Bills Digest no. 64 2008–09
Tax Agent Services Bill 2008
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
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced: 13 November
2008
House: House of Representatives
Portfolio: Treasury
Commencement:
The Act commences on Royal Assent. The
commencements of the various Parts of the Bill are indicated in the
Main provision section of each Part.
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/.
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AAT
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Administrative Appeals Tribunal
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ATO
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Australian Taxation Office
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BAS
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Business Activity Statement
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Board
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Tax Practitioners Board
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CGT
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capital gains tax
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Code
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Code of Professional Conduct
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Commissioner
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Commissioner of Taxation
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Corporations Act
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Corporations Act 2001
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Criminal Code
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Criminal Code Act 1995
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Federal Court
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Federal Court of Australia
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FBT
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fringe benefits tax
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FMA Act
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Financial Management and
Accountability Act 1997
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GST
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goods and services tax
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ITAA 1936
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Income Tax Assessment Act
1936
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ITAA 1997
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Income Tax Assessment Act
1997
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TAA 1953
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Taxation Administration Act
1953
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TAS
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Tax Agent Service
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R&D
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research and development
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state Boards
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state Tax Agents Boards
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the Minister
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relevant Treasury Portfolio
Minister
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The Bill will provide a new regulatory
framework for providers of tax agent services (TASs) and the
providers of services in relation to business activity statements
(BASs). The object of the Bill is to ensure that these services are
provided to the public in accordance with appropriate standards of
professional and ethical conduct. These measures include:
- establishing a national Tax Practitioners Board (the Board) to
register fit and proper persons with the appropriate qualifications
and experience as registered tax agents or BAS agents,
- introducing a Code of Professional Conduct (the Code) to
regulate the personal and professional conduct of a registered tax
agent or BAS agent,
- providing for sanctions to be imposed by the Board for failure
to comply with the Code,
- providing for termination of registration by the Board if a
person ceases to meet the tax practitioner registration
requirements,
- providing for civil penalties if an unregistered person
provides tax agent services or BAS services for a fee, advertises
that such services can be provided or makes representations that
such services can be provided.
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Currently, the regime for the regulation of registered tax
agents is provided for in Part VIIA of the Income Tax
Assessment Act 1936 (ITAA 1936) and Part 9 of the Income Tax
Regulations 1936. This regime was introduced in 1943 to deal
primarily with taxpayer services in relation to income tax law and,
on the introduction of the GST from 1 July 2000, it was expanded to
include the providers of BAS services.
A tax agent service is not defined in the current law but
section 251L of Part VIIA states that unregistered tax agents must
not charge a fee for certain services listed in subsection 251L(1).
Subsection 251L(6) provides exceptions for providers of a BAS
service, and certain specified unregistered individuals may provide
a BAS service for a fee. Subsection 251L(7) defines BAS service and
briefly includes the preparation or lodging of an approved form
about a taxpayer under a BAS provision, or giving advice in
relation thereto, or dealing with the Commissioner in relation to
such a provision. Members of recognised professional associations
can render BAS services through an entity under subsection
251L(9).
Barristers and solicitors are also exempted from the provisions
of subsection 251L(1) and may charge a fee for certain services to
taxpayers listed in subsection 251L(8).
Division 2 of Part VIIA currently provides for Tax Agent s
Boards to be established in each State. These State Boards are
responsible for the registration of tax agents in each State. The
Regulation Impact Statement (RIS) states that the six State Boards
are resourced individually (but each to the same level, regardless
of relative workloads) by the Australian Taxation Office (ATO)
through its annual appropriation. The State Boards have their own
rules and procedures and make decisions independently of each
other.[1]
The RIS states that the need for reform is justified by
deficiencies in the existing regulatory framework under three broad
categories:
- Inconsistency in the regulation of agents (paragraphs 6.12 to
6.15 on pages 125 to 126 of the Explanatory Memorandum),
- Inadequacy of consumer protection (paragraphs 6.16 to 6.19 on
pages 126 to 128 of the Explanatory Memorandum), and
- Threat to the integrity of the tax system (paragraphs 6.20 and
6.21 on page 128 of the Explanatory Memorandum).
The impact of these deficiencies must be viewed against
increasing taxpayer dependence on providers of tax agency services
and BAS services since this regime for the regulation of tax agent
services was enacted in 1943. Some of the events that increased
taxpayer dependence on tax agents include the tax reforms of the
1980s which resulted in the introduction of the capital gains tax
(CGT), the fringe benefits tax (FBT) and the self-assessment regime
since 1986-87. This was followed by the tax reforms of the 1990s
which included the introduction of the goods and services tax (GST)
from 1 July 2000, again under the self-assessment regime.
The ATO
Compliance Program 2006-07 set out the impact of the services
of tax practitioners on the integrity and efficiency of the tax
system with data that illustrates the significant role of tax
agents and BAS service providers.
Tax practitioners are tax
professionals such as tax agents, tax advisers and legal
practitioners who are legally authorised to provide advice to
taxpayers, to otherwise deal with us on behalf of taxpayers, or to
prepare and lodge documents for taxpayers. For the purposes of this
booklet, tax practitioners also include bookkeepers who provide
services to businesses.
Tax practitioners play an important role in
maintaining the integrity and efficiency of the tax system,
providing a key compliance leverage point to influence taxpayer
behaviour. A capable and well regulated tax profession benefits the
tax system.
There are almost 26,000 registered tax agents
in Australia. Collectively, they lodge around 74% of income tax
returns for individuals and over 95% of returns for businesses.
Many agents also provide financial advice and/or act as independent
auditors of self managed superannuation funds.
There are more than 120,000 people working in
the bookkeeping industry in Australia. We estimate that around 10%
to 15% of bookkeepers prepare and lodge business activity
statements on behalf of clients.
Attempts to reform the law in relation to the regulation of tax
agents goes back to at least 1992. This was discussed by Mr Michael
D'Ascenzo, the Commissioner of Taxation (the Chief Tax Counsel), in
a
speech presented to the Australian Society of Public
Accountants at the Hilton Hotel, Sydney, on the 24 March 1995:
A national review of standards for the tax
profession was undertaken by tax professionals, the Tax Agents'
Board of NSW, the Attorney-General's department and the Australian
Tax Office (ATO) following discussions in July 1992.
In November 1994 a report was subsequently
issued which recommended a number of improvements to the regulation
of tax agents.
The Report of the National Review of Standards for the Tax
Profession released on 2 November 1994 titled Tax Services for
the Public was the genesis of the current reforms. A time line
of the progress made thereafter is given in Attachment A to this
Bills Digest and outlines the various steps taken since the
publication of Tax Services for the Public to the
introduction of this Bill.
The Bill has generally been accepted by the taxation community,
particularly because it has been such a long time coming. However,
some concerns still have been expressed.
The Taxation Institute of Australia said in a
press release on 14 November 2008:
Although the Tax Agent Services Bill
2008 is the corner stone of the new regulatory regime,
the Taxation Institute believes that we still don t have the full
picture for this new regulatory regime.
According to the press release, the Institute s specific
problems with the Bill centre around:
- Concerns about the potential for inconsistencies between the
words of the legislation and the more pragmatic guidance material
in the Explanatory Memorandum.
- The need for clarification as to when a tax agent can rely on
information provided by a client and when the tax agent needs to
seek confirmation of that information.
- Specific wording on the safe harbour measures. Details of
these measures are not included in the Bill. However, the
Explanatory Memorandum suggests that a client will not be protected
from penalties if the relevant error is made by the tax agent other
than carelessly (eg negligently or recklessly).
Important issues relating to the consequences of tax agents
negligence, including the removal of the current statutory cause of
action to recover a penalty, fine or interest charge from an agent,
will be contained in the Tax Agent Services (Transitional
Provisions and Consequential Amendments) Bill. That Bill is
expected to be introduced in early 2009. Some detail
regarding the proposed changes are however discussed in paragraphs
3.12-3.15 of the Explanatory Memorandum.
President of the Taxation Institute Sue Williamson was welcoming
of the Bill and potential reform in a
press release on 14 November 2008:
This Bill is an important step forward in
supporting a mature tax profession with an appropriate regulatory
regime. It ensures that clients can use tax agents with
greater comfort in knowing that their tax agent will be expected to
meet education requirements and be required to comply with an
acceptable code of conduct, Ms. Williamson said.
Financial Planning Association CEO Jo-Anne Bloch also welcomed
the Bill in a
press release on 13 November 2008, especially since it resolved
issues the association had with the exposure draft issued in
May.
The Tax Agents Services Bill and the
accompanying Explanatory Memorandum clarify that financial planners
are not required to become registered tax agents to provide advice
to consumers.
A financial planner must take into account
their client s individual circumstances and financial position,
including tax implications, in order to be able to provide adequate
and appropriate advice which helps their client make informed
financial decisions, said Ms Bloch. But this does not mean that
financial planners are tax experts, nor Tax Agents, unless
specifically qualified to perform such services.
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The Explanatory Memorandum to the Bill on page 4 sets out the
financial impact as follows.
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.
The safe harbour provisions are not in this Bill. However, as
stated in paragraph 1.24 on page 11 of the Explanatory Memorandum
taxpayers who use a tax agent or BAS agent may be relieved from
certain administrative penalties in certain circumstances.
Safe harbour from
penalties
1.24 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.
The Bill has eight Parts and the main provisions in each Part
will be considered in this Bills Digest.
Division 1 of Part 1 includes
the commencement provisions of each Part in a table in
clause 1-5.
Clause 1-15 provides that the proposed Tax
Practioners Board has the general administration of the Act, thus
making the Board independent of the Commissioner of Taxation who
has the general administration of taxation laws.
Division 2 of Part 1 provides an overview of
the Act with subdivision 2-A stating the objects
of the Act and subdivision 2-B providing a general
guide to each Part. Clause 2-5 of the Bill
provides that the object of this Act is to ensure that tax agent
services are provided to the public in accordance with appropriate
standards of professional and ethical conduct and that this object
is to be achieved by (among other things):
- establishing a national Board to register tax agents and BAS
agents; and
- introducing a Code of Professional Conduct for registered tax
agents and BAS agents; and
- providing for sanctions to discipline registered tax agents and
BAS agents.
Item 1 in the table in clause
1-5 provides that Part 1 will commence when the Act
receives the Royal Assent. The commencement of Parts 2 to 8 will be
considered when dealing with the main provisions of the respective
parts.
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The requirements for registration as a tax agent or BAS agent
are provided for in clause 20-5 of
subdivision 20-A of Part 2 and is
available to eligible individuals, partnerships and companies.
Subclause 20-5(1) provides that an individual,
aged 18 years or more, is eligible for registration as a registered
tax agent or BAS agent if the Board is satisfied that:
- the individual is a fit and proper person; and
- the individual meets the requirements prescribed by the
regulations.
Criteria for determining whether a person is a
fit and proper person are set out in clause
20-15.
Subparagraph 20-5(1)(b) also adds that the
requirements prescribed by regulations may not be limited to
requirements relating to qualifications and experience in respect
of registration as a registered tax agent or BAS agent. It is only
when the regulations are made that it will be clear what other
requirements, apart from qualifications and experience, that may be
prescribed for registration.
Note 1 to subclause 20-5(1) makes a reference
to subclause 70-15 whereby an individual in the
capacity of a trustee of a trust can be registered as a tax agent
or BAS agent.
Note 2 to subclause 20-5(1) makes a reference
to subclause 20-5(4) which has a special rule
about pre-1988 tax agents and nominees. This special rule is
referred to below.
Subclause 20-5(2) provides that a partnership
is eligible for registration as a registered tax agent or BAS agent
if the Board is satisfied that:
- each partner who is an individual is:
- aged 18 years or more; and
- a fit and proper person; and
- if a company is a partner:
- each director of the company is a fit and proper person;
and
- the company is not under external administration; and
- the company has not been convicted of a serious taxation
offence or an offence involving fraud or dishonesty during the
previous 5 years; and
- the partnership has:
- in the case of registration as a registered tax agent a
sufficient number of individuals, being registered tax agents, to
provide tax agent services to a competent standard, and to carry
out supervisory arrangements; or
- in the case of registration as a registered BAS agent a
sufficient number of individuals, being registered tax agents or
BAS agents, to provide BAS services to a competent standard, and to
carry out supervisory arrangements.
A company is eligible for registration as a registered tax agent
or BAS agent if the Board is satisfied that:
- each director of the company is a fit and proper person;
and
- the company is not under external administration; and
- the company has not been convicted of a serious taxation
offence or an offence involving fraud or dishonesty during the
previous 5 years; and
- the company has:
- in the case of registration as a registered tax agent a
sufficient number of individuals, being registered tax agents, to
provide tax agent services to a competent standard and to carry out
supervisory arrangements; or
- in the case of registration as a registered BAS agent a
sufficient number of individuals, being registered tax agents or
BAS agents, to provide BAS services to a competent standard, and to
carry out supervisory arrangements.
A note to subclause 20-5(3) states that a
company in the capacity of a trustee can be registered under
clause 70-15.
Paragraph 20-5(4)(a) provides that individuals
registered as tax agents or as nominees under Part VIIA of the ITAA
1936 as in force immediately before the commencement of item 12 of
Schedule 1 to the Tax Agents Services (Transitional Provisions
and Consequential Amendments) Act 2008 would be entitled to be
registered as a tax agent, regardless of whether they satisfied the
qualifications, experience and other requirements prescribed by
regulation under paragraph 20-5(1)(b), if they
were so registered at both of the following times:
(i) immediately before the commencement of this Act, and
(ii) immediately before the commencement of section 39 of the
Taxation Laws Amendment Act (No. 2) 1988.
Further, paragraph 20-5(4)(b) provides that the
individual must be otherwise be eligible for registration as a
registered tax agent.
As the Tax Agent Services (Transitional Provisions and
Consequential Amendments) Bill 2008 has not yet been introduced
into Parliament it is not possible to ascertain the commencement
time of item 12 of Schedule 1 of the Tax Agent Services
(Transitional Provisions and Consequential Amendments) Act
2008.
Again, it will be necessary to await the regulations prescribed
under paragraph 20-5(1)(b) to know what other
conditions must be satisfied by an individual under
paragraph 20-5(4)(b) to be otherwise eligible for
registration as a registered tax agent.
Paragraph 2.22 on page 23 of the Explanatory Memorandum sheds
some light on the operation of clause 20-5(4) as
follows.
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 other registration
requirements.
Even this explanation would leave pre-1988 tax agents in a state
of suspense as to what other requirements (other than
qualifications and experience) might be prescribed by regulations.
Further, it is unsatisfactory that the Tax Agent Services
(Transitional Provisions and Consequential Amendments) Bill 2008
was not introduced at the same time as this Bill to let tax
practitioners know the full scope of the requirements of
registration under the new regime including the safe harbour
provisions referred to in the Financial implications section of
this Bills Digest.
Clause 20-10 states that regulations may
provide for a system to allow the Board to accredit professional
associations for the purpose of recognizing professional
qualifications and experience that are relevant for the
registration of individuals as registered tax agents and BAS
agents.
Clause 20-45, euphemistically titled as events
that may affect your registration , that is events that
may end your registration as a tax agent or BAS agent, are
the following:
- conviction of a serious tax offence,
- conviction of an offence involving fraud or dishonesty,
- penalised for being a promoter of a tax exploitation
scheme,
- penalised for implementing a scheme that is materially
different from that described in the product ruling, but promoted
on the basis of complying e\with the product ruling,
- become an undischarged bankrupt or go into external
administration,
- being sentenced to a term of imprisonment.
The grounds for termination of registration, including
clause 20-45 events, are listed in
Subdivision 40-A.
Item 2 of the table in subclause
1-5(1) provides that Part 2 will commence on a single day
to be fixed by Proclamation.
Item 2 also states that this day must not occur
before the Tax Agent Services (Transitional Provisions and
Consequential Amendments) Act 2008 receives the Royal
Assent.
It adds, that if any of the provision(s) do not commence within
the period of 9 months beginning on the day when the Tax Agent
Services (Transitional Provisions and Consequential Amendments) Act
2008 receives the Royal Assent, they commence on the first day
after the end of that period. If the provision(s) commence in this
way, the Minister must announce by notice the on which the
provision(s) commence.
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The Code of Professional Conduct (the Code) is set out in
Division 30 of Part 3 of the
Bill.
The Guide to this Division in Clause 30-1
states what this Division is about as follows.
The Code of Professional Conduct regulates your
personal and professional conduct as a registered tax agent or BAS
agent.
If the Board investigates you and finds that
you have failed to comply with the Code, the Board may give you a
written caution, order you to take specified actions, or suspend or
terminate your registration.
You must also notify the Board if certain
circumstances change, including if you cease to meet the
requirements for registration.
Clause 30-5 provides that the Code applies to
you if you are a registered tax agent or BAS agent.
Clause 30 -10 of Division 30 the Bill sets out
the core principles and other responsibilities of the Code which
are set out below. As is common in taxation law, the provisions are
drafted in the second person (that is, using the personal pronoun
you ) and this phraseology is followed in this Bills Digest.
Subclause 30-10(1), (2) and
(3) respectively provide that:
- you must act honestly and with integrity,
- you must comply with the taxation laws in the conduct of your
personal affairs, and
- if you receive money or other property from or on behalf of a
client, and you hold the money or other property on trust, then you
must account to your client for the money or other property.
Subclause (4) and (5)
respectively provide:
- you must act lawfully in the best interests of your
client,
- you must have in place adequate arrangements for the management
of conflicts of interest that may arise in relation to the
activities that you undertake in the capacity of a registered tax
agent or BAS agent.
Subclause 30-10(6) provides that unless there
is a legal duty to do so, you must not disclose any information
relating to a client s affairs to a third party without your client
s permission.
Subclauses 30-10(7), (8),
(9) and (10) respectively provide
that:
- you must ensure that a tax agent service that you provide, or
that is provided on your behalf, is provided competently,
- you must maintain knowledge and skills relevant to the tax
agent services that you provide,
- you must take reasonable care in ascertaining a client s state
of affairs, to the extent that ascertaining the state of affairs is
relevant to a statement you are making or a thing you are doing on
behalf of the client,
- you must take reasonable care to ensure that taxation laws are
applied correctly to the circumstances in relation to which you are
providing advice to a client.
Subclauses (11), (12),
(13) and (14) respectively
provide that:
- you must not knowingly obstruct the proper administration of
the taxation laws,
- you must advise your client of the client s rights and
obligations under the taxation laws that are materially related to
the tax agent services you provide,
- you must maintain the professional indemnity insurance that the
Board requires you to maintain,
- you must respond to requests and directions from the Board in a
timely, responsible and reasonable manner.
The reader is referred to paragraphs 3.21 to 3.69 on pages 52 to
64 of the Explanatory Memorandum for details, with examples, of the
core principles of the Code and other responsibilities of
registered tax agents and BAS agents.
The range of sanctions available to the Board for failure to
comply with the Code is set out in clause 30-15,
and includes:
- giving a written caution, or
- giving an order under clause 30-20, or
- suspending registration under clause 30-25,
or
- terminating registration under clause
30-30.
The reader is referred to paragraphs 3.70 to 3.78 on pages 64 to
67 of the Explanatory Memorandum for details, with examples, of
these administrative sanctions that may be imposed by the
Board.
A decision by the Board to impose an administrative sanction of
making an order under clause 30-20, suspending
registration under clause 30-25 or terminating
registration under clause 30-30 is a reviewable
decision under paragraphs 70-10(f),
(g) and (e) respectively. The
affected tax registered tax agent or BAS agent may apply to the
Administrative Appeals Tribunal (AAT) for a review.
Subclause 30-35(1) imposes an obligation on a
registered tax agent or BAS agent to notify the Board in writing
whenever you cease to meet one of the tax practitioner registration
requirements or an event affecting your continued registration
described in clause 20-45, occurs. Similar
obligations are imposed under subclauses 30-35(2)
and (3) respectively on partnerships and companies
which are registered tax agents or BAS agents.
Item 2 in the table in subclause
1-5(1) provides that Part 3 will commence
on a single date to be fixed by Proclamation. Also see the comments
on the commencement of Part 2 for the qualifications relating to
this date which apply to Part 3 as well.
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Division 40 of Part 4 of the
Bill deals with the termination of registration. The Guide to this
Division in clause 40-1 states that the
registration of a registered tax agent or a BAS agent may
be terminated by the Board if:
- an event occurs that affects their continued registration as
set out in clause 20-45 above,
- they cease to meet the tax practitioner registration
requirements, or
- they breach a condition of registration.
Clause 40-5 of Subdivision
40-A, sets out the grounds on which the termination of an
individual as a registered tax agent or BAS agent may take place,
reflecting the grounds set out in the Guide. Similar provisions in
respect of the termination of registered tax agents and BAS agents
who are partnerships and companies are set out in clause
40-10 and clause 40-15 of
Subdivision 40-A.
Paragraph 70-10(e) provides that a decision of
the Board under Subdivision 40-A is a decision
reviewable by the Administrative Appeals Tribunal (AAT).
If the registration is terminated, the Board may also determine
a period during which you may not apply for registration under
clause 40-25 of Subdivision 40-B
of Part 4. Under subclause
40-25(1) the period so determined by the Board should not
be more than 5 years.
Subclause 40-25(2) provides that
subclause 40-25(1) does not apply if the
registration was terminated because you surrendered your
registration or you became an undischarged bankrupt or you went
into external administration. This means such a person can re-apply
for registration at any time. Paragraphs 2.95 and 2.96 on page 45
of the Explanatory Memorandum state that these exceptions avoid the
potentially unfair outcome where the termination is not related to
the agent s character.
Item 2 in the table in subclause
1-5(1) provides that Part 4 will commence
on Proclamation. Also see the comments on the commencement of Part
2 for the qualifications relating to this date of Proclamation
which apply to Part 4 as well.
There are two broad categories of civil penalties provided for
under Division 50 of Part 5.
Subdivision 50-A deals with civil penalties for
conduct that is prohibited by entities without registration.
Subdivision 50-B deals with other civil penalties
in relation to serious misconduct prohibited by entities that are
registered. These are briefly referred to below.
Entities (including individuals) are liable to pay a pecuniary
penalty under subdivision 50-A for engaging in the
following conduct without registration:
- providing tax agent services for a fee or other reward if
unregistered (subclause 50-5(1)),
- providing a BAS service for a fee or other award if
unregistered as a tax agent or BAS agent (subclause
50-5(2)),
- advertising tax agent services if unregistered
(subclause 50-10(1)),
- advertising BAS services if unregistered as a tax agent or BAS
agent (subclause 50-10(2)),
- representing that you are a registered tax agent or BAS agent
if unregistered (clause 50-15)).
The reader is referred to paragraphs 4.26 to 4.44 on pages 75 to
81 of the Explanatory Memorandum for details, with examples, of the
application of these civil penalty provisions. The maximum
penalties range up to 250 penalty units ($27 500) for
individuals and 1250 penalty units ($137 500) for
corporations.
Registered tax agents and BAS agents are liable to pay a
pecuniary penalty under Subdivision 50-B for the
following serious misconduct:
- making a false or misleading statements (clause
50-20),
- employing or using the services of deregistered entities
(clause 50-25),
- signing of a declaration or other statement in certain
circumstances (clause 50-30).
The reader is referred to paragraphs 4.45 to 4.58 on pages 81 to
86 of the Explanatory Memorandum for details, with examples, of the
application of these civil penalty provisions. Similar maximum
penalties apply as for Subdivision 50-A.
The penalties under the Bill are imposed through a court
order.
Clause 50-35 of Subdivision
50-C provides that within 4 years after you contravene a
civil penalty provision, the Board may apply to the Federal Court
on behalf of the Commonwealth for an order that you pay the
Commonwealth a pecuniary penalty. The Federal Court may order the
person to pay an appropriate pecuniary penalty, but not more than
the maximum amount specified for the provision.
The court only needs to be satisfied on the balance of
probabilities (as compared to the criminal standard of beyond
reasonable doubt ) of the contravention to make the order for a
penalty.
If a partnership contravenes a civil penalty provision,
subclause 50-40(1) provides that each partner in
the partnership, at the time when the contravention took place, is
taken to have contravened the civil penalty provision, unless the
partner proves, on the balance of probabilities, that the
partner:
- did not engage in the conduct, and
- did not aid, abet, counsel or procure the conduct, and
- was not in any way knowingly concerned in, or party to, the
conduct.
If a partnership contravenes a civil penalty provision,
subclause 50-40(2) provides that the civil penalty
that may be imposed on each partner in the partnership:
- if the partner is an individual, must not exceed one-fifth of
the maximum penalty that could be imposed on a body corporate for
the same contravention, and
- in any other case, must not exceed the maximum penalty that may
be imposed on a body corporate for the same contravention.
Subclause 70-5(1) provides that an injunction
may be granted by the Federal Court , on the application of the
Board, 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.
The reader is referred to paragraphs 4.59 to 4.76 on pages 86 to
89 of the Explanatory Memorandum for details, with examples, of the
application of the provisions relating to obtaining an order for a
civil penalty.
Item 2 in the table in subclause
1-5(1) provides that Part 5 will commence
on Proclamation. Also see the comments on the Commencement of Part
2 for the qualifications relating to this date of Proclamation
which apply to Part 5 as well.
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Division 60 in Part 6 of the
Bill deals with the Tax Practitioners Board (the Board), which as
mentioned earlier, has the general administration of the Act
(clause 1-10).
- The provisions relating to the establishment, functions and
powers of the Board are dealt with in Subdivision
60-A.
- The provisions relating to the appointment of Board members,
their remuneration and allowances, disclosure of interest by Board
members, their resignation and termination of appointment are
included in Subdivision 60-B.
- The Board procedures in relation to its meetings, the taking of
decisions without meetings and the administrative support of the
Board by APS employees whose services are to be made available to
the Board by the Commissioner of Taxation are dealt with in
Subdivision 60-C.
- The power given to the Board to establish committees to assist
the Board in the performance of its functions and the exercise of
its powers, as well as the power to determine the remuneration of
committee members are set out in Subdivision
60-D.
- The scope of the power given to the Board to undertake
investigations in relation to applications for registration and
whether conduct breaches this Act is set out in Subdivision
60-E. For the purpose of its investigation the Board is
given power in Subdivision 60-E to request the
production of a document or thing, the power to require witnesses
to appear before the Board, the power to take evidence on oath or
affirmation. The method of notification of decisions on the
conclusion of investigations is also set out in Subdivision 60-E.
More commentary on the investigatory powers is contained
below.
- The public reporting obligations of the Board in relation to
its annual report, the requirement to establish and maintain a
register of tax agents and BAS agents and to make it available for
inspection on the internet are all set out in Subdivision
60-F.
A detailed commentary on the measures in each Subdivision is
beyond the scope of this Bills Digest and in the following
paragraphs the commentary will be restricted to certain significant
aspects of the functions, powers and obligations of the Board. The
reader who requires a detailed commentary on the Board and its role
is referred to Chapter 5 of the Explanatory Memorandum. References
will be made in the following paragraphs to the paragraphs of the
Explanatory Memorandum that give detailed explanations and
examples.
The functions of the Board as set out in clause
60-15 of Subdivision 60-A are:
- to administer the system for the registration of registered tax
agents and BAS agents , and
- to investigate applications for registration and conduct that
may breach this Act, and
- to impose sanctions for non-compliance with the Code of
Professional Conduct, and
- to issue, by legislative instrument, guidelines to assist the
functions mentioned above, and
- to carry out such other functions as are conferred on the Board
by this Act, the regulations and any other law of the Commonwealth,
and
- to do anything incidental or conducive to the performance of
its functions.
The Board is appointed by the Minister: clause
60-25. There are no eligibility requirements in terms of
expertise or experience. However, Board members cannot hold any
other office or appointment under Commonwealth law or be employed
under the Public Service Act 1999. The Board is not
subject to any direction by the Minister in performing its
functions
A standard set of provisions on outside employment, disclosure
of interest and termination of appointment apply. However, it is
notable that clause 60-65 states that the Minister
may set written terms and conditions of appointment to the Board
additional to those in the Act.
The Board may investigate applications for registration, any
conduct that may breach the Act, or any other matter set out in
regulations: subclause 60-95(1). If the Board does
intend to investigate a person or entity, it must advise them
within two weeks of making the decision to investigate. In
undertaking its investigation, the Board is not subject to the
rules of evidence: subclause 60-95(4).
For purpose of an investigation, the Board may require persons
to produce documents, or appear before the Board to give evidence,
including requiring the evidence to be under oath or affirmation:
clauses 60-100 60-110. Amendments that are due to
be introduced by the Tax Agent Services (Transitional Provisions
and Consequential Amendments) Bill, will mean that failure by a
person to comply with these provisions will potentially render them
liable to a maximum penalty of 20 penalty units ($2 200) see
sections 8C-8E of the Taxation Administration Act
1953.
Clause 60-115 deals with self-incrimination. It
provides that an individual is not excused from providing
information, evidence or documentation on the grounds of
self-incrimination, or of exposure of the individual to a penalty.
However, the information, evidence or documentation, or
anything obtained as a direct or indirect consequenceof the
information, evidence or documentation provided cannot be used in
evidence against the individual in criminal proceedings
except for a prosecution for under the Criminal Code Act
1995 for failing to provide information, giving false or
misleading information, obstruction of Commonwealth public
officials, or under sections 8C-8E of the Taxation
Administration Act 1953. Note that the information given could
be used to criminally prosecute another party, and also it could
also be used to suspend a person s registration etc.
Clause 60-80 of Subdivision
60-C provides that the Board is to be assisted by APS
employees whose services are made available to the Board by the
Commissioner.
In the Second reading speech, emphasis was placed on the need to
ensure the practical independence of the Board from the
Commissioner of Taxation:
The Bill will establish an independent national
Tax Practitioners Board to replace the existing state-based Tax
Agent s Boards. The Board s key functions will be to register
agents and to regulate the provision of tax agent services. The
establishment of a single national Board will make the registration
process consistent and standardise the way in which entities
providing tax agent services are regulated across the country. It
will also enable greater efficiency in the allocation and use of
the Board s resources.
The Bill proposes to establish the Board as a
statutory authority within the Australian Taxation Office. The
Board s funding will be quarantined from the Tax Office s annual
appropriation and its functions and powers under the Bill will be
vested independently from the Commissioner of Taxation, thus
providing all possible practical independence.
A formal post-implementation review of the
proposed governance arrangements for the Board will be conducted in
three years time to assess whether the independence of the Board is
impaired in any way because of its continued connection with the
Tax Office, and whether an alternative arrangement should be
considered.
The Explanatory Memorandum in paragraphs 5.29 to 5.33 on pages
96 and 97 set out the technicalities of the arrangements to fund
the operations of the Board by means of a special account under
section 20 of the Financial Management and Accountability Act
1997 (the FMA Act) through the annual appropriations to the
Australian Taxation Office (ATO)
5.29.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.
5.30.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.
5.31.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.
5.32.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.
5.33.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.
It is not clear whether the Board will be free to draw up
budgets for funding its operations and will have the resources to
do so independently of the administrative structure in place in the
ATO. To ensure the practical independence of the Board in its
decision making it has to be well resourced. If resources are
inadequate the main function of the Board that might be adversely
affected will be the extent to which it may be able to exercise its
powers of investigation into applications for registration and
conduct which allegedly breaches the Act. The planned
post-implementation review at the end of three years is therefore
welcome, but it is noted that the review is not a
statutory requirement.
The Regulation Impact Statement (RIS) adds in paragraph 6.72 on
page 143 of the Explanatory Memorandum that in any case, the
legislation will be reviewed under the government s five-yearly
review requirements . However, it provides no information on what
these requirements actually are.
The following provisions of Part 6 commence, under item
3 in the table in subclause 1-5(1) of the
Bill, on the day on which the Act receives the Royal Assent:
- Establishment of the Board its membership, functions and powers
under Subdivision 60-A
- Appointment etc of members of the Board under
Subdivision 60-B
- Board procedures under Subdivision 60-C
- Committees etc under Subdivision 60-D
The following provisions commence on by Proclamation, under
item 4 and item 2 of the table in
subclause 1-5(1) of the Bill or such other date as
may arise under item 2 of the table in
subclause 1-5(1):
- Investigations under Subdivision 60-E
- Public reporting obligations of the Board under
Subdivision 60-F
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Division 70 of Part 7 of the
Bill has five Subdivisions dealing with the following miscellaneous
matters.
Subdivision 70-A deals with the Board s power
to make application to the Federal Court for injunctions to
restrain or require certain conduct.
Subclause 70-5(1) provides that if the Federal
Court is satisfied you are engaged, or proposing to engage, in
conduct that would constitute a contravention of a civil penalty
provision, it may, on application by the Board grant an injunction
to refrain you from engaging in that conduct or, if the Federal
Court so decides, require you to do something.
Subclause 70-5(2) provides that before deciding
the application of the Board the Federal Court may grant an interim
injunction restraining you from engaging in conduct or requiring
you to do something.
An application may be made under clause 70-10
for review by the Administrative Appeals Tribunal (AAT) of the
following Board decisions:
- A decision under clause 20-25 to reject an application for
registration, including renewal of registration, or a condition
imposed by the Board on registration.
- A decision under subclause 20-30(3) to require professional
indemnity insurance on registration.
- A decision under subclause 20-50(1) not to determine a shorter
period for making a renewal application.
- A decision under Subdivision 30-B or Subdivision 40-A to
terminate registration.
- A decision made under clause 30-20 to make an order or to
specify a time period in respect of an order. These orders relate
to sanctions for failure to comply with the Code of Professional
conduct and may require you to complete a course of education,
providing tax agent services under supervision of a registered tax
agent or BAS agent or providing only those tax agent services
specified in an order.
- A decision under clause 30-25 to suspend registration,
including a decision as to the length of suspension.
- A decision under clause 40-25 to determine a period during
which an application may not be made, after termination of
registration.
- A decision under subclause 60-125(4) to extend the period of
time within which an investigation is to be completed.
Clause 70-15 provides that this Act applies
to:
- A trustee who is an individual in the same way that it applies
to an individual, and
- A trustee that is a company in the same way that it applies to
a company.
Clause 70-20 provides that for the purpose of
this Act, a change in the composition of a partnership does not
affect the continuity of the partnership.
Clause 70-25 states that no action, suit or
proceeding may be brought against:
- a person who is or has been a Board member, or
- a person who is or has been a member of a committee
in relation to anything done or omitted to be done in good faith
by the Board member or committee member:
- in the performance or purported performance of the Board s
functions, or
- in the exercise or purported exercise of the Board s
powers.
Subclause 70-30(1) provides that, subject to
subclause 70-30(2), the Board may delegate to a
Board member or committee member any of its functions and powers,
other than:
- its functions of issuing guidelines, and
- its power to establish a committee under clause
70-10.
However, subclause 70-30(1) is qualified by the
operation of subclause 70-30(2). This provides
that the Board may only delegate to a committee a power to make a
decision in respect of which an application for review may be made
to the Administrative Appeals Tribunal under clause
70-10 if:
- the committee has 3 members or more, and
- all members of the committee are Board members.
Subclause 70-35(1) provides that a person
commits an offence if the person is or has been:
- a Board member or a member of a committee, or
- an APS employee whose services were made available to the Board
by the Commissioner, or
- a person appointed or employed by or a provide of services for
the Commonwealth
and the person acquires or acquired information relating to a
person in the course of or because of his or her duties in relation
to the Act or regulations, and the person:
- discloses the information to another person, including a
Minister, or
- makes a record of the information.
The maximum penalty is imprisonment for 2 years.
However, subclause 70-35(2) provides that
subclause 70-35(1) does not apply if the
information is disclosed or a record of the information is
made:
- under or for the purposes of this Act or regulations, or
- in the course of or because of the person s duties under or in
relation to this Act or the regulations.
Subclause 70-35(3) provides that a person who
has acquired information in the circumstances of performing his or
her duties under this Act or regulations, referred to in
paragraph 70-35(1)(a), is not required to disclose
information to a court or tribunal except if it is necessary to do
so for the purpose of carrying into effect the provisions of this
Act or regulations.
Subclause 70-40(1) provides that, despite the
secrecy provisions in clause 70-35, the Board may
disclose information to the Commissioner if the Board is satisfied
that the information is relevant to:
- establishing whether a taxation offence has been or is being
committed, or
- the making or proposed or possible making of a proceeds of
crime order.
Subclause 70-40(2) provides that a reference in
clause 70-40 to the possible making of a proceeds
of crime order includes a reference to a potential order because a
person is not yet convicted of an offence.
The following provisions of Part 7 commence on a single day to
be fixed by proclamation under item 2 of the table
in subclause 1-5(1):
- clause 70-1 (provision on the
Guide), clause 70-5 (provisions on the granting of
injunctions), clause 70-10 (administrative review
provisions), and clauses 70-15 and
70-20 ( provisions affecting trustees and
partnerships - under item 4 of the table in
subclause 1-5(1), and
- clause 70-50 (provision in
relation to legal professional privilege) and clause
70-55 (provision dealing with the making of regulations) -
under item 6 of the table in subclause
1-5(1)
The following provisions of Part 7 commence on
the day on which this Act receives the Royal Assent under
item 5 of the table in subclause
1-5(1).
- Clause 70-25 (provisions
dealing with immunity from legal action), clause
70-30 ( provisions dealing with delegation by the Board),
clause 70-35 (secrecy provisions), clause
70-40 ( provision of information by Board to Commissioner)
and clause 70-45 (application of certain secrecy
provisions of the Taxation Administration Act 1953)
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Part 8 consists of Divisions 80 and 90.
Division 80 contains rules for interpreting
this Act and Division 90 contains the Dictionary.
Subclause 80-1(1) states that the following
forms part of this Act:
- the headings to the Parts, Divisions and Subdivisions of this
Act,
- the Guides,
- the headings to the sections and subsections of this Act,
- the notes and examples (however described) that follow
provisions of this Act.
Subclause 80-1(2) provides that asterisks used
to identify terms form part of this Act. However, if a term is not
identified by an asterisk, disregard that fact in deciding whether
or not to apply to that term a definition or other
interpretation.
Subclause 80-5(1) provides that a Guide
consists of sections under a heading indicating that what follows
is a Guide to a particular Division, Subdivision, etc.
Subclause 80-5(2) states that a Guide forms
part of this Act, but is kept separate from operative
provisions.
In interpreting an operative provision, a Guide may only be
considered:
- in determining the purpose or object underlying the provision,
or
- to confirm that the provision s meaning is the ordinary meaning
conveyed by its text, taking into account its context in the Act
and the purpose or object underlying the provision, or
- 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 Act
and the purpose or object underlying the provision, leads to a
result that is manifestly absurd or is unreasonable.
The dictionary contains the meaning of two significant
expressions, namely, tax agent service and BAS service . These are
replicated below.
Clause 90-5 of the Bill gives the following
meaning of tax agent service .
(1) A tax agent service is any service:
(a) that relates to:
(i) ascertaining liabilities, obligations or
entitlements of an entity that arise, or could arise, under a
*taxation law; or
(ii) advising an entity about liabilities,
obligations or entitlements of the entity or another entity that
arise, or could arise, under a taxation law;
(iii) representing an entity in their dealings
with the Commissioner; and
(b) that is provided in circumstances where the
entity can reasonably be expected to rely on the service for either
or both of the following purposes:
(i) to satisfy liabilities or obligations that
arise, or could arise, under a taxation law;
(ii) to claim entitlements that arise, or could
arise, under a taxation law.
(2) A service specified in the regulations for
the purposes of this subsection is not a tax agent service.
Note: For specification by class, see subsection 13(3) of the
Legislative Instruments Act 2003.
Clause 90-10 of the Bill gives the following
meaning of BAS service .
(1) A BAS service is
a *tax agent service:
(a) that relates to:
(i) ascertaining liabilities, obligations or
entitlements of an entity that arise, or could arise, under a *BAS
provision;
(ii) advising an entity about liabilities,
obligations or entitlements of the entity or another entity that
arise, or could arise, under a BAS provision; or
(iii) representing an entity in their dealings
with the Commissioner in relation to a BAS provision; and
(b) that is provided in circumstances where the
entity can reasonably be expected to rely on the service for either
or both of the following purposes:
(i) to satisfy liabilities or obligations that
arise, or could arise, under a BAS provision;
(ii) to claim entitlements that arise, or could
arise, under a BAS provision.
(2) A service specified in the regulations for
the purposes of this subsection is not a BAS
service.
Note: For specification by class, see subsection 13(3) of the
Legislative Instruments Act 2003.
Item 7 of the table in subclause
1-5(1) provides that Part 8 commences on the day this Act
receives the Royal Assent.
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Concluding comments
It was noted earlier that the Taxation Institute of Australia in
a
press release on 14 November 2008 took the position that this
Bill does not give the full picture of the new regulatory regime
for tax agents and BAS agents.
Applicants for tax agent services and BAS services must await
the regulations to know what further requirements apart from
qualifications and experience they will have to comply with to
secure registration.
The safe harbour provisions referred to in the Financial
implications section of this Bill s Explanatory Memorandum will
only be known when the Tax Agent Services (Transitional Provisions
and Consequential Amendments) Bill is introduced into Parliament.
While the Explanatory Memorandum has given some indication of what
the safe harbour provisions might mean to tax practitioners and
taxpayers who use their services, nevertheless, the full picture of
the new regulatory regime is not complete at this stage.
Back to top
Bernard Pulle
26 November 2008
Bills Digest Service
Parliamentary Library
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