Do you provide advice on tax consequences as part of your financial advice?
If you are a financial planner or adviser providing tax advice or advice on tax consequences as part of your financial advice to clients for a fee or reward, you must be registered with the TPB.
Tax (financial) advice services
In most cases, if you advise your clients about the tax consequences of the financial advice you provide, you are providing a tax (financial) advice service.
A tax (financial) advice service consists of five key elements:
- a tax agent service (excluding representations to the Commissioner of Taxation)
- provided by an Australian financial services (AFS) licensee or representative (including individuals and corporates) of an AFS licensee
- provided in the course of advice usually given by an AFS licensee or representative
- relates to ascertaining or advising about liabilities, obligations or entitlements that arise, or could arise, under a taxation law
- reasonably expected to be relied upon by the client for tax purposes.
Clients being reasonably expected to rely on tax advice provided
The TPB’s view is that if you are charging a fee or receiving a reward for tax (financial) advice services, you generally expect that your client is going to rely on that advice for tax purposes.
Some of the key facts and circumstances that help determine whether a client can reasonably be expected to rely on that advice for tax purposes that you provide include:
- whether you have to interpret or apply a taxation law, or calculate a tax liability and it therefore requires a certain level of knowledge about a taxation law
- whether you apply knowledge of the taxation laws to your client’s individual circumstances
- whether your client, or another entity, checks or reviews the work before purporting to rely on it
- whether your engagement documentation with the client specifically excludes all tax advice
- whether you intended for your client to rely on the advice or information provided
- whether your client has a relative lack of knowledge or prior experience in relation to the advice, perhaps indicating that the client regards your skill and experience superior to their own
- the availability of other expert views and the ability of your client to form their own judgment or rely on their own knowledge
- the circumstances surrounding the provision of the advice, including the nature of the relationship/dealings between you and your client (for example, whether the advice is provided as part of a formal consultation or merely during the course of a casual conversation/engagement)
- further circumstances that may be relevant include whether your client has specifically requested the advice or has paid for the advice
- the level of complexity surrounding the particular advice
- whether you suggested or encouraged your client to seek further advice in relation to the matter
- the nature of the advice or information given. For example, it would not normally be reasonable to expect your client to rely on a provisional opinion in speculative circumstances or an “off-the-cuff” statement where you gave no indication that you possessed greater knowledge or skill in relation to the matter
- whether you provided an effective disclaimer against responsibility for the service. However, the existence of a disclaimer does not automatically absolve you from the need to register and the effect of such a disclaimer will generally depend on all the circumstances of the case, including your relative knowledge and skill and the complexity and/or significance of the service provided.
For more information about registering as a tax (financial) adviser visit www.tpb.gov.au/financialadvisers