Bills Digest no. 18 2009–10
Tax Agent Services (Transitional Provisions and
Consequential Amendments) Bill 2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Tax Agent Services
(Transitional Provisions and Consequential Amendments) Bill
2009
Date introduced: 24 June 2009
House: House of
Representatives
Portfolio: Treasury
Commencement: Schedules 1 and 2 commence upon the commencement of
Part 2 of the Tax Agent Services Act 2009[1]. All other sections of
the Bill commence on the day of Royal Assent.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The measures in this Bill form
part of the reform of the current regulation of tax agents and
provide a transition to the new law in the Tax Agent Services
Act 2009 (TAS Act) for the registration and regulation of tax
agents and Business Activity Statement (BAS) agents. The Bill also
deals with consequential matters arising from the enactment of the
TAS Act.
The Tax Agent Services Bill 2008 was introduced into Parliament
on 13 November 2008 and the Tax Agent Services Act
2009 (TAS Act) received Royal Assent on 26 March
2009.
Briefly, the TAS Act established a national Tax Practitioners
Board (TPB) as a statutory authority within the Australian Taxation
Office (ATO); required certain entities that provide tax agent
services and Business Activity Statement (BAS) services to be
registered; introduced a Code of Professional Conduct to govern tax
and BAS agents; provided for disciplinary sanctions to be imposed
by the TPB; and replaced criminal penalties for certain misconduct
by agents and unregistered entities with civil penalties and
injunctions.
The provisions of the new legislation relating to the
establishment of the TPB and appointment of the Chair and Board
members, commenced on 26 March 2009.
The Bills
Digest for the TAS Bill gives further background to the Bill as
well as the measures it introduced.[2] Readers are also referred to the
Explanatory Memorandum to the TAS Bill for a more detailed
explanation of the measures.[3] The TAS Bill was referred to the Senate Economics
Committee on 26 November 2008 and its
report was tabled in Parliament on 12 February 2009.[4]
According to the ATO
website the key features of the TAS (Transitional Provisions
and Consequential Amendments) Bill are:
- transitional arrangements to allow tax agents and nominees
registered under the current law to transition smoothly into the
new regulatory regime, and similarly allow certain entities to be
taken as registered BAS agents under the new regime
- amendments to introduce two safe harbour provisions, which
constitute key features of the new regulatory regime. The safe
harbour provisions exempt taxpayers who engage an agent from
liability for an administrative penalty for certain mistakes and
omissions where the error is solely due to the agent s lack of
reasonable care, and
- consequential amendments to existing legislation that will be
necessary upon the enactment of the Tax Agent Services
Act 2009, for example the repeal of the existing law
relating to the registration of tax agents.[5]
The TAS (Transitional Provisions and Consequential Amendments)
Bill was released as an exposure draft on 3 April 2009, and a
number of public
submissions were made.[6]
The Commonwealth and Taxation Ombudsman was critical of some
aspects of the proposed safe harbour provisions in its
submission to the exposure draft.[7] While welcoming the principle of the
provisions, the Ombudsman had some concerns about the penalty
standards and possible problems in applying the measures fairly due
to their interpretive nature; the lack of relief for taxpayers
whose agent has defrauded them or been severely reckless, outside
of civil proceedings; the evidentiary burden on taxpayers seeking
relief under the provisions; and lack of clarity between different
forms of default by agents and the taxpayer s culpability.
CPA Australia also recommended
that certain safe harbour provisions be more expressly codified in
the Bill, rather than being discretionary. It then published a
second
submission to highlight its disapproval of the excessive
transitional period for registration as a BAS agent, particularly
because many current bookkeepers/BAS preparers will not currently
have the requisite educational and professional qualifications
necessary to adequately provide such services .[8]
The Association of Accounting Technicians (AAT) raised similar
concerns in its
submission about the length of the transition period in which
various categories of tax agents have to obtain necessary
qualifications required under the TAS regime.
It is conceded there must be a reasonable time
frame for the transition of current operatives into the new regime
however, in AAT Australia s opinion that period should be as short
as reasonably possible and two years is appropriate period. To
protract the time frame to five years would result in the community
being unnecessarily exposed to practitioners who have not proven
the level of their competence and experience, a major prime mover
for the legislation.[9]
The National Institute of Accountants called for further
clarification in its
submission on what a client is expected to supply when
providing all relevant taxation information and whether the onus is
on the client to make sure all information has been supplied. It
also sought further clarification on the term reasonable care and
on the application of the transitional periods.[10]
The Taxation Institute of Australia identified problems with the
safe harbour provisions and proposed that they be amended so they
are available:
- regardless of whether the fault of the agent is reckless or
intentional
- regardless of whether the statement is made or lodged by the
registered agent or the taxpayer
- for penalties that could be imposed under provisions dealing
with no reasonably arguable position and the failure to lodge
documents on time.[11]
The Institute of Chartered Accountants highlighted in its
submission the need to clarify terms in the safe harbour
provisions, and the application of the transitional provisions for
registration.[12]
The Australian Association of Professional Bookkeepers (AAPB)
raised concerns in its
submission that the Bill does not adequately legislate for the
bookkeeping profession and that bookkeeping cannot be properly
covered because of the inclusion of section 251L(6) of the
Income Tax Assessment Act 1936 in the process for BAS
agent registration.
AAPB rejects the recommended government
transitional arrangements approach for registration for BAS Agents
as the proposed transitional arrangements do not provide
appropriate consumer protection to the client or the bookkeeper
within the transitional period nor does it meet the reasoning
behind, why the Tax Agents Services Bill 2009 was
introduced.[13]
The Australian Bookkeepers Network raised similar concerns in
its
submission, and suggested that the drafting could lead to abuse
of the system.[14]
The Bookkeeping Institute of Australia was also concerned about
the lengthy transitionary period in its
submission, but had additional concerns about the level of
qualifications required to be a registered BAS agent. It argued
that a Certificate IV in Financial Services (Accounting) is not an
adequate qualification because it does not require the graduate to
be competent in bookkeeping procedures or BAS tasks. The
Bookkeeping Institute suggested that a Certificate IV in Financial
Services (Bookkeeping) is a much more suitable qualification, or as
a minimum standard the subject titled Carry out Business Activity
and Instalment Activity Statement tasks should be a required
unit.[15]
In response to submissions to the exposure draft, the following
changes are present in the Bill:
- access to the safe harbour provisions is restricted by an
evidential burden
- civil penalty provisions under the Taxation Administration
Act 1953 are applied to the TAS Act
- minor wording amendments are made to the TAS Act
- notes throughout the Bill remind readers that a registered tax
agent within the meaning of the TAS Act is registered under section
20-25 of the TAS Act
- entities providing tax agent services (other than BAS services)
that were not required to be registered under the old law only have
3 months to notify the TPB (as opposed to 6 months in the exposure
draft, which is still offered to providers of BAS services)
- the TPB is able to grant an additional registration of 12
months to providers of BAS services who are registered under the 2
year transition period (rather than the additional registration of
3 years required by the TAS Act, thereby reducing the access to
transitional provisions available to BAS service providers from 5
years to 3 years)
- the ability for taxpayers to recover fines etc. through legal
proceedings is extended to fines incurred under the taxation laws
(rather than just the Income Tax Assessment Act
1936).
- documents relating to the enforcement of Part VIIA of the
Income Tax Assessment Act 1936 in the custody of the
Commissioner are no longer required to be handed over to the TPB,
and
- notifications given to the TPB must be submitted in a form
approved by the TPB in a way required by the TPB, and including any
information required by the TPB.
According to the Explanatory Memorandum, there will be an
unquantifiable cost to revenue because of the removal of certain
administrative penalties under the safe harbour provisions.[16]
There will also be a compliance cost associated with the new
regime which will be small for tax and BAS agents with the
appropriate qualifications, but could be potentially large for
individuals without the minimum qualifications who wish to seek
registration as a BAS agent.[17]
The Bill has two Schedules, with Schedule 1 involving
consequential amendments and Schedule 2 involving transitional
amendments.
Part 1 of Schedule 1 amends,
repeals or inserts relevant definitions of, and references to, a
registered tax agent or BAS agent in the A New Tax System
(Goods and Services Tax) Act 1999, the Corporations Act
2001, the Fringe Benefits Tax Assessment Act 1986,
the Income Tax Assessment Act 1936 (ITAA 1936),
the Income Tax Assessment Act 1997 (ITAA 1997), and the
Taxation Administration Act 1953 (TAA 1953) to ensure
consistency with the TAS Act.
Also, this Part repeals provisions in other Acts which will now
be covered by the TAS Act, including:
- Part IX of the Fringe Benefits Tax Assessment Act 1986
covering administrative penalties involving the preparation of
fringe benefits tax returns (item 3)
- Part VIIA of the ITAA 1936 which is the current law governing
the registration of tax agents being replaced by the framework
contained in the TAS Act (item 7)
- section 214-185 of the ITAA 1997 covering registration
requirements for persons giving a franking credit return or making
an objection for the purposes of dealing with the imputation system
(item 8), and
- section 214-130 if the Income Tax (Transitional Provisions)
Act 1997 covering the registration of tax agents in relation
to the imputation system (item 13).
Additionally, Part 1 of Schedule 1 introduces machinery
amendments to the ITAA 1936, ITAA 1997, and the TAA 1953 to
transfer the administration of the provisions relating to the
registration of tax agents from the Commissioner of Taxation to the
TPB, and to reflect the independence of the TPB from the
Commissioner.[18]
Part 1 also expands the definition of taxation law to include the
TAS Act, and regulations made under it, by amending subsection
995-1(1) of the ITAA 1997 (item 12).
Items 23 and 24 of the Bill
introduce two safe harbour provisions into the TAA 1953. The
proposed new subsection 284-75(1A) of the TAA 1953
is designed to ensure that taxpayers who engage a registered tax
agent or BAS agent are not liable to an administrative penalty for
making a false or misleading statement which results in a shortfall
amount, if the statement was made by the agent and the shortfall
amount was caused by the agent s failure to take reasonable
care.[19] However,
the provision will not apply if the agent intentionally disregards
any tax law, or is reckless about the operation of any tax law, in
making the relevant statement.
The proposed new subsection 286-75(1A) of the
TAA 1953 is designed to ensure taxpayers who engage a registered
tax agent of BAS agent are not liable to an administrative penalty
for the failure to lodge a document where that failure arose from
their agent s failure to take reasonable care, or even if it arose
despite the agent s exercise of reasonable care.[20] Again, the provision will not
apply if the agent intentionally disregards any tax law, or is
reckless about the operation of any tax law, in making the relevant
statement.
Both safe harbour provisions involve an evidentiary burden on
the taxpayer to show they have provided the agent with all relevant
taxation information (new subsections 284-75(1B)
and 286-75(1B)). This includes bringing the agent
s attention to all accurate information the taxpayer would
reasonably expect to be necessary in the provision of agent
services, and answering accurately and completely in response to
questions asked by the agent. The liability for penalties is not
transferred from the taxpayer to the registered tax agent or BAS
agent. If the error covered by these provisions occurs because of
intentional disregard or recklessness by the agent, they may be
referred by the Commissioner or the taxpayer to the Board.[21]
Part 2 of Schedule 1 amends
the TAS Act to correct numbering and wording inconsistencies. It
also amends section 70-40 to enable the TPB to disclose information
to the Commissioner for the purposes of a civil penalty provision
in the taxation law.
Schedule 2 deals with the transitional
arrangements for registration, references to things done by or in
relation to a Tax Agents Board, legal proceedings, and disclosure
requirements.
Part 1 of Schedule 2 provides
preliminary definitions including that Board refers to the TPB
(which replaces state Tax Agents Boards), commencement refers to
the commencement of Part 1 of Schedule 1 to this Bill, new law
refers to the TAS Act, and old law refers to Part VIIA of the ITAA
1936.
Part 2 provides for the continuation of
existing registrations. Item 2 of Schedule
2 allows for tax agents registered under the ITAA 1936 to
be continued to be recognised as a registered tax agent until that
registration would have expired under the old law, or until the
entity s registration is terminated. It also continues suspensions
under the old law, and allows for a suspended tax agent to be taken
as a registered tax agent within the meaning of the new law after
the period of suspension under the old law ends. Item
3 provides for persons registered as a nominee of a tax
agent under the old law to become a registered tax agent upon
commencement of Schedule 2.
Item 4 provides a two year transitional period
for providers of tax agent services (other than BAS services) who
were not required to be registered under the ITAA 1936. This allows
certain entities to be recognised as registered tax agents for two
years to allow them to gain the necessary qualifications to
register under the TAS Act. The entity must notify the TPB within 3
months of commencement and the TPB may impose conditions on the
entity s registration and/or require them to have professional
indemnity insurance. Under item 5, if the entity
was providing BAS services, they have 6 months to notify the TPB so
they can access the same arrangements.
Part 3 of Schedule 2 deals
with pending applications. It specifies that the TPB must decide on
pending applications made under the old law for registration and
re-registration as a tax agent, and registration or re-registration
of a nominee, within six months of commencement (items 6,
7, 8 and 9). If the TPB does not decide
on pending applications within this period, the applications are
taken to have been rejected. Applicants seeking re-registration are
regarded as registered tax agents until the 6 month period expires,
or until the TPB makes its decision, whichever is the earlier.
Item 13 allows entities that were providing tax
agent services (not BAS services) immediately prior to the TAS Act
to make a new application to the TPB within six months of
commencement without needing to satisfy the qualification and
experience requirements if the TPB is satisfied they were providing
services to a competent standard for a reasonable period.
Item 14 allows BAS service providers to make a
similar application within a three year period after commencement.
However, subitem 14(2) stipulates that if the
applicant is a registered tax agent under the two year transitional
period provided in item 5 of Schedule
2, then the TPB may approve a limited registration period
of 12 months or more (rather than the minimum 3 year registration
required by the TAS Act). This means BAS service providers can
potentially be a registered BAS agent for three years before
requiring the qualifications and experience set out in the TAS
Act.
Part 4 of Schedule 2
stipulates that references to a Tax Agents Board (which are
currently state entities) in legislation and instruments shall be
taken to be references to the TPB (which replaces Tax Agents Boards
under the TAS Act). It also requires the TPB to continue inquiries
currently being managed by state Boards, and to make decisions on
whether to investigate entities within 60 days of commencement.
Under Part 5 of Schedule 2,
decisions by the TPB on applications for registration or
re-registration, or suspension or cancellation can be reviewed
through an application to the Administrative Appeals Tribunal.
Part 6 of
Schedule 2 to the Bill provides for the
transitional arrangements that relate to legal proceedings.
Item 19 of Schedule 2 provides
that if any proceedings were pending in any court or tribunal
immediately before commencement to which a state Board was a party,
the TPB is substituted for the state Board, after commencement, as
a party to the proceedings.
Part 7 of Schedule 2 applies
the reporting and disclosure obligations of the TAS Act and
transfers the custody of records from Tax Agents Boards to the
TPB.
Item 25 requires notifications
given to the TPB to be submitted in a form approved by the TPB, in
a way required by the TPB, and including any information required
by the TPB. Item 26 allows the Governor-General to
make regulations in respect of Schedule 2 matters, including
matters of a transitional nature relating to amendments or repeals
made by Schedule 1.
Bernard Pulle and Paige Darby
19 August 2009
Bills Digest Service
Parliamentary Library
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