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Fee or other reward for tax (financial) advisers exposure draft Information sheet TPB(I) D23/2014

Exposure Draft
Information sheet TPB(I) D23/2014

Fee or other reward for tax (financial) advisers

This exposure draft is also available as a PDF – Download link at the end of the page.

The Tax Practitioners Board (TPB) has released this draft Information Sheet as an exposure draft and invites comments and submissions in relation to the information contained in it within 30 days. The closing date for submissions is 24 October 2014. The TPB will then consider any submissions before settling its position, undertaking any further consultation required and finalising the Information Sheet.

Written submissions should be made by the closing date to the Secretary of the TPB via email at tpbsubmissions [at] tpb.gov.au or by mail to:

Tax Practitioners Board
PO Box 126
HURSTVILLE BC NSW 1481

Disclaimer

This document is in draft form, and when finalised, will be intended as 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). The principles and examples in this paper do not constitute legal advice. They are also only at a preliminary stage. The TPB’s conclusions and views may change as a result of comments received or as other circumstances change.

Document history

This draft Information Sheet was issued on 24 September 2014 and is based on the TASA as at 1 July 2014.

Fee or other reward for tax (financial) advisers

Introduction

  1. From 1 July 2014, entities that provide tax (financial) advice services for a fee or other reward may notify to register with the Tax Practitioners Board (TPB).

  2. This draft TPB Information Sheet (TPB(I)) has been prepared by the TPB to assist entities to determine what constitutes a fee or other reward.

  3. Whether a particular tax (financial) advice service is provided for a fee or other reward is a question of fact. This means that each situation will need to be considered on a case-by-case basis having regard to the facts and circumstances.

Fee or other reward

Legislative background

  1. From 1 January 2016, unregistered entities that provide a tax (financial) advice service for a fee or other reward will contravene a civil penalty provision in the Tax Agent Services Act 2009 (TASA).

  2. Subsection 50-5(2A) of the TASA provides that:

    (2A) You contravene this subsection if:

    1. you provide a service that you know, or ought reasonably to know, is a tax (financial) advice service; and
    2. the tax (financial) advice service is not a BAS service; and
    3. you charge or receive a fee or other reward for providing the tax (financial) advice service; and
    4. you are not a registered tax agent or a registered tax (financial) adviser; and
    5. in the case of you providing the tax (financial) advice service as a legal service—you are prohibited, under a State law or Territory law that regulates legal practice and the provision of legal services, from providing that tax (financial) advice service.

    Civil penalty:

    1. for an individual—250 penalty units; and
    2. for a body corporate—1,250 penalty units.[1]

Meaning of 'fee or other reward'

  1. The phrase ‘fee or other reward’ is not defined in the TASA. As a result, it takes on its ordinary meaning.

  2. However, the phrase ‘fee or other reward’ specifically excludes employees (who are unregistered) who provide tax (financial) advice services to their employer(s) for a salary, wage or other benefit.[2] Other benefits paid to employees would include, but are not limited to, fringe benefits, commissions, bonuses and incentives.

  3. Examples of whether certain transactions and arrangements constitute a fee or other reward are provided in the non-exhaustive list contained in Appendix A to this draft TPB(I).

Fee

  1. The Macquarie Dictionary (2009) defines fee, among other things, as ‘A payment for services: a doctor’s fee’.

  2. A service is taken to be provided for a fee even if the fee for the tax (financial) advice service is bundled with other fees for other services.[3]

Other reward

  1. The Macquarie Dictionary (2009) defines reward, among other things, as:

    1. Something given or received in return, or recompense, for service, merit, hardship, etc

    2. To recompense or requite (a person, etc) for service, merit, achievement, etc

  1. The phrase ‘or other reward’ recognises situations where services are provided for a reward other than a financial reward, for example when bartering tax (financial) advice services for goods or other services. [4]

  2. Further, it also captures future benefits such as future business, sales or commission. For example, providing tax (financial) advice services without charging a fee, as a means of attracting or retaining clients may constitute the provision of tax (financial) advice services for a reward.[5]

APPENDIX A

Examples of whether certain transactions and arrangements constitute a fee or other reward

The following table contains a non-exhaustive list of the types of transactions and arrangements that may constitute a fee or other reward.

 

Transaction/arrangement

Fee

Other reward

1

An employee representative provides a tax (financial) advice service, on behalf of, or to, their employer who is a registered tax (financial) adviser.

No

No

2

An entity provides a tax (financial) advice service for a fixed amount.

Yes

No

3

An entity provides a tax (financial) advice service for a time based amount (for example, an hourly rate).

Yes

No

4

An entity provides a tax (financial) advice service for an asset based amount (for example, calculated as a percentage of the client’s assets).

Yes

No

5

An entity provides a tax (financial) advice service (in the form of a statement of advice) together with other services. The entity bundles the fees and charges a single amount to the client for all the services.

Yes

No

6

An entity provides a tax (financial) advice service for an amount, part or all of which is payable via a third party. For example, an authorised representative provides a tax (financial) advice service and receives an amount that has been passed on by their Australian financial services licensee and/or corporate authorised representative (who may or may not retain a portion of that amount).

Yes

No

7

An entity provides a tax (financial) advice service in exchange for other goods and/or services (non-dollar benefits). This may include, for example, a bottle of wine or use of a holiday home as recompense for advice provided.

No

Yes

8

An entity provides a tax (financial) advice service in lieu of payment of an existing third party debt, or for a future benefit.

No

Yes

9

An entity provides a tax (financial) advice service for an amount that is calculated, or to be calculated in the future, based on certain conditions being satisfied or not satisfied.

Yes

No

10

An entity provides a tax (financial) advice service which consists of tax advice in relation to certain financial products. Upon receipt of this advice, the client invests in the financial products, which triggers a commission payable to the entity.[6]

Yes

No

 

[1] The value of one penalty unit as at 1 July 2014 is $170.

[2] See paragraphs 4.29 and 4.30 of the Explanatory Memorandum to the Tax Agent Services Bill 2008.

[3] See paragraph 4.31 of the Explanatory Memorandum to the Tax Agent Services Bill 2008.

[4] See paragraph 4.32 of the Explanatory Memorandum to the Tax Agent Services Bill 2008.

[5] See paragraph 4.32 of the Explanatory Memorandum to the Tax Agent Services Bill 2008.

[6] The TPB recognises that under the Future of Financial Advice reforms there is a prospective ban on conflicted remuneration structures including commissions and volume based payments.