TPB Consultative forum report - 10 July 2018
Thank you for joining Ian Taylor (Chair), Greg Lewis (Board member) and fellow Tax Practitioners Board (TPB) colleagues at the TPB consultative forum held on Tuesday 10 July 2018. We appreciate your valuable input and have produced a summary below to assist your association with communicating key messages to your members.
Items raised by Forum members
Inspection of depreciating assets
- The Forum discussed the requirements for inspecting depreciating assets when preparing depreciation reports, noting the varying approaches adopted by firms in this regard.
- It was confirmed that the TPB does not prescribe the extent to which tax agents are required to inspect depreciating assets when completing depreciation reports, however, the TPB expects that registered tax agents comply with the requirements of the Code of Professional Conduct (Code) in the Tax Agent Services Act 2009 (TASA), in particular:
- Code item 7 – ensuring that the tax agent services that the practitioner provides, or that are provided on the practitioner’s behalf, are provided competently;
- Code item 9 – taking reasonable care in ascertaining a client’s state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement the practitioner is making or a thing they are doing on the client’s behalf; and
- Code item 10 – taking reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which the practitioner is providing advice to a client.
The TPB confirmed that whilst the extent of inspection of depreciating assets required to ensure compliance with the Code will vary depending on the circumstances, the TPB will review its guidance, particularly in relation to ‘reasonable care’, and consider including more practical examples for practitioners about the types of circumstances that the TPB considers tax practitioners should take into account when considering the extent to which they inspect assets when completing depreciation reports.
- The Forum noted the tax practitioner application fee increase and removal of the ‘not in business’ category, that was announced in the 2018-19 Federal Budget to supplement the TPB’s funding needs. Further, some Forum members noted that there was no public consultation on this matter. The TPB noted the concerns raised and that it is not always possible to consult with industry on Budget measures. The TPB confirmed that the related Cost Recovery Implementation Statement is expected to be published on the TPB’s website as soon as possible.
- As a result of the application fee increases, the TPB confirmed that in 2017-18, the TPB received a budget allocation of approximately $17 million (comprised of $15 million through the portfolio budget statement (PBS) process and an additional $2 million that was supplemented by the ATO). In 2018-19, the TPB will have a budget allocation of approximately $18.3 million (comprised of $15 million through the PBS process and $3.3 million in application fee amounts). Therefore, the net effect for the TPB of application fee increase is not $3.3 million, rather $1.3 million. It was noted that the TPB also received an additional $1.375m specifically for BET related activity.
- The Forum noted that the removal of the ‘not in business’ category may result in tax practitioners reviewing their practice structures to reduce the number of registered tax practitioners they have to satisfy the TPB’s sufficient number requirements. The TPB confirmed that it is aware that this may occur, but ultimately a tax practitioner practice must ensure that it continues to meet the ongoing registration requirements. If the TPB has concerns that a practice is no longer meeting this ongoing registration requirement, the TPB will review the matter on a case-by-case basis to ensure ongoing compliance with the sufficient number requirements.
- The TPB confirmed that the changes to the TPB’s application fees was an interim partial cost recovery measure. In 2018-19 the TPB has been asked to review the application of the Australian Charging Framework 2018-19 (ACF) to the TPB’s activities. Some queries were raised by Forum members as to what costs can be included under the ACF and the TPB confirmed that it has yet to materially commence this work and will report back to the Forum in due course. The TPB also confirmed that, consistent with the ACF, it expects that there will be consultation with key stakeholders.
Registrations and compliance update
- The Forum noted a summary of TPB registrations and compliance activity and observed that, as expected, the spike in tax (financial) adviser renewal applications received (including for the final end-January 2018 tranche) has had an impact on overall weighted average registration processing times. The Forum noted that the TPB managed to process virtually all tax (financial) adviser renewal applications by 30 June 2018, not including those applications that remain with applicants due to further information and evidence being required (noting that a number of these applications have become significantly aged). The TPB confirmed that it intends to return aged renewal applications with refunded application fees to applicants who have not provided the TPB with the requisite information to process their applications despite repeated requests by the TPB to do so. The Forum further noted the following information in relation to the TPB’s registrations update, as at 30 June 2018:
- the weighted average processing times for tax agent applications is 11 days (21 days for new applications and 9 days for renewal applications);
- the weighted average processing times for BAS agent applications is 10 days (24 days for new applications and 7 days for renewal applications);
- the weighted average processing times for tax (financial) adviser applications is 132 days (9 days for new applications and 164 days for renewal applications). It was noted that this number is inflated by the tax (financial) adviser renewal applications that have not been able to be processed by the TPB due to outstanding information being required by applicants in question. The TPB confirmed that this number will reduce significantly in the future, due to the TPB returning incomplete applications and refunding application fees where appropriate;
- 89% of registration applications were decided within 30 days of receiving a complete application (measured against the service standard of 80% of applications being decided within 30 days);
- 90% of registration applications were decided within 60 days of receiving a complete applications (measured against the service standard of 95% of applications being decided within 60 days).
- The Forum noted the achievement by the TPB to manage all tax practitioner application processing times, despite the significant volume of tax (financial) adviser renewals.
- The Forum noted that the number of complaints received by the TPB in relation to registered tax practitioners in the 2017-18 year was similar to the 2016-17 year, with almost 70% of complaints received being made by the general public. The Forum noted that as at 31 May 2018, the TPB finalised 104 unregistered provider cases and had 46 unregistered compliance cases on hand. It was noted that 52 cases had been finalised resulting in advertising being removed or amended, or specific educational letters being issued. It was suggested that the TPB update its messaging to registered practitioners to clarify the compliance activity the TPB is taking in relation to unregistered providers.
- The issue of the TPB’s approach to unregistered tax practitioner activity was raised by Forum members and the TPB confirmed that it would publish more information (via eNews as an example) to further articulate what the TPB can do, what it has done (via case studies) and the outcomes that have been achieved so far.
Continuing professional education reviews
- The TPB advised that it will be undertaking reviews in relation to tax practitioner compliance with the TPB’s Continuing Professional Education (CPE) requirements in the 2018-19 year. The TPB noted that it will be taking a risk based approach, initially focussing on tax practitioners who are are not subject to another regulatory requirement (for example, those who are not members of professional associations who conduct CPE/CPD review activity and tax (financial) advisers are subject to oversight by their Australian Financial Services licensee through requirements under the Corporations Act 2001) and therefore are unlikely to be subject to other CPE/CPD review activity.
Black economy taskforce
- The Forum noted that the TPB has been allocated an additional $1.375 million each year over the forward estimates for Black Economy matters. The TPB will work with the Australian Taxation Office (ATO) to deal with Black Economy matters referred to TPB, and will establish a Regulatory Assurance taskforce and Risk and Intelligence team to undertake this work.
Agents of concern
- The ATO advised that they have identified and are working on dealing with approximately 70 agents of concern, with a further approximately 100 cases to be handled through the Government’s black economy response. The ATO is also implementing as part of the Government’s black economy response an early intervention strategy to address the risk that certain tax practitioners will in the future become part of one of the ATO’s corrective programmes such as agents of concern or higher risk agents.
- The ATO have been provided with additional resources to deal with these issues and the TPB has indicated its keenness to work closely with the ATO on these matters.
Payroll service providers
- The Forum noted that the single touch payroll (STP) requirement to have a TPB registration number to lodge reports with the ATO via the STP portal commenced for certain employers on 1 July 2018. The TPB confirmed that it is taking a pragmatic approach focussing on, in the first instance, raising awareness of the need to register and supporting those who are seeking registration.
Annual Declaration process for recognised associations
- The TPB noted that the annual declaration process for recognised professional associations is ongoing, with particular emphasis going forward on seeking more detailed information about complaints handling processes in light of the matters that were raised at the Royal Commission into Misconduct in the Financial Services Industry. The TPB noted that it will also be seeking information from recognised associations that referrals from the TPB in relation to registered practitioners who have been found to have contravened the TASA have been appropriately considered by the associations in question.
Regulator Performance Framework
- The Forum was advised that the TPB’s self-assessment metrics report in relation to the Regulator Performance Framework will be circulated with the Forum Communique, with Forum members being invited to provide comment and feedback.
- The TPB is continuing its commitment to communication and awareness activity, including a broad-based approach to Outreach that involves a rolling schedule of monthly webinars, speaking engagements, eNews, social media and media releases. The TPB’s unregistered service provider advertising campaign appeared more than 1.1 million times when people were searching for a tax or BAS agent and generated more than 4,300 clicks through to the TPB Register.
Financial Adviser Standards and Ethics Authority
- The TPB noted that it has provided submissions to the Australian Securities and Investments Commission (ASIC) and the Financial Adviser Standards and Ethics Authority (FASEA) in relation to the proposed oversight of Compliance Monitoring Bodies, the proposed Code of Ethics for Financial Advisers and proposed education pathways. The TPB advised that it will continue to engage with ASIC and FASEA, particularly highlighting the need for consistency, minimisation of regulatory overlap and ensuring appropriate information sharing between relevant parties.
- The TPB has provided advice to Treasury regarding GST requirements for purchasing new residential premises which commenced on 1 July 2018 and the operation of the TASA. The Forum noted that the TPB will re-iterate advice on the TPB website that data entry is appropriate (with appropriate disclaimers) and mere transmittal of data by conveyancers does not require registration with the TPB.
Legislative instrument for tax (financial) advisers
- The Forum noted that the TPB is still seeking to progress the legislative instrument in relation to tax (financial) advice services. The TPB confirmed that the Office of Best Practice Regulation has advised that a Regulatory Impact Statement is not required, as the regulatory impact of the proposed legislative instrument is considered to be low. The TPB will continue to liaise with stakeholders in relation to the scope of the proposed services listed in the legislative instrument.
Professional Indemnity Insurance
- The Forum noted that the TPB has met with the Insurance Council of Australia (ICA) to discuss the continued appropriateness of the TPB’s minimum aggregate amounts of professional indemnity (PI) insurance cover for registered tax and BAS agents, and cyber security insurance. In relation to the TPB’s minimum requirements, the ICA confirmed that these amounts continue to be appropriate, and suggested the TPB may wish to review its policy to require, rather than recommend, at least one reinstatement in PI insurance policies (noting that one reinstatement is standard in most policies, and that this is not expected to significantly impact policy premiums).
- In relation to cyber security insurance, the TPB noted that the ICA confirmed that in relation to third party losses incurred as a result of a cyber attack, it is likely that these types of losses would be covered by most existing PI insurance policies, as they would generally be incurred in connection with the provision of taxation services. The ICA advised however, that first party losses caused by cyber attacks would generally not be covered by PI insurance policies, and as such, separate cyber security insurance would be required by practitioners intending to protect their practices against these types of attacks.
- The Chair thanked forum members for their attendance and continuing feedback. The next meeting is scheduled to be held on 7 November in Melbourne (with a telepresence option in Sydney).
Last modified: 26 July 2018