Financial advisers with a tax agent registration will soon need to comply with new breach reporting laws that were passed by Federal Parliament without any industry consultation last year.
These breach reporting rules will require advisers to report what they believe to be significant breaches of the Code of Professional Conduct to the Tax Practitioners’ Board, unlike ASIC’s reportable situations regime which requires licensees to report all breaches.
Practitioner groups have been nervous with some justification because there was no explanation of the way in which they were to determine a significant breach of the tax agent rules.
This ultimately requires judgment and that is at times difficult for people to grapple with if insufficient guidance is provided in the law.
It is customary for people to refer to explanatory memoranda when legislation is passing through parliament in order to understand what it means.
These breach reporting rules had no such explanation because they were amendments proposed by the Australian Greens and it is not customary for the government to consult further with external parties when bills are in play in either house.
That should concern professionals more than people realise given that a law could change dramatically from what has been proposed and consulted on before a bill hits the parliamentary table.
Enter the TPB
An agreement between the Federal Government and the Australian Greens brought a more stringent breach reporting regime into being but it was up to the TPB to attempt to put flesh on the bones.
This was done as a part of the consultation process that concluded by the end of May for a suite of documents that sought to break this thorny part of law down for people still troubled by the new breach reporting regime.
One look at threads on LinkedIn heaving with comments about aspects of the TPB’s guidance tells you that there was still uncertainty about how the new regime’s rules would be imposed.
Associations including the Financial Advice Association have also been a part of the TPB’s consultation process in order to bed these new rules down.
Chair’s assurance
TPB chair Peter de Cure has been talking to audiences of tax professionals over the past two months to calm the farm over the new regime.
De Cure has sought to provide some practical examples to people so that they can assess whether what they are observing is a significant breach.
An aggressive view taken by a practitioner on a work-related expense when preparing a return for a client is unlikely to be a significant breach but an adviser that has told a client they can manipulate numbers to get an advantageous tax outcome that is dodgy merits reporting.
There are other telltale signs of breaches such as somebody continuing to provide advice while they are bankrupt, and a tax agent providing an unregistered individual access to their tax agent number for the provision of tax agent services by somebody that is unregistered.
A further possible reason for the TPB to take a poke and prod at a tax agent is the very person that might for vexatious or malicious reasons dob in an adviser to the TPB for investigation.
De Cure has made clear to people that anybody found to be using the new powers to play dirty pool – behaving without integrity or honesty – could wind up having meaningful conversations with the TPB themselves.
