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The TPB has sought to assure practitioners that the requirement to report false or misleading statements is unlikely to arise very often for most practices.
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Application of Section 15 will be ‘rare for most practices’, says TPB
29 October 2024
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The Tax Practitioners Board (TPB)has provided further information for tax practitioners on Section 15 of the Tax Agent Services (Code of Professional Conduct) Determination 2024 and its proposed guidance in a recent webinar.
The regulator is running a series of webinars on the obligations contained in the determination as it consults on its guidance for the upcoming changes.
TPB chair Peter de Cure reminded practitioners that under section 15 of the determination, there are expanded obligations for practitioners in relation to false or misleading statements.
The new obligations state that a practitioner must not make a statement to the TPB, Commissioner or another government agency that they know or reasonably to know is false or misleading in any of its particulars or omits any matter that without which the statement would be misleading in a material respect.
Practitioners have the same obligations in relation to statements that they prepare, or statements that they permit or direct someone else to prepare, to the TPP or to the ATO.
"So for clarity, the statement must not be false or misleading in a material particular or it must not by omission of something be misleading in a material aspect," said de Cure.
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De Cure stressed that this applies to not only the work of a registered tax agent or a registered BAS agent but also any other capacity.
"I want to be really clear that it relates to your own personal tax obligations as much as it does your client obligations and relates to all of your interactions with the TPB and the Commissioner," he said.
"This requirement is really based on the existing code provisions around integrity and honesty and truthfulness. It's completely consistent with the existing obligations under the code, and is about how we conduct ourselves in our day to day practice."
As section 15 is only concerned with particulars that are material in nature, de Cure said this means that false and misleading matters that are trivial or minor in circumstances would not constitute a breach of the code obligation.
"I want to emphasise that this is in relation to significant or material issues. It's not about trivial things," he said.
"I think in most people's day to day practice, it'll be a rarity that they come across a significant or material false or misleading statement. I'm sure when you do come across it you'll recognise it."
The concept of what is considered to be material will depend on the individual client, he said.
"For a large public company, a material item might be in the millions of dollars. For an individual taxpayer, it could in the small thousands of dollars if someone is really persistently not prepared to do the right thing," he said.
An example of a false or misleading statement could be telling the Tax Commissioner that a taxpayer has made no income in a year when they've made $100,000, de Cure explained.
"Or if you're making statements that you didn't sell a capital asset during the course of the year and incur a capital gain when you actually did for a significant amount of money, that would also be a false and misleading matter," he said.
"Trivial, on the other hand, would be if you accidentally claim an extra $300 in mileage. People have got to think along those lines."
Where the obligation has been breached and the tax practitioner has reasonable grounds to believe the false or misleading nature of the statement resulted from a failure to take reasonable care, recklessness or intentional disregard of the tax law, they must take certain reasonable steps, the TPB said.
Where the statement relates to the tax practitioner's own affairs, de Cure said this means they must the statement as soon as possible.
Where the statement relates to a client, the tax practitioners must advise the client that the statement should be corrected and the possible consequences for not correcting it, he said.
He reminded practitioners that if after a reasonable period the tax practitioner is not reasonably satisfied that the client has corrected the statement or explained the basis of the statement, then the tax practitioner will need to withdraw from that engagement with that client.
As well as withdrawing from that engagement, de Cure said if the practitioner has reasonable grounds to believe that the client's actions have caused or are likely to cause substantial harm to the interests of others, they must notify the TPB or Commissioner. This is unless doing so would pose an unreasonable safety risk or be unlawful.
TPB assistant secretary Janette Luu said its important to recognise that there are a lot of steps and hurdles to go through before the requirement to even notify the ATO or in some cases, the TPB, is even triggered.
"[In terms of] what's material, its not something that's trivial or inconsequential, its something that a decision maker, for example, would take into account when they're considering an issue,"she said.
"Where we're looking at a false, misleading statement, you've got to establish things such as failure to take reasonable case, recklessness or intentional disregard and so its not something you'll be doing lightly and hopefully it won't be something that you'll be doing often."
Luu also assured practitioners that where they do find themselves in a position where they are required to notify the ATO, for example, it will not be a particularly onerous task to do.
"You'll see in our draft guidance that there is no expectation to provide detailed case information and evidence to the ATO or the TPB," she said.
"It's about providing some general information that allows either organisation to make further inquiries if they think that it's necessary."
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