TPB guidance “dismissive” of tax experience

July 1 marks the start of the three-year transition period during which financial planners are deemed to fall under the auspices of the Tax Agent Services Act (TASA) 2009. Professional Planner asked expert Craig Meldrum for his view on initial guidelines proposed by the Tax Practitioners Board.

Study period

If the terms outlined in the Exposure Draft Proposed TPB Guideline TPB (PG) D04/2013 are ratified, financial planners will have three years in which to complete a course in Australian taxation law that will be approved by the Tax Practitioners Board (TPB), be at diploma level (AQF5) and be the equivalent of one-quarter of a semester’s full-time workload (that is, 12 to 14 weeks) amounting to a total of 100 to 130 hours of study and tuition.

Experience? So what?

Financial planners will also have to meet an arbitrary time-based measure of relevant experience, reduced from two years to 12 months if the financial planner can demonstrate 12 months of full-time relevant experience in the preceding five years, has successfully completed a TPB-approved course in Australian tax law and be a voting member of a recognised tax (financial product) adviser association or a tax agent association (such as the Financial Planning Association or The SMSF Professionals’ Association of Australia).

But what would be included in such a course? Is it relevant? What of previous study and previous experience? And what if, like up to 20,000 other financial planners and risk specialists around the country, you don’t see the benefit to yourself or your clients in going back to school to become a tax expert?

Most financial advisers who studied the eight units of a diploma of financial planning or an advanced diploma of financial services (financial planning) in order to achieve RG146 also did a 13-week unit devoted to taxation, not to become quasi-tax specialists or accountants. They did so in order to understand the ramifications of incidental tax advice on the wealth creation and retirement strategies they implement to assist clients in achieving their financial goals and objectives.
The exposure draft is quite dismissive of any recognition of prior learning through experience and has set an “expiry date” of 10 years on formal education in tax that has been completed previously. However, where a course is more than 10 years old and the applicant can show updating of that knowledge through experience and continuing professional development, there can be some relief.

Education elusive

I’m not sure that ASIC and the TPB have adequately considered what level of tax knowledge advisers really need to know. Tax administration is a nice-to-know but financial planners don’t need to be or want to be quasi-accountants. And can a requirement to learn about ethical and professional responsibilities be met by other courses and continuing professional development that financial planners study as part of the regular training plan? Based on what the TPB has stipulated in the exposure draft as the minimum requirement of a course in Australian tax law to qualify under the provisions, what courses are available that will effectively cover all the knowledge areas required?

Many courses cover some, but not all, of the knowledge areas referred to. Will a university happily alter its program to cover all the areas required at the risk of devaluing a quality program? What of new entrants who have just completed an undergraduate or post-graduate course in taxation law to discover that it doesn’t meet the requirements?

Will this measure encourage a raft of competing registered training and education institutions and other providers to come to market with the “cheapest” or “quickest” offerings, and thereby devalue the process as did some providers with offerings based around RG146?

For experienced financial planners and risk specialists who don’t want to play ball, TASA will bring forward a decision to either retire to become more educated. Virtually every aspect of advice is caught by TASA because even recommending a life, total permanent disability or an income protection policy inside or outside of super has tax implications.

The benefit of a three-year transition period is that with the TPB currently taking up to five months to process tax agent and BAS agent registrations, another 20,000 registrations will be a breeze. My advice, once we know fully what we’re dealing with, is don’t wait until the last two weeks of June 2016 to consider your application to be recognised as a registered tax (financial product) adviser.

Craig Meldrum is head of financial advice at Australian Unity Personal Financial Services, and sits on the board policy and regulation committee of the Financial Planning Association.