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Tax Agents Service Bill – A great framework but a little fine tuning required

Publication date: 27 Jun 08 | Source: THE TAX INSTITUTE

Australia’s premier professional tax body, the Taxation Institute of Australia endorses the general framework of the proposed regime for the regulation of tax professionals and is confident that with clarification of a few issues it will deliver on expectations for a properly regulated tax profession and protection for the consumer.

President of the Taxation Institute, Sue Williamson, said that the Government is to be commended for the steps it has taken to secure a sound basis for the future administration and operation of the tax profession and, in particular, for the extensive consultation process that has resulted in significant improvements to the proposed regime.

“Improvements in this draft of the new regime to ensure the independence of the Tax Practitioners Board, the recognition of tax agents’ practice structures, and the further clarification of some of the contentious areas of application of the Code of Professional Conduct are welcome steps forward. However, there is still a little bit of fine tuning to be done,” said Ms Williamson.

“It is important that the regulatory framework operates on the basis that both tax service providers and their clients act in good faith and that neither should be accountable for the other.”

Ms Williamson said that tax agents and BAS agents should not be accountable for incorrect or false information provided by a taxpayer – the taxpayer should be solely accountable for any consequences arising from all their own actions. The current draft requires tax agents to take reasonable care to ascertain the facts around their client's affairs. Tax agents will not be able to accept information provided by clients at face value. "The system should be based on mutual trust and respect between the tax agent and the taxpayer. If a client provides false information the client will be exposed to penalties. This is fair and reasonable - the client should be responsible for the veracity of the information it provides. A tax agent should not be exposed to sanctions because it fails to identify that information provided by a client is not correct.

“Similarly, if there is to be a safe harbour from penalties for taxpayers, it needs to provide protection against all errors of tax agents and BAS agents,” said Ms Williamson.

Under the current draft taxpayers will not be exposed to penalties for tax shortfalls if the penalties arise from the carelessness of the tax agent. Tax shortfalls arising from reckless acts of the tax agent remain at the risk of the taxpayer. If taxpayers are to be encouraged to use tax agents because of the greater scrutiny and controls in the new model, these provisions should be extended to provide relief from penalties whenever the tax shortfall arises from a tax agent's error.

Other areas that need to be addressed include clarification of:

  • the extent to which people, such as financial planners, can provide tax advice or services without being registered. Ms Williamson said "Tax agents are willing to be exposed to greater scrutiny and to meet the more significant expectations imposed in relation to education and the level of services provided to clients. However, the quid pro quo is that they should be protected from unregistered parties providing tax advice on the basis that it is ancillary to another service";
  • the extent to which the outsourcing of tax services can be done under the framework. Ms Williamson said "The proposed regime appears to support outsourcing of tax services. However, it is ambiguous and greater guidance should be given as to the types of services that can be outsourced and what will be considered to be acceptable supervision and control of outsourced services. This is essential as the trend to outsourcing tax services outside Australia continues to grow. "

"The draft regime does touch on these issues. However, as these are major areas of concern for tax professions, the legislation and or supporting materials needs to more clearly identify the obligations and expectations that apply."

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Click here to view the Taxation Institute of Australia's submission to Treasury regarding the Bill

About the Taxation Institute of Australia: The Taxation Institute is Australia’s largest and most diverse body of tax professionals working together to improve the tax system and the delivery of tax services through education, sharing of information and consultation.

Media Contacts: Sue Williamson, President - Taxation Institute of Australia on 0411 646 783

Peter Laidlaw, Lighthouse Communications Group on 0419 210 306