Open letter to:
The Hon Mr Stephen Jones MP
Assistant Treasurer and Minster for Financial Services
Dear Assistant Treasurer,
Chartered Accountants Australia and New Zealand, CPA Australia, Institute of Public Accountants, The Tax Institute, Australian Bookkeepers Association, Institute of Certified Bookkeepers, Institute of Financial Professionals Australia, Financial Advice Association of Australia, NTAA PLUS and SMSF Association (collectively the Joint Bodies) represent the tax profession as the external members of the Tax Practitioners Board (TPB) Governance and Standards Forum (TPGSF).
The Joint Bodies write to you to express our strong concerns about the construct and implications of provisions of the legislative instrument registered on 2 July 2024, the Tax Agent Services (Code of Professional Conduct) Determination 2024 (the LI). The LI imposes additional obligations on registered tax and BAS agents (tax practitioners) under the Code of Professional Conduct (Code) in section 30-10 of the Tax Agent Services Act 2009 (TASA). This follows the release in December 2023 of an exposure draft of the LI (draft determination) for public consultation.
The Joint Bodies welcome more robust and effective regulation of the tax system and the tax profession. However, rules that create inconsistencies and uncertainties work against compliance and good governance. In practice, tax practitioners, many of them in small businesses, will find it difficult to comply with certain aspects of the LI in its current form.
From the outset, the Joint Bodies have consistently expressed concerns about the Minister being able to unilaterally alter Code obligations, as it avoids more robust scrutiny from Parliament. We request the Minister withdraw the LI as registered and conduct further targeted consultation to ensure an equitable outcome that allows effective compliance with and better oversight of the LI.
Our primary concerns relate to the following aspects of the LI:
1. Section 45 — Keeping clients informed of all relevant matters
Our members are very concerned about the obligation to keep their current and prospective clients informed of ‘any’ matter that could significantly influence a decision of a client to engage them. For clarity, the scope of section 45 of the LI should clearly exclude matters unrelated to a tax practitioner’s ability to provide tax agent services as a fit and proper person.
2. Section 151 — Retrospectivity
Tax practitioners need to consider matters as far back as 1 July 2022 to determine if these need to be disclosed to their current and prospective clients. Notwithstanding the transitional provision in section 151, the retrospective nature of the LI and the commencement date of 1 August 2024 places a significantly onerous and impracticable requirement on tax practitioners.
3. Confidentiality (subsection 15(2))
A new obligation in the LI that was not included in the draft determination requires a tax practitioner to report their client to the TPB or the Commissioner of Taxation if a statement prepared by the tax practitioner is materially false, incorrect or misleading and the client refuses to correct the statement within a reasonable time. This change could be considered to operate inconsistently with subsection 30-10(6) of the TASA and will cause unnecessary disruption and confusion for tax practitioners acting in their clients’ best interests.
4. Start date
The Joint Bodies are concerned that the LI’s commencement date of 1 August 2024 is unrealistic and unachievable for many tax practitioners who are already operating under heavy workloads to assist their clients and ensure tax revenue is correctly calculated and paid. As a minimum, a six-month period should be allowed before the commencement of the LI to enable an effective implementation.
Further consultation and co-design
Having regard to all the matters mentioned herein and otherwise included in the LI, we request the Minister withdraw the LI as registered and conduct further targeted consultation on the LI to ensure that the new measures can be fairly implemented and that there are no unintended consequences for tax practitioners or the regulator, the TPB.
We acknowledge the release of the draft determination for public consultation in December 2023 on which the Joint Bodies made a submission on 23 January 2024 (a copy of which is attached in Appendix B). Following this, some important changes were made to improve the LI based on our feedback, such as:
- better targeting the overarching ethical obligation in paragraphs 10(b) and 10(c) of the draft determination by imposing a prohibition against engaging in conduct that undermines public trust, rather than a general duty to protect public confidence in the integrity of the tax system;
- improving the record-keeping obligation to make it more flexible to adapt to a wider range of circumstances; and
- changing the quality assurance obligation to one instead relating to a quality management system.
However, the final LI contains previously unseen obligations together with significant additional implications of the provisions that were amended following the public consultation and which have not been subject to public consultation. Overall, we continue to hold significant concerns about the LI and the detrimental aspects that outweigh the improvements made to address our concerns.
The Code was originally written in a principle-based approach as a model of principles and ethics for tax practitioners to embody and implement in their practices to regulate their conduct and how they operate and interact with clients and the tax system more broadly. Adding prescriptive obligations that use vague or unfamiliar concepts detracts from the breadth, generality and certainty of the existing Code. Further, there is a degree of duplication and overlap between the existing Code obligations in section 30-10 of the TASA and the additional Code items set out in the LI.
We set out below in Appendix A matters that, in our view, require amendment before the LI can be implemented. Accordingly, we seek the withdrawal of the LI as registered so further consultation can be undertaken. We support the intention of many of the provisions of the additional Code requirements, however, they must be implementable and able to be complied with by tax practitioners and effectively administered by the TPB.
In light of the above concerns, and to further constructive collaboration, the Joint Bodies request urgent discussions and we will be in contact this week. If you would like to discuss any of the above, or to arrange a meeting with the Joint Bodies, please contact the Co-Chair of the TPGSF, Matthew Addison, on 0421 553 613.
Yours faithfully,
Kelvin Deer, Director, Australian Bookkeepers Association
Simon Grant, Group Executive, Advocacy and International Development, Chartered Accountants Australia and New Zealand
Ram Subramanian, Interim Head of Policy & Advocacy, CPA Australia
Phil Anderson, General Manager Policy, Advocacy and Standards, Financial Advice Association of Australia
Tony Greco, General Manager Technical Policy, Institute of Public Accountants
Matthew Addison, Executive Director, The Institute of Certified Bookkeepers
Geoff Boxer, Director, NTAA PLUS
Tracey Scotchbrook, Head of Policy and Advocacy, SMSF Association
Todd Want, President, The Tax Institute
Please see PDF download for appendix A and Appendix B.