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Two new Code of Professional Conduct (Code) Items commenced on 1 January 2024. 

  • Under Code Item 15, you must not employ or use the services of an entity that you know (or ought reasonably to know) is a disqualified entity, to provide tax agent services (including BAS services) on your behalf, unless you have obtained our approval.
  • Code Item 16 prohibits you from having certain arrangements, with an entity that you know (or ought reasonably to know) is a disqualified entity, in connection with the provision of tax agent services, including BAS services.

These requirements apply from 1 January 2024 to certain situations. However, transitional provisions apply in some circumstances until 31 December 2024.

For more information on these Code items, see:

Types of disqualified entities

Under the Tax Agent Services Act 2009 (TASA), a disqualified entity includes an individual, a body corporate (company), a body politic, a partnership, any other unincorporated association or body of persons, a trust, a superannuation fund, and an approved deposit fund.

However, an entity cannot be a disqualified entity if they are currently:

Events that will disqualify an entity

An entity will be a 'disqualified entity' if any of the following events has occurred within the last 5 years.

Types of entities ‘employed’ or ‘used’ to provide tax agent services

Below is a non-exhaustive list of entities who can be considered as ‘used’ or ‘employed’ to provide tax agent services on behalf of a registered tax practitioner:

  • Employees
  • Associates
  • Contractors
  • Individuals (or entities) who share in the revenue and income received from the tax agent services provided under a registered tax practitioner.

Code Item 15 does not apply to entities that provide:

  • administrative support only to a tax practitioner
  • tax agent services for no fee or reward.

Certain arrangements with disqualified entities prohibited by the Code

Code Item 16 prohibits you from having certain arrangements with a disqualified entity in connection with the provision of tax agent services.

The term ‘arrangement’ is defined broadly and can include any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not legally enforceable between the registered tax practitioner and the entity.

Code Item 16 is intended to prevent arrangements where the disqualified entity is operating ‘through’ the registered tax practitioner. This may occur where the disqualified entity is acting as the ‘controlling mind’ of the registered tax practitioner and provides tax agent services (while unregistered) using the registered tax practitioner’s credentials.

The circumstances which may constitute an ‘arrangement’ for the purposes of Code Item 16 can vary significantly and will be considered on a case-by-case basis.

Refer to the scenarios included in the TPB(I) 42/2024 Code of Professional Conduct – Prohibition on providing tax agent services in connection with an arrangement with a disqualified entity for further information.

How to determine if an entity is a disqualified entity

You must take reasonable steps and make reasonable enquiries to determine if an entity you employ or use to provide tax agent services on your behalf is a disqualified entity.

These reasonable steps and enquiries are expected to include new information gathering processes for entities providing tax agent services on your behalf, such as:

  • onboarding requirements for new employees or other entities (i.e. contractors)
  • employee reporting processes or contractual notification requirements for other entities.

We consider that, at a minimum, you must take the following steps and enquiries to comply with your Code obligations.

As a first step, you should check if the entity is (or was previously) registered with the Tax Practitioners Board (TPB) or the Australian Securities and Investments Commission (ASIC).

  • Use the TPB Public register to check the entity’s registration status as a tax or BAS agent, including whether the entity has been sanctioned and/or terminated by the TPB.
  • Use the ASIC’s Financial Advisers Register to check if the entity is currently registered as a qualified tax relevant provider (QTRP).

If the entity is currently registered as a tax or BAS agent, or as a QTRP, then the entity is not considered a disqualified entity at this time.

Information published on the TPB public register

You should be aware of the limitations on the TPB's powers to publish information on the TPB public register, including the following:

  • Details of terminated entities can only be published for 12 months from date of termination.
  • Details of sanctions (other than termination or written caution) can only be published for 12 months from the date of sanction, or the duration of the sanction, whichever is longer.
  • We cannot publish decisions where an entity was issued with a written caution, or was subject to an investigation but this did not result in a sanction.

A search of the TPB Public register is only the first step to determining if an entity is a disqualified entity. To ensure you have taken reasonable steps and made reasonable enquiries, you must also complete steps 2 and 3 below, depending on your situation.

 

  • Undertake appropriate proof of identity (POI) checks on the entity which meet the minimum requirements outlined in our client verification process guidance.
  • Discuss the requirements of Code Items 15 and 16 with the entity (or their authorised representative) and obtain written confirmation from the entity that they have not had a disqualifying event occur within the last 5 years.
  • Ensure that you have a written contract or arrangement in place with the entity that:
    • requires the entity to notify you as soon as possible should a disqualifying event occur
    • enables you to immediately cease employing or using the entity to provide tax agent services on your behalf, or in connection with an arrangement, if the entity becomes a disqualified entity.

We recommend you seek independent legal advice in respect of your obligations under employment and contract law.

 

Where you already have an existing contract or arrangement with an entity, follow the steps outlined in Steps 1 and 2 (excluding POI checks, if these have already been undertaken).

See also the transitional provisions for Code Items 15 and 16 below for further information on existing contracts or arrangements with disqualified entities.

How to comply with the Code if the entity is a disqualified entity

Transitional provisions apply from 1 January 2024 to 31 December 2024

To allow a reasonable time for you to comply with the new requirements of Code Items 15 and 16, transitional provisions apply from 1 January 2024 to 31 December 2024 (the ‘transitional period’) in some circumstances.

The following table explains what action is required to comply with Code Item 15 during the transitional period.

Stage of contract to employ or use the disqualified entityAction required to comply with Code Item 15
Contract was entered into on or before 31 December 2023 and not renewed or extended during the transitional period.
  • You must apply for TPB approval during the transitional period if you want to continue to employ or use the disqualified entity to provide tax agent services on your behalf after 31 December 2024. 
  • If you do not receive TPB approval, you will need to consider your options to cease employing or using the disqualified entity to provide tax agent services on your behalf, having regard to your obligations under contract and employment law, by 1 January 2025. You may wish to seek independent legal advice.
Entering into a new, extended or renewed contract during the transitional period.
  • You must obtain TPB approval before entering into, extending or renewing a contract to employ or use the disqualified entity to provide tax agent services on your behalf during the transitional period.
  • If TPB approval is not obtained, you must not enter into, extend or renew the contract with the disqualified entity.
  • If the entity becomes a disqualified entity after you have entered into a new, extended or renewed contract, you need to consider your options to immediately cease employing or using the disqualified entity to provide tax agent services on your behalf, having regard to your obligations under contract and employment law. You may wish to seek independent legal advice. 
  • You must obtain TPB approval before continuing to employ or use the disqualified entity to provide tax agent services on your behalf.

 

The following table explains what action is required to comply with Code Item 16 during the transitional period.

Stage of arrangement with the disqualified entity in connection with tax agent services you provideAction required to comply with Code Item 16
Arrangement was entered into on or before 31 December 2023 and not renewed or extended during the transitional period.
  • You will need to consider your options to cease the arrangement with the disqualified entity in connection with tax agent services you provide by 1 January 2025, having regard to your obligations under contract and employment law. You may wish to seek independent legal advice.
  • Although a transitional period applies for Code Item 16, you should consider whether the arrangement is in breach of other Code items, for example:
    • Code Item 1, which relates to honesty and integrity
    • Code Item 7, which relates to ensuring tax agent services are provided competently.
Entering into a new, extended or renewed arrangement during the transitional period.
  • You must not enter into, extend or renew the arrangement with the disqualified entity.
  • If the entity becomes a disqualified entity after you have entered into a new, extended or renewed arrangement, you will need to consider your options to cease the arrangement in connection with tax agent services you provide as soon as possible, having regard to your obligations under employment and contract law. You may wish to seek independent legal advice.
  • You should also consider whether the arrangement is in breach of other Code items, for example:
    • Code Item 1, which relates to honesty and integrity
    • Code Item 7, which relates to ensuring tax agent services are provided competently.

From 1 January 2025

You must not employ or use a disqualified entity to provide tax agent services on your behalf without having obtained TPB approval.

Refer to the scenarios included in TPB(I) 41/2024 Code of Professional Conduct – Employing or using a disqualified entity in the provision of tax agent services without approval for further information.

 

Code Item 16 prohibits you from having certain arrangements with a disqualified entity in connection with the provision of tax agent services.

Refer to TPB(I) 42/2024 Code of Professional Conduct – Prohibition on providing tax agent services in connection with an arrangement with a disqualified entity for further information on the types of arrangements prohibited by Code Item 16.

Record keeping

Tax practitioners should keep a record of the following for at least 5 years after ceasing to employ or use an entity to provide tax agent services on their behalf, or ceasing an arrangement with an entity in connection with providing tax agent services:

  • a copy of the Disqualifying events declaration and consent form completed by the entity
  • any discussion or documentation provided by the entity relating to whether they have (or have not) had one of the disqualifying events occur in the last 5 years.

Disqualified entities to notify tax practitioners

A disqualified entity must notify you in writing of their disqualified status under both Code Items 15 and 16, if they are either:

  • seeking to be (or are currently being) used or employed to provide tax agent services on your behalf
  • seeking to enter into (or are currently in) an arrangement with you in connection with tax agent services you provide.

Disqualified entities can provide this notification by completing the Disqualifying events declaration and consent form and providing a copy to you.

The table below gives an overview of when the entity should notify you (the tax practitioner) of their status as a disqualified entity.

When a disqualified entity should notify a tax practitioner of their status
Entity's statusStage of contract or arrangementWhen must the entity notify the tax practitioner of their disqualified status?
Disqualified as at 1 January 2024

In a contract or arrangement with the tax practitioner that was:

  • entered into on or before 31 December 2023, and
  • continued from 1 January 2024 to 31 December 2024, without being renewed or extended.
No later than 30 days from 1 January 2025 – that is, by 30 January 2025.

After 1 January 2024, the entity is going to:

  • enter into a contract or arrangement with the tax practitioner
  • renew or extend a contract or arrangement with the tax practitioner.
Before the tax practitioner enters into, renews or extends the contract or arrangement.
Becomes disqualified after 1 January 2024In a contract or arrangement with the tax practitioner that was entered into on or before 31 December 2023.Within 30 days of the day on which the entity becomes (or ought to have become) aware that they are a disqualified entity.

After 1 January 2024, the entity is going to:

  • enter into a contract or arrangement with the tax practitioner
  • renew or extend a contract or arrangement with the tax practitioner.
Before the tax practitioner enters into, renews or extends the contract or arrangement

Consequences for failing to give notice

The disqualified entity may be subject to civil penalties for failing to give notice. The maximum penalty that can be applied is 250 penalty units for an individual and 1,250 penalty units for a body corporate. The current value of a penalty unit is $275.

Seeking TPB approval

If you want to employ or use (or continue to employ or use) a disqualified entity to provide tax agent services on your behalf, you must apply to us for approval to comply with Code Item 15.

You must obtain written consent to apply from the disqualified entity before applying to us for approval.

Written consent can be obtained by the disqualified entity completing the Disqualifying events declaration and consent form and providing this to you for your application.

Note: Code Item 16 prohibits you from having certain arrangements with a disqualified entity in connection with the provision of tax agent services. We cannot approve these types of arrangements.

Lodging an application

Login to My Profile to access our approved form (which will be available from 1 January 2024) and provide relevant information to support your application, including:

  • the reasons why the entity is a disqualified entity
  • the circumstances of the entity that led to the entity becoming disqualified
  • the role the entity would perform (or is performing) in your practice
  • the reasons why the entity’s ability to perform their role (or proposed role) to an appropriate standard of professional and ethical conduct would not be affected
  • any other relevant consideration.

My Profile
 

After lodging your application

We must make a decision on your application within 60 days of receiving the application, unless we have agreed on a longer period. 

Once we have made a decision, we will notify you in writing of our decision. If we reject your application, we will provide you with the reasons for the decision. 

If we do not make a decision within 60 days (or the agreed longer period), your application is taken to be rejected. 

If your application is rejected, you can apply to the Administrative Appeals Tribunal for a review of our decision.

Consequences for failing to comply

We recognise that these are new obligations and our guidance will not be finalised until after 1 January 2024. We will be pragmatic in addressing any compliance concerns you may have between 1 January 2024 and the date our guidance is finalised. Nevertheless, it is crucial that you familiarise yourself with and establish processes in your practice to adhere to Code Items 15 and 16.

You will breach Code Items 15 and/or 16 if you:

  • employ or use the services of a disqualified entity to provide tax agent services on your behalf without our approval, or
  • have an arrangement with a disqualified entity of the type prohibited by Code Item 16, in connection with the provision of tax agent services.

If we find that you have breached Code Item 15 or 16, we may impose sanctions for that breach, which may include termination of your registration.

A breach of Code Item 15 or 16 can also impact on:

  • the fit and proper person requirement necessary to maintain your registration as a tax or BAS agent
  • other Code items such as:
    • Code Item 1 relating to honesty and integrity
    • Code Item 7 relating to ensuring tax agent services are provided competently.

Further information

Last modified: 18 December 2023