TPB Consultative forum report - 3 July 2019
Thank you for joining Ian Klug (Chair), Michael O’Neill (CEO / Secretary), Julie Berry (Board member), Nick Westerink (Treasury) and fellow Tax Practitioners Board (TPB) colleagues at the TPB Consultative Forum held on Wednesday 3 July 2019. We appreciate your valuable input and have produced a summary below to assist your association with communicating key messages to your members.
TPB operational update
General compliance update
- A brief overview of the TPB compliance process was provided, noting the following:
- The TPB employs a triage process involving an initial assessment, a secondary preliminary analysis/investigation, and a formal investigation process for relevant matters.
- The TPB considers intelligence from all information sourced from complaints lodged with the TPB, referrals, and data analytics of high risk areas.
- The TPB’s firmer compliance approach has been facilitated by data analysis indicating areas of non-compliance by registered tax practitioners. The TPB is also adopting a more overt approach for dealing with unregistered service providers.
- The TPB works collaboratively with relevant agencies and regulators, and will continue to be proactive in raising attention of relevant matters such as the recent Peter Moltoni matter.
- There has been a recent increase in the number of terminations and suspensions. There were 61 terminations for the 2018-19 year, compared to 24 terminations in the 2017-18 year.
- The TPB will continue to provide updates on its compliance activity.
- The TPB is currently investigating more than 350 tax practitioners who are suspected of high-risk behaviour including:
- failure to meet personal tax obligations
- over-claiming work-related expenses on behalf of clients
- egregious conduct which is considered black economy behaviour
- non-lodgement of annual declarations
- non-compliance with continuing professional education (CPE) requirements.
72-hour complaints handling process
- It was noted that the trial process entailed the TPB facilitating an opportunity for practitioners to work through issues with complainants on relevant matters in the first instance, with the TPB providing guidance around the process to enable swift resolution of some complaints.
- The TPB has taken on board feedback received about the process, undertaken further engagement and resolved to put the program on hold and consider the residual issues that have been raised.
- Under our existing process, we will continue to encourage complainants to resolve complaints directly with their tax practitioner in the first instance.
- Where required, we will continue to engage the practitioner and the complainant to assist in working through the specifics of the complaint.
CPE review update
- A status update was provided in relation to the TPB’s CPE review activity, with the following noted:
- Of the tax practitioners reviewed to date, most have been found compliant and have responded to requests for their CPE logs within the specified timeframe.
- Most practitioners are now aware of the project, but the TPB is continuing to provide education and guidance to practitioners to improve compliance. In particular, the TPB continues to remind practitioners of the importance of maintaining contemporaneous records.
- The TPB will continue to provide updates on the outcomes of the TPB’s CPE review program.
- CPE review results for year to date were as follows:
- 530 formal CPE reviews had been completed:
- 421 practitioners were found compliant
- 83 practitioners were found to have been marginally deficient in meeting their obligations and received education letters
- 8 formal investigations were conducted for practitioners who were significantly deficient in meeting their obligations and this led to more formal sanctions including suspensions and orders
- 18 practitioners surrendered their registration.
- There are 158 CPE reviews currently in progress.
- The TPB is awaiting further progress to develop a more accurate picture regarding any learnings, noting that the program was expanded in March to include tax (financial) advisers (who are renewing their registration) as well as to members of recognised associations.
- These learnings will be considered in the TPB’s review of CPE policies.
- 530 formal CPE reviews had been completed:
- The TPB has noted feedback that CPE review activity is an indirect proxy measure to ensure professionals are providing appropriate standards of service. Future consideration will be given to evolving activity into a more practice management focus, with the TPB to consult on any model redesign. In particular, the TPB recognises the importance of providing synergy with ATO and professional association practice review processes where appropriate.
Debt and lodgement strategy update
- There continues to be a positive response to the strategy. Analysis as at 31 May 2019 shows that:
- Of the original target population of 7,839 tax practitioners, there has been:
- 10,120 outstanding lodgements (66%) have been brought up-to-date (income tax returns, BAS and instalment activity statements).
- Outstanding/collectable debt has been reduced by approximately $35 million (from nearly $115 million to just under $80 million).
- Further, the ATO has reported that almost 1,000 (36%) tax practitioners with outstanding SMSF annual returns had rectified the situation by either submitting all outstanding annual returns or winding up the SMSF fund, and that the superannuation assets at risk decreased from nearly $1.07 billion to just over $572 million.
- Of the original target population of 7,839 tax practitioners, there has been:
- The TPB is continuing to progress focus on those higher risk practitioners who fail to comply, with almost 70 investigations into the most egregious practitioners having either commenced or finalised with firm sanction. The majority of practitioners who have been investigated under this targeted work have had their registration terminated, many with a five-year exclusion period applied.
- The TPB and ATO have been appreciative of the support from professional associations in disseminating calls to action, which has helped to drive improved compliance.
Future of the Tax Profession
The TPB agreed with all six recommendations made for the TPB in the Inspector- General of Taxation and Ombudsman (IGTO) Final Report, with the TPB building on existing work being undertaken (including review of information architecture).
- The TPB has been in consultation with the IGTO’s office about the TPB implementation plans and it is noted that the outcome of the current independent review into the TPB and the Tax Agent Services Act 2009 (TASA) may impact implementation.
- The TPB will continue to work closely with all stakeholders, including the consultative forum. In particular, specific input may be sought in relation to:
- providing advice on whether practitioner’s future transformation plans meet TASA obligations (Recommendation 4.1(b)(ii))
- research to determine if TPB policies and procedures appropriately cater for all tax professionals within the TPB’s jurisdiction (Recommendation 6.1)
- ongoing periodic review of education requirements (Recommendation 6.2(a))
- review of the TASA regime to ensure sufficient flexibility for managing service providers (Recommendation 6.2(b))
- changes to be made to information products (if required).
Transfer of business by tax (financial) advisers and confidentiality
- It was confirmed that the TPB has resolved to not progress the practice note at this point in time, having due regard to the range of feedback received on the Exposure Draft Practice Note and the current regulatory environment.
- The TPB will give due consideration to the inclusion of some guidance (such as a practical example) in relation to transfers of business for all tax practitioners when reviewing the current guidance on Confidentiality under the Code of Professional Conduct (Code item 6) in due course.
- The final practice note (TPB(PN) 3/2019 Letters of engagement), being released in July, provides further practical guidance on best practice and assists tax practitioners to understand the TPB’s position in relation to the provision of letters of engagement to clients. The Practice Note replaces information sheet TPB(I) 01/2011: Letters of engagement.
- The TPB considered feedback received on the Exposure Draft Practice Note and made further amendments for clarity, including changing wording to reflect that the TPB recommends that there be annual reconfirmation of arrangements with clients and noting that a change in the client’s relevant personal circumstances is a factor for requiring a new engagement letter.
- The Whistleblower Act commenced from 1 July 2019, extending persons who can receive a protected disclosure (eligible recipient), including a registered tax practitioner who provides services to the entity, without fear of breaching the Code of Professional Conduct (Code Item 6 – Confidentiality of client information) in accordance with having a legal duty to disclose.
- The TPB has been liaising with the ATO in relation to the development of guidance for the ATO website, and the updating of ATO processes as appropriate.
Items raised by Forum members
BAS agents and Super Guarantee
- It was noted that an issue has been raised in relation to clarifying the scope of services BAS agents can lawfully undertake when dealing with Superannuation Guarantee and Superannuation Guarantee Charge work.
- The TPB is continuing to liaise with the ATO and is currently waiting on the receipt of relevant information from the ATO. The TPB will advise of any further developments, noting that consultation processes would be required in relation to any amendment to the current legislative instrument declaring certain services as ‘BAS services’.
- It was suggested that the TPB review its overall communications to ensure the TPB appropriately endorses the TASA regime and supports the clear majority of registered tax practitioners who comply with their obligations.
- It was noted that feedback is considered as part of the TPB’s ongoing review of its communications, and that an increase in compliance-focused messaging and shift in focus to a more targeted approach has not been to the detriment of practitioner support activities or messaging.
Review of the TASA and TPB
- Forum representatives spoke about their submissions on the terms of reference for the independent review of the effectiveness of the TPB and the TASA, as published on the Treasury website, with discussion providing an opportunity to facilitate a better understanding of stakeholder views and create a shared understanding.
- Nick Westerink (Treasury) provided a brief update, noting key coalescing themes raised in submissions including:
- TPB’s independence and funding arrangements
- governance arrangements and the role of the Board
- tax (financial) advisers and regulatory overlap
- regulating the tax profession of the future, having regard to the IGTO Future of the Tax Profession report
- who should be required to be registered and improving registration requirements
- relationship between the TPB and professional associations (including information sharing)
- Code of professional conduct (including the possibility of a dynamic code)
- sanction powers
- legal practitioners and the provision of legal advice
- use of legal professional privilege
- improving the TPB’s visibility and interactions.
- A discussion paper is expected by end-July (which will canvass issues coming out of the submissions, include focusing issues and questions and discuss various options), with the subsequent submission period providing another opportunity for feedback. The TPB will consider feedback submitted on the consultation paper before settling on a TPB view.
- It was noted that there will be further targeted stakeholder consultation and that a final report is still expected to be completed by 31 October for Government.
- The next TPB Consultative Forum and TPB Financial Adviser Forum meetings are currently scheduled to be held on 19 November 2019.
- Other forums may be held on an exception basis as required, including the possibility of an earlier separate forum to discuss issues in relation to review of the TASA and TPB.
- A 'save the date' notification will be forwarded to participants, pending final details.
Last modified: 30 July 2019