations, tax
agents or BAS agents.
146. When providing tax agent services that involve a statement being
made to the Commissioner or something else being done on behalf of
a client, tax agents and BAS agents must take reasonable care when
ascertaining the facts around their client's affairs that are
relevant to the service being provided. [Subsection 30-10(9)]
147. This requirement applies if a tax agent or BAS agent is acting
pursuant to a taxation law on behalf of their client, for example,
preparing and lodging a return on behalf of a client - refer to
paragraph 3.55 for the requirement to take reasonable care in
applying the law in relation to the provision of advice.
148. Tax agents and BAS agents are only required to take reasonable care
in ascertaining their clients' state of affairs insofar as the
state of those affairs is relevant to the service that they have
been engaged to provide. That is, the requirement is subject to
the agreed scope of the engagement between the agent and their
clients.
149. Where the agreed scope of the tax agent services excludes the
examination of information provided by the client or requires the
tax agent to rely on the information or advice of another expert,
then further enquiries would not be required unless the agent
identifies, or reasonably ought to have identified, that the
information was incorrect or incomplete.
150. The provision focuses on the requirement for agents to take
'reasonable care'. Although tax agents and BAS agents are not
responsible for the veracity of the tax information provided to
them by their clients, they are required to do what is reasonable
in the circumstances.
151. In many cases, taking reasonable care means that agents must ask
their clients the appropriate questions, based on their
professional knowledge and experience, in seeking the information.
Where there are grounds to doubt the information provided by a
client, the agent must make reasonable enquiries as to the
completeness or correctness/accuracy of that information.
152. Where a statement provided by a client seems plausible, is
consistent with previously established statements and the agent has
no basis to doubt the client's reliability or the veracity of the
information supplied, the agent may discharge its responsibility by
accepting a statement provided by the client without further
checking.
153. However, if a client provides information to their agent that seems
to be implausible or inconsistent with a previous pattern of claim
or statement, further inquiries would be required. While tax
agents and BAS agents are not required to audit, examine or review
books and records or other source documents to independently verify
the accuracy of information supplied by their clients, agents do
not discharge their responsibility in such a case by simply
accepting what they have been told.
1.
Alfred & Co. is a registered tax agent and has been engaged
by XYZ Media to conduct a review of its annual income tax
return prepared by its in-house tax manager. In reviewing
the draft return, Alfred & Co. identifies an apparent
inconsistency in the information contained in the return,
namely that the value of the stock on hand is less than the
daily stock turnover. As such, Alfred & Co. must make
further enquiries to resolve the inconsistency.
2.
Ozz & Associates, a registered tax agent, has been engaged
by Abco Media to prepare its annual income tax return, based
on the audited financial statements of Abco Media (Ozz &
Associates is not the auditor).
Ozz & Associates determines that it can rely on the
information provided by Abco Media, because it has
appropriate staff involved in its financial function and Ozz
& Associates has no reason to doubt the quality of the
materials provided in the course of the tax return
preparation engagement.
Ozz & Associates is not required to undertake audit-like
activities, such as comparing the value of trading stock on
hand at the end of the year with average daily sales, in
relation to the facts which underlie the financial records
from which the return is prepared.
3.
Stefan, a registered tax agent, has been engaged by Walsh
Ltd to prepare its income tax return. Walsh Ltd gave Stefan
all of its tax information, including its BAS and goods and
services tax (GST) reconciliation accounts prepared by
Craig, a BAS agent.
As Craig is a registered BAS agent, it would normally be
reasonable for Stefan to accept Craig's work at face value.
However, based on previous examination of other work by
Craig, Stefan has doubts as to the accuracy of Craig's work.
In these circumstances, it is not reasonable for Stefan to
accept Craig's work at face value. In this case, Stefan can
demonstrate having taken reasonable care in various ways.
These might include reviewing the original documentation
(eg, tax invoices) or satisfying himself of the procedure
and methodology Craig used to arrive at a particular
determination.
Stefan may decide to alert the Board to his concerns about
the accuracy of Craig's work.
154. Tax agents and BAS agents must take reasonable care to apply the
taxation laws correctly to the circumstances in relation to which
advice is sought. The circumstances may be the actual
circumstances of their clients or the hypothetical circumstances
provided by their clients. [Subsection 30-10(10)]
155. This provision does not require agents to determine the correct
application of the law, rather it requires agents to take
reasonable care to ensure the correct interpretation and
application of the law.
156. Where an agent is uncertain about how a taxation law applies to a
particular set of circumstances, it must seek clarification from
relevant authorities and sources such as:
. legislation and relevant extrinsic material (eg,
explanatory memoranda);
. relevant case law;
. the Commissioner's views as expressed in rulings and
determinations on the topic;
. the Commissioner's instructions in documents such as
income tax return form instructions, BAS instructions,
fact sheets and practice statements;
. information published or provided by a recognised
professional association, recognised BAS agent association
or legal professional association; or
. information published by experts, other agents or
specialists and other relevant commentaries.
1.
Justin is a registered tax agent. Bryn engages Justin to
provide GST-related tax advice. As the majority of Justin's
work involves providing income tax advice or preparing and
lodging income tax returns, his experience and knowledge in
the GST law is not up-to-date. Without carrying out any
further research into the subject matter (eg, checking the
relevant law and publications by the ATO on the subject),
Justin provides the advice based on his existing knowledge
of the GST law obtained through certain professional
education courses he attended several years ago. As a
result, Justin's advice to Bryn is incorrect. Justin is in
breach of the Code for failing to take reasonable care to
ensure the correct application of the taxation laws to
Bryn's circumstances.
157. Where an agent, after consulting the relevant authorities and
sources, is still uncertain of how to apply a taxation law, the
agent may choose to seek assistance from another party, such as
another agent, a legally qualified professional, a recognised
professional association or recognised BAS agent association, a
legal professional association, or the ATO. The agent should be
satisfied that the individual or organisation from which assistance
is sought has the ability and resources to provide advice on the
taxation laws. If the client is to bear the associated costs, the
agent should seek approval from the client before seeking such
assistance.
158. One method of clarifying the application of a relevant law is to
seek a private ruling from the ATO (see Division 359 of Schedule 1
to the TAA 1953). Private rulings can be relied upon by taxpayers
to bind the Commissioner. However, there is no obligation for the
taxpayer to act in accordance with the ruling. A taxpayer or agent
may object under Part IVC of the TAA 1953 where he or she applies
for a private ruling and the Commissioner fails to make the ruling
and has not otherwise declined to make the ruling within a certain
time period.
Other responsibilities
Proper administration of the taxation laws
159. Tax agents and BAS agents must not knowingly obstruct the proper
administration of the taxation laws. [Subsection 30-10(11)]
1.
Stella is a registered tax agent. Stella becomes aware that
the ATO is investigating the tax affairs of one of her
clients, Georgia. To delay the investigation process,
Stella removes documents relating to Georgia's tax affairs
from her business premises and 'misplaces' them elsewhere.
Stella is in breach of this principle of the Code.
160. Relying on the agent's or the client's lawful rights to withhold
documents or not provide information, such as legal professional
privilege or accountants' concession, is not a breach of this
requirement.
1.
Elizabeth is a registered tax agent. Greg is one of
Elizabeth's clients. The ATO is conducting an audit of Greg
and serves a notice under section 264 of the ITAA 1936 on
Elizabeth to obtain information relating to Greg's tax
affairs. After consulting with Greg, Elizabeth delays
compliance with the notice, however she provides the
required information within the time frame specified on the
notice. Elizabeth is not knowingly obstructing the proper
administration of the taxation laws.
2.
Henry is a registered tax agent. Ella is one of Henry's
clients. In response to a notice under section 264 of the
ITAA 1936 being served on Henry to provide documents
relating to Ella to the ATO, Henry, on behalf of Ella,
claims accountants' concession, in good faith, over some of
the documents sought. Henry is not in breach of this
requirement by claiming the concession.
If, however, Henry knows that the documents sought are not
within the scope of the accountants' concession, and still
claims they are in an effort to delay the process, he would
be in breach of this requirement.
Advising clients of their rights and obligations
161. Tax agents and BAS agents must advise clients of their rights and
obligations under the taxation laws that are materially related to
the services being provided. [Subsection 30-10(12)]
162. The advice may include:
. an explanation of the nature of self assessment, including
the Commissioner's ability to amend an assessment within a
certain time of the original assessment;
. the client's obligation to keep proper records and the
consequences of not doing so;
. that the responsibility for the accuracy and completeness
of the particulars and information required to comply with
the taxation laws vests with the client; and
. where necessary, the rights or options available to
clients including how to seek a private ruling and how to
object or appeal against adverse decisions made by the
Commissioner.
163. However, a tax agent or BAS agent is only required to advise a
client of their rights and obligations that are relevant to
services within the scope of engagement between the tax agent or
BAS agent and the client. One way of advising clients of their
relevant rights and obligations under the taxation laws is to
outline them in the engagement letter between the agent and their
clients.
Holding professional indemnity insurance
164. A tax agent or BAS agent is required to maintain appropriate
professional indemnity insurance. [Subsections 20-30(3) and 30-
10(13)]
165. Given that some agents may already maintain appropriate
professional indemnity insurance, it is not mandatory for the Board
to specify professional indemnity insurance for all agents.
However, the Board is expected to give notice in writing requiring
an agent who does not have appropriate professional indemnity
insurance to maintain professional indemnity insurance as specified
- refer to paragraph 2.77 in Chapter 2 of this explanatory
memorandum.
Following the directions of the Board
166. A tax agent or BAS agent must respond to requests and directions
from the Board in a timely, responsible and reasonable manner.
[Subsection 30-10(14)]
167. A tax agent or BAS agent may have to balance their obligation to
comply with requests from the Board against other professional
obligations, such as common law privileges or statutory
obligations. Consequently, claiming legal professional privilege
or other legal rights of the client is not an unreasonable response
to a direction of the Board.
168. Where there is no conflict of obligations, failure to follow a
direction of the Board will amount to a breach of the Code and may
attract an administrative sanction.
1.
Mario is a director of M&J Tax Pty Ltd, a registered tax
agent. Recently, Mario was penalised for being a promoter
of a tax exploitation scheme, which is an event affecting
M&J Tax Pty Ltd's continued registration. The Board
subsequently informed M&J Tax Pty Ltd, by notice in writing,
that it was required to remove Mario from its Board of
Directors within a certain period. M&J Tax Pty Ltd ignores
the Board's direction and allows Mario to continue to sit on
its Board of Directors. This failure to follow the Board's
direction is a breach of the Code.
Administrative sanctions for failing to comply with the Code of
Professional Conduct
169. Compliance with the Code is mandatory for all tax agents and BAS
agents. If tax agents and BAS agents do not comply, they may be
subject to administrative sanctions imposed by the Board.
170. The sanctions available to the Board allow the Board to tailor the
sanction to the seriousness of the conduct that breaches the Code.
The purpose of the sanctions is not primarily to punish tax agents
and BAS agents, but rather to improve the performance of agents and
maintain public confidence in agents' adherence to certain
standards.
171. Where, following an investigation, the Board is satisfied there has
been a breach of the Code, the Board may impose any one or more of
the following sanctions [section 30-15(1)]:
. a written caution [paragraph 30-15(2)(a)];
. an order requiring the tax agent or BAS agent to take one
or more actions including, but not limited to, the
following:
- complete a course of education or training specified in
the order by the Board [paragraphs 30-15(2)(b) and 30-
20(1)(a)];
- provide services (for which the tax agent or BAS agent
is registered) only under the supervision of another tax
agent or BAS agent that has been specified in the order
[paragraphs 30-15(2)(b) and 30-20(1)(b)]; and/or
- provide only those services that are specified in the
order [paragraphs 30-15(2)(b) and 30-20(1)(c)];
. suspension of registration [subsection 30-25(1) and
paragraph 30-15(2)(c)]; and/or
. termination of registration [section 30-30 and
paragraph 30-15(2)(d)] - refer to paragraphs 2.95 to 2.101
in Chapter 2 of this explanatory memorandum for notice and
effect of a termination.
1.
Arif is a registered BAS agent. Several complaints have
recently been made to the Board regarding Arif.
As a result of investigating Arif, the Board discovers that
he has made numerous errors in advising clients, largely in
relation to recent developments in the taxation laws. Arif
has not undertaken any continuing professional education in
accordance with the guidelines issued by the Board for the
last two years. The Board concludes that Arif is in breach
of the Code (subsections 30-10(7) and (8)) for, in part,
failing to maintain up-to-date knowledge and skills relevant
to the tax agent services he provides. Since this is Arif's
first breach of the Code, and to ensure that Arif is
appropriately supervised until he updates his knowledge, the
Board may impose sanctions such as issuing Arif with a
written caution, together with orders to complete the
necessary further training and to work under another agent's
supervision until he completes the further training.
172. The graduated range of sanctions provides the Board with the
capacity to tailor its response to the severity of the breach of
the Code. For instance, in the case of isolated mistakes, the
Board may take no specific action, or issue a written caution. For
repeated mistakes the Board may issue an order specifying that the
tax agent or BAS agent must undertake further education or training
in the particular area. In more severe cases, where a tax agent or
BAS agent has displayed a serious disregard for the Code,
suspension or termination of registration may be appropriate. This
is particularly so where a tax agent or BAS agent causes serious
damage to their clients, or to the integrity of the tax system.
Behaviour that calls into doubt the honesty, integrity or
competence of a tax agent or BAS agent, or raises questions about
their suitability to practise, may warrant more severe sanctions
such as suspension or termination of registration.
1.
Complaints are made to the Board that Christine, a tax agent
whose registration is limited to the provision of advice
about the fringe benefits tax law, has been giving some of
her clients advice about their broader income tax
obligations over the course of several months. Christine is
acting outside her expertise and would be in breach of both
the conditions placed on her registration and the Code for
providing a tax agent service which she is not competent to
provide.
The Board is satisfied that the allegations against
Christine are true and decides to impose an administrative
sanction. While the Board can terminate Christine's
registration for failing to comply with a registration
condition or the Code, given that this is the first time
that Christine has been found to have breached a condition
of her registration and the Code, the Board may choose to
issue Christine with a written caution for failing to comply
with the Code and a condition of her registration and order
her to provide only those services which she is registered
to provide.
2.
Rithy is a registered tax agent. It is brought to the
Board's attention that for the 2007-08 financial year Rithy
lodged 22 income tax returns on behalf of clients containing
mistakes in relation to allowable deductions. The Board
orders Rithy to undertake a course in taxation law
specialising in general and specific deductions. Rithy
ignores the Board's direction and fails to comply with the
order by the notified date. When questioned as to the cause
of his failure to comply, he responds simply that he has
been too busy. Rithy fails to comply with a new order for
training issued by the Board with an extended date. The
Board may subsequently decide to suspend Rithy's
registration for displaying a serious disregard of the Code
by repeatedly failing to follow directions of the Board.
173. The Board may decide not to impose an administrative sanction
against a tax agent or BAS agent for immaterial breaches of the
Code. Some breaches of the Code may be so trivial or isolated that
it would be unlikely for the Board to take any further action
against the agent.
1.
Dave is a registered BAS agent. Dave has lodged his own tax
returns on time for many years. Due to a sudden spike in
workload, he fails to lodge his own income tax return on
time (being a month late) and is referred by the ATO to the
Board for appropriate action. In this case, although Dave
is in breach of the Code for failure to comply with the
taxation laws in the conduct of his personal affairs, the
Board may choose not to impose any sanction.
Period of orders
174. The Board may specify the period of time in which the tax agent or
BAS agent must comply with requirements in the order, or
alternatively, the time period during which the agent must perform
certain requirements stated in the order. [Subsection 30-20(2)]
Period of suspension of registration
175. Where the Board decides to suspend the registration of a tax agent
or BAS agent, the Board may determine the period of suspension that
applies to the agent. If the agent's registration has already been
suspended, the Board can extend that suspension for a further
period, which commences at the end of the original suspension
period. [Subsections 30-25(1) and (3)]
176. Tax agents and BAS agents must not provide tax agent services while
their registration is suspended. If an agent provides tax agent
services in these circumstances, the Board may impose further
administrative sanctions, for example, it may suspend the agent's
registration for a further period or terminate registration.
Alternatively (or additionally), the Board may apply to the Federal
Court for a civil penalty order and/or an injunction to restrain
the agent from continuing to provide tax agent services - refer to
Chapter 4 of this explanatory memorandum for an explanation of
civil penalty orders and injunctions. [Subsections 30-25(2) and
(4)]
177. A tax agent or BAS agent under suspension can apply for
registration if their registration is due to expire during or after
the suspension period and must, where required, notify the Board of
a change in circumstances. The Board can also impose further
administrative sanctions, including termination for failure to
comply with the registration requirements or failure to comply with
the Code, during the suspension period. The agent is not, however,
taken to be a tax agent or BAS agent for any other purpose during
the suspension period. [Subsection 30-25(4)]
1.
Luke has had his registration suspended by the Board for
engaging in conduct that breaches the Code. Luke does not
inform his clients that his registration has been suspended
and continues to provide tax agent services. The Board
applies to the Federal Court for a civil penalty order
against Luke for providing tax agent services for a fee
while unregistered. At the same time, the Board also
applies to the Federal Court for an injunction to restrain
Luke from continuing to provide tax agent services to his
clients during the period of his suspension.
Notification of the Board's decision
178. Where the Board sanctions a tax agent or BAS agent, the Board must
notify the agent of its decision in writing. The notice must
contain the reasons for the Board's decision - refer to Chapter 5
of this explanatory memorandum for notification requirements
following an investigation by the Board that results in the
imposition of a sanction. [Subsections 30-20(2), 30-25(1) and 40-
20(1) and paragraphs 60-125(8)(c) and (d)]
179. A decision by the Board to impose an administrative sanction is a
reviewable decision for which the tax agent or BAS agent may apply
to the AAT for a review. This includes decisions to make an order
and to specify a time period in an order, a decision to suspend
registration, including a decision as to the length of the
suspension, and termination decisions - refer to paragraph 2.67 in
Chapter 2 of this explanatory memorandum for further explanation of
AAT review of Board decisions. [Paragraphs 70-10(e) to (g)]
Chapter 4
Civil penalties and injunctions
Outline of chapter
55. Part 5 of this Bill outlines the civil penalties to which
unregistered entities, tax agents and Business Activity Statement
(BAS) agents may be liable for contravening a civil penalty
provision under the Bill, and the way in which orders for civil
penalties are obtained.
56. Specifically, Part 5 of the Bill provides:
. for unregistered entities' liability for civil penalties
for engaging in conduct that is prohibited without
registration, as follows:
- providing tax agent services or BAS services for a fee
or other reward;
- advertising the provision of tax agent services or BAS
services; and
- making representations of being registered;
. for registered entities' liability for civil penalties for
engaging in certain serious misconduct while registered,
as follows:
- making a false or misleading statement;
- employing or using the services of an entity whose
registration has been terminated in certain
circumstances; and
- signing a declaration or statement that relates to a
document which was prepared by an entity other than the
tax agent or BAS agent, another tax agent or BAS agent,
or an individual under the supervision and control of a
tax agent or BAS agent; and
. that the Tax Practitioners Board (Board) may apply to the
Federal Court of Australia (Federal Court) for an order
for a civil penalty.
57. Subdivision 70-A of Part 7 of the Bill provides that the Board may
apply to the Federal Court for an injunction to prevent or compel
certain action if an entity has engaged or proposes to engage in
conduct that contravenes a civil penalty provision.
58. Section 70-20 of the Bill provides that, for the purpose of the
Bill, a change in the composition of a partnership does not affect
the continuity of the partnership.
59. Section 50-40 introduces special rules relating to the liability
for civil penalties of partners in a partnership that contravenes a
civil penalty provision.
Context of amendments
Operation of current provisions
Criminal penalties
60. Subsection 251L(1) of the Income Tax Assessment Act 1936 (ITAA
1936) provides for a criminal penalty for a person who provides any
of the specified services listed in the subsection for a fee
without being registered. Subsection 251L(6) specifies certain
entities that may provide a BAS service for a fee without
registration.
61. Section 251O of the ITAA 1936 provides for a criminal penalty for
an unregistered person who advertises that they will provide income
related
services or who represents that they are a tax agent.
62. Section 251N of the ITAA 1936 provides for a criminal penalty for a
tax agent who allows another person (who is not a partner in the
partnership or their employee, or a tax agent) to prepare income
tax returns or conduct other business relating to any income tax
matter on their behalf.
Rationale for major changes
63. In accordance with the Commonwealth guide to framing civil
penalties, civil penalties are considered more appropriate than
criminal penalties for conduct that is prohibited without
registration and for serious misconduct while registered. This is
because such conduct is not considered serious enough to warrant
the imposition of a criminal conviction or imprisonment. There is,
however, a need for more significant monetary penalties to deter
tax agents and BAS agents from contravening the civil penalty
provisions in the Bill.
64. In addition, civil penalties may be more appropriate than
suspension or termination of registration in circumstances where an
agent has engaged in conduct prohibited by the Bill, which,
although serious, does not warrant the loss of the agent's
livelihood.
Summary of new law
Civil penalties
65. Entities are liable to pay a pecuniary penalty for contravening a
civil penalty provision (civil penalties) for engaging in the
following conduct without registration:
. providing a tax agent service or BAS service for a fee or
other reward;
. advertising the provision of a tax agent service or BAS
service; or
. representing themselves to be a tax agent or BAS agent.
(Refer to paragraphs 2.14 to 2.19 and 2.28 to 2.42 in Chapter 2 of
this explanatory memorandum for an explanation of the definitions
of 'tax agent service' and 'BAS service'.)
66. There are exemptions from liability to civil penalties for certain
unregistered entities providing (for a fee or other reward) or
advertising tax agent services or BAS services as legal services in
certain circumstances. These services are referred to as 'exempted
legal services' in this chapter.
67. Tax agents and BAS agents are liable to civil penalties for the
following serious misconduct:
. making a false or misleading statement to the Commissioner
of Taxation (Commissioner);
. employing or using the services of a deregistered entity;
or
. signing a declaration or statement in relation to a
taxpayer on a document that was not prepared by a
registered entity or an individual under the supervision
and control of a registered entity.
68. The maximum amount of civil penalties for individuals for engaging
in prohibited conduct ranges from 50 penalty units to 250 penalty
units. Bodies corporate are subject to a penalty that is five
times the penalty imposable on an individual, and therefore ranges
from 250 penalty units to 1,250 penalty units.
69. If a partnership contravenes a provision of the Bill imposing a
civil penalty, each partner that was in the partnership at the time
of the contravention is treated as though they have contravened the
provision, unless they prove otherwise. The maximum amount of
civil penalties for each individual partner is the same as for
individuals for engaging in prohibited conduct, and therefore
ranges from 50 penalty units to 250 penalty units. Similarly, the
maximum amount of civil penalties for each corporate partner is the
same as for bodies corporate for engaging in prohibited conduct,
and ranges from 250 penalty units to 1,250 penalty units. The
maximum amount of civil penalties for a partnership depends on the
number and type of contravening partners in the partnership.
70. If the Board believes an entity has contravened a provision of the
Bill imposing a civil penalty, it may apply to the Federal Court
for an order requiring the entity to pay the Commonwealth the civil
penalty.
Injunction
71. If the Board is satisfied that an entity is engaging in conduct
that contravenes a civil penalty provision, for example, engaging
in conduct that is prohibited without registration, it may apply to
the Federal Court for an injunction to restrain or require certain
conduct.
Comparison of key features of new law and current law
|New law |Current law |
|Unregistered entities are|Unregistered entities are|
|liable to a civil penalty|liable for a criminal |
|if they provide a tax |penalty if they provide |
|agent service or BAS |any of a specified list |
|service for a fee or |of services for a fee, or|
|other reward, or if they |if they advertise income |
|advertise or represent |tax related services or |
|themselves to be a tax |represent themselves to |
|agent or BAS agent. |be a tax agent. |
|Tax agents and BAS agents|No equivalent. |
|are liable for a civil |(The state Tax Agents' |
|penalty if they make a |Boards have discretion to|
|false or misleading |suspend or cancel the |
|statement or employ or |registration of a tax |
|use the services of a |agent if they are |
|deregistered entity in |satisfied that any return|
|certain circumstances. |prepared by the tax agent|
| |is false in any material |
| |particular.) |
|Tax agents and BAS agents|A criminal offence |
|are liable to a civil |imposes a criminal |
|penalty if they sign a |penalty on a tax agent |
|declaration or other |who allows a person other|
|statement in relation to |than an employee, a |
|a taxpayer on a document |partner or another tax |
|that was prepared by an |agent to prepare or |
|unregistered entity |conduct business relating|
|without supervision and |to an income tax return |
|control by a registered |or objection on their |
|entity. |behalf. |
|The Board may apply to |No equivalent. |
|the Federal Court for an |(The Commissioner may |
|order for a civil penalty|initiate criminal |
|if an unregistered entity|proceedings if an |
|or a tax agent or BAS |unregistered entity or a |
|agent has contravened a |tax agent contravenes a |
|provision of the Bill |provision imposing a |
|imposing a civil penalty.|criminal penalty.) |
|If a partnership |No equivalent. |
|contravenes a civil | |
|penalty provision, each | |
|partner in the | |
|partnership, at the time | |
|of the conduct | |
|constituting | |
|contravention, is liable | |
|to pay a civil penalty | |
|unless the partner proves| |
|that they did not engage | |
|in, aid, abet, counsel or| |
|procure the conduct, or | |
|were in any way concerned| |
|in, or party to, the | |
|conduct. | |
|The Board may apply to |No equivalent. |
|the Federal Court for an | |
|injunction to prevent or | |
|compel certain action. | |
Detailed explanation of new law
Civil penalties for prohibited conduct
72. The Board may apply to the Federal Court for an order requiring an
unregistered entity, a tax agent or a BAS agent to pay a civil
penalty for engaging in certain specified misconduct. (The
procedure for obtaining a civil penalty order is explained in
detail from paragraph 4.59.)
Conduct by an unregistered entity
73. Subdivision 50-A provides that an unregistered entity is liable to
a civil penalty if it:
. provides a tax agent service or BAS service for a fee or
other reward in circumstances where it knows or is
reasonably expected to know that such a service is a tax
agent service or BAS service;
. advertises that it will provide a tax agent service or BAS
service; or
. represents that it is a tax agent or BAS agent.
[Subdivision 50-A]
74. Exemptions from liability are provided for entities providing
exempted legal services and for customs brokers in certain
circumstances. These exemptions are explained in paragraphs 4.39
to 4.44.
75. The maximum amount of the civil penalty for providing a tax agent
service or BAS service for a fee if unregistered is 250 penalty
units (currently $27,500) for an individual and 1,250 penalty units
(currently $137,500) for a body corporate. ('Penalty unit' has the
meaning given by section 4AA of the Crimes Act 1914.) [Subsections
50-5(1) and (2) and 90-1(1)]
76. The maximum amount of the civil penalty for advertising the
provision of a tax agent service or BAS service or representing as
a tax agent or BAS agent if unregistered is 50 penalty units
(currently $5,500) for an individual and 250 penalty units
(currently $27,500) for a body corporate. [Subsections 50-10(1)
and (2) and section 50-15]
77. Refer to paragraphs 4.67 to 4.69 for an explanation of the
treatment of partners in a partnership in the case of contravention
of a civil penalty provision.
Misconduct by a tax agent or BAS agent
78. Subdivision 50-B provides that a tax agent or BAS agent is liable
to a civil penalty if it:
. makes a false or misleading statement to the Commissioner;
. employs or uses the services of a tax agent or BAS agent
who has had their registration terminated in certain
circumstances; or
. signs a declaration or statement on a document that has
been prepared by an entity other than an individual who is
a tax agent or BAS agent, or an individual working under
the supervision and control of another individual who is a
tax agent or BAS agent.
[Subdivision 50-B]
79. The maximum amount of the civil penalty per offence by a tax agent
or BAS agent is 250 penalty units (currently $27,500) for an
individual and 1,250 penalty units (currently $137,500) for a body
corporate - refer to paragraph 4.69 for the treatment of partners.
[Section 50-20 and subsections 50-25(1) and 50-30(1) to (4)]
Conduct prohibited without registration
Providing a tax agent service or BAS service for reward if
unregistered
80. To ensure tax agent services and BAS services are provided to the
required standard, there are restrictions on who is entitled to
provide these services. Only a tax agent is allowed to provide a
tax agent service (other than a BAS service or exempted legal
service) for a fee or other reward.
81. An entity that is not registered as a tax agent is liable for a
civil penalty if it provides a service that it knows or ought
reasonably to know is a tax agent service (other than a BAS service
or an exempted legal service) and charges or receives a fee or
other reward for that service. [Subsection 50-5(1)]
82. An entity is liable for a civil penalty if it provides a service
that it knows or ought reasonably to know is a BAS service (other
than an exempted legal service) for a fee or other reward and it is
not registered as a tax agent or a BAS agent, or, if the BAS
service relates to imports or exports to which an indirect tax law
applies, the entity is not a customs broker licensed under Part XI
of the Customs Act 1901. [Subsection 50-5(2)]
83. The requirement that tax agent services or BAS services be provided
'for a fee or other reward' allows employees (who are unregistered)
to provide tax agent services or BAS services to their employer/s
for a salary, wage or other benefit (such as a fringe benefit as
defined under the Fringe Benefits Tax Assessment Act 1986) without
contravening the civil penalty provision.
84. As for tax agents, an employee whose job entails the provision of
BAS services to their employer will not be required to register as
a BAS agent.
1.
Kylie, a bookkeeper, is employed by a business in her local
area. Kylie is paid a salary and her work involves
preparing and reconciling goods and services tax and pay as
you go control accounts and the preparation of BASs from
these accounts.
Kylie is not required to register as a BAS agent as she is
an employee of the business, and is paid a salary for her
work and not a fee.
85. A service is taken to be provided for a fee even if the fee for the
tax agent service or BAS service is bundled with other fees for
other services.
1.
Gerry is a financial services licensee licensed under the
Corporations Act 2001 to provide a range of financial
services. Gerry is not a registered tax agent.
One of Gerry's major clients, Petrol Evans Pty Ltd, is about
to sell its wholesale petroleum distributorship which
comprises a considerable amount of land acquired before 20
September 1985 as well as land, fixtures and goodwill
acquired after that time. The company's owner, Larry, seeks
Gerry's advice on how the proceeds from a sale of all the
distributorship's assets should be invested.
While providing the financial services, Gerry holds himself
out to have significant tax expertise and provides tax
advice to Larry that Petrol Evans Pty Ltd will be able to
shelter any tax on any gain arising from the sale of the
distributorship under the small business capital gains tax
(CGT) concessions. He does not advise Larry to seek
confirmation from a registered tax agent.
In this case, because Gerry held himself out as a tax
expert, it is reasonable to expect that Larry would rely on
this tax advice not only to determine the proceeds from the
sale of the distributorship's assets for investment
purposes, but also to claim an entitlement under a taxation
law (eg, the small business CGT concessions) in Petrol Evans
Pty Ltd's income tax return, without consulting a registered
tax agent.
Being a financial services licensee, Gerry ought to know
what type of services he is licensed to provide and that the
tax advice he provided is a tax agent service. As such,
Gerry contravenes the civil penalty provision and is liable
for a civil penalty if he charges a fee for the provision of
the CGT advice. Gerry is taken to have charged a fee for
the CGT advice even if he bundles the fees for the CGT
advice with his fees for the financial advice.
86. The inclusion of 'or other reward' ensures that situations where
services are provided for a reward other than a financial reward
(eg, by bartering tax agent services for goods or other services)
may be within the scope of the civil penalty provision. Also,
future benefits (eg, such as future business, sales or commission)
may constitute a 'reward'. For example, providing tax agent
services at no charge as a means of attracting or retaining clients
may constitute the provision of tax agent services for a reward.
1.
AdvanceTaxation is a recognised professional association.
In an effort to improve the technical proficiency of its
members, AdvanceTaxation sets up a technical helpline to
advise its members on any difficult tax technical issues in
relation to their clients' tax affairs, and answer any
related queries. The advice provided by the helpline is
often specific to a taxpayer's factual circumstances (rather
than merely general advice about the law, such as signpost-
type advice). AdvanceTaxation markets the service in such a
way that it is reasonable to expect its members to rely on
the advice obtained for the purpose of satisfying their
clients' obligations or claiming entitlements on behalf of
their clients under the taxation laws. Although a fee is
not separately charged to members for this service, this is
part of a package of services that AdvanceTaxation offers to
members as a way of differentiating itself from other
recognised professional associations. In this case,
AdvanceTaxation would be providing tax agent services for a
fee or other reward, and therefore needs to be registered as
a tax agent.
87. An unregistered contractor contravenes this civil penalty provision
if it provides tax agent services or BAS services to tax agents or
BAS agents for a fee - refer to paragraphs 2.34 and 2.35 in
Chapter 2 of this explanatory memorandum for the application of the
definitions of 'tax agent service' and 'BAS service' to these
circumstances and to paragraphs 3.42 to 3.44 in Chapter 3 for an
explanation of circumstances where unregistered entities may
provide services on behalf of an agent.
1.
ZARA Service Trust employs and supplies professional staff
as contractors to Thomas & Partners (which is a registered
tax agent and provides tax agent services for a fee). ZARA
Service Trust charges a fee for providing services, via the
professional staff, to Thomas & Partners. The arrangement
between ZARA Service Trust and Thomas & Partners is such
that it is reasonable to expect that Thomas & Partners or
its clients would rely on the services provided by the
employees of ZARA Service Trust to satisfy obligations or
claim entitlements under the taxation laws, and Thomas &
Partners does not check or review the work performed by the
professional staff.
Because ZARA Service Trust is providing tax agent services
to Thomas & Partners for a fee, in order to avoid a civil
penalty, at least one of the trustees of ZARA Service Trust
must be a registered tax agent, and that trustee must ensure
the services provided by ZARA Service Trust on their behalf
are provided competently.
2.
XC Pty is not registered as a tax agent. XC Pty employs Bob
as its tax manager. Bob provides assistance and advice in
respect of tax matters through a shared services arrangement
to other companies within the same wholly owned group as XC
Pty. The services are provided on a request basis, and XC
Pty charges a fee to recover the costs it incurs in
providing the services. The related companies rely on the
advice provided by XC Pty through Bob and do not generally
consult a registered tax agent on the accuracy of the advice
provided.
XC Pty is in breach of the civil penalty provision for
providing the services for a fee to related companies while
unregistered.
88. The civil penalty only applies where an unregistered entity that
provides a service knows or ought reasonably to know that the
service is a tax agent service or BAS service. Whether or not an
entity ought reasonably to know that a service that they are
providing is a tax agent service will depend on the particular
circumstances. This provision ensures that entities that take
reasonable care, but provide a tax agent service or BAS service
inadvertently, will not incur the penalty. [Paragraphs 50-5(1)(a)
and (2)(a)]
1.
Sarah is a law student. At a family gathering, she is
approached by her Uncle for some tax advice. Sarah provides
advice based on what she learned as part of her law studies.
Her Uncle is really grateful and gives Sarah a gift which
she gladly accepts. Sarah offers further help with any
other tax related questions her Uncle may have. In this
case, if the service is a tax agent service, it is not
reasonable for Sarah to know that she is unlawfully
providing a tax agent service for a fee or other reward.
Sarah is therefore not in contravention of the civil penalty
provision.
Advertising a tax agent service or BAS service if unregistered
89. An entity is liable for a penalty if it advertises that it will
provide a tax agent service (other than a BAS service, or an
exempted legal service) and it is not a tax agent. [Subsection 50-
10(1)]
1.
John is a registered BAS agent. He advertises in the local
paper that he is able to prepare BAS and other income tax
forms for individuals and business. As John is registered
as a BAS agent, he is not entitled to advertise tax agent
services including the preparation of income tax forms. He
is liable for a penalty for unlawfully advertising tax agent
services.
90. An entity is liable for a penalty if it advertises that it will
provide a BAS service (other than an exempted legal service) and it
is not a tax agent or BAS agent, or, if the BAS service relates to
imports or exports to which an indirect tax law applies, it is not
a customs broker licensed under Part XI of the Customs Act 1901.
[Subsection 50-10(2)]
1.
Ronald has been a bookkeeper for the past five years.
Ronald advertises in the local paper that he is able to
prepare BAS for small businesses. Unless he is registered,
Ronald is liable for a penalty.
91. An entity is not liable for a civil penalty if it advertises that
it will provide a tax agent service or a BAS service and those
services would be provided on a voluntary basis under a scheme
approved by the Commissioner by notice published in the
Commonwealth of Australia Gazette. A notice given by the
Commissioner in these circumstances is not a legislative instrument
for the purposes of the Legislative Instruments Act 2003.
[Paragraphs 50-10(1)(e) and 50-10(2)(e) and subsection 50-10(5)]
1.
Mai, a retired tax agent, prepares the income tax returns of
pensioners and newly arrived immigrants on a voluntary basis
as part of the Tax Help Program, a scheme published in the
Commonwealth of Australia Gazette, approved by the
Commissioner and run by the Australian Taxation Office
(ATO). As a result, Mai, although unregistered, is
permitted to advertise that she will provide tax agent
services as part of the Tax Help Program and she is not
liable for a penalty.
Representing that you are a tax agent or BAS agent if unregistered
92. An entity is liable for a civil penalty if it represents that it is
a tax agent or BAS agent, or both, and that representation is
untrue. [Section 50-15]
1.
Alberto was once a registered tax agent, but let his
registration lapse several years ago. Alberto continues to
distribute business cards stating that he is a tax agent.
Alberto is therefore liable for a penalty for representing
himself as a tax agent when unregistered.
Exemption from liability for providing or advertising certain legal
services
93. Entities such as legal practitioners may provide or advertise tax
agent services in certain circumstances without being registered as
a tax agent or BAS agent.
94. Exemptions from liability to civil penalties apply to unregistered
entities that are permitted to provide legal services under a state
or territory law regulating legal practice and the provision of
legal services (ie, the Legal Profession Acts of the states and
territories).
95. If an entity is permitted to provide a tax agent service or BAS
service (other than the preparation and lodgment of a return or a
return-like statement such as a BAS, instalment activity statement,
superannuation guarantee statement or pay as you go withholding
payment summary statement) as a legal service under a state or
territory Legal Profession Act, it may charge a fee or advertise
without being registered as a tax agent or BAS agent. [Subsections
50-5(1) to (4) and 50-10(1) to (4)]
96. These entities may also prepare and lodge returns or return-like
statements for a fee or advertise such services if the entity
provides or would provide the service in the course of acting for a
trust or deceased estate as a trustee or legal personal
representative. [Subsections 50-5(3) and (4) and 50-10(3) and (4)]
1.
Philip has information about an investment opportunity which
advertises significant tax deductions. He contacts his
solicitor, Bryce, who is an Australian legal practitioner as
defined under the relevant Legal Profession Act but not a
registered tax agent, to obtain taxation advice on the
investment (this service does not involve preparation or
lodgment of a return or statement). Although Bryce provides
a tax agent service for a fee, he is not liable for a civil
penalty as he is permitted to provide the tax agent service
as a legal service under the relevant Legal Profession Act.
2.
Toby & Co. is an incorporated legal practice and not a
registered tax agent. Toby & Co. is permitted under the
relevant Legal Profession Act to provide legal services.
Toby & Co. provides a range of tax agent services to its
clients for a fee, including preparation and lodgment of
returns in some cases. Toby & Co. is in breach of the civil
penalty provision unless it prepares and lodges returns for
its clients only in the course of acting for a trust or
deceased estate as a trustee or legal personal
representative.
97. Where an entity described in paragraphs 4.39 to 4.42, in the course
of civil penalty proceedings for charging a fee or other reward
while unregistered, seeks to rely on the fact that it prepared and
lodged returns or return-like statements as a legal service and for
a fee because it was acting for a trust or deceased estate as
trustee or legal personal representative, the entity bears an
evidential burden in relation to that matter. This is because only
the entity providing the service has this knowledge. [Subsection
50-5(5)]
Other exemptions
98. Customs brokers licensed under the Customs Act 1901 are not liable
for a civil penalty if the BAS service they provide or advertise
that they will provide relates to imports or exports to which an
'indirect tax law' (as defined in section 995-1 of the Income Tax
Assessment Act 1997) applies. [Paragraphs 50-5(2)(e) and 50-
10(2)(d)]
Serious misconduct prohibited while registered
Making a false or misleading statement
99. A tax agent or BAS agent must not prepare or certify a statement
(or permit another person to do so) that they know, or ought
reasonably to know, is likely to be made to the Commissioner, in
circumstances where they know, or are reckless as to whether, the
statement:
. is false, incorrect or misleading in a material particular
respect; or
. omits any matter without which the statement is misleading
in a material respect.
[Section 50-20]
100. Given that the Code of Professional Conduct (Code) requires tax
agents and BAS agents to take reasonable care in their provision of
tax agent services and therefore addresses circumstances where the
agent is careless in making a statement (eg, see paragraph 3.47 in
Chapter 3 of this explanatory memorandum), this civil penalty
provision only applies to making a false or misleading statement
knowingly or recklessly.
101. If a tax agent or BAS agent has reason to believe that their
client's records are incorrect or misleading, to avoid exposure to
a civil penalty the agent may:
. discuss the matter with the client to clarify any possible
misstatement or omission;
. advise the client to disclose the misstatement or omission
to the ATO if the relevant documents have already been
submitted; and/or
. withdraw from the engagement if the client, after having
been advised, refuses to explain or correct any apparent
misstatement or omission.
1.
Tyler is a registered BAS agent and is completing a BAS
statement for Eddie, his client. Eddie instructs Tyler to
record $2,000 as the amount withheld from his employees'
salaries during the quarter. On reviewing Eddie's records,
Tyler finds that Eddie has in fact withheld $5,000 from his
employees' salaries. When queried, Eddie states that he has
had unexpected expenses for the past quarter and therefore
intends to record only $2,000 of the withheld amount in this
BAS and the remaining $3,000 in the next quarter. Tyler
would be knowingly making a false statement if he continues
with Eddie's request.
Because Eddie insists that the misstatement be made and
Tyler is unable to resolve the issue, to avoid a civil
penalty Tyler resigns from the engagement.
Employing a tax agent or BAS agent whose registration has been
terminated
102. A tax agent or BAS agent must not provide tax agent services for a
fee or other reward where its registration has been terminated by
the Board.
103. Extending this principle, a tax agent or BAS agent must not employ
or use the services of an entity to provide tax agent services on
its behalf in circumstances where it knows or ought reasonably to
know that the entity:
. is not registered; and
. was previously registered and had its registration
terminated less than one year ago.
[Subsection 50-25(1)]
1.
Frank is a registered tax agent with a large client base.
Due to his heavy workload he decides to employ his friend
Cheryl to assist with the preparation of tax returns. Frank
is aware that Cheryl had previously been a registered tax
agent, and that her registration was terminated by the Board
the previous year as a result of a conviction for fraudulent
activities.
Frank is liable to a civil penalty for employing a person
whose registration has been terminated within one year of
the employment.
104. However, a tax agent or BAS agent is not liable for a civil penalty
if it employs or uses the services of an entity whose registration
was terminated as a result of the entity surrendering its
registration or becoming an undischarged bankrupt or going into
external administration, or because of a reason prescribed by the
regulations under the Bill. [Subsection 50-25(2)]
105. These exemptions from penalty cater for entities whose registration
was terminated for reasons not involving serious misconduct by the
entities. For example, it would be unfair for an entity that
surrendered its registration or an individual who became bankrupt
(eg, as a result of their position as guarantor for a loan) to
automatically be prevented from providing tax agent services for
another entity.
106. This civil penalty provision does not apply to tax agents or BAS
agents who employ or use the services of an entity whose
registration has lapsed as, in such a case, the entity's
registration was not terminated.
107. To facilitate compliance with this civil penalty provision, details
of certain deregistered tax agents and BAS agents must be
maintained on the Board's website - refer to paragraphs 5.126 to
5.129 in Chapter 5 of this explanatory memorandum.
108. The prohibition only applies to the employment or use of a
deregistered entity during the year following termination. This is
to ensure an entity is not prevented from operating in the tax
industry for an indeterminate period.
Signing of a declaration or other statement in certain
circumstances
109. Broadly speaking, a tax agent or BAS agent is liable for a civil
penalty if they sign a declaration or other statement in relation
to a taxpayer that is required or permitted by a taxation law (or
by a BAS provision for BAS agents), where the document that the
declaration or statement relates to was prepared by an unregistered
entity without supervision and control (which includes, but is not
limited to, an employment relationship) by a registered entity.
110. For registered individuals, a civil penalty applies if:
. a tax agent signs a declaration or other statement in
relation to a taxpayer that is required or permitted by a
taxation law (other than a BAS provision), and the
document that the declaration or statement relates to was
not prepared by:
- the tax agent;
- an individual working under the supervision and control
of the tax agent;
- another tax agent who is an individual; or
- an individual working under the supervision and control
of another tax agent who is an individual;
[subsection 50-30(1)] and/or
. a tax agent or BAS agent signs a declaration or other
statement in relation to a taxpayer that is required or
permitted by a BAS provision, and the document that the
declaration or statement relates to was not prepared by:
- the tax agent or BAS agent;
- an individual working under the supervision and control
of the tax agent or BAS agent;
- another tax agent or BAS agent who is an individual; or
- an individual working under the supervision and control
of another individual who is a tax agent or BAS agent.
[Subsection 50-30(2)]
111. For registered partnerships and companies, a civil penalty applies
if:
. a tax agent signs a declaration or other statement on a
document in relation to a taxpayer that is required or
permitted by a taxation law (other than a BAS provision),
and the document that the declaration or statement relates
to was not prepared by:
- a tax agent who is an individual; or
- an individual working under the supervision and control
of another individual who is a tax agent; [subsection 50-
30(3)] and/or
. a tax agent or BAS agent signs a declaration or other
statement on a document in relation to a taxpayer that is
required or permitted by a BAS provision, and the document
that the declaration or statement relates to was not
prepared by:
- a BAS agent who is an individual;
- a tax agent who is an individual; or
- an individual working under the supervision and control
of another individual who is a tax agent or BAS agent.
[Subsection 50-30(4)]
112. A tax agent or BAS agent is not liable for a civil penalty if they
sign a declaration or other statement that relates to a document
which was prepared by an entity other than those listed above,
including an unregistered entity which is not supervised and
controlled by a registered entity, provided they have taken
reasonable steps to ensure the accuracy of the document before
signing it. The taking of reasonable steps could be demonstrated
by evidence that the agent reviewed the document before signing it
or by evidence of appropriate alternative review or monitoring
arrangements. In this regard, the agent bears an evidential burden
in relation to that matter. [Subsection 50-30(5)]
1.
Hans, who is not registered to provide tax agent services,
has prepared a number of income tax returns for a fee. He
arranges for his friend, Joel, a registered tax agent, to
sign and submit these income tax returns in exchange for
providing Joel with a share of his profits. The returns
contain significant errors as Joel did not review Hans' work
or otherwise ensure their accuracy prior to signing the
returns.
Joel is liable for a civil penalty for signing a tax return
that was not prepared by him, another registered tax agent,
or a person working under his or another tax agent's
supervision and control. He is not exempt from the civil
penalty because he cannot demonstrate that he took
reasonable steps to ensure the accuracy of the returns
before signing and submitting them.
Hans is also liable for a civil penalty for providing tax
agent services for a fee while unregistered.
Obtaining an order for a civil penalty and recovery of a penalty
Order to pay a pecuniary penalty for contravening a civil penalty
provision
113. If an entity contravenes a provision of the Bill imposing a civil
penalty, the Board may apply to the Federal Court within four years
of the contravention for an order that the entity pays the
Commonwealth a pecuniary penalty. [Subsection 50-35(1)]
114. The application must be made by the Board, on behalf of the
Commonwealth. Although applications for civil penalty orders are
more commonly made to the Federal Court by Commonwealth public
officials (and, generally, by Ministers), in this case, it is
appropriate for the Board - rather than any Commonwealth public
official - to make such applications to preserve the Board's
independence in the exercising of its functions and powers in
regulating the provision of tax agent services. Appropriate
accountability for, and transparency of, decisions to make such
applications is provided through the requirement that the Board
report annually to the Parliament, via the Minister, on its
operations - refer to paragraphs 5.123 to 5.125 in Chapter 5 of
this explanatory memorandum.
115. The four-year limitation for commencing proceedings is consistent
with other instances in the taxation laws where a civil penalty is
the appropriate remedy (eg, the civil penalties for the promotion
and implementation of schemes in Division 290 of Schedule 1 to the
Taxation Administration Act 1953 (TAA 1953)).
116. The Board is not required to apply to the Federal Court for an
order for every contravention of a civil penalty provision in the
Bill. For example, isolated, technical contraventions may not
warrant the Board taking action in the Federal Court.
117. If the Federal Court is satisfied that the entity has contravened a
civil penalty provision, it may order the entity to pay a pecuniary
penalty to the Commonwealth for each contravention of that
provision. The amount of the penalty is determined by the Federal
Court and is payable for each contravention, but the penalty for
each contravention must not exceed the amount specified in the
relevant civil penalty provision. (The maximum penalty amounts are
explained in paragraphs 4.18 to 4.25.) [Subsection 50-35(2)]
118. Where conduct contravenes two or more civil penalty provisions,
then proceedings may be commenced against the entity for
contravention of any or all of those provisions. However, an
entity is not liable for more than one pecuniary penalty for the
same instance of misconduct (ie, the entity may be penalised for
contravening only one of the civil penalty provisions, where
conduct contravenes more than one provision). [Subsection 50-
35(3)]
119. A contravention of a provision of the Bill imposing a civil penalty
is not an offence. That means that a contravention is not a
violation of the criminal law.
Recovery of a pecuniary penalty
120. If the Federal Court orders an entity to pay a pecuniary penalty,
then the penalty is payable to the Commissioner, who receives the
penalty on behalf of the Commonwealth. The Commissioner may
enforce the order on behalf of the Commonwealth as if it were a
judgment of the Federal Court. If the entity does not remit the
penalty, then it will be held in contempt of court and may be
subject to further proceedings. [Section 50-45]
Treatment of partnerships
121. For the purposes of the Bill, a change in the composition of a
partnership does not affect the continuity of the partnership.
However, where a partnership contravenes a civil penalty provision
in the Bill, only those partners that were in the partnership at
the time of the misconduct may be liable to pay a civil penalty.
The civil penalty will not apply to those partners that can prove,
on the balance of probabilities, that they:
. did not engage in the conduct;
. did not aid, abet, counsel or procure the conduct; and
. were not in any way knowingly concerned in, or party to,
the conduct (whether directly or indirectly or by any act
or omission of the partner).
[Subsection 50-40(1) and section 70-20]
122. This provision is modelled on subsection 444-30(4) of Schedule 1 to
the TAA 1953, which applies to criminal offences in certain
taxation laws. The provision deems a partner that was in a
partnership at the time of the misconduct to be liable to a civil
penalty if the partnership is liable. The rationale for this
provision is that it may be difficult for the Board to determine
which partner is responsible for a particular misconduct, such as
where the partnership employs or uses the services of a
deregistered entity.
123. In circumstances where a partnership consists of both individual
and corporate partners, individual partners are subject to a
penalty up to the maximum for individuals when they are in breach
of a civil penalty provision (being one fifth of the maximum
imposable on a body corporate), and corporate partners are subject
to a penalty up to the maximum for a body corporate.
1.
KKB Services is a partnership providing bookkeeping
services, but is not a registered BAS agent. In this
partnership, Kristel is an individual partner, and Hood
Services Ltd is a corporate partner, and neither partner is
a registered agent. The partnership advertises in the local
phone directory that its business prepares BAS and provides
advice in relation to BAS provisions.
KKB Services is found by the Federal Court to have breached
the civil penalty provision that prohibits unregistered
entities from advertising that they provide BAS services.
Because the partners are different types of entities, the
civil penalties for the partners are different. Hood
Services Ltd is liable for five times the amount for which
Kristel is liable.
Kristel was able to prove that she did not engage or
knowingly assist in the conduct of advertising the provision
of BAS services, and was not liable for the civil penalty.
Injunction
124. Whilst an application to the Federal Court for a civil penalty
order may result in an entity being penalised financially, there is
no guarantee that the penalty will change the entity's behaviour.
In such circumstances, the Board may apply to the Federal Court for
an injunction to prevent or compel certain action.
125. The Federal Court may grant an injunction against an entity on such
terms as it considers appropriate. It may grant an injunction
restraining an entity from engaging, or continuing to engage, in an
activity or grant an injunction requiring the entity to do
something if it is satisfied that the entity has not done that
thing and/or is likely not do the thing required without
compulsion.
126. An injunction may be granted if the Federal Court is satisfied that
a tax agent or BAS agent has engaged in the past, or is proposing
to engage in the future, in conduct that would constitute a
contravention of a civil penalty provision in this Bill.
[Subsection 70-5(1)]
1.
Felix was a registered tax agent, however the Board recently
terminated his registration due to a serious breach of the
Code. Although Felix's registration has been terminated, he
continues to advertise the provision of tax agent services
(for a fee) in the local newspaper and continues to act for
many of his former clients.
The Board could apply to the Federal Court for a civil
penalty order against Felix or an injunction prohibiting
Felix from advertising these services and acting for others,
or both.
127. Injunctions can be used as an alternative to civil penalty
proceedings or in addition to them if the Federal Court considers
the circumstances of a case warrant both injunctive relief and a
civil penalty order.
128. Before deciding the Board's application, the Federal Court may also
choose to grant an interim injunction. [Subsection 70-5(2)]
129. The ability to seek injunctions and interim injunctions allows the
Board to take immediate action against entities which engage in
conduct prohibited by this Bill, limiting the period during which
they can engage in such conduct.
130. The Commonwealth may provide an undertaking to pay damages for the
losses that an entity suffers due to the granting of an interim
injunction if it turns out to be unjustified.
Chapter 5
The Tax Practitioners Board and its role
Outline of chapter
131. Part 6 of this Bill establishes a national Tax Practitioners Board
(Board) and creates a framework for the conduct of investigations
by the Board.
132. Specifically, Part 6 of the Bill provides that the Board is
responsible for:
. registration of tax agents and Business Activity Statement
(BAS) agents;
. conducting investigations and imposing sanctions for
breaches of the Code of Professional Conduct (Code) where
necessary; and
. other functions that are incidental to the above
responsibilities or are prescribed in the regulations.
133. Paragraph 70-10(i) of the Bill provides that a decision to extend
the period of time within which an investigation is to be completed
is reviewable by the Administrative Appeals Tribunal (AAT).
134. Subdivision 70-D of the Bill provides that the Board may delegate
certain functions and powers to others and that Board members and
committee members, both past and current, are immune from legal
action for things done in good faith in the performance of the
Board's functions or the exercise of the Board's powers.
135. Sections 70-35 to 70-45 of the Bill are the secrecy and disclosure
provisions governing the use of information acquired under the
Bill.
136. Section 70-50 of the Bill provides that the Bill does not affect
the law relating to legal professional privilege.
Context of amendments
Operation of current provisions
137. Currently, the six state Tax Agents' Boards (state Boards) operate
somewhat independently of one another. Each administers
registration processes, disciplinary processes, investigations and
evidence gathering activities in accordance with the same law, but
may employ different administrative processes.
138. The separation of the state Boards has increased the risk of
inconsistencies in the regulation and standards of tax agents,
particularly in the administration of tax agent registrations and
the handling of complaints and disciplinary matters.
139. Furthermore, while the current law provides for a Treasury
Portfolio Minister to appoint members to each state Board, it does
not:
. stipulate duration of appointments;
. provide for a person once appointed to resign; or
. provide for the removal of Board members for cause.
140. Other deficiencies in the current system include:
. The state Boards are not required to report on their
activities to the Minister or to the Parliament.
. The state Boards' powers are narrowly defined without
sufficient flexibility to accommodate various
circumstances.
. There is no statutory requirement for the conduct of
investigations and disciplinary proceedings by the state
Boards.
. The state Boards can apply different interpretations to
similar circumstances in different states.
. The current administrative arrangements between the state
Boards and the Australian Taxation Office (ATO) blur the
responsibilities of the state Boards and the ATO. Both
tax agents and taxpayers often regard the state Boards as
merely an arm of the ATO.
Rationale for major changes
141. Part 6 of the Bill defines the role, functions, powers and
reporting obligations of the Board. The primary purpose of Part 6
is to establish a single national board to register and regulate
tax agents and BAS agents, with the powers to perform its functions
effectively and the flexibility to allocate resources
appropriately.
142. The new framework makes the responsibilities of the Board for
investigations related to, and enforcement of, the law explicit.
It provides for the Board to gather information and to hear and
decide on complaints against tax agents and BAS agents. The
investigation and enforcement role of the Board aims to ensure that
agents comply with their obligations to their clients and the
broader community.
143. The Board will be composed of a sufficient number of members to
allow it to undertake its statutory functions and exercise its
powers at a national level. All stakeholders within the system
will benefit from the Board providing an efficient and effective
national system of regulation and administration, with the
flexibility to have such regional presence as may be required.
This approach eliminates duplication of services and activities and
inconsistencies in the interpretation of terms, rules and
procedures.
144. The Board will be a statutory body that falls within the Treasury
portfolio. The statutory functions and powers are vested in the
Board independently of any other body including the ATO. Although
the secretariat to the Board will be provided by the ATO, the
secretariat must take its directions for the administration and
operation of the Board from the Board itself.
Summary of new law
145. The Bill abolishes the six state Boards and creates a national
Board.
146. The Board is vested with a number of functions and powers:
. The functions include administration of tax agent and BAS
agent registration, investigation and the imposition of
sanctions where necessary, and the performance of any
other functions prescribed or required by the Bill and
anything else incidental to the performance of the
functions.
. The Board may do all things necessary for the performance
of its functions.
. The Board also has the power to delegate many of its
functions and powers to others, to establish committees to
assist it and to determine its own procedures.
147. The Board consists of a Chair and at least six other members,
appointed by the relevant Treasury Portfolio Minister (the
Minister), holding office on a part-time or full-time basis.
148. A member may resign by notice provided to the Minister. The
Minister may terminate the appointment of a member of the Board in
certain circumstances.
149. A quorum at a Board meeting is constituted by a majority of the
members appointed. Questions are decided by a majority of the
votes of the Board members present and voting, with the Chair
having a casting vote in the case of a deadlock.
150. The Board may investigate:
. applications for registration; and
. the conduct of tax agents, BAS agents and unregistered
entities that may be in breach of a provision of the Bill.
151. The Board may establish a committee of one or more individuals to
assist the Board in carrying out its functions and exercising its
powers, including performing an investigation on its behalf.
152. The Board may compel the provision of information or summon
witnesses and compel them to provide information for the purposes
of the investigation.
153. Following an investigation, the Board must decide what action (if
any) to take. (Part 5 of the Bill provides for the enforcement of
certain decisions made as a result of an investigation - refer to
Chapter 4 of this explanatory memorandum.)
154. Information acquired under the Bill may only be disclosed in
limited circumstances.
Comparison of key features of new law and current law
|New law |Current law |
|A national Board is |The current law provides|
|established to |for six state Boards. |
|administer the | |
|regulation of tax agent | |
|services in all States | |
|and Territories, to | |
|achieve national | |
|consistency and flexible| |
|resource allocation. | |
|The Board has certain |No equivalent. |
|statutory functions and | |
|powers. It may make | |
|decisions following an | |
|investigation, may | |
|establish committees, | |
|and has reporting | |
|obligations. | |
|The Board has the power |The state Boards' power |
|to compel the provision |to summon witnesses and |
|of information and |compel persons to supply|
|summon witnesses to |information is contained|
|supply information to |in the Income Tax |
|the Board for the |Regulations 1936. |
|purposes of its | |
|investigation. | |
|The Board may delegate |No equivalent. |
|most of its powers and | |
|functions to any | |
|person/s that the Board | |
|considers appropriate. | |
|Decisions that are | |
|reviewable by the AAT | |
|may only be delegated to| |
|a committee that | |
|consists of three or | |
|more Board members. | |
|The Board may not | |
|delegate the power to | |
|make guidelines or the | |
|power to establish | |
|committees. | |
|If the Board decides to |No equivalent. |
|investigate a matter and| |
|no decision is made | |
|within six months of the| |
|commencement of an | |
|investigation (or within| |
|a period extended by the| |
|Board in specified | |
|circumstances) the Board| |
|is taken to have decided| |
|to take no further | |
|action in relation to | |
|the matter. | |
Detailed explanation of new law
Functions and powers of the Tax Practitioners Board
Establishment
155. The Board is to be established at a time on or after the day on
which the Bill receives Royal Assent. [Section 60-5 and
subsections 1-5(1) and 90-1(1)]
156. Enabling the Board to be established on the day on which the Bill
receives Royal Assent allows the Board time to perform preparatory
work prior to the commencement of its functions - refer to
paragraphs 1.25 to 1.29 in Chapter 1 of this explanatory memorandum
for an explanation of the commencement dates of the Bill. The
preparatory workload of the Board to effect a smooth transition to
the new framework is expected to be significant.
157. Although section 4 of the Acts Interpretation Act 1901 provides for
the exercise of certain powers between passage and commencement of
an Act, reliance on this provision alone would not allow the
members of the Board and committees that it may establish to be
remunerated. In addition, some of the preparatory work that the
Board may need to perform is likely to fall beyond the scope of
section 4 of the Acts Interpretation Act 1901.
158. The Board has responsibility for regulating the provision of tax
agent services in all Australian states and territories by
reference to the Code and the system for the registration of tax
agents and BAS agents and conduct of investigations set out in the
Bill.
159. The Board is a statutory authority that falls within the portfolio
responsibilities of the Treasurer. It is not itself a prescribed
agency under the Financial Management and Accountability Act 1997
(FMA Act) and is not a body regulated by the Commonwealth
Authorities and Companies Act 1997 (ie, the Board is neither a
prescribed FMA Act agency nor a Commonwealth Authorities and
Companies Act body) but is formally part of the ATO, a prescribed
FMA Act agency.
160. To ensure that the Board has the requisite degree of independence
from the ATO, it will be funded via a Special Account (under
section 20 of the FMA Act) through the annual appropriation to the
ATO. As such, the Board's annual appropriation will be quarantined
within the ATO's funding. The Commissioner of Taxation
(Commissioner) will provide resources to the Board within the
limits of the Special Account.
161. In this way the Board will operate with decision-making
independence from the ATO, but will rely on the ATO for
administrative support. The Board will have available to it the
resources necessary to perform its functions up to the amount of
its Budget as determined by the Finance Minister. The exact nature
of the service relationship and arrangements between the Board and
the ATO will be determined through agreements between the two
parties. Such agreements are likely to cover a number of issues
including resourcing, technical support and legal support.
162. In the establishment phase, it is efficient for the Board to sit
within the ATO, due to the administrative obligations that would
otherwise apply to it as a separate agency and because the ATO
provides the most appropriate functional fit for the Board from
amongst existing prescribed FMA Act agencies.
163. However, this arrangement is intended to be the subject of a post-
implementation review to be conducted three years after
commencement of the Bill - refer to paragraph 6.71 in Chapter 6 of
this explanatory memorandum. The key focus of the review will be
to assess whether this arrangement remains appropriate and
satisfactory. The review will consider whether the independence of
the Board is impaired in any way because of its continued
connection with the ATO, and whether an alternative arrangement
should be considered.
Functions
164. The functions of the Board are to:
. administer the system for the registration of tax agents
and BAS agents - registration of agents is discussed in
detail in Chapter 2 of this explanatory memorandum;
. investigate applications for registration and conduct that
may breach the Bill, including non-compliance with the
Code - investigations are discussed in more detail below,
and the Code is explained in Chapter 3 of this explanatory
memorandum;
. impose administrative sanctions for non-compliance with
the Code;
. issue guidelines, which are legislative instruments, to
assist in achieving the functions outlined above;
. undertake other functions conferred on the Board by the
Bill, the regulations, or any other law of the
Commonwealth; and
. do anything else related to the performance of its
functions.
[Section 60-15]
165. Guidelines issued by the Board are legislative instruments that
bind the Board and those to whom they apply. Under the Legislative
Instruments Act 2003, legislative instruments are generally
required to be exposed for consultation with relevant parties,
including those proposed to be affected by the instrument. They
must be tabled in both Houses of Parliament and entered onto the
Federal Register of Legislative Instruments by a specified date.
Powers
General power
166. The Board has the power to do all things necessary or convenient to
be done to enable it to perform its functions. This gives the
Board flexibility in the administration of the system. The Board's
powers therefore include, but are not limited to, such things as
issuing guidelines to determine the application of the principles
of the Code. [Section 60-20]
Power to establish committees
167. The Board may establish committees, consisting of such person(s) as
the Board thinks fit (whether or not Board members), to assist the
Board in the performance of its functions and the exercise of its
powers. Committees may be formed for a variety of purposes, for
example, to assist with investigations, prepare draft guidelines or
review training standards. [Section 60-85 and subsection 90-1(1)]
168. In determining the membership of committees, the Board may seek
nominations for membership of committees at a time prior to the
commencement of an investigation, thereby establishing a pool of
people from which the Board may draw a committee when necessary.
Alternatively, the Board may choose to establish committees as and
when required, or to establish standing committees for certain
matters. Committees do not have to contain or comprise Board
members except in situations where a committee is being delegated
certain functions or powers which may only be performed by a
committee consisting of Board members only - refer to paragraph
5.44.
169. A key role for committees is to provide assistance with Board
investigations. Having regard to the fact that most investigations
will relate to breaches of the Code, the Board will select people
with a sound reputation and qualifications and experience relevant
to the matters dealt with by the Code. Experienced tax agents may
often be appointed to a committee. Similarly, ATO personnel,
members of recognised professional associations and recognised BAS
agent associations, members of the legal profession, or
professional investigators could be appointed to a committee.
(Note, however, that ATO personnel would perform their role as
committee members in their capacity as representatives of the
Board, not of the ATO.) There may also be occasions where a person
with special qualifications, but no specialised knowledge of the
taxation laws, will be appointed to a committee.
170. A committee may be made up of one person or as many persons as the
Board determines necessary or appropriate. For example, where a
committee is established to investigate a complaint referring to a
relatively minor issue, the Board may choose to investigate the
complaint through an individual. On the other hand, where the
complaint is of a more complex or serious nature, the Board may
choose to appoint a committee with several members.
171. Members of committees are remunerated and compensated in the same
way as Board members, that is, by determination of the Remuneration
Tribunal and/or as prescribed in regulations - refer to paragraphs
5.66 and 5.67 for an explanation of remuneration arrangements for
Board members. [Section 60-90]
Power to delegate
172. The Board has the power to delegate any of its functions and powers
to a Board member or a committee, except the following:
. its function of issuing guidelines;
. the power to establish a committee; and
. the power to make decisions that give rise to a right of
appeal to the AAT for review of the decision.
[Subsections 70-30(1) and (2)]
173. In addition, under section 34AB of the Acts Interpretation
Act 1901, the Board may not delegate its power to delegate.
174. The Board may only delegate its power to make decisions that give
rise to a right of appeal to the AAT for review of the decision to
a committee that consists of three or more Board members and no non-
Board members. [Subsection 70-30(2)]
175. The Board's ability to delegate certain functions and powers will
improve its ability to manage its resources and workload, without
exposing it to risk. In particular, functions which do not have
the potential to impact significantly on a person's livelihood,
such as many of the routine administrative functions, may
appropriately be performed by others.
176. Any delegation must be in writing and may be revoked at any time by
the Board. A delegation is not affected by a change in the
membership of the Board. Therefore, a delegation continues in
force even if the membership of the Board changes and may be
revoked even if the Board is not constituted by the members who
constituted the Board when the delegation was made. [Subsections
70-30(1) and (4)]
177. In exercising the power that has been delegated, the delegate is
subject to the directions of the Board. [Subsection 70-30(3)]
Immunity from legal action
178. Members or past members of the Board, and members or past members
of committees established by the Board to assist it, are immune
from legal action in connection with their activities undertaken in
good faith as members of the Board or Board committees. No action,
suit or proceeding may be brought against such members in relation
to anything they do, or fail to do, in good faith in the
performance (or purported performance) of the Board's functions or
in the exercise (or purported exercise) of the Board's powers.
[Section 70-25]
Structure of the Tax Practitioners Board
Composition of the Board
179. The Board consists of:
. a Chair; and
. at least six other members.
[Subsection 60-10(1)]
180. The Bill provides for a minimum of seven Board members. There is
no maximum number of Board members.
Appointments and process for appointment
181. The Minister is responsible for appointing members of the Board and
for appointing one of the members of the Board to be the Chair.
Appointments must be in writing. [Subsections 60-25(1) and (2) and
90-1(1)]
182. The Chair cannot be a member of the Board who holds any office or
appointment under a law of the Commonwealth (other than as a member
of the Board) or is appointed or engaged under the Public Service
Act 1999. This restriction enhances the operational independence
of the Board, in particular its independence from the ATO.
[Subsection 60-25(2)]
183. An individual's appointment as a member of the Board is not invalid
because of a defect or irregularity in connection with the person's
appointment. [Subsection 60-25(3)]
184. In appointing a Board member, the Minister may determine, in
writing, any terms or conditions relating to matters that are not
provided for in the Bill. A Board member therefore holds office on
the terms and conditions outlined in Part 6 of the Bill - refer to
paragraphs 5.59 to 5.71 - and the Minister's determination, if any.
[Section 60-65]
185. Appointment of Board members needs to be consistent with the
selection arrangements for statutory appointments which ensure
transparent and merit-based assessment in the selection of
statutory officeholders. It is expected that a vacancy will be
advertised. Candidates for appointment to the Board may be
nominated by a recognised professional association, a recognised
BAS agent association, the Commissioner or a legal professional
association, or may respond of their own accord to an advertised
vacancy.
186. While it is likely that the Minister will appoint members with an
appropriate level of qualifications and experience, relevant to the
tax profession, the Minister may appoint a community
representative, or a person with special qualifications or
experience. The Board represents all segments of the
community/industry that it regulates, including the emerging BAS
agent industry.
187. Although ATO employees (who are appointed or engaged under the
Public Service Act 1999) may hold Board membership (other than as
the Chair - refer to paragraph 5.52), it would be unusual for more
than two ATO employees to be appointed to the Board at any one
time. The Bill does not require there to be any ATO employees on
the Board.
Vacancies
188. The performance of the functions or the exercise of the powers of
the Board is not affected by a vacancy or vacancies in the
membership of the Board. [Subsection 60-10(2)]
Duration, basis and terms of office
Duration and basis
189. Members of the Board hold office for a period determined by the
Minister and specified in the written instrument of appointment.
Members are eligible for reappointment on expiry of the term of
appointment. The terms of members of the inaugural Board may be
staggered to facilitate a smooth integration of future members and
maintain corporate knowledge. [Section 60-30]
190. Office - including that of the Chair - is held on either a part-
time basis or a full-time basis. This flexibility recognises that:
. on the one hand, some Board members hold full-time
employment elsewhere, so that a part-time appointment to
the Board will not require members to forego their usual
employment. Part-time appointment does not prevent Board
members from working full-time hours when necessary and
convenient. Part-time office provides flexibility around
the management of the Board's workload - the workload is
expected to be greater during and immediately following
the establishment of the Board and the commencement of the
rest of the Bill, but is likely to stabilise over time;
and
. on the other hand, some applicants for appointment to the
Board may only be interested in a full-time appointment.
[Subsection 60-25(1)]
Leave of absence
191. Leave of absence (other than recreation leave, in the case of full-
time members of the Board) may be granted by the Minister on the
terms and conditions determined by the Minister. In practice, it
is expected that members' leave of absence arrangements will be
determined and agreed as part of the general terms and conditions
of appointment. [Subsections 60-40(2) and (3)]
192. Individuals appointed to the Board on a full-time basis are
entitled to recreation leave as determined by the Remuneration
Tribunal. [Subsection 60-40(1)]
Outside employment and disclosure of interests
193. The Bill provides for certain restrictions on engaging in paid
employment other than membership of the Board.
194. Full-time Board members are prohibited from undertaking paid
employment elsewhere without the Minister's approval. Part-time
Board members are permitted to hold paid employment elsewhere as
long as that employment does not conflict, or have the potential to
conflict, with the proper performance of the member's duties on the
Board. [Section 60-45]
195. Board members must disclose, to the Minister in writing, certain
direct or indirect pecuniary interests that the member has or
acquires. Such interests are those that conflict (or have the
potential to conflict) with the proper performance of the Board's
functions. Failure, without reasonable excuse, to give written
notice of such interests to the Minister may result in the
termination of the member's appointment. [Section 60-50 and
paragraph 60-60(1)(c)]
Remuneration and allowances
196. The members of the Board are to be paid:
. such remuneration as is determined by the Remuneration
Tribunal;
- if the Remuneration Tribunal has not made a
determination of remuneration, or if such a
determination is not in operation, Board members are to
be paid such remuneration as is prescribed in
regulations; and
. such allowances as are prescribed in regulations.
[Subsections 60-35(1) and (2)]
197. Remuneration and allowances are subject to the Remuneration
Tribunal Act 1973. The Remuneration Tribunal, an independent
statutory body, is responsible for determining remuneration and
related matters for Commonwealth statutory officeholders and
certain other offices, including the Board and its committees. The
Remuneration Tribunal Act 1973 outlines the functions and powers of
the Remuneration Tribunal. [Subsection 60-35(3)]
Termination of appointment
Resignation by a member
198. Ordinarily, a member who wishes to resign from membership of the
Board or the Chair who wishes to resign his or her appointment as
the Chair will give the Minister written notice of resignation.
The notice must specify a date from which the member or the Chair
proposes that the resignation will take effect. The Chair may
resign his or her appointment as the Chair without also resigning
his or her appointment as a member of the Board. [Section 60-55]
Termination by the Minister
199. The Minister may terminate the appointment of a member prior to the
expiry of the member's term on one or more of the following
grounds:
. misbehaviour [paragraph 60-60(1)(a)];
. mental or physical incapacity to perform duties
[paragraph 60-60(1)(a)];
. the member becomes bankrupt, applies to take the benefit
of any law for the relief of bankrupt or insolvent
debtors, compounds with creditors, or makes an assignment
of remuneration for the benefit of creditors [paragraph 60-
60(1)(b)]; or
. the member fails, without reasonable excuse, to comply
with the requirement to notify the Minister in writing of
any direct or indirect pecuniary interests that conflict
or could conflict with the Board's functions [paragraph 60-
60(1)(c)].
200. Additional grounds for termination of the full-time appointment of
a Board member are:
. the member is absent for 14 consecutive days without leave
of absence [paragraph 60-60(2)(a)];
. the member is absent for 28 days in any 12-month period
without leave of absence [paragraph 60-60(2)(a)]; or
. the member engages in paid employment outside his or her
duties as a Board member without the Minister's approval
[paragraph 60-60(2)(b)].
201. Additional grounds for termination of the part-time appointment of
a Board member are:
. the member is absent from three consecutive meetings of
the Board without leave of absence [paragraph 60-
60(3)(a)]; or
. the member engages in paid employment that conflicts or
could conflict with the proper performance of the duties
of office [paragraph 60-60(3)(b)]:
- Employment as a tax agent or BAS agent, or employment in
a professional association or the ATO, for example, is
not employment that ordinarily would conflict with the
performance of duties as a member of the Board.
Board procedures
Meetings
202. The Board may regulate proceedings at its meetings in any way that
it considers appropriate. For example, this may include such
things as determining the priority and nature of agenda items,
circulating an agenda in advance of each meeting, and circulating
minutes following a meeting. The Board may also determine its
approach to managing conflicts of interest of Board members.
[Subsection 60-70(5)]
203. At a meeting of the Board a quorum is constituted by a majority of
Board members appointed. Subsection 33B(3) of the
Acts Interpretation Act 1901 provides explicitly that a member who
participates in a meeting via telephone or other means of
communication, such as a video-link, is taken to be present at the
meeting. [Subsection 60-70(1)]
1.
The Board has eight members. At the time of one of the
Board's meetings, two members are absent overseas, one
member is absent due to illness, and one further member,
Maria, is unable to attend in person due to other
commitments. Maria participates in the discussion and
decisions made during the meeting via video-link.
There are, therefore, four members present at the meeting
and one participating by video-link. In this case, the
quorum requirement of five members is met.
204. A question arising at a meeting is decided by a simple majority of
the votes of the members of the Board present and voting.
[Subsection 60-70(2)]
205. The Chair presides at all meetings at which he or she is present.
If the Chair is unable to attend a meeting, the members present
must appoint one of themselves to preside. Consistent with the
restriction on appointments to the position of Chair, the Board
member appointed to preside over a meeting of the Board in the
Chair's absence cannot be a member who holds any office or
appointment under a law of the Commonwealth (other than as a member
of the Board) or a person appointed or engaged under the
Public Service Act 1999. (This means that a meeting will not be
able to proceed in the event that only members who are also engaged
or appointed under a Commonwealth law other than the Bill are in
attendance. In practice, it is expected that the number of Board
members who are also engaged or appointed under a Commonwealth law
other than the Bill will be few, so this situation is unlikely to
arise.) [Subsection 60-70(3)]
206. The Board member presiding at a meeting has a deliberative vote
and, in the event of an equality of votes, a casting vote. (A
deliberative vote is a vote that expresses an individual's opinion
on a matter being deliberated. A casting vote, or deciding vote,
is a vote given to the presiding officer in order to resolve a
deadlock.) [Subsection 60-70(4)]
Decisions without meetings
207. A decision can be made in the absence of a meeting if the Board has
determined that the decision may be made without meeting and
decided the method by which its members are to indicate agreement
(or otherwise) with the proposed decision. [Subsections 60-75(1)
and (3)]
208. Once these procedures have been determined, a decision is taken to
have been made at a meeting of the Board if:
. all of the members of the Board were informed of the
proposed decision, or reasonable efforts were made to
inform all the members of the proposed decision; and
. a majority of the Board indicates agreement with the
proposed decision in accordance with the method determined
by the Board for indicating such agreement.
[Subsection 60-75(2)]
209. The purpose of this subsection is to ensure that part-time
membership does not inhibit the functioning of the Board, while
providing assurance that all Board members have the opportunity to
consider and express their opinions on a matter before it is
decided.
210. The Board must keep a record of all decisions made without
meetings. [Subsection 60-75(4)]
Administrative support
211. The Board secretariat is to be staffed by persons engaged under the
Public Service Act 1999. The Commissioner is responsible for
making the services of such individuals available to the Board.
This arrangement will be subject to the post-implementation review
- refer to paragraph 5.33. [Section 60-80]
212. In performing services for the Board, an individual whose services
have been made available by the Commissioner is subject to the
directions of the Chair of the Board, provided they do not conflict
with the requirements of other legislation and guiding rules (eg,
the Public Service Act 1999 and the Australian Public Service Code
of Conduct).
213. To the extent that an individual is doing things other than
assisting with the execution of the Board's statutory functions or
powers, the individual is simply acting as an officer of the ATO
who is charged with doing things to assist the Board. In these
contexts, the individual should be subject to direction by the
Commissioner, provided that any particular direction does not
hinder the Board's independent performance of its functions or
exercise of its powers.
Investigation procedures
214. An important function of the Board is to investigate matters
relating to alleged or potential breaches of the provisions of the
Bill. The investigation procedures outlined in the Bill provide a
mechanism for grievances to be heard, ensure that the Board will
make considered decisions, and allow for sanctions or penalties to
be imposed where appropriate.
215. The Board has the power to investigate matters relating to any
aspect of its responsibilities, in particular:
. an application for registration as a tax agent or BAS
agent;
. any conduct that may be considered to be a breach of the
Code or any other section of the Bill; and
. any other matter prescribed by the regulations.
[Subsection 60-95(1)]
Commencing an investigation
216. An investigation may arise as a result of a complaint made by a
third party (such as a client, an employee of a tax agent or BAS
agent, a member of the public or the Commissioner) about an agent's
conduct, or the Board may decide to initiate an investigation of
its own accord.
217. When a complaint is made to the Board, the Board will determine
whether the complaint is one of substance and whether an
investigation is warranted. To do this, the Board may need to
gather preliminary information. It may do this by any means it
sees fit, for example, by inquiry of the complainant and/or the tax
agent or BAS agent to whom the complaint pertains, or by requesting
and reviewing documentation provided by the complainant, the
client, or obtained from the ATO.
218. Following its preliminary inquiry, if the Board decides to
investigate a matter, it must notify the tax agent, BAS agent,
unregistered entity or applicant for registration, as appropriate,
in writing, within two weeks after the decision to investigate.
The Board is not required to notify the complainant (if any) of its
commencement of an investigation, however it may choose to do so.
[Subsection 60-95(2)]
1.
Allister is unhappy with the services provided to him by his
tax agent Ms Fish, a partner of the registered tax agent
Fish & Associates. He raises his concerns with Ms Fish but
is not satisfied with the response and complains to the
Board.
Leo, an employee of the Board Secretariat, receives
Allister's letter of complaint. He commences gathering
preliminary information by contacting Ms Fish to discuss
Allister's claim. Leo requests copies of relevant
documentation from Ms Fish and seeks her view on the
complaint. Leo also contacts Allister to advise him that
the Board is reviewing his complaint and requests that he
provide copies of documentation held by him.
After gathering preliminary information, Leo presents this
information to the Board. The Board meets and decides to
investigate the matter further. The Board notifies Ms Fish
formally that it has decided to investigate the complaint.
This notification is made in writing within two weeks after
the day on which the Board decided to commence an
investigation.
219. An investigation is taken to have commenced on the date of the
Board's written notice of its decision to investigate.
[Subsection 60-95(3)]
1.
The Board receives a complaint against WWW Co., a registered
tax agent, on 1 June. Over the course of several months,
the Board Secretariat undertakes preliminary inquiries in
relation to WWW Co. and recommends to the Board that an
investigation be undertaken. The Board considers the
recommendation and decides that an investigation is
warranted on 15 October. The Board notifies WWW Co.
accordingly on 22 October (within two weeks after the
decision). The investigation is taken to commence on
22 October rather than 1 June.
Referral of complaints
220. Where the Board receives a complaint that an unregistered entity is
providing tax agent services or BAS services for a fee or other
reward, the Board may conduct an investigation. If the
investigation concludes that the unregistered entity was operating
unlawfully, the Board may apply to the Federal Court of Australia
(Federal Court) for a civil penalty order or an injunction. This
is explained in Chapter 4 of this explanatory memorandum.
221. The Board may also refer certain matters to other agencies. Under
the Bill, Board members may only disclose information they acquire
under the Bill in the performance of their duties under or in
relation to the Bill. In addition, Board members may disclose
information acquired under the Bill to the Commissioner and to
certain law enforcement agencies for the purpose of investigating
certain criminal offences - refer to paragraphs 5.134 to 5.151 for
an explanation of the secrecy and disclosure provisions in the
Bill.
Conducting an investigation
222. The Board may determine its own procedures for the conduct of
investigations. This flexibility allows the Board to conduct
investigations in a way that is the most efficient and appropriate
in the circumstances. [Paragraph 60-95(4)(a)]
223. The Board may choose to issue or publish guidelines (which are
legislative instruments) on the conduct of investigations for the
information of committee members, tax agents, BAS agents and
applicants for registration.
224. In conducting investigations, the Board is not bound by the rules
of evidence. Normally, the rules of evidence apply to judicial
decision-making processes, not administrative decision making
processes. The Board may therefore conduct its investigation with
as little formality as feasible and as expeditiously as a proper
consideration of the matters of the investigation permits. The
investigation process should not be prolonged or overly onerous on
the entity being investigated. [Paragraph 60-95(4)(b)]
225. Although the rules of evidence do not apply, the Board is required
to use its best judgment in conducting investigations and the rules
of evidence may provide the best guide. For example, if a witness
declines to verify a statement by oath or affirmation, the Board
could be expected to accord that evidence little weight.
226. The administrative law principles of natural justice (which include
the requirement for procedural fairness) apply to the Board's
investigations. This would involve, among other things, giving the
entity being investigated the right to be informed of the detail of
the complaint and the opportunity - including sufficient time - to
be heard in response.
Gathering information
227. For the purposes of conducting an investigation, the Board may seek
information by notice in writing. It has the power to require a
person to:
. provide the Board with the information referred to in the
notice [paragraph 60-100(1)(a)];
. provide the Board the documents or things referred to in
the notice [paragraph 60-100(1)(b)]; and/or
. appear before the Board to give evidence or to produce
documents or other things referred to in the notice
[subsection 60-105(1)].
228. Sections 8C and 8D of the Taxation Administration Act 1953
(TAA 1953) provide for offences relating to failure to give
information, failure to produce records, documents or things,
failure to attend, failure to take an oath or make an affirmation,
failure to answer questions and other matters when required under a
taxation law. Section 8C provides for an absolute liability
offence while section 8D provides for a strict liability offence.
For strict liability offences, the common law permits a defence of
honest and reasonable mistake of fact. Absolute liability offences
do not allow such a defence.
229. When the Board requests the production of a document or thing, the
request must be in writing and must specify the period within which
the person must comply with the request. The period specified must
be at least 14 days after the date of request to give the person
sufficient time to comply without impeding the Board's efficient
conduct of its investigations. [Subsection 60-100(2)]
230. The Board may request information from any person, including ATO
officers, for the purpose of an investigation.
231. For the purpose of taking evidence, the Chair of the Board, or an
individual acting on behalf of the Chair, may require a person to
either take an oath or make an affirmation. The oath or
affirmation is an undertaking that the evidence to be given is
true. For this purpose, the Chair or individual acting on behalf
of the Chair may administer the oath or affirmation. [Subsections
60-110(1) and (2)]
232. Persons who appear before the Board for the purpose of an
investigation are entitled to be paid an allowance and expenses, if
any, to compensate them for the time and expense incurred in
carrying out their role. Allowances and expenses are as prescribed
by the regulations. [Subsections 60-105(2) and (3)]
233. The entity that is liable to pay the allowance and expenses (if
any) in various circumstances is set out in Table 5.1.
1.
|If the person appears |Then the allowance and |
|before the Board because of|expenses must be paid |
|a nomination by... |by... |
|an entity that has applied |that entity |
|for registration | |
|any other entity |the Commonwealth |
[Subsections 60-105(2) and (3)]
234. A witness who has been sworn, or who has made an affirmation, may
be allowed to give evidence by tendering a written statement rather
than appearing in person before the Board. In this case, the
statement must be verified by oath or affirmation. An oath or
affirmation in the form of an affidavit would satisfy the
requirements of this provision of the Bill. [Subsection 60-110(3)]
235. The Board may take possession of documents and things provided to
it during the course of an investigation. It may make copies of
such documents or things and take extracts from such documents as
it considers appropriate or necessary. It may retain such
documents and things for as long as is necessary for the purpose of
the investigation. [Subsection 60-120(1)]
236. While the Board has possession of the document or thing, the Board
must allow reasonable access to it by a person who would otherwise
be entitled to possess the document or thing, including a person
authorised by that person. Reasonable access to a document must be
provided for the purpose of inspecting it, making copies of it and
taking extracts from it. [Subsection 60-120(2)]
Self-incrimination
237. A person required to provide information or evidence or produce a
document or thing to the Board for the purpose of an investigation
must do so even if doing so might incriminate the person or
otherwise expose them to a penalty. This requirement prevents self-
incrimination privileges from being used to obstruct the Board from
obtaining information for the proper conduct of its investigations.
It therefore protects the integrity of investigations conducted by
the Board and enables the Board to enforce the efficient and timely
collection of accurate information to conduct its investigations.
[Subsection 60-115(1)]
238. While persons required to provide information or evidence or
produce a document or thing must do so even if doing so may
incriminate them, in the case of an individual, there are limits on
the subsequent evidentiary use of:
. the information, evidence, document or thing given or
produced, as the case may be, during the course of an
investigation;
. the giving or producing of the information, evidence,
document or thing; and
. any information, document or thing obtained as a direct or
indirect consequence of giving or producing the
information, evidence, document or thing.
[Subsection 60-115(2)]
239. The information acquired by the Board by abrogating the self-
incrimination privilege can only be admissible evidence in
specified proceedings that relate only to the provision of
information and the quality (or accuracy) of the information
provided during investigations by the Board. These specified
proceedings are:
. proceedings for an offence against section 8C or 8D of the
TAA 1953 that relate to the Bill. These sections refer to
failure to comply with requirements under a taxation law
and failure to answer questions when attending before the
Commissioner or another person pursuant to a taxation law
(eg, the Board), respectively;
. proceedings for an offence against section 137.1 or 137.2
of the Schedule to the Criminal Code Act 1995 that relate
to the Bill. These sections deal with false or misleading
information and false or misleading documents,
respectively; and/or
. proceedings for an offence against section 149.1 of the
Schedule to the Criminal Code Act 1995 that relate to the
Bill. This section deals with obstruction of Commonwealth
public officials.
[Subsection 60-115(2)]
Legal professional privilege
240. The investigation powers established by Part 6 do not override the
principle of confidentiality of communications between legal
practitioners and their clients. The Bill does not affect the law
relating to legal professional privilege. [Section 70-50]
Outcome of investigation
Decision
241. The Board must make a decision following an investigation.
242. If the investigation relates to an application for registration
under section 20-20 of the Bill, the Board must make a decision in
accordance with section 20-25. That is, the Board must grant
registration if the applicant is eligible for registration of the
type applied for, or decline to register the applicant (details are
provided in Chapter 2 of this explanatory memorandum). [Subsection
60-125(1)]
243. If the investigation relates to conduct that may breach the Bill
and the Board finds that the conduct breaches the Bill, the Board
must either:
. make a decision that no further action will be taken in
relation to the investigation [paragraph 60-125(2)(a)]; or
. do one or more of the following:
- impose one or more sanctions under Subdivision 30-B
(administrative sanctions are discussed in Chapter 3 of
this explanatory memorandum) [subparagraph 60-
125(2)(b)(i)];
- terminate an entity's registration under Subdivision 40-
A (discussed in Chapter 2 of this explanatory
memorandum) [subparagraph 60-125(2)(b)(ii)];
- apply to the Federal Court for an order requiring
payment of a pecuniary penalty under Subdivision 50-C
(discussed in Chapter 4 of this explanatory memorandum)
[subparagraph 60-125(2)(b)(iii)]; or
- apply to the Federal Court for an injunction under
section 70-5 [subparagraph 60-125(2)(b)(iv)].
Timeframe for the making of a decision
244. The Board must generally make its decision within six months after
the date of the Board's written notice of its decision to
investigate. This limitation on the time for investigations
minimises uncertainty for the applicant, unregistered entity or
registered entity who is the subject of the investigation.
[Subsection 60-125(3)]
245. In some cases, six months will be insufficient time to finalise an
investigation. Where a delay in the conduct of an investigation is
caused by reasons beyond the control of the Board, the Board has
the discretion to determine a longer period within which to make
its decision. This discretion must be exercised at least two weeks
before the expiry of the initial six-month period, and may only be
exercised once. If a longer period is determined, the Board must
make its decision within that longer period. [Subsections 60-
125(3) to (5)]
1.
The Board receives a complaint about Pru, a registered tax
agent. After conducting preliminary inquiries, the Board
decides to investigate the matter. The Board refers the
complaint to an investigating committee and issues a notice
to Pru within two weeks after its decision to investigate.
During the investigation, Pru notifies the Board that her
home and office have been severely damaged in a tropical
cyclone and that, as a result, she will have trouble
producing the documentation by the deadline that the
investigating committee originally set. Given this delay,
the Board decides to extend the investigation period by six
months. The Board then notifies Pru of its decision.
246. 'Reasons beyond the control of the Board' may include, but are not
limited to, the following:
. delay caused by the subject of the investigation;
. delay caused by a person giving evidence; and
. where the complexity of the investigation is such that it
is not feasible to complete the investigation thoroughly
and with due regard to the requirements of legislation in
the allocated timeframe.
[Subsection 60-125(6)]
247. The Board's decision to extend the period of time within which an
investigation is to be completed is reviewable by the AAT. The
right to review allows those persons whose interests have been
affected by the decision (depending on the circumstances and the
reviewable decision itself, this may include the registered entity,
a complainant, or the ATO) to question the Board's exercise of its
power - refer to paragraph 2.67 in Chapter 2 of this explanatory
memorandum for further explanation of the AAT review of Board
decisions. [Paragraph 70-10(i)]
1.
The Board gathers preliminary information in relation to a
complaint that it received about Daniel, a registered BAS
agent, and notifies Daniel on 13 March that it has commenced
an investigation into the matter. The Board appoints a
committee to investigate, and the committee proceeds to
gather evidence and interviews relevant persons.
Five months after commencing the investigation into Daniel's
conduct, the investigating committee informs the Board that
it will not be able to make a recommendation on the case
within the six-month timeframe. The reasons for the delay
are that the committee has had trouble contacting a key
witness, Daniel has not been cooperative and the issues
under consideration are of a very complex nature. The
committee recommends that the investigation period be
extended by three months.
Because of the time limit on investigations and the
availability of the discretion to extend the time limit, on
28 August the Board accepts the committee's recommendation
and decides to extend the deadline for a further three
months, to 13 December. On 24 September (within 30 days of
the decision) it notifies Daniel in writing of its decision
and reasons and advises him that this decision is reviewable
by the AAT. Daniel disagrees with the Board's reasons and
seeks a review by the AAT.
248. If the Board does not make a decision within the six-month period
or within the longer timeframe determined by the Board, then its
decision is taken to be that no further action is warranted in
relation to the matter that was the subject of investigation.
[Subsection 60-125(7)]
Notification of decisions
249. The Board must notify certain parties if the Board investigates
conduct that may breach the Bill and either finds that the conduct
breaches the Bill or finds that the conduct does not breach the
Bill. Notice must be given in writing within 30 days of the
Board's decision or finding. [Subsection 60-125(8)]
250. The Board must notify the affected entity of its decision or
finding following an investigation and provide written reasons for
the decision. If the decision or finding is relevant to the
administration of the taxation laws (other than the Bill), notice
of the decision or finding and the reasons must be provided to the
Commissioner. The complainant, if any, is also entitled to receive
notice of the decision or finding following an investigation.
[Subsection 60-125(8)]
251. When the Board determines a longer period for making a decision as
described in paragraph 5.115, it must notify the entity affected by
that determination of the determination in writing. Such
notification must be provided within 30 days of the determination
and must provide reasons why the longer period is required.
[Subsection 60-125(9)]
252. Board decisions following an investigation are reviewable by the
AAT, except for decisions to take no further action, to issue a
caution and decisions to apply to the Federal Court for an order
that the tax agent or BAS agent pay the Commonwealth a pecuniary
penalty or for an injunction. [Section 70-10]
Reporting and disclosure obligations of the Tax Practitioners Board
Annual report
253. The Chair of the Board is responsible for ensuring that an annual
report on the operation of the Board is prepared and given to the
Minister for presentation to the Parliament. The report must be
prepared and provided to the Minister as soon as practicable after
the end of each financial year. Note that the Board's periodic
reporting requirements to Parliament are governed by section 34C of
the Acts Interpretation Act 1901. [Subsection 60-130(1)]
254. To fulfil the Board's reporting obligation, the annual report must
include certain information relating to the Board's disclosure of
information to law enforcement agencies - refer to paragraph 5.145.
[Subsection 60-130(2)]
255. The Minister must table a copy of the report provided by the Chair
of the Board in each House of the Parliament within 15 sitting days
of each House following receipt of the report.
Publication of information
On the Internet
256. The Board must establish and maintain a register on the Internet
of:
. every entity that is registered under the Bill; and
. entities that have had their registration terminated,
except where the termination occurred due to:
- the entity surrendering its registration; or
- a reason prescribed in the regulations.
[Subsections 60-135(1) and (4)]
257. For each tax agent and BAS agent, and each entity listed on the
Internet whose registration has been terminated, the register must
include the details that are prescribed in the regulations.
[Subsection 60-135(2)]
258. In the case of those entities listed on the Internet whose
registration has been terminated, the entry is only required to be
maintained on the register for 12 months starting on the day on
which the entity's registration was terminated, that is, the day on
which the termination takes effect. [Subsection 60-135(3)]
259. A 12-month period will assist agents to comply with the civil
penalty for employing or using the services of a deregistered
entity within one year of termination of its registration. It also
balances the protection of taxpayers (by providing transparency)
with the need to not inhibit an individual's future employment or
other provision of services in the industry.
260. A register of tax agents and BAS agents is a valuable resource for
taxpayers who wish to locate and engage a tax agent or BAS agent to
obtain tax agent services.
1.
Olga, an individual registered as a tax agent, is an
employee of B-Best Taxation & Accounting Services, a
registered tax agent. Following preliminary inquiries, the
Board appoints a committee to investigate its concerns about
various aspects of Olga's conduct over the past few months.
The Board's decision following investigation results in
Olga's registration being suspended for six months. Details
of Olga's suspension are listed on the Board's website.
Olga is an associate member of a recognised professional
association. Because the information has been made
available publicly on the Board's website, the public,
including Olga's recognised professional association, will
be alerted to Olga's suspension. This enables the
association to take appropriate disciplinary action if it
chooses to do so.
In the Commonwealth of Australia Gazette
261. The Board must cause a notice of certain decisions to be published
in the Commonwealth of Australia Gazette. The decisions that must
be published are decisions under Subdivision 30-B or Subdivision 40-
A to terminate the registration of a tax agent or BAS agent and
decisions under section 30-25 to suspend the registration of a tax
agent or BAS agent. [Section 60-140]
262. The requirement to cause a notice of such suspension and
termination decisions to be published in the Gazette allows the
application of section 153 of the Evidence Act 1995, which provides
that notices in the Gazette are prima facie evidence of the
notification.
263. Note that where the Board has terminated the registration of an
entity under Subdivisions 30-B and 40-A for a reason related to
their character, the deregistered tax agent or BAS agent cannot
apply for registration for a period of up to five years, as
determined by the Board. [Section 40-25]
Protection of information obtained under the Bill
264. In order to maintain the privacy and confidence of entities
interacting with the tax system, the secrecy provisions in the
taxation laws impose strict obligations on those who receive
information under a taxation law. Consistent with this, and given
that the Bill will be a taxation law - refer to paragraph 1.32 in
Chapter 1 of this explanatory memorandum - information obtained
under the Bill will be subject to a high level of protection.
265. Information that relates to and can identify a person will be
protected. There are no limitations on the use of information that
is purely of an administrative or procedural nature that does not
contain any personal information (and, consequently, in relation to
which there are no privacy concerns). To be protected, the
information must have been obtained by a person in the course of
his or her duties under or in relation to the Bill or the
regulations. It therefore does not include information obtained in
a private context. [Paragraph 70-35(1)(b)]
266. A limitation on the use of protected information is imposed on a
range of persons who perform duties under or in relation to the
Bill or regulations. While this clearly includes past or current
Board members, committee members and ATO officers providing
administrative support to the Board, it also applies to any person
who is or was employed by, or is or was engaged to provide services
for, the Commonwealth. [Paragraph 70-35(1)(a)]
1.
Michael, an IT professional, is contracted to develop and
maintain for the Board a database that will store
information relating to applications for registration. In
the course of his duties, Michael has access to a
considerable amount of information relating to individual
applicants. Notwithstanding that Michael is not a Board
member, a member of a committee or otherwise an Australian
Public Service employee appointed to assist the Board,
Michael's use of the information is restricted by the
provisions of the Bill.
267. ATO officers who provide services to the Board and perform duties
under the Bill are subject to the secrecy provisions in the Bill.
Therefore, an ATO officer cannot disclose or record information he
or she acquired in performing functions for the Board, even if
another provision of a taxation law ostensibly authorises such a
disclosure or record unless permitted to do so by the provisions in
this Bill.
268. If a person discloses or makes a record of information other than
in accordance with the Bill they commit an offence that is
punishable by two years imprisonment. [Subsection 70-35(1)]
269. This prohibition applies to disclosures of information to another
person, and 'another person' includes a Minister, court or
tribunal. [Subparagraph 70-35(1)(c)(i)]
270. However, no offence is committed if a person discloses or makes a
record of the information under or for the purposes of the Bill or
regulations or in the course of their duties under or in relation
to the Bill or regulations. This extends to disclosures that are
required to give effect to a specific provision of the Bill.
[Subsection 70-35(2)]
1.
Simon, a Board member, notifies the Commissioner of the
Board's decision to terminate the registration of a
particular tax agent. This notification is made in
accordance with paragraph 60-125(8)(c) of the Bill. It is
not an offence for Simon to disclose this information to the
Commissioner because Simon is merely ensuring that an
obligation of the Board under the Bill is fulfilled and is
therefore disclosing the information for the purposes of the
Bill and in the performance of his duties under the Bill.
271. For a disclosure or record to be authorised it need not be
referable to a specific provision of the Bill. The breadth of the
phrase 'performance of duties' has been considered by the courts on
a number of occasions including by the High Court (see Canadian
Pacific Tobacco Co. Ltd. v Stapleton (1952) 86 CLR 1). A person's
duties under or in relation to the Bill may include a range of
functions that a person performs and that are not explicitly
provided for in the Bill, for example, it may include an obligation
that arises under another Act of the Commonwealth.
1.
The Commissioner issues an information-gathering notice to
the Board under section 264 of the Income Tax Assessment
Act 1936, requiring it to provide information held by the
Board about a particular tax agent. It is not an offence
for Marie, a Board member, to disclose this information to
the Commissioner on behalf of the Board as she does so in
the performance of her duties in relation to the Bill.
272. In recognition of the confidential nature of information obtained
under a taxation law, such information cannot be compelled to be
provided to a court or tribunal unless it is necessary for the
purpose of carrying into effect the provisions of a taxation law.
This reflects the significant loss of privacy that would result
from the disclosure of this information in a public forum.
Consistent with this, persons who are subject to the secrecy
provisions of the Bill (as outlined in paragraph 5.136) cannot be
compelled to provide information to a court or tribunal except
where such a disclosure is required to give effect to the
provisions of the Bill or regulations. [Subsection 70-35(3)]
273. In addition to being able to disclose information for the purposes
of the Bill or regulations or in the performance of its duties
under the Bill or regulations, the Board can disclose information
that is relevant for law enforcement purposes. The Board's
disclosures are linked to existing provisions in the TAA 1953
permitting the Commissioner to disclose information collected under
a taxation law to certain agencies. Similar to the rationale for
such disclosures by the Commissioner, this recognises that the
public interest in the Board disclosing information to such
agencies overrides the resulting erosion of a person's privacy.
Specifically the Board will be able to disclose information to:
. the Chief Executive Officer of the Australian Crime
Commission for the purposes of a tax related investigation
(section 3D of the TAA 1953); and
. a law enforcement agency or a Royal Commission for the
purpose of establishing whether a serious offence has been
or is being committed or for the making or possible making
of a proceeds of crime order (section 3E of the TAA 1953).
[Section 70-45]
274. A 'serious offence' is defined by section 3E to be an indictable
offence. A 'law enforcement agency', defined in section 2 of the
TAA 1953, includes state and territory police departments, the
Australian Federal Police and other agencies such as the Australian
Securities and Investments Commission that have law enforcement
powers.
275. The on-disclosure of this information received by such entities is
governed by the provisions of section 3D and 3E of the TAA 1953.
In addition, given the significant consequences which may arise for
an individual as a result of such disclosures, any disclosures that
the Board makes to a law enforcement agency or to a Royal
Commission must be reported by the Chair in the annual report on
the operations of the Board - refer to paragraphs 5.123 to 5.125.
Specifically, things mentioned in paragraphs 3B(1AA)(b) and (c) of
the TAA 1953 must be set out in the annual report, to the extent
that the Board discloses information under section 3E of the TAA
1953 during the year. (This is consistent with similar reporting
requirements for the Commissioner.) [Subsection 60-130(2)]
276. In recognition of the law enforcement role that the Commissioner
plays in relation to the taxation laws, the Board is also permitted
to disclose information to the Commissioner for the purposes of
establishing whether a taxation offence has been or is being
committed or for the making or possible making of a proceeds of
crime order in relation to a taxation law. The relevant definition
of 'taxation offence' is that used in section 8A of the TAA 1953.
[Subsections 70-40(1) and 90-1(1)]
277. A proceeds of crime order is an order that relates to a person's
commission of a taxation offence that is made under the Proceeds of
Crime Act 2002 (in particular, Chapter 2 or Division 1 of Part 3-
1), the Proceeds of Crime Act 1987 (in particular, Part II or III),
a law of a state or territory that corresponds to those Parts or
Chapters of either of those Acts, or the Customs Act 1901 (in
particular, Division 3 of Part XIII). [Subsection 90-1(1)]
278. The possible making of a proceeds of crime order in respect of a
person includes making an order that is only a possibility at the
time in question because the person has not been convicted (within
the meaning of section 331 of the Proceeds of Crime Act 2002) of an
offence to which the order relates. [Subsection 70-40(2)]
279. While no specific on-disclosure restrictions are placed on the
Commissioner when he receives information from the Board, the
Commissioner's use of the information is governed by existing
taxation secrecy and disclosure provisions.
280. The fact that the ability to disclose information for law
enforcement purposes is specifically entrusted to the Board (as
outlined in paragraphs 5.143 and 5.148), as opposed to other
persons, recognises the sensitivity associated with disclosing
information for law enforcement purposes and the significant
consequences that could result for an individual.
281. Although these law enforcement provisions permit the Board to make
certain disclosures, the secrecy provisions prohibit a person from
disclosing or recording information except in certain
circumstances. However, as the Board may delegate its functions or
powers, it may delegate its power to decide to disclose information
and/or to make the disclosure of information to an individual (such
as a specific Board member). Where an individual discloses
protected information in accordance with such a delegation, they do
not commit an offence as they are deemed to have disclosed
information as the Board (see section 34AB of the Acts
Interpretation Act 1901).
1.
The Board becomes aware that information that it possesses
may be relevant to an Australian Federal Police
investigation into allegations that Alex, a registered tax
agent, obtained property by deception. Obtaining property
by deception is punishable by imprisonment of up to 10
years, and is therefore an indictable offence. The Board
decides to disclose this information to the Australian
Federal Police. Natalie, a member of the Board, has been
delegated the Board's power to disclosure information in
such circumstances and discloses information in accordance
with this delegation. Therefore, Natalie is considered to
have exercised this power as the Board and therefore will be
protected by the operation of section 3E of the TAA 1953.
Chapter 6
Regulation impact statement
Background
282. Tax agents are currently regulated under Part VIIA of the Income
Tax Assessment Act 1936 and Part 9 of the Income Tax Regulations
1936. Part VIIA, which imposes a mandatory registration system for
entities providing tax agent services for a fee, was inserted in
1943 and remains largely unchanged. It replaced various items of
state legislation as the passage of the uniform income tax
legislation necessitated uniform treatment of tax agents.
283. When Part VIIA was introduced, regulation of tax agents was
considered necessary for reasons of both consumer protection and
administrative control. Registration of tax agents was considered
to be in the best interests of both the taxpayer (who would benefit
with an assurance that their agent is reputable and competent) and
the taxation department (which would be able to deal effectively
with unscrupulous persons who may exploit taxpayers and expose them
to penalties).[2]
284. Since Part VIIA was introduced, the movement to a self assessment
system in 1986-87 shifted the balance of risk and uncertainty
towards taxpayers. Self assessment effectively moved the
responsibility of interpreting and applying the law to particular
circumstances from the Australian Taxation Office (ATO) to
individual taxpayers.
285. In addition, Australia's tax environment has changed significantly
in a number of other ways:
. The expansion of the tax base to include capital gains tax
(CGT), fringe benefits tax (FBT), expanded superannuation
regimes, and the goods and services tax (GST).
. Several waves of tax reform during the 1980s and 1990s,
which resulted in the addition of new regimes
(eg, consolidation), special treatment for market segments
(such as special concessions for small business) and the
rewriting of significant parts of the law (eg, through the
Tax Law Improvement Project).
. The expansion of taxation expenditures to include numerous
family assistance and industry policy measures.
. Responses to the threats of several concerted periods of
tax avoidance activity.
286. Taken together, these developments have markedly increased the
volume and complexity of the taxation laws (at least in terms of
the number of interactions), leading to significant challenges for
those seeking to interpret and apply them.
287. These changes, together with lifestyle decisions, have led to
significant growth in the use of tax agents over the last 20 years.
Engaging an agent relieves taxpayers of some of the anxiety and
uncertainty faced under self assessment and assists them to deal
with the complexity in the taxation laws. Whereas, in 1980,
approximately 20 per cent of individual taxpayers sought
professional assistance from tax agents to lodge their tax returns,
by 1992 this figure had grown to 72 per cent.[3] At present there
are approximately 26,000 tax agents who prepare and lodge around 74
per cent of individual tax returns and over 95 per cent of tax
returns for business.[4]
288. Although the rationale for the introduction of Part VIIA in 1943
remains relevant and valid today, the changes in the regulatory
environment and the growth of the taxation laws have prompted
consideration of whether the existing registration system remains
appropriate and adequate for the contemporary setting.
289. This potential need for realignment of the legislation with its
setting was contemplated when, during the early 1990s, the
regulatory arrangements and professional standards for tax agents
were reviewed. The review was performed by a working party of
accountants, legal practitioners, tax agent representatives and the
ATO, and its report, Tax Services for the Public, was issued in
November 1994. The report examined the need for regulation and
concluded that continued government intervention is necessary and
that the existing legislation should be updated and strengthened to
redress the deficiencies that had become apparent over time.
290. Although in April 1998 the introduction of a new legislative
framework for tax agent services was announced, its implementation
was postponed at the behest of the tax profession to allow it to
adjust to other changes to the tax environment occurring at that
time.
291. Work on the new regulatory framework recommenced in 2002, using the
findings outlined in Tax Services for the Public, and the existing
legislation, as a base.
Problem specification
292. The need for reform is justified by deficiencies with the existing
regulatory framework. These deficiencies that can be classified
into three broad categories.
Inconsistency in the regulation of agents
293. The existing framework is narrowly centred around a registration
system for tax agents with a focus on services related to income
tax only. Although this approach was appropriate at the time of
its inception, the tax base has expanded significantly over recent
decades, with an associated increase in the volume and the
complexity of the taxation laws. Indeed, the introduction and
pervasiveness of new taxes such as the GST, FBT and CGT, without
corresponding adjustments to the scope of the regulatory framework,
has resulted in the regulation no longer reflecting the reality of
the commercial environment. There is now a strong argument for
broad, transparent and systemic regulation of the provision of tax
agent services, which would reflect the broader scope of services
being provided given the expansion of the tax base.
294. This narrow focus of the existing regulatory framework prevents
certain competent providers of Business Activity Statement (BAS)
services and specialised tax agent services from providing tax
agent services, creating inconsistencies in the framework's
coverage:
. Currently, only a small set of entities is permitted to
provide BAS services for a fee, limited to registered tax
agents (who are qualified to prepare income tax returns
and transact business on behalf of taxpayers in income tax
matters), and individuals such as those who are members of
a recognised professional association (which are largely
the accounting professional associations) or who work
under the direction of a registered tax agent (a
requirement which is rarely enforced due to uncertainty as
to the meaning of the phrase 'under the direction'). This
limitation does not necessarily reflect the
qualification/skills required to provide BAS services
competently.
. In addition, entities which specialise in services related
to a particular area of the taxation laws (other than
income tax) or a particular type of service such as advice
rather than return preparation are unable to register
without demonstrating a range of experience that extends
beyond their specialisation to cover a variety of services
across the income tax laws. This impacts on both the
specialist agent, who encounters high barriers to entry
and who cannot truly specialise, and also consumers, by,
in turn, restricting competition.
295. Even within the existing regulatory framework there are
inconsistencies. Registration and regulation, although under
Commonwealth legislation, are administered on a state basis by the
six Tax Agents' Boards (state Boards), which has led to
inefficiencies with duplication of services and administrative
functions. It has also allowed inconsistencies in interpretation
and application of the law to develop, which in turn has
consequences for the consistent regulation of tax agents across the
states and results in discrepant standards of services provided to
taxpayers.
296. Although many tax agents are currently subject to codes of ethical
and professional conduct by virtue of their memberships of
professional associations, such market initiative does not apply
consistently across all of the industry, as not all agents are
members of such organisations.
Inadequacy of consumer protection
297. For consumers, the narrow focus of the existing regulatory
framework has two consequences:
. The first relates to quality of service provision. The
different degrees of regulation under the current law for
the provision of different types of tax agent services
results in services of varying standards. For example,
throughout consultation on these reform proposals,
participants have communicated that the limited regulation
of the provision of BAS services under the current law has
allowed for a low standard of service provision, with tax
agents frequently being required to re-perform work
completed by bookkeepers to ensure its accuracy. The need
for re-performance could cause inflation of costs to
consumers and a decline in confidence in the industry.
. The second consequence relates to market competition which
is affected by the presence of the inappropriate barriers
to entry described above. The entry barrier for providers
of BAS services, for example, is not aligned with the
skills and knowledge required to provide BAS services.
This misalignment allows certain unqualified people to
provide BAS services while preventing other qualified
people from providing BAS services. This disrupts the
efficient operation of a competitive market which benefits
consumers. Further, the fact that the requirement that an
individual be working under the direction of a registered
tax agent is rarely enforced (due to uncertainty as to its
meaning) also creates incentive and opportunity for
illegal operators in the market and exposes clients to
risk.
298. The consumer protection deficiencies of the existing legislation
are also evident in the lack of clarity for agents in terms of what
is required and the lack of flexibility for the state Boards in
terms of the imposition of sanctions, as outlined below.
299. The current law does not contain clear and uniform standards
required of agents providing tax agent services. Instead, it only
lists certain serious misdemeanours which may or will result in the
termination or suspension of registration. This has the following
consequences for consumers:
. the quality of tax agent service provision can vary
significantly and largely depends on an individual's own
professional ethics (or membership of a professional
association which imposes certain standards on its
members); and
. there is not a standard against which consumers can
evaluate the competence and ethical standards of tax
agents and there is no requirement for public
dissemination of information about tax agents. As such,
there are information asymmetries between tax agents and
their clients which expose consumers to a risk of adverse
selection.
300. The administrative sanctions available to the state Boards to
discipline tax agents are inflexible and too limited, leading, at
times, to counterproductive outcomes: the state Boards can only
take an 'all or nothing' approach to regulation for misconduct.
Because the sanctions available to the state Boards are limited to
suspension or termination of registration, unless the misconduct is
sufficiently serious to warrant the taking away of a person's
livelihood, the state Boards are reluctant to impose a sanction.
The ATO has advised that, in 2007-08, of 660 complaints that have
been finalised, only 25 resulted in the imposition of a sanction.
Threat to the integrity of the tax system
301. Increasing complexity in the taxation laws has corresponded with an
increasing proportion of the taxpaying public engaging the services
of tax specialists to assist them to comply. With a regulatory
framework that is inflexible and too narrow, the risk of
incompetent work being performed is high. This could lead to a
lower level of compliance, thereby subjecting taxpayers to
additional risk and impacting on revenue collection.
302. In addition, uncertainty in the current law, inflexibility in its
administration and excess demand created by inappropriate entry
barriers have allowed illegal operators in the market which
undermines the integrity of the tax system. For example,
anecdotally, some BAS services are currently being provided
unlawfully by unregulated entities.
Summary of distribution of benefits and costs under the current
framework
303. These examples demonstrate that the deficiencies in the current
regulatory framework impact negatively on taxpayers, agents and the
tax system as a whole. In particular:
. in terms of the industry, tax professionals specialising
in aspects of the taxation laws other than income tax are
affected most acutely, as they are unable to register
without demonstrating a range of experience beyond their
specialisation, and therefore are not accommodated as
specialist agents in their own right; and
. in terms of consumers, key costs are the uncertainty faced
around the quality of services received and concern about
exposure to risk.
304. Accepting that the current framework is outdated, generally
positive feedback throughout extensive consultation over many years
on the reform proposals suggests that the benefits to any party of
the existing situation, in the contemporary environment, are few.
Indeed the only party which may benefit from the existing situation
is those misbehaving tax agents or unregistered service providers
who are currently operating within the industry without being
subject to sanction or clear, unambiguous regulation.
Objectives of government action
305. Broadly, the objective of government action is to redress the
deficiencies identified above.
306. Specifically, the policy objectives of the new legislative
framework for tax agents and BAS agents are:
. for tax agents and BAS agents - to improve consistency in
registration and to regulate the provision of tax agent
services in an appropriate, but flexible, way;
. for taxpayers - to enhance the protection of consumers of
tax agent services, thereby reducing the level of
uncertainty for taxpayers and the risks associated with
the self assessment system; and
. for the system - to strengthen the integrity of the tax
system and the tax industry.
307. The objectives outlined above are broadly stated in the
Assistant Treasurer and Minister for Competition Policy and
Consumer Affair's Media Release No. 039 of 29 May 2008.
Options that may achieve objectives
308. To address the deficiencies and achieve the objectives, the only
viable option is continued explicit government intervention with a
focus on a more robust regulatory framework. This is consistent
with the recommendation in Tax Services for the Public, which
concluded that the public interest is best served by a mandatory
registration system for all those in the business of providing tax
agent services, supplemented with appropriately enforceable
standards of conduct.
309. The key elements of such an option would be:
. a national Tax Practitioners Board (Board) to replace the
existing state-based Boards to, among other things, make
consistent the registration process and standardise the
way in which tax agents are regulated across the country;
. registration and regulation of both entities providing tax
agent services (as tax agents) and entities providing BAS
services (as BAS agents);
. a legislated and enforceable Code of Professional Conduct
(Code), based largely on the codes of the professional
associations, to make explicit the standards expected of
tax agents and BAS agents and to clearly define their
roles and responsibilities;
. a wider and more flexible range of administrative
sanctions which may be imposed by the Board;
. civil penalties and injunctions to replace criminal
penalties for certain misconduct by agents and
unregistered entities; and
. 'safe harbours' which provide that, in certain
circumstances, taxpayers who engage a tax agent or a BAS
agent are not liable to administrative penalties that
would otherwise ordinarily apply for making a false or
misleading statement resulting in a tax shortfall amount,
or for lodging a document late.
310. Building on and strengthening the existing law will create fewer
additional compliance and administrative costs than instituting an
entirely new regulatory framework.
311. Other options were explored in Tax Services for the Public and
during the development of the proposals:
. To deregulate the industry and rely on self-regulation or
quasi-regulation would be ineffective at achieving the
policy objectives. This approach would arguably decrease
standards and quality of service in a complex area of the
law, reducing the accuracy of taxpayers' tax returns,
creating uncertainty for consumers, and exposing them to
risks of penalties. As such taxpayers may obtain no
benefit from engaging a 'professional'.
. The option of strengthened co-regulation was canvassed
early in the legislative design phase. Two elements of
this option were considered:
- allowing the professional associations to certify the
academic qualifications and relevant work experience
requirements for registration, as well as possibly the
determination of agents' fitness and propriety; and
- sharing information about agents' conduct with the
professional associations, thereby allowing the
professional associations to sanction their members in
accordance with their own rules.
This option was later abandoned at the recommendation of the
professional associations, which expressed concern about both
elements. Their concern with the former related to their inability
to gather the necessary information and to recover the resources
expended. Their concern with the latter was the potential exposure
to civil liability for imposing sanctions either prior to the
Board's decision or that differ from the Board's conclusion.
312. These options are not considered further in this regulation impact
statement.
313. The option of strengthened explicit government regulation is
considered against the backdrop of retaining the current system of
tax agent registration (ie, maintaining the status quo). Retaining
the existing regulatory framework would clearly not achieve the
objectives identified above. It would commit agents and the state
Boards into the current regime without flexibility to deal with the
contemporary environment and issues. Additionally it would be
inconsistent with the expectations of the profession, which has
invested significant resources in the development of the measure.
Impact analysis
Impact group identification
314. The measure will impact on all taxpayer groups (including
individuals and businesses which do or do not use the services of
tax agents), tax agents, bookkeepers and other intermediaries,
professional and para-professional associations, the state Boards,
and the ATO. Many tax agents and bookkeepers operate as small
businesses.
315. There are currently approximately 26,000 registered tax agents who
will be directly impacted by these proposals[5]. In addition, the
ATO has advised that there are a further 11,000 nominees (of
partnership and company registered tax agents) who will be
affected. In terms of other intermediaries, there are over 120,000
people working in the bookkeeping industry, 10 to 15 per cent
(12,000 to 18,000) of whom are in business lodging BASs for clients
for a fee[6].
Impact of reforms
Analysis of benefits
Taxpayers / consumers
316. The key benefits to consumers, including small business consumers,
are likely to be:
. greater protection and certainty that a tax agent or BAS
agent has demonstrated and maintains a certain degree of
competence (in terms of qualifications and experience and
continuing professional education) and is bound to act in
accordance with the statutory Code;
. increased competition with respect to the tax agent
services industry as a whole, as there will be a
significant increase in the number of registered entities
which can provide different types of tax agent services:
- in terms of BAS agents, although imposing barriers to
entry could decrease competition, the proposed very low
level of entry requirement and long transitional period
are expected to allow a majority (if not all) of the
individuals currently providing BAS services to be
registered and will therefore not inhibit the promotion
of competition within this segment of the industry; and
. a 'safe harbour' (or exemption) from certain
administrative penalties in certain circumstances where
they engage an agent - refer to paragraphs 6.52 and 6.53.
Tax agents, BAS agents and other intermediaries
317. Agents, including small business agents, will benefit from the new
framework in the following ways:
. improvement to the clarity of regulation and requirements,
through well balanced law, coupled with flexibility for
the Board which will be supplemented by detailed
explanatory material and guidelines to be issued as
legislative instruments by the Board;
. recognition of the important role that providers of BAS
services play in the tax system;
. improvement to the reputation of the profession, which
could enable agents to attract more business;
- The measure will 'raise the bar' for tax agents, and
intends to raise the bar for BAS agents gradually
through the proposed transitional period which will
allow them time to obtain the necessary training.
. removal of inefficient barriers to entry with regard to
the relevant employment requirement in the existing law,
which currently precludes specialists from registering as
tax agents. Registration of specialists could expand the
tax agent industry to meet the existing excess demand for
tax agent services; and
. a broader range of more constructive and educative
administrative sanctions which may be applied in cases of
breach, rather than only the final sanctions of suspension
and cancellation of registration.
Professional associations
318. The measure proposes to allow the Board to recognise associations
which meet certain prescribed criteria (relating to membership
numbers, professional, ethical and educational standards and
governance and management procedures) as recognised BAS agent
associations. This provides such associations with the opportunity
to market themselves with a view to increasing their membership
numbers. Importantly, it also provides an incentive to offer a
variety of services to members that may benefit BAS agent members.
319. There is expected to be little impact on recognised professional
associations (tax and accounting professional associations), which
will continue to be able to be recognised under the new regulatory
framework.
State Tax Agents' Boards
320. The state-based Boards will be replaced by a national Tax
Practitioners Board.
321. The establishment of a nationally administered framework will
improve the Board's economies of scale and enhance consistency in
the Board's decision making processes and outcomes. The gains in
terms of efficiency and the associated administrative cost savings
are expected to be significant. Currently, the six state Boards
are resourced individually (but each to the same level, regardless
of relative workloads) by the ATO through its annual appropriation.
They have their own rules and procedures and make decisions
independently of each other. The national Board will be better
able to allocate its operational budget in accordance with its
priorities and create a nationally consistent regulatory framework.
It will have the opportunity to centralise many of its functions
and to implement process and technological improvements, such as
electronic record-keeping and an interface with agents, as well as
an electronic case management system to manage complaints handling
and the Board's proactive integrity work.
Tax system
322. The measure is designed to contribute to greater institutional
certainty. This is expected to have a positive economic impact as
administrative and transaction costs within the tax system will
reduce with the anticipated reduction in inefficiencies (eg, either
elevation of tax agent performance standards or underperforming
agents exiting the industry).
Analysis of costs
Compliance costs
323. The ATO has estimated that the potential transitional compliance
cost impact of the measure (with a medium level of confidence) will
be:
. a small cost for tax agents and BAS agents with the
appropriate qualifications:
- The requirements for registration as a tax agent will
remain largely the same as under the existing law. On
transition, registration under the current law will be
taken as registration under the new law.
- Although the measure represents a strengthening of the
existing framework, there are likely to be some
transitional compliance costs associated with learning
about the changes. This could be partially offset by
increased certainty about tax agents' rights and
responsibilities.
- The ATO has advised that approximately 50 per cent of
the bookkeepers who are currently in business lodging
BASs for clients for a fee are expected to already hold
the required Certificate IV Financial Services
qualification in either bookkeeping or accounting.
- New entrants seeking registration as BAS agents will
need to pay a registration application fee, proposed to
be $100 or $50 (depending on whether or not the agent is
carrying on a business), and will also need to obtain
professional indemnity insurance.
. a potentially large cost for those bookkeepers who are
currently in business lodging BASs for clients for a fee
(and who are expected to seek registration as BAS agents)
but do not currently meet the minimum standard of
qualification. The cost of obtaining the necessary
qualification will crystallise after two years and may be
spread over as many as five years for many bookkeepers,
given the proposed transitional arrangements. As many
bookkeepers operate as small businesses, these costs do
reflect (at least in part) a cost of the measure to small
business:
- The transitional compliance cost for bookkeepers without
the necessary qualifications is estimated to be up to
$15,000 each ($110 million for a population of
approximately 7,500), however 78 per cent of this cost
estimate reflects the estimated opportunity cost of
gaining the required qualification.
- Many education providers grant credit (in some cases up
to 100 per cent) for relevant prior study and/or work
experience. It is anticipated that a large number of
bookkeepers will be eligible for such credit, and this
will significantly reduce the initial compliance costs.
For example, if 50 per cent of the course is granted in
recognition of relevant work experience, implementation
costs are expected to be $8,700 per bookkeeper
($65 million for a population of 7,500).
324. Ongoing compliance costs are estimated to be:
. nil/minimal for tax agents; and
. small, at $1 million per annum, for BAS agents
(approximately $67 each per annum):
- The registration application fee will be payable at most
once every three years. Other expected costs are those
associated with continuing education.
325. With regard to the introduction of a legislated Code, the impact
will be minimal on many currently registered tax agents and
individuals providing BAS services, who are subject to codes of
conduct by virtue of their membership of professional associations.
The impact will be greater on BAS agents entering the industry,
who are not members of an association and have not previously been
subject to a code of conduct. The proposed Code will not, however,
be onerous and will reflect a minimum standard of professional and
ethical behaviour of agents.
326. The introduction of the 'safe harbour' provisions may impose some
costs on agents in terms of record-keeping.
Administrative costs
327. Additional funding for the implementation of the measure of
$57.5 million over four years was allocated and announced in the
2006-07 Budget. This includes funding to cover:
. the development of information technology systems:
- this represents costs associated with changes to the Tax
Agent Portal, the development of registration,
accounting and correspondence systems and the
development of a new Board website; and
. community education programs about the changes in the law
and penalty provisions.
328. The ATO has advised that the ongoing administrative cost is
estimated to be at least $14 million per year. This represents a
net change of approximately $4 million from the 2007-08 financial
year (however the administrative cost of approximately $10 million
for the 2007-08 financial year includes not only the cost of
administering the current framework, but also the cost of preparing
for the new framework). The current spending on the state Boards
is conservative given that the ATO has been in a 'holding pattern'
over past years in anticipation of the new framework becoming
effective (ie, the existing state Boards are not currently
sufficiently resourced to perform all of their functions
effectively). In addition, the proposed expanded role and
functions of the proposed Board will require an increase in its
budget.
329. Additionally, costs related to the administration of the proposed
'safe harbour' provisions are estimated at $9.089 million over four
years.
330. The administrative costs are associated with:
. the regulatory role of the national Board including the
registration of BAS agents and activity around enforcing
compliance with the Code:
- Additional administrative resources will be made
available to assist the Board. The ATO has estimated
that secretariat staffing of approximately 100 to 110
full-time equivalent positions will need to be made
available during the first two years, estimated to
settle at approximately 90 full-time equivalent
positions in future years. By contrast, currently
approximately 70 full-time equivalent positions are
dedicated to Board assistance.
. the administration of safe harbours for taxpayers in
certain circumstances when they engage an agent:
- This cost is associated with designing and building
administrative systems and debt collection and lodgment
management.
- The timing of the application of the safe harbours
(either prior to or following the imposition of a
penalty) will provide flexibility to ensure that they
are able to be administered in the most efficient way
with minimal impact on the ATO's existing lodgment
program.
Revenue costs
331. As the new arrangements do not introduce or remove taxes, the
measure will not have a significant impact upon government revenue.
332. It is expected that the impact of replacing criminal penalties with
civil penalties will result in a small gain to revenue. This gain
is not expected to exceed $1 million over four years.
333. There is expected to be a cost to revenue associated with the
introduction of 'safe harbour' provisions which exempt taxpayers
from administrative penalties in certain circumstances.
334. The safe harbour from tax shortfall penalty will apply if taxpayers
demonstrate that they took reasonable care by engaging a registered
agent and providing them with all necessary tax information, but
the agent carelessly made a false or misleading statement that
resulted in a shortfall amount. The cost of this safe harbour is
unquantifiable (meaning that there will be a cost, but that it
cannot be measured reliably) due to a lack of data on the
percentage of penalties raised due to careless tax agent errors,
where the taxpayer has provided them with the correct information.
335. The safe harbour from administrative penalty for failing to lodge a
document on time and in the approved form is proposed to apply if
taxpayers establish that they engaged a registered agent, gave
their agent all relevant information to enable the lodging of a
document on time in the approved form and the agent carelessly
failed to do so. The cost of this safe harbour is unquantifiable
due to a lack of data on the percentage of penalties raised due to
tax agent carelessness, as well as the unknown impact of the
exemption on the behaviour of taxpayers and their agents.
336. In both cases, the sensitivity analyses suggest that a small change
in the assumed percentage of tax agent errors can have a large
impact on the cost estimates.
Anticipated net impact
337. In summary, the principle costs of the measure are associated with
the following elements:
. compliance costs borne by bookkeepers to obtain the
educational qualifications required for registration as a
BAS agent; and
. administrative costs borne by the Government to fund the
national Board at a sufficient level to enable it to
perform its legislated functions, including its role
registering and regulating a larger number of agents.
338. While the benefits cannot be quantified, it is expected that the
costs will be more than offset by the benefits to taxpayers, agents
and the tax system as a whole outlined above, resulting in an
overall net benefit of the measure. In terms of the key elements
of the measure, broadly speaking:
. establishment of a national Board will benefit agents by
providing nationally consistent regulation and will
benefit the Board by enabling greater efficiency in the
use and allocation of its resources;
. registration and regulation of tax agents and BAS agents,
including the introduction of the Code, will benefit
taxpayers who engage agents and the tax system as a whole
by regulating the standard of services provided and
improving confidence. It will also provide certainty and
clarity for agents as to what is expected of them, and
should therefore reduce compliance costs. BAS agents will
face certain barriers to entry, but will benefit from the
clarity provided by a move away from the partially
regulated but unenforced arrangement in place currently;
. taxpayers will benefit from the introduction of a wider
range of administrative sanctions which may be imposed by
the Board through the assurance that agents will be
appropriately disciplined for breaches of the Code.
Agents will also benefit from the expansion of options
available to the Board rather than just suspension or
termination of registration. Administrative flexibility
also has the benefit of allowing the Board to administer
the system most efficiently;
. replacement of criminal penalties with civil penalties and
injunctions will benefit agents and the integrity of the
tax system, by providing appropriate disincentives to act
inappropriately; and
. safe harbours from certain administrative penalties in
certain circumstances where a taxpayer engages a tax agent
will provide greater protection for taxpayers and will
improve the integrity of the tax system by encouraging
taxpayers to engage tax experts to assist them in their
interactions with the tax system.
Consultation
339. The details of the new regulatory framework and the draft
legislation have evolved through extensive consultation with tax
agents and bookkeepers, tax, accounting and legal professional
associations and bookkeeper associations, representatives of
community organisations, government departments and agencies
including the ATO, the state Boards and taxpayers.
340. The broad range of entities consulted and the extent of
consultation has resulted in an appropriately balanced regulatory
framework. Consultation has promoted stakeholder buy-in and
ownership of the reforms, and has undoubtedly led to better, more
robust, outcomes. Indeed, the key elements of the measure have
received unanimous support.
341. Consultation spanned the period since the establishment of the
working party in 1992 - refer to paragraph 6.8 - through to late
2008, and included:
. confidential consultation on the framework during the late
1990s;
. extensive confidential consultation with the tax
profession in 2004 and 2005 on the proposed framework
(including on a Treasury discussion paper) and in 2006 and
2007 on draft legislation prior to public release:
- Throughout these consultation processes the tax
profession expressed general support for the proposed
reforms and indicated its endorsement of release of an
exposure draft package for public consultation. Prior
to the public release, several revisions and refinements
were made to draft legislation as a result of concerns
raised.
. release of a first exposure draft package for public
consultation for 14 weeks from 9 May 2007 to
10 August 2007, followed by numerous consultation meetings
with key stakeholders:
- Treasury received 114 submissions in response to the
exposure draft package, most of which expressed broad
support for all of the elements of the proposed reforms.
The key issues raised were a need for greater clarity
in the wording of various principles of the proposed
Code and a need for independence of the Board from the
ATO. These concerns were raised by practitioners, the
legal, tax and accounting professional associations, the
ATO and the existing state Boards. Amendments made to
the materials to address concerns raised included
revisions to the Code and associated explanatory
materials and the transfer of the exposure draft into
its own, separate Bill, of which the Board - and not the
Commissioner of Taxation - has the general
administration. Some relatively minor technical
adjustments were also made.
. public consultation on a revised exposure draft
legislative package for four weeks from 29 May 2008 to
27 June 2008:
- Treasury received 45 submissions which expressed broad
support for the revised package and acknowledgment of
the issues addressed through the initial public
consultation process. The key issues raised in
submissions concerned aspects of the Code, largely
resolved through minor amendments to wording and
discussions with the accounting profession and
professional associations, and the extent to which
financial services licensees are permitted to provide
tax agent services without registration as a tax agent,
resolved through minor amendment of the proposed
definition of 'tax agent service' to express clearly the
policy intention. Some other relatively minor
amendments were made to the draft legislation and
explanatory materials.
342. Very few concerns were raised by small business throughout the
consultation processes about the anticipated impacts on that
segment of the community in particular. A very small number of
submissions raised concern with the costs to small business BAS
agents of obtaining registration. To address such concerns, a low
start up requirement and long transitional period are proposed to
be provided. These will enable such businesses to enter the new
framework initially without being required to have the necessary
educational qualifications, and to spread the associated costs of
obtaining the qualifications over several years. Additionally, the
registration application fee is proposed to be relatively low and a
cost recovery approach has not been adopted.
Further consultation
343. Consultation on the complete set of transitional provisions and
consequential amendments is expected to take place in late 2008 or
early 2009, prior to planned introduction during the Autumn 2009
Parliamentary sitting period.
Conclusion and recommended option
344. The decision to strengthen the existing framework for registration
of tax agents through additional explicit government regulation was
made in partnership with industry and community representatives.
345. The details of the measure (including the introduction of the Code
and the creation of a national Board) are the result of a broad
consultative process undertaken over many years with the major
stakeholders in the tax system. Accordingly, they represent the
most efficient and transparent approach to achieve the desired
policy outcomes. Further, as the proposal essentially builds on
existing registration and regulatory arrangements, it will not
impose a significant implementation or compliance cost on
stakeholders.
346. This proposal is envisaged to promote greater certainty and
transparency for taxpayers, clarity for agents in terms of their
roles and responsibilities, and greater consistency and efficiency
in the regulatory system.
Implementation and review
Implementation and enforcement
347. The Board will be a statutory body that falls within the Treasury
portfolio. Its membership will be appointed by the relevant
Treasury Portfolio Minister and will be drawn from the industry.
It will operate independently, as its functions and powers will be
vested in it by statute. The administrative and secretariat
services will initially be provided by Australian Public Service
employees (specifically, ATO officers), but this arrangement may
change pending the outcome of the post-implementation review
mentioned in paragraph 6.70.
348. Entities seeking to provide tax agent services (including BAS
services) for a fee will need to apply to and register with the
Board. Registration will require demonstration that they meet the
prescribed qualifications and experience requirements, and the 'fit
and proper person' test.
349. Registered agents will need to comply with the Code, which will be
drafted in principles with clear guidance on what is regarded as
compliant behaviour provided in the explanatory memorandum and in
legislatively enforceable guidelines to be issued by the Board.
350. Compliance with the Code will be enforced by the Board, which will
have available to it a broad range of administrative sanctions
ranging from a written caution through to termination of
registration. The Board will also be able to apply to the Federal
Court of Australia for a civil penalty order or injunction where an
agent or unregistered entity breaches a civil penalty provision.
351. The ATO will administer the application of the 'safe harbours' from
certain administrative penalties that are available to taxpayers in
certain circumstances where they have engaged a registered agent.
The onus, however, will be on the taxpayer to demonstrate that the
safe harbour should apply to them.
Review of regulation
352. The measure does not contain a statutory review requirement.
However, the Government intends that the operation of the
legislation will be reviewed within three years of implementation,
with particular emphasis on (but not being limited to) the
governance arrangements for the Board and the operation of the
'safe harbour' from penalties in certain circumstances for failing
to lodge a return, notice, statement or other document in the
approved form and on time.
353. In any case, the legislation will be reviewed under the
Government's five-yearly review requirements.
-----------------------
[1] Australian Taxation Office, Compliance Program 2006-07, Commonwealth
of Australia (available at www.ato.gov.au), and as advised by the
Australian Taxation Office in July 2008.
[2] Second Reading Speech of the then Treasurer, Ben Chifley, with
reference to the findings and recommendations of the Royal Commission on
Taxation 1932-1934 (the Ferguson Commission).
[3] National Review of Standards for the Tax Profession 1994, Tax
Services for the Public: Report of the National Review of Standards for
the Tax Profession, page 5, Australian Government Publishing Service,
Canberra.
[4] Australian Taxation Office, Compliance Program 2006-07, Commonwealth
of Australia (available at www.ato.gov.au ).
[5] Australian Taxation Office, Compliance Program 2006-07, Commonwealth
of Australia (available at www.ato.gov.au ).
[6] Australian Taxation Office, Compliance Program 2006-07, Commonwealth
of Australia (available at www.ato.gov.au ).