The Assistant Treasurer, Chris Bowen MP, today introduced the Tax Agent Services Bill 2008 into the Parliament. The Bill will reform the registration and regulation of entities providing tax agent services for a fee.
"The introduction of this Bill indicates the Government's commitment to strengthening the tax industry and the integrity of the tax system by improving the registration and regulation of tax agent service providers, thereby giving greater protection and certainty to taxpayers," Mr Bowen said.
"Reform in this area is long overdue. An updated regulatory regime that is appropriate for the modern tax environment has been on the drawing board for almost 15 years."
An exposure draft Bill and explanatory memorandum were released for public consultation in mid-2008. The Bill and explanatory memorandum have been developed through extensive consultation over preceding years with tax professional associations, tax practitioners, government agencies and taxpayers.
They represent the outcome of a comprehensive and highly collaborative approach to policy development and implementation, with significant ownership by the industry in particular.
The Assistant Treasurer also announced today the Government's intention that a formal post-implementation review of certain aspects of the regulatory framework be conducted three years after implementation to ensure the new framework operates effectively.
"The review will include consideration of whether the proposed governance arrangements for the Tax Practitioners Board remain satisfactory and appropriate in three years' time.
A key focus of the post-implementation review will be to assess the independence of the Board because of its continued connection with the Tax Office," Mr Bowen said.
The key elements of the tax agent services regulatory framework are outlined in Attachment A and a chronology of the reforms is in Attachment B.
Attachment A
KEY ELEMENTS OF THE TAX AGENT SERVICES LEGISLATIVE FRAMEWORK
A national Tax Practitioners Board
A single national Tax Practitioners Board is proposed to replace the existing state-based Tax Agents' Boards.
The Board will be an independent statutory body. Its key functions will be to register and regulate tax agents and Business Activity Statement (BAS) agents; however it will also have certain powers to ensure that unregistered entities are not holding themselves out as registered. The Board will be able to investigate matters and impose sanctions where appropriate. The Board will report annually to the Parliament and will publish certain information about registered agents on its website.
Registration requirements
Entities that provide tax agent services or BAS services (a narrower range of services relating to a BAS provision in the taxation laws) for a fee or other reward, who advertise the provision of such services, or who hold themselves out as being registered, will be required to register with the Board.
Two types of registration are proposed, namely, tax agent registration and BAS agent registration. The requirements for registration as a tax agent will remain largely the same as under the existing law, however the Bill introduces a requirement for entities providing
BAS services for a fee or other reward to register with the Board.
The registration requirements for agents will consist of a 'fit and proper person' test as well as minimum educational qualifications and relevant work experience requirements.
BAS agents will not be required to demonstrate the same degree of formal education and relevant experience as tax agents, which reflects the narrower scope of services that they may provide. In the case of partnerships and companies seeking registration, compliance with the requirements will be demonstrated by sufficient organisational qualifications and experience.
Entities that specialise in a particular area of the taxation laws or that only provide a type of tax agent service (for example, tax compliance work or advice rather than both) will be eligible to register, with scope to operate in their specialty.
Because BAS agents are not currently regulated, a significant transitional period for their registration is proposed to allow sufficient time for applicants to meet the requirements.
This will be given effect through the transitional provisions and consequential amendments Bill, planned to be introduced to the Parliament in early 2009.
A Code of Professional Conduct
Tax agents and BAS agents will be governed by a legislated Code of Professional Conduct defining the professional and ethical standards required of them.
There will be a broad range of sanctions that the Board may impose for non-compliance with the Code, ranging from issuing a written caution or an order to undergo training or work under supervision, through to termination of registration.
Civil penalties and injunctions to replace criminal penalties
The existing scheme of offences and criminal penalties will be replaced by civil penalties and injunctions, which are more appropriate where the conduct being sanctioned is not serious enough to warrant a criminal conviction or imprisonment. There is, however, a need for significant monetary penalties to apply in some cases to deter prohibited conduct. The Board may apply to the Federal Court of Australia for a civil penalty order in certain circumstances, being:
- where an unregistered entity provides a tax agent service or BAS service for a fee or other reward, advertises that it will provide such services for a fee or other reward, or represents itself as being registered; or
- where a registered agent makes a false or misleading statement, employs or uses the services of an entity whose registration has been terminated due to misconduct, or signs a declaration in relation to a document prepared by an entity that is not qualified to prepare that document and was not appropriately supervised.
The Board may also apply to the Federal Court of Australia for an injunction to prevent or compel certain conduct.
Safe harbours for taxpayers from certain administrative penalties
A major direct benefit for taxpayers will be the introduction of two 'safe harbours' for taxpayers who engage a tax agent or BAS agent. These safe harbours will be given effect through the transitional provisions and consequential amendments Bill.
The safe harbours exempt taxpayers from liability for an administrative penalty imposed by the Commissioner of Taxation in certain circumstances. These are as follows:
- Taxpayers will be exempt from an administrative penalty for making a false or misleading statement resulting in a shortfall amount, where they demonstrate that they have taken reasonable care by engaging a tax agent or BAS agent and giving all relevant taxation information to the agent.
- Taxpayers will be exempt from an administrative penalty for failing to lodge a document on time and in the approved form where they engage a tax agent or BAS agent and provide all necessary information to the agent to enable them to provide the document to the Commissioner on time and in the approved form, but the agent carelessly fails to do so.
The safe harbours will not apply where either the taxpayer or the agent has intentionally disregarded a taxation law or been reckless as to the operation of a taxation law.
Attachment B
Chronology
November 1994: Tax Services for the Public report released by the Steering Committee of the National Review of Standards for the Tax Profession recommends a suite of legislative changes, given the movement to a tax regime based on self assessment principles.
Tax Office commences work on the new framework following release of the 1994 report.
6 April 1998: The then Assistant Treasurer, Senator the Hon Rod Kemp, announced that the then Government approved a new legislative framework for tax agent services "with a view to having the proposals commence on 1 July 1999." (Press release number 14 1998).
Implementation delayed to allow the tax profession time to adjust to the A New Tax System reforms.
2004-2007: Confidential consultation with the tax profession, the Chairs of the state Tax Agents' Boards and the Australian Taxation Office conducted between 2004 and 2005 on the proposed framework and in 2006 and 2007 on draft legislation.
9 May 2006: The 2006-07 Budget contained additional funding to the Australian Taxation Office of $57.5 million over four years for the implementation of the new legislative regime.
7 May 2007: Exposure draft Bill, Regulations and explanatory materials released for public consultation.
29 May 2008: Revised exposure draft package released for public consultation.
13 November 2008: Tax Agent Services Bill 2008 introduced into the House of Representatives.