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TPB Consultative Forum Report 6 July 2012

Report Tax Practitioners Board Consultative Forum – 6 July 2012

On 6 July 2012, the Tax Practitioners Board (Board) held its tenth Consultative Forum (Forum) in Hurstville, Sydney with representatives from a number of professional associations.

Board and Secretariat representation at the Forum consisted of:

  • Dale Boucher – Chair of the Board
  • Cynthia Coleman – Board member
  • Roger Cotton – Board member
  • Russell Smith – Board member
  • Yvonne Sneddon – Board member
  • Mark Maskell – Secretary
  • Neil Pegg – Secretariat

Representation at this 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
  • Financial Planning Association of Australia
  • Institute of Certified Bookkeepers
  • Institute of Chartered Accountants in Australia
  • Institute of Public Accountants
  • Law Council of Australia
  • Law Society of New South Wales
  • National Tax Agents' Association Ltd (NTAA+)
  • Royal Institute of Chartered Surveyors
  • Self-Managed Super Fund Professionals’ Association of Australia
  • Tax Institute of Australia

An Australian National Audit Office (ANAO) representative also attended as an observer, noting:

  • the ANAO has started a performance audit of the Board's registration, regulatory assurance and governance functions
  • the audit is assessing the effectiveness of the Board's implementation of the Tax Agent Services Act 2009
  • as part of the process, feedback will be sought from stakeholders
  • an audit report is expected to be tabled in Parliament in 2013
  • it is hoped that issue papers will be able to be provided for the Chair and Board by October 2012.

Apologies were noted from the Australian Institute of Quantity Surveyors and the Chartered Institute of Management Accountants.

This draft Report summarises the key points discussed at the Forum. It is intended only to provide an overview of the issues that were discussed and does not represent the final views of the Board, nor is it intended as minutes of the Forum. 

1.    Update on issues from previous Forum meeting

The Chair welcomed all attendees, including new members representing the Financial Planning Association of Australia and the Law Society of New South Wales to their first meeting of the Forum.

The log of issues arising from the previous Forum meeting was noted, with the Chair observing that all items had now been completed. The following items were highlighted:

  • A Media release was issued on the Board’s website on 5 July 2012 reiterating the requirement for agents to comply with the Board’s Professional indemnity insurance (PI insurance) requirements. This includes a reference to the AAT decision of Ferdinand Lengyel and the Tax Practitioners Board [2012] AATA 134 in which the Administrative Appeals Tribunal (AAT) affirmed the Board’s decision requiring an agent to maintain PI insurance cover, despite low turnover.

    In regard to determining appropriate PI insurance cover in relation to turnover, the following was noted:

    • The first principle that the Board has adopted is that it is up to the individual agent to consider for themselves the appropriate level of cover for their circumstances (i.e. the normal business judgment rule applies).
    • The Board’s Explanatory paper (EP) on PI insurance makes reference to minimum floor levels and tiers in relation to turnover from the provision of tax agent or BAS services or both (excluding GST), as opposed to general turnover. The Board undertook to review the EP and, if there is any doubt, to clarify and issue an appropriate message about turnover levels.
    • When the financial adviser category (covering those financial advisers who provide tax agent services in the context of providing financial advice) is required to register under the Tax Agent Services Act 2009 (TASA), consideration will need to be given to be given to the application of PI insurance requirements to this category.
  • A recent Chair’s message reinforced the Board’s support of the use of engagement letters by registered agents.
  • Information provided in a previous Chair’s message concerning the Board’s position in relation to contractors registering with the Board has now been incorporated within an information sheet and published on the Board’s website.

2.    Update from the Chair

The Chair gave a brief overview of the key events since the last Forum meeting on 13 March 2012. The Chair noted the following:

Board appointments
On 31 May 2012, the Assistant Treasurer (the Hon David Bradbury MP) announced in a media release that he will be concluding his term as Chair of the Board on 2 November 2012 and that the Government is conducting a merit-based selection process for the next Board, including the position of Chair.

In the meantime, there is a busy program of work to undertake to ensure a smooth transition to the next Board.

Compliance activity

  • The Board is determined to take the necessary action to protect consumers against those who fail to comply with the law, and has commenced proceedings against several individuals for alleged breaches of the Tax Agent Services Act 2009 (TASA). The Board has issued media releases providing details of the court cases it commences. These can be accessed at www.tpb.gov.au.
  • Civil penalties:
    • In the Board’s first civil penalty case brought to Court, on 10 May 2012, Avril Hogan was ordered to pay a penalty of $30,000 by Justice Logan of the Federal Court of Australia. Justice Logan also ordered an injunction and for Ms Hogan to pay costs. The case concerned the provision of a tax agent service for a fee while not being registered as a tax agent with the Board.
    • There are 3 other matters in which proceedings have commenced in the Federal Court against individuals suspected of having provided tax agent services for a fee without being registered with the Board.
  • Referrals:
    • A number of BAS agent conduct matters are under consideration but the ability of the Board to take action is dependant upon referrals.
    • There is a strong cooperative relationship between the Board and the ATO, with the Board receiving many referrals from the ATO.
  • Code of Professional Conduct (Code):
    • A number of cases have arisen where it has been determined by the Board that a breach of the Code has occurred and sanctions applied accordingly, including:
      • written cautions (including for a matter where an agent had failed to respond to the Board in relation to PI insurance)
      • issue of a supervision order (where an agent failed to forward refunds in a timely manner and did not lodge returns on time)
      • suspension of an agent (where an agent lodged false income returns)
      • 3 agents terminated (including for breaching competency and honesty and integrity provisions in association with lodging false payment summaries; not accounting for refunds, failing to respond to the Board and being under external administration)
      • 13 Part 4 terminations (relating to registration eligibility requirements), for reasons of lack of fitness and propriety including - failure to notify the Board of a serious taxation offence; multiple breaches of the Code; failure to forward refund monies, failure to respond to a client and the Board, and having outstanding personal tax obligations.
  • In regard to the issue of the need to raise awareness of the Board, the Chair asked attendees to be cognisant of the budgetary constraints on the Board. The Board intends to publicise compliance results, and is actively working on the development of a registered agent symbol. When completed, the symbol will enhance the status of registered agents and assist their recognition and that of the Board in the community. 

Information products

The proposed bankruptcy information sheet will serve more as useful internal guidance for staff in considering circumstances when bankruptcy ought to or ought not to sound against registration.

It was remarked that offshoring is becoming a common phenomenon and that there are implications in regard to the TASA (e.g. confidentiality, in particular informed consent when sending work overseas). This development imposes regulatory challenges. The Chair noted that work will be undertaken to refresh what the Board has said about this topic in 2010.

In regard to conflicts of interest, the Board is currently scoping out information and it was observed that any relevant material from the professional associations would be welcomed.

Commercial law requirements for regulation 156(4) and (5) tax agents: The Board is in continuing discussions with Treasury and Government about this issue.

CPE Update

  • The Assistant Treasurer launched the Board's new policy on continuing professional education (CPE) on 4 June 2012 at Parliament House Canberra. This took effect from 1 July 2012.
  • All registered tax and BAS agents are required by the Code to maintain their knowledge and skills relevant to the tax agent or BAS services they provide. The CPE policy sets out the Board’s expectations concerning CPE. It was noted that there has been a positive response to the issue of the CPE policy.
  • A brochure (including an electronic version) will be sent to all individual tax and BAS agents to tell them about what the CPE policy means for them.
  • The Board’s enquiries management team has started receiving a number of queries about whether agents can be exempted from the CPE policy. Most of the requests have already been accommodated in the policy. The Board undertook to provide information about how it is treating exemption requests in a Board message.
  • The Chair noted that generally, the Board will not give an exemption from the CPE policy where the agent is providing or is able to provide tax agent services or BAS services and is in business or is an employee in a registered agent’s business. Registered agents should be mindful, in completing their minimum hours over a 3 year period, of the flexibility contained in the CPE policy about the types of activities which will qualify as CPE.
  • The Board does acknowledge that there can be extenuating circumstances. These could occur because of illness/disability or financial or other hardship. In these situations, an agent must still ensure that they comply with the obligation in subsection 30-10(8) of the Code to maintain knowledge and skills relevant to the tax agent services they provide.
  • Requests have included the following:

    (a) Do I need to formally enrol in CPE activities for them to count under the TPB’s CPE policy?
    No. You do not need to formally enrol in a CPE activity for it to count as CPE under the Board’s CPE policy. However, registered agents should maintain a record and evidence of their engagement in CPE activities.

    (b) Can a registered tax or BAS agent provide CPE to individuals, including employees?
    Registered agents can provide CPE if they have suitable qualifications and/or practical experience in the relevant subject matter. However, individuals undertaking CPE activities need to exercise their own professional judgement in selecting suitable CPE activities.

    (c) I live in a rural area and cannot attend face to face CPE sessions or I cannot afford CPE – what should I do?
    The types of CPE activities that can be undertaken are broad and are not necessarily limited to face to face activities or fee paying CPE. Examples of non face-to-face activities and no-fee paying CPE include reading, computer/internet assisted courses, structured multimedia conferences and discussion groups. It may also be possible to attend ATO provided talks in regional centres. 

    (d) I am not carrying on a business as a registered tax agent; do I need to undertake CPE?
    Yes. Individuals who are registered as a tax agent or BAS agent should undertake CPE in accordance with the Board’s CPE policy. There is no difference between individuals carrying on a business and those not carrying on a business for the purposes of the Board’s CPE policy. This is because work of a registered agent who is an employee might create just as much risk as that of a registered agent who is in business.

    (e) I work part time as a registered agent, do I need to undertake CPE?
    Yes. Individuals who are registered as a tax agent or BAS agent should undertake CPE in accordance with the Board’s CPE policy. There is no difference between full-time and part-time work for the purposes of the Board’s CPE policy.

    The need for an agent to keep up to date is not lessened by only working part time, nor is the risk to consumers if they do not do so.

  • From 1 July 2013, the Board will start asking agents how they are complying with the CPE policy, with the registration application form being modified to insert new questions about this. Compliance with the Board’s CPE policy will largely be a system of self-assessment.
  • In respect to relevance, professional judgment is required in respect to what a registered agent believes they need in regard to their practice (including an appropriate balance of subject matter and hours).
  • Relevant CPE undertaken through a professional association will be recognised by the Board.

Financial advisers

  • On 30 April 2012, the Assistant Treasurer confirmed that the Government has given financial advisers an extension to their exemption from the tax agent services regime until 30 June 2012. This means that financial advisers who give taxation advice in the context of financial advice will need to comply with the TASA, including the Code of Professional Conduct, from 1 July 2013.
  • The Board is continuing to work with Treasury and ASIC on the regulatory system for financial advisers that provide tax advice.

BAS agent encouragement strategy

  • The Board is urging any individuals or other businesses providing BAS services for a fee but who have not registered with it to do so. The transitional option remains open until 28 February 2013 and simply requires applicants to demonstrate that they have been providing services to a competent standard and for a reasonable period.

3.    Update from the Secretary

The following brief points were highlighted:

  • Registrations work continues to be a priority, including in regard to renewals (where for many applicants who notified the Board to be registered in the first place, the Board is effectively assessing them for the first time).
  • Regulatory Assurance (RA) investigations are continuing. Activity is continuing to refine the Board’s approach, including working with the ATO in regard to referrals.
  • Work is progressing on development of a separate new ICT environment for the Board.
  • Website refresh activity is continuing and communications products (pamphlets/brochures) are being developed in regard to advising agents of their obligations. 

4.    Registrations update

A presentation was provided on the Registrations process by the Board’s Director of Registrations. This included illustrating a new tax agent application scenario. The following points were noted:

  • The Registrations area also includes Enquiries Management.
  • The Registered agent profile highlights that a significant proportion of tax agents are over 50 years of age.
  • A large number of registration applications have been received and processed in the 2011-12 financial year, with numbers exceeding expectations. It was also observed that the end of financial year agent registration figures had just been released on the Board’s website.
  • The Board continues to process applications as quickly as possible, but is experiencing backlogs for various reasons, including a high number of incomplete applications, large volumes of applications being received as the notification period ended, IT issues and the need to train new staff. The Board is not comfortable with this situation and is focusing on streamlining processing as appropriate. However, processing rates have improved significantly over the last few months.
  • The Board has worked to improve registration processes. A number of key improvements have been implemented to reduce work on hand, including:
    • centralisation of the registration function to Hurstville;
    • better communication of the registration requirements;
    • a more responsive IT system to support the registration process;
    • further development of online registration forms;
    • using external sources, where possible, to verify information;
    • more frequent Board meetings to impose PI insurance and conditions; and
    • workshops with Board members for the purpose of further streamlining processes, including in regard to assessing applications.
  • Improvements from innovations and adjusting our processing methods have meant that of the 19,000 applications processed in the 2011-2012 financial year, more than 14,000 have been processed since the end of December 2011.
  • It was reiterated that if an agent submitted an application to renew their registration as a tax agent or BAS agent with the Board on or before the due date, they will remain registered until the Board has considered their application and the applicant is notified in writing of the outcome.
  • The Board has been prioritising the processing of new registrations to make sure people can begin to practice as a registered agent. The processing of standard tax agent renewals is now at a business as usual stage.
  • There are a number of requisite steps in registering agents. A lot of work has to be expended in requesting further information, with some withdrawals also resulting after interactions with applicants.
  • Reasons for incomplete applications commonly include applicants:
    • not providing evidence of educational qualifications
    • not demonstrating relevant experience
    • not supplying a Schedule of personal details for non agent directors, partners and/or directors of company partners
    • not paying registration fees.
  • It was suggested that the Board could consider communicating ongoing timely status report messages in regard to backlogs and processing delays, for example noting that the Board is still processing applications and that there are delays being experienced.
  • The Board is undertaking a letter simplification review at present, and is progressing its Website refresh and form modification activity (including in the provision of clearer up-front messaging).
  • Approval of education courses is a matter for the Board required by the legislative framework.
  • Item 206 in the Tax Agent Services Regulations 2009 recognises the role and the quality assurance processes of associations.
  • Feedback from Forum members was also sought in regard to the Board’s approach wherein someone is not prepared to supply a statement supporting an applicant’s relevant experience (e.g. for competition reasons). It was noted that the Board sends a please explain letter to the person who is not prepared to supply a statement, and also advises relevant applicants to complete a statutory declaration and to seek statements from others. The Forum was generally supportive of the approach being taken by the Board.
  • It was agreed that the Board would provide electronic copies of the slides from the Registrations process presentation to Forum members.

5.    Board’s compliance approach

  • The Forum noted the brief Regulatory Assurance (RA) presentation, which included a reference to the Board’s compliance model and roadmap. The following was highlighted:
    • RA activity is guided by the Board approved Compliance Strategy.
    • In 2011-2012 RA had a strong focus on building capability.
    • Some of the key outcomes in the 2011–12 year to date were noted:
      • Federal court issued civil penalty of $30,000 and an injunction restraining the unregistered agent from engaging in similar conduct for three years
      • three other civil penalty matters referred to Federal Court
      • five terminations, one order and two written cautions
      • streamlined investigation and triage process.
    • For 2011-12, the Board received about 1280 complaints and referrals, which resulted in the creation of about 780 cases for the year. RA will finalise about 700 cases by the end of financial year.
    • In 2012-13, RA will continue to focus on enhancing capability. It is expected that 1400 complaints and referrals will be received.
  • It was agreed that the Board would provide electronic copies of the slides from the RA process presentation to Forum members.

6.    Education update

  • Board approved course in commercial law
    • The Chair noted that the Board is seeking to modify its approach in regard to the requirements for a course in commercial law that is approved by the Board, and invited views and comments on the proposed amendments outlined at the Forum.
    • The Board is seeking to ensure that courses undertaken by applicants include an appropriate amount of content about ‘core commercial law areas’ including:
      • Australian legal systems and processes
      • Contracts
      • The law of entities, business structures and trusts
      • Property law.

The Board views these as ‘core commercial law areas’ that are fundamental for registered agents to possess knowledge of and understand effectively to apply the taxation law.

  • A concern was raised that the commercial law requirement is not weighted appropriately with the Australian taxation law requirement (noting that it is a tax agent services regime) and it was suggested by the representative of one organisation that requiring three commercial law units was a new requirement of the TPB and was inconsistent with past practice. In response, it was noted that there is an enormous breadth of commercial knowledge that a tax agent needs to possess and understand prior to the application of the taxation law. Further, the approach is consistent with that undertaken by the previous State Tax Agent Board's (wherein there was a requirement for 18 months of study equating to three units or subjects).
  • It was commented that a fundamental understanding of the components of common law, equity and statute that comprise commercial law is crucial for a tax agent to provide tax agent services. Further, it was remarked that it is critical that a sufficient amount of study is undertaken on separate entity structures.
  • It was remarked that while the course will assist in raising standards, the 1 March 2017 date may be too ambitious for universities to satisfy. In response, the following was noted:
    • The Board has been involved in discussions with Innovation and Business Skills Australia (IBSA) in an endeavour to make Board approved courses in tax and commercial law more widely available in the TAFE sector;
    • Publishing a future target date sends a signal to providers; and
    • there is flexibility with the Board’s approach in the meantime.
  • Some suggestions were also made in regard to specific wording, including whether all of the core subjects must be completed and whether the Board's commercial law course requirement might inadvertently describe the work of a lawyer.
  • The Board will take on the comments that were made at the Forum meeting and consider what further adjustments if any need to be made to the Board’s proposed approach, including on the requirements.
  •  Board approved course in Australian taxation law for financial planners: It was noted that the Board is hoping to issue an exposure draft of its proposed guideline later this year.

7.    Professional practice work of the Board

  • The Board released an exposure for comment on the obligation under the Code that agents must account to their clients for money or other property held on trust. The closing date for comments on the exposure draft is 26 July 2012.
  • The exposure draft can be found on the Board’s website and is called ‘TPB(I) D13/2012 - Code of professional conduct - Holding money or other property on trust’.
  • The Board has also developed an early iteration of draft exposure drafts in regard to Code items 9 and 10 (reasonable care to ascertain client’s state of affairs and apply taxation laws correctly). The intention is to provide simple and practical information to assist registered agents comply with their obligations under these Code Items. The Chair invited the submission of comments and noted that finalisation will take an extended period of time and further materials would be issued by the Board.
  • The Board is also seeking to issue an exposure draft in regard to conflicts of interest, with the Board currently scoping out information. Members were asked if their associations had any materials that they wished to provide to the Board to assist in this regard.

8.    Other items suggested by Forum members

Hierarchy of documents (ATMA)
The Board’s website includes a guide to the Board’s information products, including details about their purpose and status. It was observed that ‘proposed guidelines’ cannot be referred to as ‘guidelines’ until they are tabled in Parliament.

9.    Close of meeting

The Chair thanked everyone for attending the meeting. The Forum agreed to meet again on Thursday 11 October 2012 in Canberra.