24 Feb 2021 This week in tax
This week, our President, Peter Godber, CTA, discusses the impact of the recently released Final Report of the Review of the Tax Practitioners Board.
TPB review: its impact on our profession
Review of the Tax Practitioners Board
The development of the law regulating tax agents in Australia has had a long history. Since inception in 1943, The Tax Institute has taken an active role in industry regulation and law design, including during the consultation and implementation of the reforms effected by the Tax Agent Services Act 2009 (TASA).
Now is no different. A review of the Tax Practitioners Board (TPB) has been overdue, originally intended to take place three years after the creation of the TPB in 2009 which replaced the former State-based Tax Agents Boards.
On 5 March 2019, the Government announced an independent review into the effectiveness of the TPB and TASA to ensure that tax agent services are provided to the public in accordance with appropriate professional and ethical standards.
The Final Report of the Review of the Tax Practitioners Board led by Keith James and Neil Earle (Report) was released by the Assistant Treasurer on 27 November 2020. The Report is comprehensive and is generating significant debate among the professional bodies and other stakeholders. However, we must understand and accept that change is necessary. The Report contains 28 recommendations and the Government response has in the main been to accept these, or accept them subject to consultation. The consultation process we are about to embark on will be very significant.
Key issues for our members
I would like to outline some of the key issues for our members. We are establishing channels of communication to inform you, obtain your feedback, and then properly determine how The Tax Institute will respond throughout the consultation period. I think the role of our organisation can be significant on an on-going basis as this very important reform of the regulation of the tax profession plays out.
At the outset, we support in principle the recommendations that go towards ensuring the independence of the TPB (from the ATO and all other bodies). The TPB has an important continuing role to play in the integrity of tax agent services and the protection of consumers of these services. Regulation in this regard should continue to be a positive hallmark of our tax system. The TPB will continue to be able to apply sanctions to tax agents, registered or not, and these sanctions need to be variable and appropriate in any given circumstance.
The powers of the TPB is one area that will attract further discussion. However, independent governance and sustainable funding for the operations of the TPB will generally receive widespread support.
New Tax Practitioners Governance and Standards Forum
One crucial aspect of the governance of the TPB is the proposed Tax Practitioners Governance and Standards Forum (Governance Forum), and with it, a new Charter of Tax Practitioner Governance.
Currently, the TPB consults with The Tax Institute and other recognised professional tax and BAS agent associations through the medium of a Consultative Forum that meets four times a year to discuss operational issues, share up to date information, and provide input, feedback and guidance to the TPB.
The proposed Governance Forum will play a different and more important role in setting the governance framework for the TPB. Representative bodies will have the opportunity to participate regularly to raise and discuss matters of substance and help set standards for practitioner conduct. This may be reflected in a separate governance charter and we would expect that the Governance Forum would also review and monitor the Code of Professional Conduct contained in section 30-10 of the TASA to ensure it remains current and appropriate.
Other notable recommendations
A very important aspect for us is the recommendations covering tax agent registration and education. It is proposed that currently registered agents will receive some sort of grandfathering from the new rules. However, the final form of the registration requirements is somewhat uncertain at this stage and requires consultation.
It is proposed that the current registration pathway based on voting membership of a recognised professional association will be removed. That is, tax agent registration will not be automatic for voting members of The Tax Institute, and the other bodies currently recognised by the TPB. Given the educational and ongoing CPE conditions for membership of The Tax Institute, we do not presently anticipate significant negative consequences of this change for our members. However, this is a significant step that the professional bodies are watching closely.
In addition, the Government has shown its support for an annual agent registration process, as opposed to the three-yearly registration that exists at present.
How the TPB will administer these changes is yet to be understood, however, they are significant for our tax agent members. We consider that tax professionals should not be overburdened by excessive professional registration requirements. In the past, working with the TPB to allow recognition for the membership of recognised bodies like ours seemed sensible. Now we will have to work through how the TPB manages its recognition of, and relationship with, the external bodies to ensure its registration requirements do not overly burden and add compliance stress to busy tax practitioners.
Further, there will be a focus in the reforms for ensuring that a tax agent, and a tax agent practice, satisfies ‘fit and proper person’ requirements, including those in the employ of a tax agent. This is a difficult topic because of the wide spectrum of ‘fit and proper person’ tests and their interpretation in our laws. We support adequate disclosure to the public of registered agents, and those who are or have been de-registered. What is appropriate in terms of monitoring the behaviour of individuals over a period of time to determine their fitness for registration is not yet clear and is ready for further debate.
Lastly, I would like to add a word about continuing education requirements. As you are aware, CPE hours for tax agents will also be increasing under an exposure draft explanatory paper released for comment by the TPB on 11 February 2021. While we support CPE and continual learning for tax agents, we will argue that it is the content that matters most. How should we be educating tax agents to make them better professionals? More of the same learning may not be enough. For example, is there sufficient content around ethics and non-technical topics that make better professionals. As you can see, the CPE content debate is another one deserving of our active input.
As always, we welcome your views and thoughts, which you can provide here.
Peter Godber, CTA