TOC (auto-generated)

 

Thank you for joining Ian Klug (TPB Chair), Michael O’Neill (TPB CEO Secretary), Janette Luu (TPB acting Assistant Secretary) and Nadja Harris (TPB acting Director of Policy and Legislation) at the TPB Consultative Forum held on Monday 20 June 2022. We appreciate your valuable input and have produced a summary below to assist your association with communicating key messages to your members.

The TPB extends its thanks to Robyn Jacobson from The Tax Institute for her great work in coordinating agenda from external Consultative Forum members. 

Tax (financial) advice legislative instrument and transitional issues

The TPB was asked to provide an update in relation to the previously proposed development of a legislative instrument to expand the definition of tax (financial) advice services. 

The TPB confirmed that this body of work was previously placed on hold due to the Hayne Royal Commission and the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Act 2021 (Better Advice Act). The TPB confirmed that now that the Better Advice Act has commenced, the TPB, in consultation with Australian Securities and Investments Commission (ASIC), may re-commence consultation in relation to the proposed legislative instrument. 

Further, the TPB confirmed that there are transitional arrangements for those tax (financial) advisers who were previously registered with the TPB at 31 December 2021, allowing these tax (financial) advisers to continue to provide tax agent services until 31 December 2022. From 1 January 2023, these tax (financial) advisers will need to be registered tax agents (with tax (financial) advice services condition) with the TPB, or Qualified Tax Relevant Providers (QTRPs) in order to provide tax (financial) advice services. 

TPB’s approach to unregistered conduct 

The TPB was asked to explain how it addresses the provision of tax agent services by unregistered preparers in contravention of the Tax Agent Services Act 2009 (TASA). 
The TPB advised that it undertakes various approaches to support its strategy against unregistered conduct, including:

  • through communications and advertising campaigns, including a radio advertising campaign to commence at the start of tax time

  • by encouraging and supporting members of the community and tax practitioners in making complaints about unregistered behaviour. The TPB confirmed that it does accept anonymous complaints, and that a complainant can nominate to have their complaint dealt with anonymously on the TPB’s complaint form

  • through the TPB’s compliance activities, which range depending on the risk of the conduct in question. 

The TPB confirmed that it identifies unregistered behaviour through 5 core channels:

  • complaints/tipoffs from the public, including registered tax practitioners

  • Australian Taxation Office (ATO) referrals

  • data analytics

  • proactive searches of advertising

  • monitoring terminated tax practitioners.

Further, the TPB noted that its unregistered conduct strategy adopts an ‘educative’ approach at first instance, followed by an escalating range of TPB actions where the individual or entity refuses to cease the conduct in question. This includes:

  • engaging directly with the unregistered preparer at first instance to understand what activity they are engaged in and educating them on the requirements of the TASA

  • issuing cease and desist correspondence to the unregistered preparer and/or asking the unregistered preparer to sign an undertaking

  • issuing media releases and/or client letters to the unregistered preparer’s client base where it becomes evident that the unregistered preparer continues to act in contravention of the TASA

  • interviewing the unregistered preparer’s clients and taking statements and evidence from them for use in litigation

  • commencing proceedings in the Federal Court for injunctions and civil penalties.

The TPB confirmed that its strategy has a specific focus on supporting clients of unregistered preparers. This informs clients of TPB action (for example, possible Federal Court injunction), suggests review of their tax affairs and points out options for further advice from the ATO, registered tax practitioners or tax clinics in some cases.

TPB(I) 36/2021 Supervisory arrangements under the Tax Agent Services Act 2009

The TPB’s Information Sheet TPB(I) 36/2021 Supervisory arrangements under the Tax Agent Services Act 2009 was discussed. The TPB was asked whether it would consider providing a template for tax practitioners to use in order to consider if their supervisory arrangements meet the TPB’s requirements. 

The TPB noted that when it comes to determining whether supervisory arrangements are adequate, each situation must be considered on a case-by-case basis having regard to the entity’s facts and circumstances. This makes providing a template or checklist of factors that the TPB would consider when investigating a supervision issue a difficult task given each case is unique. The TPB considers that a more appropriate approach is to provide guidance on broad factors that the TPB takes into consideration, which the TPB Information Sheet addresses (primarily at paragraphs 16, 36 and 37).

The TPB noted that it is open to including additional factors that may assist tax practitioners in determining whether their supervisory arrangements are appropriate, and invited Consultative Forum members to provide any additional factors that could be considered for inclusion out-of-session. 

Tax agents advertising ‘supervisory services’ to unregistered agents 

The TPB was asked to provide an update in relation to its approach to a registered tax agent who advertises ‘supervisory services’ to unregistered preparers. The TPB confirmed that it has undertaken enquiries in relation to the provision of these services by the entity in question and found that there no breach of the TASA. The TPB noted that when an unregistered preparer is providing tax agent services, but is doing so with an engagement letter that clearly puts clients on notice that any tax agent services (such as the lodgement of an income tax return) provided as part of their engagement are provided by a registered tax practitioner (with the name and registration number of that tax practitioner stated in the engagement letter), it is the TPB’s view that there is no breach of the civil penalty provisions in the TASA.

Proof of identity requirements 

The TPB was asked to clarify when the requirements contained in TPB(PN) 5/2022 Proof of identity requirements for client verification will come into effect. 

The TPB confirmed that additional consultation is being undertaken in conjunction with the ATO in relation to the most appropriate way to transition making the ATO and TPB’s proof of identity requirements mandatory. 

The TPB noted that whilst the minimum requirements set out in the Practice Note are not yet mandatory, it is important that tax practitioners ensure that they meet their requirements under the TASA, particularly the requirements in relation to:

  • Code Item 7 – ensuring that tax agent services are provided competently

  • Code Item 9 – taking reasonable care to ascertain a client’s state of affairs

The TPB also confirmed that it would review the prominence of the messaging at paragraph 11 of TPB(PN) 5/2022 Proof of identity requirements for client verification, to make it clearer to tax practitioners that if they comply with the client verification requirements of the ATO or Australian Transaction Reports and Analysis Centre , they will generally also meet the TPB’s requirements. In addition, the TPB advised that it would consider including further clarity in relation to the types of evidence that should be used by tax practitioners to verify the authorisation of an individual to represent a non-individual client, with further information and suggestions to be provided by members to the TPB out-of-session. 

TPB’s approach to section 100A (reimbursement agreements and trust distributions)

The ATO’s release of the following 3 documents was raised for discussion: 

  • Draft Taxation Ruling TR 2022/D1 – Income tax: section 100A reimbursement agreements

  • Draft Practical Compliance Guideline PCG 2022/D1 — Section 100A reimbursement agreements — ATO compliance approach

  • Taxpayer Alert TA 2022/1 — Parents benefitting from the trust entitlement of their children over 18 years of age. 

The TPB was asked to provide its views in relation to circumstances in which TPB would be concerned about advice provided in relation to section 100A. The TPB confirmed that it would expect to be referred matters from the ATO in circumstances where there is an indication that tax practitioners have been involved in egregious behaviour which might breach the Code of Professional Conduct (Code) or the TASA. Upon receiving a referral, the TPB would make its own enquiries to determine whether there has been a breach of the TASA including the Code. 

Tax Practitioner Governance and Standards Forum update

The Consultative Forum was provided an update in relation to the recent Tax Practitioner Governance and Standards Forum (GSF) meeting, held on 31 May 2022, with the following items discussed:

  • a draft outline of the Charter of Tax Practitioner Governance (Recommendation 3.3(b) of the James Review)

  • a high-level discussion about the state of the tax profession

  • members’ views in relation to key areas of priority for an incoming Government/Minister

  • the draft ATO/TPB Engagement Plan.

The next GSF meeting is expected to take place in late July or early August. 

TPB update

The TPB included a TPB organisational report to Consultative Forum members. The TPB noted that it has seen an increase in the number of new applications it has received in 2022 compared to the previous year. This will be the subject of further enquiries by the TPB to understand the increase and determine if there was a trend or pattern emerging. 

The TPB noted previous Consultative Forum feedback in relation to the inclusion of an operational dashboard. The TPB asked members to provide feedback out-of-session in relation to the kinds of information that they would like to see in a dashboard provided by the TPB in the future. 

TPB policy update

The TPB provided an update in relation to its policy matters. In particular, the TPB noted that it has taken on feedback received from members in relation to the under embargo consultation relating to the following draft information sheets:

  • TPB(I) D47/2021 What is a BAS service?   

  • TPB(I) D48/2021 What is a Tax agent service?

  • TPB(I) D49/2021 What is a fee or other reward?  

The TPB confirmed that it is currently finalising amendments to the Information Sheets before they are released for public consultation. 

TPB Tax Practitioner Survey Results

The TPB presented an overview of the TPB’s Tax Practitioner Survey Results (Wave 5). In summary, the TPB noted the following:

Highlights - consumers

  • Overall, 91% of consumer respondents use a tax practitioner at least once a year.

  • Loyalty to tax practitioners continues with 61% of consumers now reporting that they have used the same tax practitioner for more than 5 years.

  • Trust (between consumer and tax practitioner) remains very high with 89% of consumers having trust in their relationship with their tax practitioner, with 66% of consumers and 75% of business owners rating their experience as excellent.

  • Consumer confidence (that they would know their rights in the case of a tax practitioner operating outside of the law), remains steady at 54%. Of those who responded, 45% believe they are insured in some way against the occurrence of a tax practitioner operating illegally.

Highlights – tax practitioners

  • From the results 43% of tax practitioners had heard, seen or experienced something that impacted how they felt about the TPB, with the majority being positively impacted.

  • Among the tax practitioner results, the majority remain largely content with the TPB. They believe that we provide the right amount of information and communication (80%) and use the appropriate channels to convey this information (77%).

  • The last 3 surveys have also sought to understand the TPB’s effectiveness during the COVID-19 pandemic – while this was not necessarily applicable for all tax practitioners 56% of tax and BAS agents said we had been responsive during this period.

  • Similarly in the latest survey (wave 5) we asked tax practitioners to comment on the TPB’s efforts to reduce red-tape (by minimising the burden for tax practitioners to maintain their registration). Although the TPB cannot benchmark this figure at the moment (as it is the first time this question has been asked) 82% of respondents noted that we had been responsive in this area.

The TPB was asked to consider whether further questions around the perceptions of independence between the ATO and TPB could be included in the next TPB Tax Practitioner Survey. 

ATO update

The ATO provided the following updates to the Consultative Forum:

Modernising Business Registers (MBR) program

The ATO advised that the MBR program will bring together the Australian Business Register (ABR) and over 30 ASIC registers in one place – the Australian Business Registry Services (ABRS). The program will be delivered progressively over several years, with the introduction of director identification numbers commencing in 2021.

Director ID

The ATO noted that the introduction of director identification numbers (director IDs) from 1 November 2021 has allowed the Registrar to commence verifying the identity of all existing directors and more importantly assure the identity of new directors entering the system. Further, the ATO noted that:

  • all directors of entities registered and regulated by ASIC and the Office of the Registrar of Indigenous Corporations will need to apply for a director ID

  • the fastest way to apply for a director ID is online through abrs.gov.au using the myGovID app

  • non-digital options are available for directors who can’t meet myGovID requirements or have limited digital access, such as some foreign directors or those with accessibility issues

  • an individual who is not a director of an existing registered entity under the Corporations Act 2001 and is appointed as a director from 5 April, must apply before appointment

  • while individuals that are a director of a registered entity under the Corporations Act 2001 before 1 November 2021 must apply by 30 November 2022, ABRS is strongly encouraging all directors to apply now

  • it is a criminal offence if directors do not apply on time.  

Companies release and ABRS agent model

The ATO advised that the next milestone for the MBR program is called the companies release and will provide a more streamlined way to register, view and maintain company details using ABRS online. The ATO confirmed that the release will unify company records administered by ASIC and the ABR on a contemporary digital registry system. The ATO further noted that:

  • entity data from the following registers will be migrated to join director identity records on the ABRS platform: 

    • Australian Public companies (from ASIC)

    • Australian Proprietary companies (from ASIC)

    • Registered Australian Bodies (from ASIC)

    • Foreign companies (from ASIC)

    • ABN details of the above public, proprietary and foreign companies (from ABR)

  • the design and build of the companies release is currently underwayregistered agents (such as ASIC, tax and BAS agents) and third-party intermediaries are key registry users who help clients meet their registry obligations. They provide expert and knowledgeable advice and act on behalf of clients, including providing value-added products and services

  • the new ABRS agent model will consolidate existing ASIC and ABR agent functions into one single agent role type. The future ABRS agent model will align with MBR principles of registry integration and harmonisation, and will streamline administration and improve the client experience. 

Consultative Forum members raised concern that the proposal to establish a new type of ABRS agent may result in ambiguity and over-regulation. 

ATO organisational update

The ATO provided a general organisational update in relation to the following matters:

  • The ATO is still very much working on supporting tax practitioners who continue to be affected by the pandemic, natural disasters and skills shortages and other industry pressures.

  • Security continues to be a significant area of focus for the ATO, particularly as tax time approaches.

  • Operation Protego remains on foot, which is addressing conduct whereby offenders have engaged in, or enticed others to engage in significant Goods and Services Tax (GST) fraud.

  • The ATO is undertaking work to enhance the client linking process between tax practitioners and clients. Phase 1 of this project will be rolled out to the top 1,000 taxpayers, before being rolled out more broadly.

  • The ATO is undertaking a review of its Lodgement Program, with further updates to be provided in due course.

  • The ATO advised that it is still awaiting the report prepared by the Australian National Audit Office in relation to the ATO’s engagement with tax practitioners.

Other business

The matter of BAS agent visibility of superannuation and income tax accounts in the ATO’s Online Services for Agents was raised as a matter of other business by the Australian Bookkeepers Network (ABN). The ATO noted this issue was under their consideration and will provide an update, in the first instance to ABN, out of session. Additional reporting to the Consultative Forum will be provided at the next opportunity. 

Next meeting

The next TPB Consultative Forum meeting is expected to be held in November 2022. 

Last modified: 17 October 2022