Updating the Tax Agents Services Act 2009

The Tax Agents Services Act 2009 (TASA), administered by the Tax Practitioners Board (TPB), has governed the operation of tax agents for more than a decade, covering the three stages of a tax practitioner’s professional life:

• “birth” – registration, which requires applicants to meet prescribed requirements for education, experience and “fit and proper” status;
• “life” – the ongoing obligation to demonstrate honesty, diligence, competence and other attributes – found primarily in the Code of Professional Conduct; and
• (professional) “death” – termination or de-registration.

While there have been a number of important cases and other developments on key aspects of the TASA (see my recent journal article), this blog concentrates on recent proposed legislative changes.

Generally, the TASA as applied by the TPB has performed quite well over its first 13 years as the regulator of tax practitioners across Australia.

Inevitably, however, the passage of time has identified areas where the Act or its administration has been shown to be lacking or in need of improvement. Indeed, Treasury’s 2019 Review of the Tax Practitioners Board identified a number of such issues, which can be grouped into three key themes:

• the setting of appropriate professional and ethical standards,
• the importance of an independent TPB, and
• whether the current TASA appropriately equips the TPB to effectively perform its task.

The Australian Government issued its response to the Review recommendations in November 2020, accepting fully 6 of the review’s recommendations, 5 in part and a further 9 in principle, with others “noted” and a few rejected.

Major recommendations for reform

Among the recommendations that the Government accepted (fully, in part or in principle), the more significant ones included:

• Enhancing the independence of the TPB from the Australian Taxation Office (ATO) particularly in relation to finance and staffing. The chief executive officer of the TPB would in future be accountable to the TPB Board rather than to the ATO, with the role of ATO appointees to the TPB governed in future by a formal memorandum of understanding. Increasing the TPB’s independence from the ATO is a beneficial change, which should increase the status and credibility of the TPB.
• Increasing the TPB’s flexibility to register applicants with “atypical” experience or education would enable the TPB to register applicants who have equivalent education and experience, but do not fall into traditional “categories”. This should help remove current anomalies and improve the process.
• Expanding the “fit and proper person” test to include consideration of additional factors (such as conflicts of interest, management of personal tax obligations and “other relevant matters”). Satisfying the test is invariably a key requirement for registration, and its expansion seems a significant improvement. The “fit and proper person” test would also be amended to make it more consistent with other regulatory systems such as the Australian Securities and Investments Commission (ASIC). While modelling the test on the ASIC provisions might not be ideal, given past experience, overall the recommendation seems a sensible change;
• Giving the Minister a power to issue legislative instruments to supplement provisions in the Code of Professional Conduct. This would make the Code more “agile” so that it can adapt quickly to changing circumstances;
• Introducing an administrative penalty on intermediaries who knowingly make false or misleading statements to the ATO in preparing tax returns.
• Expanding the range of sanctions available to the TPB to include infringement notices, enforceable undertakings, quality assurance audits, interim suspensions, permanent disbarment and external intervention. This would be a significant and welcome development, because it has been suggested that the TPB has to date tended to impose “weaker” sanctions such as a written caution in many cases because the other currently available sanctions (for example termination of registration or civil penalties) are seen as too severe for less serious infractions. If there were a wider range and gradation of penalties available in future to the TPB, it would be able to “match” an appropriate penalty to the breach more accurately, and might therefore be inclined to rely more heavily on “stronger” sanctions such as interim suspensions and the like.

Many of the above proposals have considerable merit and if enacted should improve significantly the TPB’s operational effectiveness.

The Final Report recommendations do raise some potential issues. For example, the TPB would still have to conduct a formal investigation before it could apply sanctions under section 30-15 of TASA, even if the TPB already holds adequate information on which to base those sanctions.

In addition, the use of section 70 of the ASIC Act as a potential model for Federal Court powers to deal with a failure to provide stipulated information where a claim is made for legal professional privilege may seem surprising given the problems encountered in implementing procedures for civil penalties under sub-division 50-C of TASA.

Other recommendations

From among the Review’s many other recommendations, some of the more important ones included:

• Moving regulation of tax (financial) advisers out of TASA into a new and arguably more logical “home” under a regime operated by ASIC;
• Reducing red tape by, for example, only requiring those agents not regulated by any other government body to register with the TPB;
• Moving to an annual registration period for practitioners which would be better aligned with other TPB annual responsibilities such as insurance and renewal of professional body membership;
• Creation of a Tax Practitioner Governance and Standards Forum and corresponding Charter, intended to ensure that appropriate consultation precedes any significant change affecting practitioners; and
• Consideration of the need for a specific statutory provision and procedure dealing with claims for legal professional privilege – perhaps using as a guide the Privilege Protocol issued by the Australian Taxation Office in June 2022;

Conclusion

Overall, these proposed changes would – if implemented – sharpen the TPB’s teeth, “plug” some of the “gaps” in the current TASA provisions, and give the TPB significantly enhanced powers to deal with offending registered and unregistered practitioners, including power to impose penalties on offending practitioners rather than their innocent clients.

It is unfortunate that TASA is sometimes given less attention than other areas of tax practice, because the Act governs tax practitioners from their professional “birth”, through their daily “life”, to their professional “death”. TASA provisions can have sharp teeth (which will become even sharper if the recommendations are implemented), so that failure to adapt to the new “rules” could have serious negative consequences for practitioners.

Practitioners will therefore need to monitor the progress of the Review Recommendations very closely, because they will inevitably change fundamental features of the tax practice landscape and have a significant impact on the way that many practitioners operate.

Citation :

Woellner, Robin, (2022), Updating the Tax Agents Services Act 2009, Austaxpolicy: Tax and Transfer Policy Blog, 23 September 2022, Available from: https://www.austaxpolicy.com/updating-the-tax-agents-services-act-2009/

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About the Author

Robin Woellner

Prof Robin Woellner is an Adjunct Professor in the School of Law at James Cook University and the School of Accounting, Auditing and Taxation Governance at UNSW. Robin was Foundation Dean of the Faculty of Law at (then) UWSM and the College of Law and Business at UWS, and subsequently Pro-Vice Chancellor of Law, Business and the Creative Arts at JCU. Robin has co/authored numerous books, and inter/national conference papers and articles, as well as teaching in various institutions on a wide range of topics.