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Applying for registration during the transitional period TPB Information Sheet TPB(I) 25/2015

TPB Information Sheet TPB(I) 25/2015

Applying for registration during the transitional period: Sufficient experience to be able to provide tax (financial) advice services to a competent standard

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Sufficient experience to be able to provide tax (financial) advice services (PDF)

Disclaimer

This is a Tax Practitioners Board (TPB) information sheet (TPB(I)). It is intended to be for information only. While it seeks to provide practical assistance and explanation, it does not exhaust, prescribe or limit the scope of the TPB’s powers in the Tax Agent Services Act 2009 (TASA) and Tax Laws Amendment Act (2013 Measures No. 3) Act 2013 (Amendment Act).

In addition, please note that the principles and examples in this TPB(I) do not constitute legal advice and do not create additional rights or legal obligations beyond those that are contained in the TASA and Amendment Act or which may exist at law. Please refer to the TASA and Amendment Act for the precise content of the legislative requirements.

Document history

The TPB released this document as a draft Information Sheet in the form of an Exposure draft on 12 January 2015. The TPB invited comments and submissions in relation to the information in it. The closing date for the submission was 26 February 2015. The TPB considered the submissions made and now publishes the following TPB(I).

Issued: 17 April 2015

Sufficient experience to be able to provide tax (financial) advice services to a competent standard

Introduction

  1. Between 1 January 2016 and 30 June 2017 (transitional period), entities [1] seeking registration as a tax (financial) adviser under the ‘transitional option’ will need to satisfy the Tax Practitioners Board (TPB) that, among other things, they have sufficient experience to be able to provide tax (financial) advice services to a competent standard. [2]
  2. This TPB Information Sheet (TPB(I)) has been prepared by the TPB to assist entities in understanding the TPB’s approach to this requirement. In particular, this TPB(I) explains the TPB’s view on what is meant by ‘sufficient experience’ and ‘competent standard’ in the context of registering in the transitional period.
  3. Whether an entity satisfies the requirement that they have sufficient experience to be able to provide tax (financial) advice services to a competent standard is a question of fact. This means that each application for registration will need to be considered on a case-by-case basis having regard to the entity’s facts and circumstances.

Requirement to have sufficient experience to be able to provide tax (financial) advice services to a competent standard

Legislative background

  1. Entities will be eligible for registration as a tax (financial) adviser under item 50 in Schedule 1, Part 3 of the Tax Laws Amendment (2013 Measures No. 3) Act 2013 (Amendment Act) if:
    • they are an Australian financial services (AFS) licensee or a representative of an AFS licensee [3];
    • they apply for registration as a tax (financial) adviser under section 20-20 of the Tax Agent Services Act 2009 (TASA) during the transitional period;
    • they would be eligible for registration but for:
      • the qualifications and experience requirement for registration [4]; or
      • the requirement for partnership and company applicants to have a sufficient number of individuals, being registered tax agents or registered tax (financial) advisers, to provide tax (financial) advice services to a competent standard and to carry out supervisory arrangements [5]; and
    • the TPB is satisfied that the entity has ‘sufficient experience’ to be able to provide tax (financial) advice services to a ‘competent standard’.

Meaning of ‘sufficient experience’

  1. The phrase 'sufficient experience' is not defined in the TASA. As a result it takes on its ordinary meaning. The Macquarie Dictionary provides the following definitions:

    Sufficient

    1. that suffices; enough or adequate.

    Suffice

    1. to be enough or adequate, as for needs, purposes, etc

    2. to be enough or adequate for; satisfy.

  2. The TPB is of the view that the equivalent of 18 months or longer of full-time experience would satisfy the ‘sufficient experience’ requirement and anything less would need to be considered by the TPB on a case-by-case basis. Further, this experience, subject to paragraph 9 below:
    • must be related to the provision of tax (financial) advice services or tax advice given in the context of financial advice
    • can be accrued at any time before a registration application is submitted to the TPB
    • does not necessarily need to be a continuous period of experience.
  3. There is no definitive listing of the types of experience that will constitute sufficient experience, recognising that there is significant variation in the types and descriptions of work undertaken by individuals in the financial services profession. For example, the experience that a para planner accrues may constitute sufficient experience where the para planner is involved in the provision of a tax (financial) advice service. On the other hand, a para planner who merely assists a representative, by undertaking background research, may not necessarily be able to count that experience towards meeting the sufficient experience requirement.
  4. Ultimately, whether an individual satisfies the sufficient experience requirement is a question of fact to be determined by the TPB on a case-by-case basis having regard to the individual’s circumstances and the extent to which they are involved in the provision of a tax (financial) advice service [6]
  5. For the purpose of sufficient experience for AFS licensees and authorised representatives, the TPB will count experience accrued by these entities prior to 1 July 2014 that would have required the AFS licensee and/or authorised representative to register with the TPB as a tax agent but for the carve out for these entities in sub-regulation 13(2) of the Tax Agent Services Regulations 2009. The TPB will also consider experience gained prior to the commencement of the tax agent services regime in March 2010 where the experience has consisted of the provision of tax advice given in the context of financial advice.
  6. Further, the TPB will also count experience accrued by representatives [7], in particular employee representatives, as sufficient experience provided the experience is related to the provision of tax (financial) advice services or tax advice given in the context of financial advice.
  7. The views in the paragraphs above are based on:
    • the dictionary definition of ‘sufficient’
    • the eligibility qualification requirements under the standard registration option
    • the TPB’s previous approach to tax agents who applied under the transitional option [8]
    • the Australian Securities and Investments Commission requirements as contained in Regulatory Guide 105: Licensing: organisational competence.

Meaning of ‘competent standard’

  1. The word ‘competent’ is not defined in the TASA. As a result it takes on its ordinary meaning. The Macquarie Dictionary provides the following definition:

    Competent

    1. Properly qualified; capable

    2. Fitting, suitable or sufficient for the purpose; adequate.

  2. Therefore, competence, with respect to tax (financial) advisers, can be defined as a state of being capable, fitting, suitable or sufficient to provide a tax (financial) advice service.
  3. A tax (financial) adviser will be competent if the adviser possesses such skill, ability and knowledge required to perform a tax (financial) advice service that clients may entrust their financial affairs, which includes tax advice, to the adviser’s care.
  4. Further, the Code of Professional Conduct contained in section 30-10 of the TASA provides some guidance in relation to the meaning of competence. In particular, subsections 30-10(7) to (10) of the TASA, which all fall under the key principle of ‘competence’, require that tax (financial) advisers must:
    • ensure the tax (financial) advice services they provide, or are provided on their behalf, are provided competently
    • maintain knowledge and skills relevant to the tax (financial) advice services they provide
    • take reasonable care to ascertain their clients' state of affairs
    • take reasonable care to ensure that taxation laws are applied correctly.

Required information and consideration of application

  1. To become registered under the transitional option, applicants will need to provide appropriate verification with their application to demonstrate that they have sufficient experience to be able to provide tax (financial) advice services to a competent standard.
  2. The requirement to demonstrate sufficient experience and competency applies to partnerships and companies in the same way as it applies to individual applicants.
  3. The required verification can be a brief letter outlining the experience and including a short description of the types of services the applicant has provided. The letter can be provided by a range of third parties, including:
    • an AFS licensee or authorised representative;
    • a registered tax (financial) adviser;
    • a registered tax agent;
    • an employer;
    • a principal; or
    • two separate clients.
  4. If the applicant is unable to obtain appropriate verification, the applicant will need to provide a submission with their application for registration, which the TPB will consider on its merits.
  5. Once the applicant has provided the TPB with all the required information, including verification of experience and competency, the TPB will decide whether or not to approve the applicant’s registration application.

[1] An ‘entity’ for the purposes of this TPB(I) means an individual (including an individual in the capacity as trustee of a trust), partnership or company (including a company in the capacity as trustee of a trust).

[2] Registration as a tax (financial) adviser under the ‘transitional option’ means registration under Item 50 in Schedule 1, Part 3 of the Tax Laws Amendment (2013 Measures No. 3) Act 2013.

[3] This does not include entities taken to be registered as tax (financial) advisers under the ‘notification option’ in Item 49 in Schedule 1, Part 3 of the Tax Laws Amendment (2013 Measures No. 3) Act 2013.

[4] Paragraph 20-5(1)(b) of the TASA.

[5] Paragraph 20-5(1)(b) and subparagraphs 20-5(2)(c)(iii) and 20-5(3)(d)(iii) of the TASA.

[6] For more information on the meaning of ‘tax (financial) advice service’, see TPB(I) 20/2014 What is a tax (financial) advice service?

[7] Section 910A of the Corporations Act 2001

[8] See item 13 in Schedule 2 to the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009.