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Draft legislation creates safe harbour for tax agents and taxpayers alike

Publication date: 06 Apr 98 | Source: THE TAX INSTITUTE

The Federal Government's approval of a new legislative framework for services provided by tax agents, announced today, is a win for taxpayers and a win for tax agents.

The Professional Bodies (the Australian Society of CPAs, the Australian Taxpayers Association, the Institute of Chartered Accountants in Australia, the National Institute of Accountants, the Association of Tax Management Accountants and the Taxation Institute of Australia) agree that it is in all our interests to see that the rights and responsibilities of tax agents, taxpayers and tax office personnel are clearly understood.

They agree with the general thrust of the proposed framework and believe that the creation of 'safe harbours' for both tax agents and taxpayers is good news for all concerned. It was however agreed that some additional discussions and consultation was required on some aspects of the Code of Conduct to apply to agents.

Both in an historical as well as a practical sense, this is an important development since for the first time the role and responsibilities of agents is to be covered by legislation. The Bodies emphasised that it is important that it is crystal clear that an agent is not responsible for the veracity of the client's tax information nor will the agent be obliged to conduct any audit of that information.

The proposal provides for streamlined registration procedures as well as greater consistency of decision making through a National Tax Agents' Board. It also sets out the technical and ethical standards expected of tax agents and introduces measures designed to replace the interim penalty arrangements put in place at the time of introduction of the self-assessment system. It also clearly recognises that there are obligations on taxation officers and that failure to adhere to those obligations will be the subject of sanctions which may include counselling, fines, demotion or dismissal.

The cornerstone of the proposed framework according to the Professional Bodies is the concept of 'reasonable care'.

Taxpayers who use a tax agent will have a 'safe harbour' from penalties provided that they exercise reasonable care in furnishing all relevant information to the tax agent and follow the tax agent's advice.

Tax agents, in turn, will have a 'safe harbour' if they meet the requirements expected of them as set out in a Code of Practice. This code will enable tax agents to understand their rights and responsibilities in undertaking taxation work on behalf of clients.

They will not face sanctions or penalties of any sort, where they exercise reasonable care in the preparation and lodgement of tax returns.

However, the Professional Bodies emphasised that the agent will need to be able to demonstrate appropriate continuing professional education and training for him or herself and employees, as well as appropriate supervision and control of employees.

The Professional Bodies recognise that the proposals are no more and no less than a recognition that tax agents are professionals who adhere to appropriate standards and possess the appropriate skills and competencies to remain worthy of that description.