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TPB Consultative Forum Report 13 March 2012

Report Tax Practitioners Board Consultative Forum – 13 March 2012

On 13 March 2012, the Tax Practitioners Board (Board) held its ninth Consultative Forum (Forum) in Melbourne with representatives from a number of professional associations.

Board and Secretariat representation at the Forum consisted of:

  • Dale Boucher – Chair of the Board
  • Roger Cotton – Board member
  • Russell Smith – Board member
  • Mark Maskell – Secretary
  • Janette Luu – Senior Adviser to the Chair
  • Neil Pegg - Secretariat

Representation at the Forum consisted of:

  • Australian Taxation Office
  • Australian and New Zealand Association of Chartered Certified Accountants
  • Association of Accounting Technicians Australia
  • Association of Taxation and Management Accountants
  • Australian Institute of Quantity Surveyors
  • Chartered Institute of Management Accountants
  • CPA Australia
  • Institute of Certified Bookkeepers
  • Institute of Chartered Accountants in Australia
  • Institute of Public Accountants
  • Law Council of Australia
  • National Tax Agents' Association Ltd (NTAA+)
  • Royal Institute of Chartered Surveyors
  • Self-Managed Super Fund Professionals’ Association of Australia
  • Tax Institute of Australia
  • Taxpayers Australia

This draft Report outlines the key points that were discussed at the Forum. This draft Report is only intended to provide an overview of the issues that were discussed. They do not represent the final views of the Board and are not intended as detailed minutes of the Forum meeting. 

1. Update from the Chair

The Chair welcomed all attendees and provided the Forum with a brief overview of the key updates since the last Forum meeting on 28 September 2011. In particular, the Chair noted the following:

Board member resignation

The Chair noted the resignation of Professor Gordon Cooper, an inaugural Board member since 23 October 2009. His expertise and knowledge of Australia’s tax system was greatly valued by all of the Board and our staff.

BAS agent and tax agent notifier renewals

The Chair gave an update on the numbers of outstanding notifier renewals (including surrenders), advising the following:

  • As at 4 March 2011, of about 14,500 BAS agent notifiers, about 10,000 BAS agents have lodged, or are in the process of lodging, a renewal application and over 1,500 agents notified the Board that they are surrendering their registration. Approximately 3,000 agents who notified the Board that they were providing a BAS service in 2010 have taken no action to renew.
  • Of the about 1,200 tax agent notifiers, about 800 tax agents have lodged, or are in the process of lodging, a renewal application.
  • The Board is pleased with the number of renewals applications received as it is significantly higher given the earlier predictions that about 7,000 BAS agents would become registered within the first 2 years of the tax agent services regime.

Professional practice issues

The Board is progressing its professional practice work, in particular developing its preliminary view on what it means to take reasonable care (per subsections 30-10(9) and 30-10(10) of the Tax Agent Services Act 2009 (TASA)); and its approach concerning holding money or other property on trust (per subsection 30-10(3) of the TASA). In regard to the latter, the Board is close to issuing a document for public comment.
The Board held a discussion group with tax and BAS agents in Geelong on 17 February 2012, with a focus on what it means for an agent to take reasonable care for the purposes of the Code of Professional Conduct (Code). Some key issues that arose from that session concerned source documentation, materiality, engagement letters, scoping out arrangements with clients and the relevance of ATO benchmarks. Further, the Board is working closely with the ATO and further consultation will occur in due course as appropriate.
There are a lot of issues in the Code that need to be brought out, however the Board is currently progressing the priority issues identified in the forum workshop held last year. These priority issues have been incorporated within the Board’s current professional practice work program.

Compliance activity

  • Key statistics: Some key statistics in relation to the Board’s compliance work were noted. It was observed that there are approximately 440 complaint cases on hand, with 70% relating to alleged breaches of the Code. Common complaints are that an agent has not acted with honesty and integrity, not handling refunds in time, and allegations that services have not been provided competently.
  • Compliance: The Board has been taking compliance action where appropriate, including this year terminating the registration of 12 tax agents and 2 BAS agents as a result of not meeting the fit and proper person requirements of the Tax Agent Services Act 2009 (TASA). The Board has also taken action this year to sanction three agents due to breaches of the Code – one being terminated and the other two being issued, or in the process of being issued, with compliance orders (one about attending an ethics course, and the other about operating under supervision).
  • First civil penalty proceeding: The Board has instituted its first civil penalty proceeding in the Federal Court, being against Ms Avril Hogan for alleged breaches of the TASA for unregistered preparer conduct. The Board is seeking orders, including a pecuniary penalty and an injunction against Ms Hogan. Ms Hogan is alleged to have provided tax agent services to 26 people, including by advising them about their income tax obligations and entitlements and completing and lodging their 2010 tax returns for a fee while she was not registered.
  • Criminal charges and subsequent surrenders: Where the Board is aware that an agent is facing criminal charges, including through media reports, the Board is writing to those agents to ask them to notify the Board pursuant to the Code per subsection 30-10(14) of the TASA. Further, the Board also undertakes standard checks on these matters, such as whether the agent has PI insurance cover and outstanding complaints. It was noted that in two recent cases the agents surrendered their registration, and that the Board has a range of sanctions available.
  • Complaint notification: The Board does not discourage agents notifying the Board of behaviour that they observe in the profession which may be in breach of the TASA. Complaints can be lodged via an online form or by a phone call. The Chair noted that the Board is not necessarily asking agents to tell it about those who may be operating in breach of the Act, including as unregistered preparers. However, the Board feels that if registered agents do not let the Board know about such activity, they should not later complain if their businesses are undercut or adversely affected by such activity. It was also noted that the ATO encourages people to make complaints and that referrals are expected to be provided to the Board in due course.

Other items of interest

  • Fitness and propriety: The Board’s decision to terminate an agent’s tax agent registration as he was not a fit and proper person was affirmed in the Administrative Appeals Tribunal in Fortune Corporation Pty Ltd and Ken Kai Hing Cho and the Tax Practitioners Board [2012] AATA 11. This case concerned pre-commencement conduct and fitness and propriety, a tame agent situation, and an agent lodging tax returns brought in by strangers and not checking them. It also establishes that conduct prior to commencement of the current Board on 1 March 2010 can be conduct taken into account for fitness and propriety purposes (although it cannot be taken into account for Code purposes).
  • Requirement to maintain professional indemnity insurance: Subject to any appeal by the applicant, the Board’s decision requiring an agent to maintain professional indemnity insurance (PI insurance) cover, despite turnover of approximately $10,000 per annum, was affirmed by the Administrative Appeals Tribunal (AAT) in Ferdinand Lengyel and the Tax Practitioners Board [2012] AATA 134. The following key points in the AAT’s decision were highlighted:
    • low turnover per se is no indication of the complexity of the returns involved
    • the purpose of PI insurance is to guard against unforeseen circumstances so that the fact that an agent has not previous claims is not necessarily relevant
    • it is irrelevant if an applicant can meet any claims form their own resources, noting that circumstances can change and that it is not expeditious to take action against the agent personally, and
    • relatively well affordable PII cover can be obtained.
  • Symbol: The Board is working on developing a registered agent symbol (symbol), with the Board currently in the process of trademarking and establishing rules of use. The symbol is expected to be made available to registered agents later this year, to enhance the status of registered agents and therefore their recognition in the community.
  • Processing times and backlogs: The Chair noted that a lot of applications were received as the notification period ended; however, the Board is not comfortable with its current situation and does not regard it as reaching an acceptable business-as-usual state. It was noted that work is continuing to streamline processing. Further, it was reiterated that if an agent is already registered, they remain registered until the Board makes a decision.
  • IT system: Intermittent issues have been experienced with the iMis system that the Board inherited at start-up, and that the Board is currently working on acquiring a new IT system with an independent platform. The Request for tender (RFT) for this separate IT system recently closed.
  • Website refresh: Work is continuing and progressing well on this activity, which will enable improved navigation and more logical placement of information.
  • Financial advisers (financial planners who provide tax advice): There is little that can be said at the moment. At the date of the meeting, the carve-out is due to end on 30 June 2012. The Board is working closely with ASIC and Treasury in providing input into policy. It is anticipated that there will be a notification, transition, and standard application period applied. It was observed that the Board is reasonably well advanced in its work on a Board approved course for financial planners in Australian taxation law, working with an academic group.

2. Update from the Secretary

There is a large workload regarding BAS and tax agent notifiers, with a significant number of applications received when the notification period ended on 29 February 2012.
IT performance issues have unfortunately been experienced. The Board has been actively addressing risks and recently issued a RFT for a separate IT environment.
It is difficult to accurately assess turnaround times; however, the intent is for a one-month timeframe when the Board is in a business-as-usual state, and when all required information has been submitted by applicants for registration. Priority is being given to 1,200 new applications; however, the Board is also actively addressing backlogs with renewals including considering further streamlined processing measures, issuing appropriate communications (such as advising that agents remain registered until the Board makes a decision on their renewal applications, provided the application was submitted before their registration expired), and escalating relevant matters.
It was highlighted that approximately 90% of applications do not have correct attachments, with irrelevant information being supplied in many cases. It was noted that although all questions asked on the registration form are anchored in legislation, further work is required on communications and the form to assist agents to understand relevant requirements, and thereby obviate the need for recurring contact to effectively process an application. The Secretary noted that the Board appreciates any feedback concerning how to improve the process.

3. BAS agent and tax agent notifiers

The Board sampled a number of BAS agents to identify possible reasons why agents had not renewed their registration. Of those who noted that they intended to renew, some said that they were unsure if they were going to renew, while others identified time constraints and system issues. Of those who advised that they did not intend to renew (equating to 61 out of 170 agents who were contactable), reasons provided included the following:

  • ceased providing, or did not provide, BAS services
  • became employees and therefore did not need to register
  • ineligible to renew
  • application fee or PI insurance was too expensive; and
  • a variety of other reasons.

It was also observed that a number of agents could not be contacted during the sampling exercise, including as a result of having a disconnected phone or incorrect number.
While the Board did not have definite information as to why BAS agents had yet to renew their registration, the Board believes reasons for this group consist of the following:

  • agents waiting until the last moment to renew their registration, based upon past experience with registration cut-off dates
  • the original notification process was extremely simple permitting entities to register who may not have intended to be BAS agents long term (not required to meet education and experience requirements and no cost)
  • cost of being a registered agent (for example, obtaining PI insurance) does not warrant ongoing registration
  • agents were never required to become registered as BAS agents in the first place (a sample of agents were randomly extracted and almost half were able to identified as having a primary business that was not clearly not the provision of BAS services)
  • agents have now chosen to become employees rather than operate their own business
  • agents have chosen to cease providing BAS services.

Some dropout of agents was anticipated, and the true size of the BAS agent population will become clearer when the bulk of the renewal period is over. For those agents who have taken no action to renew their registration or notify the Board otherwise, the Board will write to those agents (after a month) and notify that their registration is lapsed and should no longer be providing a service for a fee or other reward. Compliance activity will then be employed as appropriate.
An extensive array of communication activities was undertaken by the Board to assist BAS and tax agent notifiers to renew their registration. Further, there are a number of pathways to becoming registered and applications will be considered on their merits, including transitional applications (available until 28 February 2013) and recognised prior learning for applicable circumstances (where relevant experience exists). It was also highlighted that the Board has an information sheet in regard to challenge tests which sets out criteria - TPB(I) 11/2011: Challenge test criteria for a Board approved course in basic GST/BAS taxation principles.
The Board will continue to consider relevant communication activities to facilitate awareness of the TASA, including clearly articulating and highlighting the relevant pathways available and also consider writing to associations as appropriate.

4. Commercial law requirements for certain tax agents

Commercial law requirements for regulation 156(4) and (5) tax agents

The Board is giving particular attention to how it should address and apply the ‘Board approved course in commercial law’ requirement to certain tax agents who were registered before and after 1 March 2010, noting that under the previous provisions in the Income Tax Regulations 1936, the qualification requirements for those applying under sub regulation 156(4) (and its predecessor, sub regulation 156(1)(c)) were such that the applicant did not have to successfully complete a course of study in commercial law.

Board approved course in commercial law

The Board is currently considering its approach on what is considered a Board approved course in commercial law for tax agents, developing a workable position in conjunction with the engagement of Professor Michael Walpole and Professor Michael Dirkis.
This work is reasonably well advanced and the Board will consult on its preliminary view when appropriate. The Board has not resolved its position finally, but the matter is currently under active Board consideration and the Board hopes to make an announcement in regard to its approach shortly.
It was commented that if an application (new or renewal) is made under Items 203 or 205 of the TASR before 1 March 2013, agents will not need to satisfy the commercial law requirement until they next renew their registration.

5. Continuing professional education (CPE)

The Board is close to launching its CPE policy, with the finalised explanatory paper on CPE expected to be released by May 2012.
Essentially, the policy will apply from 1 July 2012, with the Board to employ a phased implementation approach.
For BAS agents, there will be a requirement to undertake 45 hours per triennium (15 hours per year). For tax agents, it will be 90 hours per triennium. A lesser amount will apply to specialist groups (such as quantity surveyors).
From 1 July 2012, agents will be expected to begin or continue their CPE in accordance with the Board’s policy to help maintain their knowledge and skills.
From 1 July 2013 the Board will start asking agents how they are complying with the CPE policy, with the registration application form modified to insert two new questions (Have you been undertaking CPE – yes/no; If no, what have you been doing).
All agents should maintain a record as evidence of their continuing professional education from 1 July 2012.
Whether an agent complies with the Board’s CPE policy will largely be a system of self-assessment. A broad approach will be applied regarding what is deemed acceptable CPE, with an extensive list of applicable items outlined within the explanatory paper. Further, relevant CPE undertaken through a professional association will be recognised by the Board, as long as it is tax agent service or BAS service related.
The Law Council of Australia re-raised the issue of seeking flexibility for legal practitioners who are registered tax agents, noting that another submission will be made to the Board for due consideration.

6. Other items suggested by Forum members

a) Registration issue - expedited processing when there is a merger of existing registered tax agents (ICAA)
It was requested that the Board expedite applications in appropriate cases (for example, where an applicant is trying to set up a new business).
The Chair noted that such situations were already been dealt with by the Board expeditiously. However, the situation does not arise enough to warrant building up a specific process per se and observed that agents could still continue to practise under an existing agent number or could seek to have the matter expedited as appropriate. It was agreed that urgency is needed in relevant situations and that the Board will endeavour to assist as appropriate, considering matters on a case by case basis, noting that as much notice as possible is sought in these situations.

b) Academic requirements – Board’s approach to course approval (ICAA)
The ICAA sought confirmation of the Board’s earlier view that the ICAA’s CA Program would not be accepted by the Board as a Board approved course in basic GST/BAS taxation principles. The Chair pointed out that the CA Program would only be approved if it meets the topic, assessment, level and duration of a GST/BAS course requirements as per the BAS agent Skill Set.

c) Use of ethical letters – are they compulsory? (ATMA)
The matter was raised in relation to clients passing from one agent to another, particularly in relation to fees and acquiring rights to records.
It was noted that the Board does not have power to require ethical letters but could consider encouraging both ethical and engagement letters.

d) Notifying agents regarding Chair’s messages (IPA)
It was noted that the Board’s website is the primary vehicle for communicating with registered agents, including notifying agents of developments. When the Board has an improved IT platform, it will also consider the use of update messages to registered agents.

e) Conduct of agents who refuse to sign a Statement of Relevant Experience (SRE) for an employee seeking registration as a tax agent – obligations under the Code of Professional Conduct (Tax Institute)
There have been examples of cases where a SRE cannot be verified by anyone, for a number of reasons. The Chair advised that the Board relies upon and expects registered tax agents and BAS agents to assist the Board in determining an agent’s competency and experience, especially those agents who are or have been the employer and/or supervisor of an applicant.
The Board is of the view that a refusal to provide a SRE or to comment upon a SRE may, depending upon the circumstances, be a matter that the Board would consider in the context of Code Item 14 which requires agents to respond to the Board in a reasonable, responsible and timely manner.

7. Other business

a) Coverage of Valuers (ICAA)
It was confirmed that where a valuer is engaged to simply provide a valuation, without doing more, this would not entail the provision of a tax agent service. This is contrasted with quantity surveyors who apply particular depreciation percentages and provide calculated figures for inclusion in a tax return. Ultimately, there is a need to look at the scope of what is being done.
The Board is currently doing some work on the issue of valuers and ‘tax agent services’ for the purpose of providing clarification and is expected to issue further guidance via an information sheet in the near future.
b) Forum administrative matters tasks
It was suggested that professional bodies might get together for a half hour telephone hook-up before Consultative Forum meetings so as to facilitate focus for the meetings, with this to entail provision of an overview of agenda items to clarify what they mean (akin to the approach used at BASAG).
It was further suggested that the Board maintain a log of any outstanding issues that are raised from Consultative Forum meetings so that they can be tracked accordingly.

8. Close of meeting

The Chair thanked everyone for attending the meeting, and also thanked Mark Morris for providing the use of premises.
The Forum agreed to meet again on 6 July 2012 in the Board’s Hurstville office (Sydney). It was suggested that some time be set aside to go through the registration process at the next meeting.