TPB Financial advisers forum report - 30 March 2017
On 30 March 2017, Ian Taylor (Chair), Julie Berry (Board member) and Tax Practitioners Board (TPB) colleagues held a TPB Financial adviser forum in Sydney with representatives from associations that represent the financial planning profession.
The TPB is mindful that forum meetings are useful for providing an update of what the TPB is up to and where it is at, as well as for forum members to refer on key messages and to have specific opportunity to provide feedback to the TPB in an interactive setting. The TPB values the opinions raised by forum members on agenda issues raised.
The key points that were discussed at the forum are summarised below. In accordance with past practice, this report provides an overview of the issues that were discussed and does not represent the final views of the TPB, nor is it intended as minutes of the forum.
Update from the TPB
- As at the end of February 2017, there were 76,519 registered practitioners comprising 41,117 tax agents, 15,136 BAS agents and 20,266 tax (financial) advisers. As expected, there has been a steady increase in the number of tax (financial) adviser registration applications received since the transitional and standard registration options commenced on 1 January 2016. The TPB is expecting that an increasing number of applications will be lodged under the transitional option prior to its availability ending on 30 June 2017.
- The 20,266 tax (financial) advisers included:
- 1,103 Australian financial services (AFS) licensees, comprising 1,062 company, 20 partnership, and 21 individual tax (financial) advisers
- 18,781 Authorised representatives (ARs), comprising 13,188 individual, 5,548 company, and 45 partnership tax (financial) advisers
- 382 Other representatives (ORs), comprising 328 individual and 54 company tax (financial) advisers.
- The TPB acknowledges that average processing times for new applications are currently outside of the 30-day service standard. Further, the ability to meet service standards is expected to be impacted due to the TPB having to assess and process around 19,000 tax (financial) adviser renewal applications expected between July and December 2017 (for those tax (financial) advisers that were registered under the previous notification process).
- The TPB has taken a number of mitigating steps in seeking to address this issue, including, among other things:
- various outreach and communications activities to educate applicants on application and supporting documentation requirements
- automation of tax and BAS agent renewal processes and diversion of relevant resourcing to processing new applications
- the use of overtime and more non-ongoing staff
- continuous review of processes, streamlined vetting of applications and earlier follow-up (where further information is sought)
- a bulk renewal process initiative for Australian financial service (AFS) licensees (with 10 or more authorised representatives) with key client managers providing assistance, with over 80 AFS licensees accepting the invitation to participate and others otherwise supporting their individual authorised representatives to submit their renewals with the TPB
- development of renewal kits (available on the TPB website) – one for individual tax (financial) advisers, and one for company and partnership tax (financial) advisers
- establishing a dedicated tax (financial) adviser team.
The TPB is also highlighting that there is no disadvantage for tax (financial) advisers if renewing early, with the renewal date still set at 3 years from the original expiry date. Further, the TPB is also reiterating the message that practitioners who lodge registration renewal applications on time (at least 30 days before registration expires) will remain registered until the TPB notifies them of the outcome of their renewal application.
- While the TPB aims not to unnecessarily impede the operation of regulated entities, the TPB is concerned that the percentage of applications not meeting service standards will increase in conjunction with further resourcing constraints from 1 July 2017. In particular the following points were noted by the TPB and forum members:
- The regulation of over 20,000 tax (financial) advisers, in addition to the regulatory responsibility for over 56,000 registered tax and BAS agents, has considerably increased the TPB’s workload since 2013.
- The TPB’s workload will effectively double with the large influx of tax (financial) adviser renewal applications that will be received from 1 July to 31 December 2017; however, the TPB is scheduled to experience a reduction in its forward operational budget from 1 July 2017, as well as not having a guaranteed capital budget to invest in technology process improvements.
- Delays in processing new registration applications (reflected in the TPB not meeting service standards) may impact on an entity’s ability to start generating an income.
- Relevant capital investment in the TPB’s processing system is required to facilitate process improvements (such as improvements to online forms), reduce registration workload backlogs and minimise the risk of service standards not being met. Further, there is a risk of engendering unnecessary practitioner interaction and increasing disengagement with the taxation system if the TPB is unable to effectively meet its objective, including its important consumer protection role (including, for example, active compliance issues such as addressing a potential population of unregistered service providers).
- Reaching out to unregistered tax (financial) advisers: The TPB is continuing to focus on raising awareness of the need to register, including:
- further promoting availability of the transitional registration option until 30 June 2017
- highlighting the key message that if an entity provides tax advice or advises on tax consequences as part of their financial advice to clients for a fee or other reward, they must be registered with the TPB to provide those services legally
- continuing to provide a number of outreach activities, including a rolling schedule of webinars, a live webcast and special eNews editions
- corresponding with a number of AFS licensees who are not registered with the TPB to ensure they understand the TPB registration requirements
- reaching out to registered AFS licensees who have individual and corporate authorised representatives that are not registered with the TPB, to ensure their representatives register with the TPB if they are providing a tax (financial) advice service for fee or other reward.
Registration of corporate authorised representatives
- The TPB is aware that there may be a number of corporate authorised representatives (CARs) that are yet to register with the TPB and that feedback has been received querying the requirement for CARs to be registered.
- In particular, it is observed that the Tax Agent Services Act 2009 (TASA) requires that any entity providing a tax (financial) advice service for a fee must be registered with the TPB. In most cases, this will include a CAR if they have an authorisation to provide financial product advice or to deal with a financial product and receive a fee or reward (generally payable by their AFS licensee).
- The TPB has consulted with the Australian Securities and Investments Commission (ASIC) and will also ramp-up communications activity to emphasise the requirement to be registered where a CAR is authorised via ASIC to provide financial product advice or to deal in a financial product. In conjunction with this communications activity, the TPB will highlight that the transitional registration option is only available until 30 June 2017.
- It is recognised that the major issue that will need to be addressed is to have a sufficient number of individually registered tax agents or tax (financial) advisers who can provide supervision and control of the services that particular entity provides.
Annual declaration process
- It was noted that the annual declaration process, which is already in existence for registered tax and BAS agents, provides an important assurance that registered practitioners are meeting their ongoing obligations, with benefits of the process including:
- improved integrity of information (including the public register of tax practitioners)
- timelier notification of changes in circumstances and ability to promptly address ongoing registration concerns of some practitioners
- currency of professional indemnity insurance information.
- The general trend is that, on average, about 97-98% of those practitioners required to lodge an annual declaration each month do so by the due date.
- The annual declaration process is expected to become operative for tax (financial) advisers, who register under the standard or transitional application process, from the second-half of the 2017 calendar year (noting that the first declaration is due one year after renewal of registration). Further information will be provided in due course as appropriate.
- The number of complaints and referrals received year-to-date (1,072 from 1 July 2016 to 28 February 2017) was slightly lower than in the corresponding period for the previous year (1,123 in the period 1 July 2015 to 28 February 2016). 20 practitioners have had their registration terminated and two practitioners have had their registration suspended in the period 1 July 2016 to 28 February 2017 (recognising that some matters are still subject to appeal).
- The number of cases on hand has increased slightly (785 at end-February 2017, compared with 659 as at end-October 2016), with many cases related to the annual declaration process. It was also observed that the number of complaints and referral cases for tax (financial) advisers continues to be very minimal.
- Overall, there continues to be a very small proportion of registered practitioners on which sanctions are applied, with an increased number of written cautions, orders and surrenders (compared to previous years) arising pursuant to annual declaration activity.
- It was also observed that there continues to be a number of Administrative Appeals Tribunal (AAT) appeals on hand (14 active as at end-February 2017) and that the AAT continues to affirm most of the TPB’s decisions.
- The TPB is continuing with a broad based approach to Outreach involving a combination of webinars, face-to-face events, speaking engagements and involvement in ATO Open Forums as appropriate. A current focus is to continue raising awareness of registration obligations and of the availability of the transitional registration option (for entities yet to register) until 30 June 2017. It was also observed that the TPB continues to regularly publish eNews and that the TPB continues to welcome any opportunities to speak at national and state conferences of associations.
- In the March 2017 quarter, the TPB presented at:
- 17 external engagements (including association events)
- two Outreach sessions in Canberra, including one session for tax (financial) advisers which involved a livestreaming option (over 700 attendees)
- five webinars reaching 1,600 tax professionals.
- Webinars continue to be well received, with a good level of attendance and interaction. The TPB continues to have a rolling schedule and ongoing development having regard to feedback received, with a further six webinars currently scheduled before end-June 2017. Details about upcoming events available from the Home page of the TPB's website
- TPB website improvement: The TPB has received generally positive feedback regarding its new website, which was launched in December 2016 and employs a segmented pathway structure (differentiated landing page access for tax (financial) advisers, tax agents and BAS agents). Subject to resourcing constraints, further work will also be undertaken this calendar year to redevelop the TPB Register search function.
- The TPB appreciates association and AFS licensee support in communicating key messages (including the importance of timely consideration of registration requirements and awareness of the consequences when ceasing to meet requirements) and also continues to welcome opportunities to participate in association conferences and speaking events on relevant topics.
- Code item 6 (Confidentiality): It was confirmed that the Exposure Draft information sheet TPB (I) D31/2015 Code of Professional Conduct – Confidentiality of client information for tax (financial) advisers (Code item 6) has been updated pursuant to consideration of previous feedback and to incorporate a relevant reference to Class Order 14/923: Record-keeping obligations for Australian financial services licensees when giving personal advice (to reflect this legal obligation). It was also noted that the information sheet will be referred to an upcoming TPB professional practice committee meeting for final review prior to being released as a final information sheet, with forum members advised prior to publication.
- Outsourcing, offshoring and the Code of Professional Conduct (Code): The forum provided feedback on an initial (under-embargo) pre-exposure draft paper, prepared for the intent of providing future practical educative guidance to registered tax practitioners (raising awareness of relevant considerations) in understanding obligations under the Code in relation to the use of outsourcing and offshoring. It was confirmed that this feedback, along with any further written comments provided by forum members (by end-April 2017), will be considered by the TPB prior to determining next steps.
- Explanatory papers on the ‘Code of Professional Conduct’ and ‘Fit and proper person’: The forum noted that the TPB has undertaken a review of these explanatory papers for the purpose of incorporating updated case references, a reference to tax (financial) advisers, and to cross-reference to other information products as appropriate (including finalised information sheets on particular Code items for tax (financial) advisers). It was confirmed that any specific comments that forum members wished to provide (by end-April 2017) will be considered by the TPB.
- Proposal for a legislative instrument for tax (financial) advisers:
- It was noted that the TPB is continuing to scope out development of a relevant legislative instrument to note certain activities as being an extension of a tax (financial) advice service (to allow making some representations to the Commissioner of Taxation).
- In particular, it was noted that a range of views has been expressed in submissions from the Financial Adviser Forum and that the TPB will also be seeking feedback from Consultative Forum members. It was confirmed that the TPB will consider all submissions received before providing something further at the next forum meeting.
- Cyber Security insurance: The TPB recognises the risk associated with cyber-attacks and is also aware that a number of insurance providers are now providing options to extend professional indemnity insurance packages to include cyber security insurance. In this regard, feedback is sought from forum members in relation to what is a notifiable event and whether the TPB’s professional indemnity insurance requirements for tax practitioners should be extended to include cyber security insurance, with further discussion to be carried over to the next forum meeting.
- Sign-off on statements of advice: The TPB acknowledged a forum suggestion for clarification regarding requirements for signatures on statements of advice (including responsibility), with the TPB giving a commitment to reviewing its guidance accordingly.
- It was noted that the TPB is seeking forum member feedback regarding future operation of the forum, with the TPB to provide a relevant short survey to forum members.
- The Chair thanked forum members for their attendance and continuing feedback. The next meeting is proposed to be held on 10 August 2017.
Last modified: 20 June 2017