Civil penalties under the tax agent services regulatory regime

A civil penalty is a pecuniary penalty imposed by courts exercising a civil rather than criminal jurisdiction. State and Commonwealth government bodies can apply to the courts to have a pecuniary penalty imposed against an individual for breaching a civil penalty provision in some circumstances. Unlike criminal penalties, civil penalties do not include criminal convictions or imprisonment.

Civil penalty provisions in the tax agent services legislation

There are a number of civil penalty provisions in the Tax Agent Services Act 2009 (TASA). These civil penalty provisions can be grouped into two categories, those relating to:

  • conduct that is prohibited without registration
  • conduct of registered tax practitioners (that is, registered tax agents, BAS agents and tax (financial) advisers).

Note: Penalties for contravention of the civil penalty provisions are imposed in the form of penalty units. The current value of one penalty unit is $170.

The penalty amounts listed below reflect the current penalty unit value. For example, one penalty unit = $170, so 250 penalty units = $42,500.

Conduct that is prohibited without registration

An entity will contravene a civil penalty provision if it is unregistered and:

  1. It charges or receives a fee or other reward for providing a service, which it knows, or should reasonably know, is a tax agent service, BAS service or tax (financial) advice service.

    PENALTY: $42,500 (250 penalty units) for an individual and $212,500 (1,250 penalty units) for a body corporate.

  2. Advertises that it will provide a tax agent service, BAS service or tax (financial) advice service.

    PENALTY: $8,500 (50 penalty units) for an individual and $42,500 (250 penalty units) for a body corporate.

  3. Represents itself as a registered tax agent, BAS agent or tax (financial) adviser.

    PENALTY: $8,500 (50 penalty units) for an individual and $42,500 (250 penalty units) for a body corporate.


Exemptions to these civil penalty provisions

The civil penalty provision listed in at 1 above, does not apply to:

  • an employee who is providing tax agent or BAS services for their employer for a salary, wage or other benefit
  • a tax (financial) advice service that is provided for a fee or other reward during the period 1 July 2014 to 31 December 2015 by an entity that is not registered as a tax (financial) adviser, if the entity gives a disclaimer when providing this service that advises that:
    • they are not a registered tax (financial) adviser, and
    • if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax (financial) adviser or registered tax agent.

The civil penalty provisions listed above do not apply to:

  • a customs broker licensed under Part XI of the Customs Act 1901 if the BAS service they provide or advertise relates to imports or exports to which an indirect tax law applies
  • legal practitioners that are lawfully providing the service under a State or Territory law regulating legal practice. However, legal practitioners wanting to prepare and/or lodge returns will need to register to avoid the civil penalty, except where such services are provided in the course of acting for a trust or deceased estate as a trustee or legal personal representative.

 

Conduct of registered entities

An entity will contravene a civil penalty provision if it is registered and:

  • knowingly or recklessly, by inclusion or omission:

    • makes a false or misleading statement to the Commissioner of Taxation (Commissioner)
    • prepares a false or misleading statement which it should reasonably know is likely to be made to the Commissioner
    • permits or directs someone to make or prepare a false or misleading statement.

    PENALTY: $42,500 (250 penalty units) for an individual and $212,500 (1,250 penalty units) for a body corporate.
  • employs or uses the services of deregistered entities. That is, the entity (first entity) employs or uses the services of another entity (second entity) to provide tax agent services, BAS services or tax (financial) advice services on its behalf and the first entity knows or should reasonably know:

    • that the second entity is not currently registered but was previously registered, and
    • the second entity’s registration was terminated within one year before the first entity first employed, or first used the services of, the second entity.

    However, the first entity will not contravene a civil penalty provision if the second entity’s registration was terminated as a result of it surrendering its registration, becoming an undischarged bankrupt or going into external administration.

    PENALTY: $42,500 (250 penalty units) for an individual and $212,500 (1,250 penalty units) for a body corporate.

An entity will also contravene a civil penalty provision if:

  • it is a registered tax agent and in the course of providing a tax agent service signs a declaration or statement in relation to a taxpayer that is required or permitted by a taxation law, which was not prepared by:

    • the entity
    • another individual who is a registered tax agent
    • another individual who is working under the supervision and control of an individual who is a registered tax agent
  • it is a registered tax or BAS agent and in the course of providing a BAS service it signs a declaration or statement in relation to a taxpayer that is required or permitted by a taxation law, which was not prepared by:

    • the entity
    • another individual who is a registered tax or BAS agent
    • another individual who is working under the supervision and control of an individual who is a registered tax or BAS agent.


    PENALTY: $42,500 (250 penalty units) for an individual and $212,500 (1,250 penalty units) for a partnership or company.

 

Consequences of contravening a civil penalty provision

If an entity contravenes a civil penalty provision under the TASA, we may, within four years, apply to the Federal Court of Australia for an order that the entity pay a pecuniary (monetary) penalty. If the Federal Court is satisfied that a civil penalty provision has been contravened, it can order an entity to pay the Commonwealth a pecuniary penalty it determines to be appropriate, being no more than the penalty stated in the relevant civil penalty provision. Once the Federal Court orders that a pecuniary penalty be paid, the penalty is payable to the Commissioner, who receives it on behalf of the Commonwealth. The Commissioner is also entitled to enforce the order as if it were a judgment of the Federal Court.

If more than one of the civil penalty provisions is contravened, proceedings may be commenced for any or all of the relevant civil penalty provisions, however only one pecuniary penalty will be imposed in respect of the same conduct.

 

Partners in a partnership

If a partnership contravenes a civil penalty provision, each partner of the partnership, as it was at the time of the contravention, is taken to have contravened the civil penalty provision. This is unless the partner proves, on the balance of probabilities, that they:

  • did not engage in the conduct
  • did not aid, abet, counsel or procure the conduct, and
  • were not in any way knowingly concerned in or a party to the conduct

 

Last modified: 15 May 2014