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Additional breach reporting obligations for tax practitioners under the Tax Agent Services Act 2009

Purpose of guidance

1. The purpose of this document is to provide a summary of the additional breach reporting obligations under the Tax Agent Services Act 2009 (TASA) and the requirements outlined in draft guidance, TPB(I) D53/2024 Breach reporting under the Tax Agent Services Act 2009. This summary should be read in conjunction with that draft guidance document.

Summary of obligations

2. From 1 July 2024, additional breach reporting obligations apply to registered tax practitioners under the TASA. These obligations require tax practitioners to report ‘significant breaches’ of the Code of Professional Conduct (Code) in the TASA:
   • relating to their own conduct, and
   • by other registered tax practitioners.
3. In order to trigger a reporting requirement, registered tax practitioners must have reasonable grounds to believe a breach of the Code has occurred, and that the breach is significant.
4. Breaches must be reported to the TPB. If the breach is by another registered tax practitioner it must also be reported to the recognised professional association(s) (RPAs) of that tax practitioner.
5. The breach reporting obligations are in addition to other existing obligations under the TASA that require tax practitioners to notify the TPB if they cease to meet a registration requirement, about events affecting their continued registration, and other changes in circumstances.
6. These additional obligations are aimed at improving tax agent services to clients and the professional and ethical standards of registered tax practitioners.

Significant breaches

7. 'Significant breaches' of the Code are breaches that satisfy one of the following tests:
   1. are an indictable offence, or an offence involving dishonesty, under an Australian law
   2. result, or are likely to result, in material loss or damage to another entity (including the Commonwealth)
   3. are otherwise significant, taking into account:
      • the number or frequency of similar breaches by the tax practitioner
      • the impact of the breach on their ability to provide tax agent services, and
      • the extent to which the breach indicates that their arrangements to ensure compliance with the Code are inadequate, or
   4. are prescribed by the Tax Agent Services Regulations 2022.
8. Whether a tax practitioner has breached the Code and the breach is ‘significant’ must be decided on a case-by-case basis, having regard to the particular facts and circumstances. 

Reasonable grounds

9. Registered tax practitioners must have ‘reasonable grounds’ for their belief that a significant breach has occurred. This means they must have a solid foundation or factual basis for their view. 
10. Whether ‘reasonable grounds’ exist is an objective test, which looks at whether a reasonable person in the position of the tax practitioner would form the belief in the same circumstances.
11. Tax practitioners do not need conclusive proof that a significant breach has occurred. However, they do need to be able to support their claim and verify or corroborate it as appropriate. If a tax practitioner is not certain whether there has been a significant breach of the Code but they have reasonable grounds for believing there has been, they must still report the breach.
12. If a breach is reported to the TPB, we will assess the information provided and make further enquiries as required. This process will ensure the reporting of a significant beach relating to another practitioner’s conduct is supported and is not frivolous, vexatious or malicious. This is consistent with the TPB’s usual practice. A belief that is solely based on hearsay or the opinion of others without being substantiated will not be based on 'reasonable grounds'.

Timeframe for reporting

13. Breaches must be notified to the TPB, and applicable RPA (where relevant), in writing within 30 days of the day the tax practitioner first has, or ought to have, reasonable grounds to believe they have, or another registered tax practitioner has, breached the Code and the breach is significant.

 Failing to comply

14. A failure to comply with the breach reporting obligations may expose registered tax practitioners to sanctions. If a tax practitioner fails to comply with the obligations, they will:
    • breach Code item 2, which requires tax practitioners to comply with the taxation laws in the conduct of their personal affairs (in which case the TPB may impose administrative sanctions); and
    • commit an offence under the Taxation Administration Act 1953, which can carry serious penalties.
15. It may also cause the TPB to potentially consider whether the tax practitioner continues to meet the ‘fit and proper’ registration requirement.

Further information

16. For more detailed information on the breach reporting obligations, please see our draft guidance. This guidance explains:
    • the meaning of key terms and phrases
    • when and how breaches are to be reported
    • our compliance approach to investigating breach notifications; and
    • the consequences of failing to comply.
17. For a simplified flowchart, see Summary of obligations diagram.