The Tax Institute welcomes the opportunity to make a submission to the Senate Economics Legislation Committee (Committee) in respect of its inquiry and report on the Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023 (the Bill) and accompanying explanatory memorandum (EM).
The Bill contains several key measures that are intended to strengthen the integrity of the tax system. These include:
- Schedule 1 – reform of the promoter penalty provisions contained in Division 290 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA);
- Schedule 2 – extending the whistleblower protections contained in Part IVD of the TAA;
- Schedule 3 – increasing the scope of information contained on the Tax Practitioners Board’s (TPB’s) Public Register, reforming the TPB’s investigation powers, and allowing the TPB to make certain delegations; and
- Schedule 4 – increasing the information sharing powers between the Australian Taxation Office (ATO), TPB, Treasury and a Minister in instances where there is an actual or suspected breach of Commonwealth confidence.
We note that the Bill also contains measures proposing reforms to the Petroleum Resources Rent Tax in Schedule 5. It remains unclear to us why these completely distinct and unrelated regimes have been amalgamated into a single Bill. We have limited our comments in this submission to Schedules 1 to 4 to the Bill.
We understand that the overarching objectives of these measures are to elevate the professional standards expected of all advisers operating in the tax system and to provide assurance to the public that these standards will be maintained and enforced appropriately. The Tax Institute supports these objectives.
It is important to ensure the community’s confidence in the administration of the tax system and the fair participation by all taxpayers and their representatives. Most advisers strive to ensure that they meet the community’s expectations and the professional standards of competency and ethical responsibility by which they are held to account. Proposed changes to address the misconduct of a small number of tax advisers should therefore be measured and proportionate. They should not result in an unduly onerous burden on all tax professionals, the vast majority of whom generally do the right thing, and should not inhibit the provision of independent, objective tax advice.
The promoter penalty provisions are proposed to significantly expand in scope and, among other things, apply to schemes promoted in purported compliance with a vast range of ATO guidance products. This may make it difficult to draw the line between a scheme that is appropriately within the scope of the promoter penalty regime, and objective tax advice. Further, there being no intention threshold requirement for the rules to apply may exacerbate this issue and may have the unintended consequence of impacting the provision of genuine objective advice. The potential for unintended serious consequences should be carefully considered and addressed through a tightening of the drafting and an introduction of an intention threshold.
We also consider that the basis for the calculation of the maximum penalty for bodies corporate and significant global entities (SGEs) should be amended so it more accurately reflects the entity’s actual fiscal position at the time of the contravention. This should more appropriately demonstrate the benefit received as a result of the advice provided.
We generally welcome the changes to the whistleblower protection regime though we consider that they should also provide protection for professional associations that make an eligible disclosure. This will better ensure that professional associations are appropriately protected when contributing to the safeguarding of the integrity of the tax system.
The whistleblower regime contained in Part IVD of the TAA should also be reviewed in light of the interaction with the breach reporting provisions contained in section 30-40 of the Tax Agent Services Act 2009 (Cth) (TASA) which come into effect from 1 July 2024. By virtue of the breach reporting provisions, registered tax agents and BAS agents will be legally required to report certain suspected breaches of the Code of Professional Conduct (the Code) contained in the TASA by other registered tax agents and BAS agents, without any real protection against harassment, bullying, damage to property or businesses, financial loss or potential lawsuits. We consider this to be an inequitable outcome that is likely to have arisen due to the lack of consultation when the breach reporting provisions were introduced in the Treasury Laws Amendment (2023 Measures No. 1) Act 2023 (TLAB1).
Meanwhile, the changes to the TPB’s Public Register will have important practical impacts on tax practitioners and the broader community. We consider it important to ensure that the Public Register is contemporaneous, accurate and displays relevant information (such as details of disqualified entities and unregistered preparers). This will better allow tax practitioners to streamline their onboarding processes and meet their obligations regarding the use of disqualified entities. It will also promote greater transparency and instil public confidence in the TPB and the tax profession.
The proposed changes to the information sharing regime are important to ensure that confidentiality over sensitive government matters is maintained. However, it is important to ensure that the measure achieves the appropriate balance with the fundamental requirement of preserving the confidentiality of taxpayer information. We also consider that consultation and a detailed framework is needed regarding the prescribed disciplinary bodies that can apply to receive disclosure of the relevant information and the expectations on those bodies.
Our detailed response in respect of each Schedule to the Bill is contained in Appendix A.
The Tax Institute is the leading forum for the tax community in Australia. We are committed to shaping the future of the tax profession and the continuous improvement of the tax system for the benefit of all. In this regard, The Tax Institute seeks to influence tax and revenue policy at the highest level with a view to achieving a better Australian tax system for all.