Under the Tax Agent Services Act 2009 (TASA), the Australian Government has issued the Code Determination which extends the ethical obligations of tax practitioners under the Code.

Recommendation 5.1, which was accepted by the Australian Government, from the 2019 independent review into the effectiveness of the Tax Practitioners Board (TPB) and the Tax Agent Services Act 2009 (TASA) recommended:

The relevant Minister be given a legislative instrument power to be able to supplement the Code of Professional Conduct to address emerging or existing behaviours and practices. The legislative instrument process would also ensure appropriate consultation with key stakeholders and parliamentary oversight.

Further, on 6 August 2023, the government announced a significant package of reforms that will crack down on misconduct and rebuild people’s confidence in the systems and structures that keep our tax system and capital markets strong. These reforms were aimed at strengthening the integrity of the tax system, increasing the powers of our regulators and strengthening regulatory frameworks to ensure they are fit for purpose.

One element of the package was supplementing the Code – which the new Code items give effect to.

The government has an ongoing program of tax and regulatory reforms to address tax practitioner misconduct and to improve community confidence in the integrity of the system. These reforms support a level playing field for the majority of tax practitioners doing the right thing.

In December 2023, the government released a draft Tax Agent Services (Code of Professional Conduct) Determination 2023 (the draft determination) and explanatory materials for a 6-week public consultation period.  

Discussions with a range of stakeholders were also undertaken after release of the exposure draft, including with TPB Governance and Standards Forum and Consultative Forum. 

Following consideration of all feedback, the Tax Agent Services (Code of Professional Conduct) Determination 2024 (Determination) was registered on 2 July 2024, which included 8 additional obligations for tax practitioners under the Code.

On 8 October 2024, following additional stakeholder feedback, the government amended the Determination to provide greater certainty on certain Code obligations and to clarify the intent and scope of the new obligations.

The Determination is available on the Federal Register of Legislation.

The new ethical requirements address aa range of professional standards, including:

• Upholding and promoting the ethical standards of the tax profession.
• Addressing false or misleading statements.
• Managing conflicts of interest when undertaking activities for government and maintaining confidentiality in dealings with government.
• Keeping proper client records.
• Ensuring competency of services provided and having quality management systems in place.
• Keeping clients informed.

The new Code obligations commence on:

• 1 July 2025 - for tax practitioners with 100 or less employees as at 31 July 2024, including new tax practitioners (with 100 or less employees) that register between 1 August 2024 and 30 June 2025 inclusive; and
• 1 January 2025 - for any other tax practitioners.

The delayed commencement date provides time for tax practitioners to develop, implement and update systems and processes necessary to meet their obligations by the relevant commencement date.

The purpose of the recent reform is to ensure there is consistency in standards across the profession and to ensure a level playing field for all registered tax practitioners. Many tax practitioners are doing the right thing. For those trying to do the right thing, these new requirements, along with our guidance, help lift processes and practices to best practice, which will help protect tax practitioners and their business. 

No, the new obligations complement and do not conflict with the existing Code obligations, noting that tax practitioners can disclose a client’s information to a third party where there is a legal duty to do so.

There are a range of existing circumstances where disclosure of information to regulatory agencies takes priority over tax practitioners’ obligations to maintain client confidentiality. These circumstances are the exception, but reflect situations where tax practitioners’ duty to maintain public trust in the tax system, and tax profession, is more critical than their duty to their clients. This will also best protect you and your practice. 

We have issued the following suite of draft information sheets covering all the new obligations for public consultation:

• Upholding and promoting the ethical standards of the tax profession (TPB(I) D56/2024).
• False or misleading statements (TPB(I) D57/2024)
• Managing conflicts of interest when undertaking activities for government and maintaining confidentiality in dealings with government (TPB(I) D58/2024).
• Obligation to keep proper client records of tax agent services provided (TPB(I) D59/2024).
• Supervision, competency and quality management system under the Tax Agent Services Act 2009 (TPB(I) D60/2024).
• Keeping your clients informed TPB(I) D61/2024).

The consultation will be open until 21 November 2024 and we aim to release finalised guidance in December 2024 working closely with our stakeholders, including professional associations and the tax practitioner community.

We will complement the draft information sheets (which includes practical case studies), with webinars and factsheet summaries, to ensure tax practitioners can review and update their systems and support for clients.

As outlined in question 7 above, we have released a suite of draft information sheets for public consultation. These draft information sheets, covering all the new obligations, seek to assist tax practitioners to understand your obligations under the Determination and how we intend to implement and transition the new obligations. This in turn will assist you to comply with these new obligations.

We encourage all stakeholders to consider these draft policy materials and provide any feedback by 21 November 2024. Written submissions may be provided by:

• email to tpbsubmissions@tpb.gov.au 
• writing to us at Tax Practitioners Board, GPO Box 1620, Sydney NSW 2001
• participating in our webinar series, or 
• engaging your relevant professional association. 

We will consider all feedback from the community in finalising our draft policy guidance by December 2024. Final guidance will support tax practitioners uphold trust in their profession, and the tax and regulatory systems.

Yes, we have scheduled a series of webinars to explain the new obligations and to consult on our draft guidance.

You can register for these webinars at tpb.gov.au/webinars.

How a tax practitioner meets the existing and new obligations has always and will always need to be determined on a case-by-case basis, having regard to individual circumstances. We recognise small practices operate differently to large firms. Consistent with our approach to our other guidance, we will set requirements that apply to all tax practitioners, however, how a tax practitioner meets those requirements will need to be assessed against a number of factors, including the tax practitioner’s business model, the nature and size of your client base and the type of tax services provided.

The 8 additional obligations, which do not commence until 1 January 2025 at the earliest (for large tax practitioners), build on the existing principles of the Code, including honesty and integrity, independence, confidentiality and competence. Most tax practitioners, acting professionally and ethically, will readily comply with the new Code obligations. The TPB's guidance will also help tax practitioners improve their services to clients and systems to comply with the law. 

The additional obligations also leverage material from the work of other existing bodies, such as the Accounting Professional & Ethical Standards Board, which has developed and released substantial guidance material. Other elements of the Code build on well-known and understood tax and corporate law concepts that tax practitioners will be regularly advising clients on.

We have issued draft information sheets, which provide detailed information about how the new Code obligations operate. These draft materials will be open for public consultation until 21 November 2024.

Our priority is to work closely with key stakeholders, including the professional associations and the tax profession community, to shape and refine our final guidance, expected to be released in December 2024.

We will run a series of webinars to explain the draft information sheets to further support and assist tax practitioners so that you understand what is required of you. These webinar sessions will also provide an opportunity to ask any questions and provide feedback that will shape the final guidance.

The transitional rule introduced by the government to delay the commencement of the new obligations (see Question 8 for details) provides time for you to develop, implement and update systems and processes necessary to meet you obligations by the relevant commencement date.

Our priority is to finalise our guidance, through consultation, and to educate tax practitioners so you understand what is required of you prior to commencement of the new obligations.

Upon commencement of the new obligations, we will continue to educate and support tax practitioners, with investigations and sanctions reserved for the higher risk and serious cases of non-compliance.

No.

Section 45 of the Code of Professional Conduct (Code) Determination prescribes the specific matters you must inform your clients about and this does not include information relating to your physical or mental health.

The obligations under section 15 will only apply if the tax practitioner has been involved in making or preparing, or directing someone else to make or prepare the statement for the new client. Further, before you have to notify the ATO of your concerns with a client and the making of a false or misleading statement, there are a number of tests that must first be satisfied, including:

• are there reasonable grounds to believe the statement was false or misleading in a material particular
• are there reasonable grounds to believe the false or misleading statement arose due to failure to take reasonable care, recklessness or intentional disregard
• have you advised your client the statement must be corrected and the possible consequences of not taking corrective action 
• are you reasonably satisfied the client has not corrected the statement or explained the basis for the statement
• do you have reasonable grounds to believe the statement resulted from recklessness or intentional disregard of a taxation law?

Our draft guidance contains a flow chart that has more information on the steps you must take in different situations.

Ultimately the responsibility will sit with the registered tax practitioner entity that is engaged by, and receiving the fees from, the client. We address this in our draft Information sheet. 

However, the company will need to have appropriate controls and procedures in place to ensure false or misleading statements are appropriately identified, managed and actioned. 

It will depend on the circumstances, however a registered tax practitioner should consider: 

• the nature of the statement 
• the circumstances of the client 
• the details that were false or misleading 
• how long ago the statement was made 
• the relevant period of review
• any timeframe set out in a taxation law for the lodgement of the statement or a correction to the statement; and
• any other relevant matter.

 Our draft guidance provides further information to assist you. 

When considering if substantial harm has been caused to the interests of others (including investors, creditors, employees, or the public), you should consider all relevant matters including:

• whether the client’s actions have resulted, are resulting, or may result, in serious adverse consequences to others in either financial or non-financial terms
• any of the rights and obligations under the taxation laws (as are relevant)
• the appropriateness and timeliness of the client’s response to the registered tax practitioner’s advice that the statement should be corrected (including any information that would lead the registered tax practitioner to conclude that the client lacks integrity)  
• the urgency of the situation. 

Our draft guidance provides additional matters that might assist in determining if a client’s actions have caused, are causing or may still cause, substantial harm to the interests of others .

What is in the ‘public interest’ requires consideration of matters that are relevant to supporting the public trust and confidence in the integrity of the tax profession and of the tax system. 

For a tax practitioner to have ‘reasonable grounds to believe’ a matter they do not have to have conclusive proof. It is sufficient if a reasonable person, possessing the required knowledge, skill and experience of a registered tax practitioner would, when objectively considered, form the belief on the same grounds in the same circumstances.

To make a decision you will need to analyse the circumstances and consider a number of factors, including but not limited to:

• the source of the information forming the basis of the belief and the credibility and reliability of that source/information
• whether there is independent evidence, verification or corroboration to support the belief 
• the circumstances in which you became aware of the possibility the statement is false or misleading and/or that the false or misleading nature of the statement resulted from recklessness or an intentional disregard of a taxation law 
• whether, and to what extent, the registered tax practitioner made reasonable enquiries or sought advice to confirm the belief
• whether there are any reasonable alternative explanations that could counter the belief.

It can relate to both. Our draft guidance addresses this in more detail, but at a high level it will generally come down to whether it will be relevant to a decision maker making a decision about the matter to which the particular relates. A good place to start would be to ask, 'would the ATO or TPB consider this particular when making a decision about the matter at hand?'. 

If you are not reasonably satisfied that they will correct the statement within a reasonable period, or otherwise explain the false or misleading statement, you will need to, depending on the circumstances, withdraw from the engagement, notify the ATO and/or TPB and take any additional action in the public interest. The action required will depend on the circumstances. 

That assessment will be made by the registered tax practitioner in the first instance. If the matter comes up in a compliance setting, the TPB will consider all the relevant facts and circumstances to ascertain whether the false or misleading statement is material (as well as all of the elements of section 15) and whether there has been a breach by the tax practitioner in question. 

The phrase ‘knows or ought reasonably to know’ includes actual and constructive knowledge. The nature of constructive knowledge is that the registered tax practitioner will be taken to have the knowledge of matters that, a reasonable and honest tax practitioner in their position will have in the circumstances. We explain this more in our draft guidance. 

To comply with section 30 of the Determination, registered tax practitioners are required to keep records that correctly record the tax agent services they have provided, or that are provided on their behalf, to each of their clients, including former clients. The records must: 

• be in English, or readily accessible and easily convertible into English 
• be retained for at least 5 years after the service has been provided
• show the nature, scope and outcome of the tax agent services provided
• reference information reasonably considered in the provision of the tax agent service
• include all advice received from the client
• include all advice provided to the client, and for more complex matters:
  • the relevant facts
  • assumptions and reasoning underpinning any advice provided (including the basis on which, and the method by which, any calculations, determinations, or estimates used, have been made).

We do not require, or recommend, you keep and retain originals or copies of any identification documents of clients and/or their representatives due to the risks of physical and cyber identity theft. 

However, the TPB requires records of proof of identity checks undertaken in relation to each client (for example, by way of a checklist) for a minimum of 5 years after the engagement has ceased. See more information on client verification process for tax practitioners.

The records can be kept and retained in paper or electronic format.

Electronic records must be readily accessible and able to be retrieved as required. It is generally not necessary to retain a hard copy of the information contained in an electronic record unless a particular law or regulation requires it.

If a registered tax practitioner makes copies of paper or electronic records, they must be a true and clear copy of the original record.

Importantly, you should have adequate procedures, policies, systems and controls in place to:

• protect the security and confidentiality of client records; and
• ensure client information is not comprised and mitigate the risk of identity theft, fraud, financial loss and reputational damage. 

Our draft guidance contains more information. 

No, not necessarily.  The new obligations do not specify any particular method for how relevant knowledge and skills are to be maintained by those that provide tax agent services on your behalf.  Formal training and on-the-job training will continue to be something a tax practitioner will consider in relation to each employee and in relation to each service an employee is authorised to perform.

We understand that quality control systems for a sole trader will be different to those for mid to large size firms. This is reflected in our draft guidance. 

A system of quality management includes policies and procedures relating to:

• governance and leadership
• monitoring of performance
• adherence to the Code of Professional Conduct
• client engagement
• proper keeping of records
• protecting confidentiality of information
• the management of conflicts of interest; and 
• the recruitment, training and management of employees.

We have more information in our draft guidance. 

The amended Determination lists the specific matters, events and circumstances that you must disclose to your clients.

Refer to our draft information sheet which explains in detail the information you will be required to disclose to  your clients to meet this obligation.