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Draft guidance issued by the Tax Practitioners Board on the new code obligations adopts vague and highly subjective terms which may “add to the confusion”, the institute has said.
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TPB’s guidance on code obligations lacking clarification, Tax Institute warns
08 August 2024
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The Tax Practitioners Board has issued draft guidance on three new obligations in the determination issued by Minister for Financial Services Stephen Jones.
The TPB has released two pieces of draft guidance on the obligations for consultation:
- TPB(I) D54/2024 False or misleading statements to the TPB or Commissioner
- TPB(I) D55/2024 Managing conflicts of interest and maintaining confidentiality in dealings with government
D54/2024 is designed to help tax and BAS agents understand section 15 of the new determination and section 50-20 of the Tax Agent Services Act 2009.
D55/2024 deals with section 20 and section 25 of the determination and explains the TPB's position on the application of these sections.
TPB chair Peter de Cure said while the minister recently announced a transitional phase for the start date for the obligations, the TPB’s immediate focus has been to finalise its guidance, through consultation, and provide information to assist tax practitioners in understanding the new obligations.
"We understand there are concerns about the new Code determination. These additional Code obligations are consistent with the existing principles of the Code and many tax practitioners will already be complying with the new requirements," de Cure said.
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"We encourage all tax practitioners and other stakeholders to review the guidance materials released and provide feedback to us."
The Tax Institute said while it was great to see the TPB release draft guidance on three new obligations, the draft guidance lacked clarification on what tax professionals need to do to comply with their new obligations.
The Tax Institute senior advocate Robyn Jacobson said guidance on the new obligations is sorely needed to address concerns raised by the profession and ensure the new determination works as intended.
"The draft guidance explains some important aspects of the new obligations but does not contain the necessary clarification that tax professionals will need to understand and comply with their new obligations and what it will mean for their business and operations," Jacobson said.
With the heavy compliance burden remaining, Jacobson said the Tax Institute is concerned that the guidance in some parts requires practitioners to use their professional judgment and whether a criteria is satisfied will depend too often on the circumstances and must be considered on a case-by-case basis.
"These vague and highly subjective terms are difficult to apply in practice, do not lessen uncertainty and only add to confusion," Jacobson said.
"We are also concerned about the low threshold for a statement to be materially false or misleading."
The draft guidance states that the extent to which a registered tax practitioner should make reasonable enquiries or take reasonable steps to substantiate information or statements it is preparing for or making to the TPB or Commissioner or directing someone else to "will be proportionate to the materiality of the matter that the statement or information is relating to".
According to D54/2024, registered tax practitioners will be required to use their professional judgement concerning the circumstances of the matter.
Jacobson said the Tax Institute would be including some of these concerns as part of its submission for the consultation.
"With the review of ours and other submissions, we hope to reach an outcome in cooperation with the TPB, which affords tax practitioners the certainty they need to effectively represent their clients while working toward improving our tax system overall," she said.
CA ANZ to highlight deep concerns with code obligations during consultation
CA ANZ said it would use the consultation on the draft guidance to reiterate its deep concerns about how the new obligations are being imposed on tax practitioners.
CA ANZ chief executive Ainslie van Onselen said that major issues remain with the determination, despite the introduction of the transitional rule to give more for time tax and BAS agents to comply with the new obligations.
"I have spoken directly with the Assistant Treasurer’s office to make it clear that while we support the intent of the reforms, aspects of the Determination – in particular Sections 15 and 45 – need to be changed," van Onselen said.
"There has been no consultation about the insertion of a new legal obligation requiring tax professionals to ‘dob in’ clients where there has been a refusal to correct a materially false, misleading or incorrect statement.
"CA ANZ has grave concerns about the impact that this new legal obligation will have on the integrity of the tax system."
Van Onselen stressed that businesses, particularly smaller ones, rely on their tax agent to help guide them through the complexity of business laws.
"This relationship is one of trust. This provision, as it stands, discourages clients from having frank and open discussions with tax practitioners and could worsen tax compliance," she said.
The TPB has also confirmed it will consult on further pieces of draft guidance for the remaining code obligations progressively over the coming months.
The TPB Communiqué, published on its website, provides an indicative timeline for the release of guidance on the new code obligations.
Van Onselen said CA ANZ will also highlight its concerns about Section 45 of the determination when the TPB releases its guidance in the coming months.
"The obligation to disclose private information, such as investigations and health conditions which may affect an agent’s ability to provide services, has not been examined according to the Statement of Human Rights that accompanied the Determination," she said.
"It is imperative that the human rights implications of these important new obligations be properly considered and ideally that the obligations be clarified through re-drafting."
CA ANZ is also deeply concerned that these new obligations will disincentivise its members seeking mental health help if they need it – fearful a diagnosis could trigger disclosure rules and hurt their business.
"I have spoken with Professor Patrick McGorry AO, psychiatrist and leading mental health advocate and he supports CA ANZ’s call for clarification in the Determination that tax agents should not be required to disclose their mental health status," van Onselen said.
"While the Chair of the TPB has sent mixed messages about whether the requirement to disclose mental health matters is something that would be clarified via TPB guidance, it is important to remember that guidance does not overrule law, and the TPB cannot amend regulation through its guidance.
"Leaving such an important matter to the administrators of this regulation is not appropriate; courts will look to the wording of the legislative instrument, not the interpretation by the TPB."
Members of the professional body are also concerned that this disclosure is required for events from 1 July 2022.
"As the Assistant Treasurer said at the National Press Club on 31 July 2024, law changes should operate prospectively not retrospectively," van Onselen said.
"CA ANZ will outline these concerns, among others, in our submission, and we will continue to have important conversations with all relevant stakeholders as we push for this determination to be withdrawn and rewritten. We are also still encouraging our members to write to their local Member of Parliament to support our call for the withdrawal of the Determination."
Van Onselen said while CA ANZ supports the government's intention to close regulatory gaps, drive cultural change, and play its part in decreasing the chance of a repeat of misconduct, it is critical to get the changes right.
The TPB has invited comments on the two draft guidance products by 3 September 2024.
The TPB has also published frequently asked questions on its website about the new obligations to assist tax practitioners.
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