There’s quite a lot more to being a professional association than meets the eye. Just how much more there is becomes clear in a draft information sheet the Tax Practitioners Board circulated this week.

The exposure draft of Information Sheet TPB(I) D39/2017 is, as may be gathered from the reference, a pretty dry document, but it deals with an important matter: The corporate governance requirements for entities that wish to gain recognition as professional associations by the TPB.

The document shows what sets recognised professional associations apart from the great mass of merely self-described professional associations that are really no more than special-interest lobby groups.

The TPB states that when the information sheet is finalised, it will still be “for information only”, and that it is designed to provide “practical assistance and explanation” on corporate governance issues for associations that apply to be (or wish to remain) recognised. It’s not clear why the TPB has issued this draft now, and the board wouldn’t speak to Professional Planner about it. But something has triggered it, and it’s easy to suppose that it’s designed to address shortcomings in many of the applications it receives.

Gaining recognition is no simple matter, as the information sheet makes clear, and it demands a high level of accountability and transparency, along with clear structures and processes. Frivolous applications, or applications that totally misapprehend the requirements, surely must take up an enormous amount of TPB staff time. This information sheet might head a few of those off at the pass.

A number of associations representing financial planners and advisers are known to have applied for recognition in recent months. The TPB announces when an association gains recognition, but not when an application fails.

While the issue of corporate governance might sound fairly esoteric, it’s important. Being a member of a recognised professional association might be one of the least painful ways that a financial planner can become and remain registered as a tax (financial) adviser (TFA) under the Tax Agent Services Act 2009 (TASR).

As all regular readers of Professional Planner should know, being registered as a TFA is required for anyone whose advice to clients contains a tax dimension – which is to say, virtually every financial planner. If you fail to register, or let your registration lapse, there’s a high risk of breaking the law every time you give advice that contains a taxation dimension.

It’s generally better not to run afoul of this law – as an individual or as a corporation – because the financial penalties are pretty steep and an adviser could quickly be put out of business.

It’s much better to be registered. Members of a recognised professional association may seek registration without having to complete the TPB-required courses in Australian taxation law and commercial law, provided the member has relevant experience in six of the last eight years.

A member of a non-registered association can still become a TFA but will have to complete the education courses in taxation and commercial law.

If a planner becomes a TFA while a member of a recognised professional association but allows that membership to lapse, the TFA registration lapses as well, and then the individual adviser must reapply, and will need to jump through the education hoops. Right now, the TPB recognises only five tax (financial) adviser associations:

  • The Financial Planning Association (FPA)
  • The Association of Financial Advisers (AFA)
  • The SMSF Association (SMSFA)
  • The Institute of Public Accountants (IPA)
  • The Stockbrokers and Financial Advisers Association (SAFAA).

Professional Planner has said it before: advisers should choose carefully the associations to which they belong. Choose the wrong one and the adviser’s status as a TFA – indeed, as an adviser, full stop – may be in jeopardy.

And the TPB has just made it abundantly clear that not all professional associations are created equal.

Share your comments and feedback with the editor
Simon Hoyle is head of market insight for CoreData Research.