TPB Financial advisers forum report - 11 July 2018
Thank you for joining Ian Taylor (Chair), Julie Berry (Board member) and fellow Tax Practitioners Board (TPB) colleagues at the TPB financial adviser forum held on Wednesday 11 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
Notification of discontinued members
- The TPB sought assistance from the Forum members in relation to notification of discontinued members. Where possible, to assist the TPB with its regulation of tax practitioners, it would be beneficial if Forum members could share information, on a routine basis, about any of their TPB registered members who have had their membership discontinued by their professional association. The TPB noted that TPB registered tax practitioner information was available on the TPB’s Public Register (www.tpb.gov.au) and www.data.gov.au.
Australian Securities and Investments Commission (ASIC), Financial Adviser Standards and Ethics Authority (FASEA) and Australian Financial Complaints Authority (AFCA)
- The TPB noted that it has provided submissions to ASIC and FASEA in relation to the proposed oversight of Compliance Monitoring Bodies and the proposed Code of Ethics for Financial Advisers. The TPB advised that it will continue to engage with these organisations, noting the need for consistency and minimisation of regulatory overlap across all regimes.
- Further, the TPB advised that it made a submission to ASIC in relation to the oversight of AFCA, particularly noting the regulatory overlap between the TPB’s and AFCA’s jurisdictions and the need for strong information sharing provisions between the two bodies.
- 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
- A Forum member raised that the number of Australian Financial Services Licensees (AFSLs) registered with the TPB (1,226 as of 18 June 2018) is less than the number of AFSLs listed in ASIC’s Cost Recovery Information Statement (CRIS) (2,895). The TPB confirmed it has previously contacted all ASFLs in 2014 to outline who needs to be registered with TPB, and again followed up in 2017 with those AFSLs who had not registered with TPB. TPB will now consider a communications strategy to unregistered AFSLs in relation to the requirement for registration if they are providing tax (financial) advice services for a fee or other reward.
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 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.
Royal Commission follow-up
- The TPB advised that it has issued correspondence to registered tax (financial) advisers (ARs and ASFLs) who were identified in the Royal Commission into Misconduct in the Financial Services Industry hearings as engaging in conduct that may have been in breach of the Tax Agent Services Act 2009, seeking additional information and assurances in relation to the conduct in question.
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.
- 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. In relation to the TPB’s webinars, the Forum noted that the TPB’s 2017-18 webinar program attracted more than 8,200 attendees, and Forum members were invited to provide the TPB with feedback from their members about suggested future webinar topics.
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. Forum members were encouraged to provide the TPB with feedback out-of-session in relation to the services listed in the legislative instrument that were causing concern for their members. 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.
Transfer of business and confidentiality
- The Forum provided the TPB with feedback in relation to the scenarios set out in a TPB discussion paper in relation to the confidentiality implications of practice transfers (relating to AFSLs, corporate authorised representatives (CARs), authorised representatives (ARs) and employee representatives (ERs)). The Forum provided feedback in relation to the entity in a practice structure that is a party to the privacy agreement with the client (and the impact that this has in relation to confidentiality and disclosure), the prevalence of client books being transferred from one AR or ER to another AR or ER within the same AFSL or CAR and replacing a scenario where two AFSLs ‘merge’ with a scenario about an AFSL acquiring or taking over another AFSL. Forum members were invited to provide any additional feedback out-of-session.
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 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 8 November in Sydney.
Last modified: 26 July 2018