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Supervision and control - tax (financial) advisers

Supervision and control - tax (financial) advisers

One of the registration requirements for a company or partnership entity to become a tax (financial) adviser is to satisfy the ‘sufficient number’ requirement. This means your entity must have an adequate number of registered individual tax (financial) advisers or tax agents to:

  • provide tax (financial) advice services to a competent standard, and
  • carry out supervisory arrangements on behalf of the entity.

This is also an ongoing registration requirement.

Sufficient number requirements

There is no set formula to determine the sufficient number of registered individuals for a practice, but the minimum number must be at least one. You must assess the number of registered individuals your practice needs to ensure tax (financial) advice services are provided competently and there are adequate supervisory arrangements in place. The registered individuals may include:

  • financial services licensee’s representatives – such as authorised representatives, responsible managers, compliance officers, regional/line managers
  • partners, directors, employees, contractors and staff provided under a service trust arrangement.

We will consider a range of factors to determine if your practice has an adequate number of registered individuals, including the following:

  • Do you have adequate financial, technological and human resources to provide the tax (financial) advice services and provide supervision?
  • Is the registered individual competent and adequately trained to provide effective supervision and control?
  • What is the size and scale of services provided within your business? This may include considerations such as your business turnover, number of clients, nature and sophistication of your client base and the number of relevant staff.
  • How complex are the services being provided and supervised?
  • How many qualified and experienced staff do you have and how often do they undertake training and development activities?
  • Do you have sufficient technology support, including network security protocols and digital monitoring and review processes?
  • What supervisory arrangements do you have in place, including quality assurance and control practices and escalation procedures?
  • What are your risk management processes, including delegated supervision processes?
  • Does your entity have a condition imposed on its registration by us?

Guidance for Australian financial services (AFS) licensees

If your business model includes corporate or individual authorised representatives only, you will meet the sufficient number requirement if every entity under your license that provides tax (financial) advice services for a fee or reward is registered with us. In this situation, each individual authorised representative and those individuals who make up the sufficient number requirement for your corporate authorised representative will form and satisfy your sufficient number requirement.

In situations where your business model also includes employee representatives, you must have registered individuals from within your licensee structure itself to meet the sufficient number requirement.

Obtain written consent

When appointing registered individuals to provide supervision for your practice, you must obtain their prior informed consent by way of a written signed statement. You must ensure they have considered all the relevant information before accepting to take on the supervisory role, including the nature of supervisory arrangements in place and the supervision and control to be undertaken. This will ensure the nominated individual is aware of their appointment as a supervising tax practitioner and understands the responsibilities of the role.

The only exception where the prior informed written consent will not be required is in situations where:

  • you have existing documentation that sets out the nature of supervisory arrangements and supervision and control to be undertaken, and
  • the nominated individual is aware of and understands the obligations set out in the documentation.

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Supervisory arrangements

You must ensure tax (financial) advice services provided by you or on your behalf are provided competently. This is an obligation under the Code of Professional Conduct (Code).

To provide competent services and comply with the Code, you need to direct, oversee and check the services provided on your behalf. There doesn’t need to be an employer/employee relationship with the person performing the services to provide adequate supervision.

Supervisory arrangements are also important in situations where an individual wants to register as a tax (financial) adviser for the first time. Individuals can demonstrate they have gained the required relevant experience by working under the supervision and control of a registered tax (financial) adviser or tax agent.

Measures to ensure adequate supervision

You can consider adopting a range of measures to ensure there is adequate supervision and control in your practice. Below are some suggested measures:

  • Inspect, advise and direct how the staff undertake their tasks. While you do not have to monitor all work or interviews conducted, you must provide a substantial degree of oversight. ‘Substantial’ means there must be ample or considerable amount of involvement and not simply checking from time to time. This will vary according to the skills and experience of the staff and the complexity of tax matters involved.
  • Ensure the staff have adequate level of education and understanding of the relevant tax laws to execute the tasks they are responsible for.
  • Provide initial and ongoing training to your staff.
  • Have documented procedures and processes in place so staff can raise any issues with their supervisor that are beyond their knowledge or if there have been any specific concerns raised by your clients.
  • Implement quality assurance and control mechanisms and conduct audits of work undertaken by staff.
  • Undertake spot checks of the source documents and questions asked by staff to justify any income and deductions declared.

Develop a supervisory plan

We strongly recommend that you develop a plan setting out the supervisory arrangements in your practice. The supervisory plan should set out processes and procedures in your practice to provide competent services and adequate supervision, covering the measures outlined above.

The plan should help the nominated supervising tax practitioner to clearly understand what their responsibilities are and that of the staff under the plan.

Having such a plan should help you establish the supervisory processes for your practice and also help you to comply with your Code obligations.

Remote supervisory arrangements

Remote supervisory arrangements can apply in situations where the supervisor and the staff they supervise are in different locations or employed by different entities (including in relation to outsourcing and offshoring arrangements).

The following considerations can be helpful to ensure there is adequate supervision and control in remote working arrangements in addition to the measures outlined above:

  • frequency of contact and the methods of communication
  • whether the supervisor is available to be contacted at all times by staff
  • access to training and research resources while working remotely
  • management of workflow, particularly where the supervision and control is being exercised by an unrelated entity
  • how documents are to be reviewed and feedback provided to staff
  • how file and document sharing logistics will be managed
  • whether systems allow for audits or reviews to be carried out remotely
  • whether the registered individual supervises one or more entities
  • other administrative obstacles inherent with a remote supervisory arrangement.

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Holding multiple supervisory roles

There may be situations where a nominated supervisor is supervising one or more related or unrelated entities. In these situations, the factors outlined above are still relevant to determine if adequate supervisory arrangements exist. Additionally, you should also consider:

  • size of each entity – for example, turnover of business, number of clients, and number of relevant staff
  • market segment of the client base of each entity
  • type and complexity of the tax (financial) advice services being provided
  • other professional duties or responsibilities of the nominated supervisor.

Failure to comply

If your entity does not have a sufficient number of registered individuals or supervisory arrangements in its practice, it may breach the TASA.

If we find that you have failed to comply with the TASA, including the Code, we may impose one or more administrative sanctions or seek a Court imposed civil penalty.

Further information

For further information, including examples refer to our information sheet TPB(I) 36/2021 Supervisory arrangements under the Tax Agent Services Act 2009.

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Last modified: 11 October 2021