6.1 The changes discussed in the foregoing chapters, including reaping the benefits and addressing the challenges, will undoubtedly have an impact on the structure and make-up of the tax profession and its associated regulatory framework. Accordingly, this chapter explores the:
- current regulatory system and the consistency of approach to registered tax professionals;
- education standards for registration; and
- expansion of the tax profession and options in considering a future regulatory framework.
The current regulatory system
6.2 Prior to the introduction of the TPB, six independent state-based statutory bodies called Tax Agents’ Boards were responsible for regulating the tax agent industry. BAS agents were not included in the tax agent services regime at the time and there were concerns that an uneven playing field had been created.577
6.3 A new legislative regime, the TASA, was implemented in 2009 to establish a single national regulatory body. The key benefits included:578
- the inclusion of those entities and individuals associated with providing BAS services for a fee, providing nationally consistent regulation;
- the registration and regulation of tax agents and BAS agents, including an enforceable Code of Professional Conduct (Code) to provide clarification and certainty regarding what is expected of them;
- the introduction of a broader range of administrative sanctions to promote compliance with the Code; and
- the replacement of criminal penalties with civil penalties and injunctions to deter inappropriate behaviour.
6.4 The TASA regime created the TPB which consists of the Chair and Board members, who are appointed by the Minister, a Secretary and administrative staff who are seconded from the ATO. Board members are appointed on a part-time basis and are responsible for making decisions that relate to statutory functions. Appointment is generally determined by the expertise possessed by each individual member.579
6.5 The TPB is the national independent body responsible for the registration and regulation of tax agents, BAS agents and, since 1 July 2014, TFAs. The TPB also has general administration of the TASA, including the Code.580
6.6 The role of the TPB is to ensure that:
… every entity that should be registered is registered, and to ensure the services provided by registered tax practitioners to the public are provided in accordance with appropriate standards of professional and ethical conduct.581
6.7 In addition to the above, the TPB may issue binding written guidelines for the interpretation and application of topics such as the Code.
6.8 The TPB applies a general compliance model in relation to its work with the vast majority of its efforts devoted to helping and supporting registered practitioners to comply with their legal obligations, as set out in Figure 6.1 below. The remainder of the work relates to education and the imposition of penalties or other civil sanctions to modify or stop non-compliant behaviour.
Figure 6.1: The TPB’s Compliance Model
Source: TPB Annual Report, 2011-12.
6.9 In 2013, the ANAO undertook a review of the work of the TPB and broadly concluded that it ‘has established an appropriate governance framework, introduced an effective national registration system for tax practitioners, and is developing a regulatory assurance function to ensure compliance with the provisions of the TAS Act’.582 The ANAO made three recommendations, namely: to develop and report performance against key performance indicators, provide a consistent compliance framework and develop a compliance intelligence capability.583 The TPB agreed with these recommendations.
6.10 Stakeholder views on the role of the TPB and their attendant concerns are discussed in detail below under appropriate headings. In summary their concerns are the:
- inconsistency with which the TPB regulates different professions under its remit and the need for professionals working in tax to adhere to a multitude of different regulatory regimes;
- different education requirements between professionals who are permitted to provide tax advice and services; and
- expanding nature of the tax profession and the need for broader regulation of new entrants into the system.
Consistent regulatory approach to registered tax professionals
6.11 Stakeholders have raised concern that regulation under the TASA regime is not consistent amongst registered tax and BAS agents and TFAs. In particular, they believe that, in practice, the Code does not apply with equal force to everyone, as it was designed to regulate tax and BAS agents and does not recognise the differing services and business models of TFAs.
6.12 Stakeholders have also commented on the high costs associated with maintaining a registration under the TASA, which may include professional membership fees, indemnity insurance, CPD costs as well as renewal fees. Some stakeholders have estimated these costs to be in excess of $10,000, which can be prohibitive for those operating smaller practices and which may, in turn, drive up the costs of advice to consumers.
6.13 Furthermore, where they seek to provide additional services, they would need to comply with the requirements of a range of different regulatory bodies including additional fees. For example, TFAs have noted that they are required to be compliant with requirements of seven different regulators: TPB, ASIC, Australian Transaction Reports and Analysis Centre (AUSTRAC), Office of the Australian Information Commissioner (OAIC), APRA, ATO and the new Financial Adviser Standards and Ethics Authority (FASEA). They believe there is also a heightened risk of inadvertent non-compliance.
6.14 Another key area of concern raised regarding inconsistencies in the regulatory approach relate to the differing education standards and registration pathways available to tax and BAS agents when compared to TFAs. This issue is explored in detail in the next section.
6.15 The Tax Agent Services Amendment (Tax (Financial) Advisers) Regulation 2014 (Regulation) gave effect to the Tax Laws Amendment (2013 Measures No.3) Act 2013 (Amendment Act) which also amended the TASA and brought TFAs within the TASA regime. The Regulation prescribed requirements for TFAs and also set out a number of other changes to align TFAs with tax and BAS agents. These changes included:584
- replacing references to ‘tax agent or BAS agent’ with ‘tax agent, BAS agent or tax (financial) adviser’ throughout the TASA;
- inserting a definition of registered TFAs and tax (financial) advice service;
- allowing the TPB to recognise TFA associations; and
- requiring the listing of TFAs on the TPB’s register of registered and deregistered tax practitioners.
6.16 The TPB’s regulation of TFAs commenced progressively from 1 July 2014 over the course of three years. From 1 January 2016, TFAs who provide tax (financial) advice services for a fee or other reward needed to be registered with the TPB.585 The TPB has released guidance on its website to support the transition including those relating to professional indemnity insurance, continuing professional education and registration of TFAs during the transitional period. The TPB continues to work in consultation with the TFAs to implement other work items that have been raised.
6.17 TFAs who are registered with the TPB are bounded by the Code. Relevantly, the text of the Code applies consistently to all tax and BAS agents as well as TFAs. The TPB’s website provides three different links to the Code depending on the type of registration of the practitioner. The only difference across the three different links appears to be links to different TPB Explanatory Notes and a block of text specific to TFAs stating:586
For tax (financial) advisers, many of the obligations under the Code are similar to the obligations of Australian financial services (AFS) licensees and their representatives under the Corporations Act 2001. For more information refer to Code comparison with the Corporations Act 2001.
6.18 The TPB has released a variety of information on its website to assist TFAs in understanding their obligations under the Code as well as a number of information sheets aimed at assisting TFAs to meet their obligations under the TASA.587 Furthermore, on 13 July 2017 the TPB updated Explanatory Paper TPB (EP) 01/2010 Code of Professional Conduct to incorporate reference to TFAs.588
6.19 In respect of stakeholder concerns about the various regulatory requirements and agencies with which tax practitioners and TFAs have to comply, it is noted that their obligations are largely similar. The only difference is that TFAs will also need to comply with FASEA requirements. FASEA was established on 13 June 2017 under the Corporations Act 2001. Its role is to establish the education, training and ethical standards for financial advisers, including approving degrees or higher equivalent qualifications, determining the requirements for the professional year and setting the Code of Ethics.589
6.20 On the issue of costs associated with maintaining a registration under the TASA, while it is not possible to say with absolute certainty the costs that any particular practice or practitioner would incur, the TPB does not believe that $10,000 cited by some stakeholders is reflective of the current costs. Specifically, it has informed the IGT that current application and renewal costs for tax agents, BAS agents and TFAs are $675, $135 and $540, respectively, every three years.590 In addition, the TPB acknowledges that professional indemnity insurance costs of approximately $800 for tax agents and $350 for BAS agents. It has stated that the insurance for TFAs is more difficult to estimate as it includes coverage for liability arising from non-tax services.591
6.21 Beyond the above costs, the TPB has asserted that any other expenses, including those relating to CPD, professional association membership or differentiated software or computer systems costs, while necessary to maintain a professional practice, are beyond its control and that it has sought to minimise costs where possible through providing free access to open forums, webinars and other events which contribute to a practitioner’s CPD requirements.592
6.22 The introduction of any new element into an existing legislative regime is likely to create a level of anxiety and concern. The introduction of TFAs into the TPB’s jurisdiction is no exception. The IGT recognises and commends the TPB for actively working and engaging with TFAs to provide them with a range of guidance material to transition them into the TASA and assist them to become compliant with the Code.
6.23 Given the persistent concerns of practitioners falling under the TPB’s remit, however, the IGT believes that there may be benefits in the TPB undertaking research to determine if its policies and procedures are comprehensive and appropriately differentiate registered tax and BAS agents as well as TFAs. Such research could also determine whether there are inconsistencies in the regulation of tax and BAS agents and TFAs and how these inconsistencies may be remedied. In particular, the research could focus on whether the TASA regime sufficiently caters for the difference between the services and business models of TFAs as compared with those of tax and BAS agents. Where the TPB is unable to take any remedial action, its findings could be shared with the Government for legislative action in appropriate cases.
6.24 The IGT acknowledges the concerns regarding costs for practitioners of maintaining a practice including those relating to regulatory compliance, especially those operating as small businesses. It is important to appreciate, however, that many of these costs are not as a result of TPB or TASA requirements and would therefore not be addressed through regulatory changes alone. The issue is challenging given the specific nature of the obligations imposed by the regulatory regimes and the role those agencies perform in administering them. However, it is important to recognise the impost of current regulatory regimes on small business and commence discussions to identify ways in which they could be minimised. The IGT is of the view that such issues should be addressed when considering the regulation of the tax profession of the future —the latter is explored in the final section of this chapter.
The IGT recommends that the TPB, in consultation with recognised professional associations, undertake research to determine if its policies and procedures appropriately cater for all tax professionals within its jurisdiction, including tax (financial) advisers.
The TPB agrees with recommendation 6.1.
In particular, the TPB notes that we will continue to work closely with all stakeholders, including recognised professional associations, to determine if our policies and guidance appropriately cater for all tax professionals.
In the first instance, the TPB will engage with the recognised professional associations, through the TPB’s formal consultation mechanisms, being the consultative forums. These forums establish an ongoing consultative arrangement with a dedicated group of representatives from TPB recognised professional associations, and other key stakeholders representing the interests of tax practitioners. The forums provide an opportunity to directly engage with the Board of the TPB and facilitate an effective dialogue, to gain a mutual understanding of issues and generally act as a consultative advisory group to facilitate the TPB achieving its overall objective and purposes.
6.25 A professional seeking registration with the TPB must meet minimum education and professional standards. This section explores those standards and the role of the TPB in setting them and complements the earlier discussion in Chapter 4 regarding the future capability needs of professionals working in tax.
6.26 Stakeholders have raised concern about the education standards between the various categories or groups of tax professionals within the TASA regime. Certain stakeholder groups contend that the tax education requirements for TFAs to provide tax advice are lower than for tax and BAS agents whereas the latter cannot provide financial advice unless they fulfil the same requirements as TFAs. Others have raised inconsistencies in the education requirements of certain professionals across different legislative regimes. For example, in the case of TFAs, the Corporations Act 2001 requires that they be degree qualified593 whereas the TASA regime has a range of different pathways for registration including lower thresholds such as diploma qualifications.594
Tax agents and BAS agents
6.27 To become registered, tax agents must possess certain qualifications and experience requirements set out in the Tax Agent Services Regulations 2009 (TASR). There are presently seven avenues to register with the TPB as a tax agent, six of which are set out in Figure 6.2 and are dependent on the qualifications and experience attained.
Figure 6.2: Qualification and experience requirements to register as a tax agent595
6.28 It should be noted that the seventh avenue for registration is a special rule within the TASA that applies to an individual who was registered as a tax agent or as a nominee prior to both 1 November 1988 and 1 March 2010.596 Individuals who meet these criteria are eligible for registration even if the Board is not satisfied that they meet the requirements prescribed in the TASR.597
6.29 The pathways to registration for BAS agents are set out in Figure 6.3.
Figure 6.3: Qualification and experience requirements to register as a BAS agent598
6.30 As noted in Figure 6.3 above, there are fewer and less onerous pathways for registration as a BAS agent when compared to those for tax agents. However, it is evident from the two diagrams above that all but one of the pathways will require the practitioner to hold certain educational qualifications.599 The reduced requirements are reflective of the more limited services provided by BAS agents.
6.31 In Australia, many tax and BAS agents are members of recognised professional bodies and associations such as CPA Australia, IPA, the Tax Institute, the Institute of Certified Bookkeepers and CAANZ. The TASA recognises this by providing a pathway for registration through membership with recognised professional associations. Professional associations can be accredited by the TPB if they meet the requirements set out in the TASR. Their accreditation can be maintained by continuing to satisfy these requirements.600
6.32 Members of recognised professional bodies represent the majority of tax agents in Australia and as such are actively represented in advocating for matters relating to the profession such as their regulation.601 Of the 30,368 individuals who are registered as tax agents, 25,850 have indicated, on the TPB Public Register, that they are a member of one or more professional associations (with 4,180 of these agents relying on their voting membership for registration with the TPB).602 Aside from advocacy support, recognised professional bodies are also responsible for providing education, training and technical support to their members.603
6.33 Members of CPA Australia, IPA and CAANZ are bound by ethical, technical and professional standards as set out by the Accounting Professional and Ethical Standards Board in Australia’s Code of Ethics for Professional Accountants.604 Relevantly, not all tax and BAS agents are members of professional associations and are, therefore, not governed by a professional code of conduct other than the Code under the TASA regime. All tax professionals are also subject to criminal or civil penalties for making knowingly false statements605 under other legislation including tax laws.
Tax Financial Advisers
6.34 The explanatory memorandum to the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 explains that there were widespread concerns with the education and training requirements for financial advisers. This was partially attributable to recent instances of inappropriate financial advice negatively impacting consumer confidence in the industry.606
6.35 In March 2015, the Government released a consultation paper and called for submissions on ways to improve the professional standards of TFAs. The then Assistant Treasurer noted that previous reports which examined the professional standards in the financial services industry:607
… make clear that the current regulatory arrangements are no longer sufficient to ensure high quality consumer outcomes and to maintain public confidence in the industry. It is now time to put in place an enduring framework that raises the professional, ethical and education standards of advisers.
6.36 On 20 March 2018, the FASEA released its draft guidance on education pathways for existing TFAs. To comply with the new statutory requirements, FASEA has determined five education pathways which are based on the current qualifications of TFAs. These are outlined Table 6.1 below.
Table 6.1: Draft statutory requirements for TFAs to meet before 1 January 2024608
|An Existing Adviser who does not have a degree ([Australian Qualifications Framework] AQF7) or above qualification||Graduate Diploma AQF 8 OR Other Approved Qualifications (Degree or Masters – AQF7 and above)||For Graduate Diploma - 8 courses, including courses in:
|An Existing Adviser who has a degree (AQF 7 or above) but it is not in a RELATED field of study||Graduate Diploma
|Made up of 8 courses, including courses in:
|An Existing Adviser who has a degree (AQF 7 or above) and it is in a RELATED field of study||Bridging Course
|Made up of 3 courses, including courses in:
|An Existing Adviser who has a degree and a post graduate qualification in a RELATED field of study||Bridging Course
|Made up of 1 course, The FASEA Code of Ethics|
|An Existing Adviser who has an approved FPEC qualification||Bridging Course
|Made up of 1 course:
6.37 In addition to the above qualifications, a TFA would also need to follow one of four pathways, set out in Figure 6.4, to register with the TPB.
Figure 6.4: Qualification and experience requirements to register as a TFA:609
6.38 In contrast to the above pathways for registration, the requirements to obtain an AFS licence with ASIC to enable the provision of financial advice are more onerous. Businesses providing financial services seek AFS licences rather than individuals. AFS licensees must comply with a range of obligations, including their operational competence.610 Such competence is measured by reference to the capabilities of ‘Responsible Managers’ and may include university degrees, relevant knowledge assessed by ASIC, meeting industry standards set by APRA or by way of submission to ASIC on one other basis.611 It is noted that the experience requirements range between 3 to 5 years and there is no option to demonstrate competence by way of voting membership in a professional association.
6.39 Education standards are an important element of any profession. Where there are different standards of education within a particular profession or regime, those affected justifiably feel that an uneven playing field has been created. Reaching consensus on such issues is undoubtedly difficult. A balance needs to be struck between consumer protection and not imposing requirements on professionals that are unduly onerous. Those requirements also need to be consistently applied to all within that profession.
6.40 As discussed in the earlier chapters, there are significant changes ahead as a result of technological advancements impacting the tax profession. The education needs of tax professionals have to be considered in light of these changes. Whilst the existing requirements for tax, law and accounting qualifications have been sufficient to date in a general sense, it is likely that future tax practitioners would also need other skillsets including those in fields of STEM as well as the ability to interact and engage through a range of electronic and digital platforms.
6.41 At present, it does not appear that the education requirements of the TASA regime are subject to consistent periodic review and update, although there have been some calls for such an approach.612 The IGT believes that it would be useful for the TPB to establish a framework for periodically engaging with practitioners, professional associations, tertiary institutions, other education providers and the ATO to assess whether existing requirements are adequate and if not, how they would be addressed. The IGT believes that flowing from such reviews, the TPB could either take action to address any findings, where that action is within its purview, or alternatively to present findings to the Government and request legislative change. The frequency of such reviews could also be determined by the TPB and the stakeholders jointly.
6.42 An ancillary suggestion that has been made to the IGT is to increase flexibility within the regime for the introduction of further differentiated levels of registration or specialisation. Such an approach is already adopted in the legal profession613 and in the membership and accreditation of accounting professional bodies. To some extent, the TASA already permits the TPB to register individuals on a limited basis by imposing conditions on the scope of services that may be provided having regard to the individual’s qualifications and experience.614 For example, a conveyancing professional may be registered to provide tax agent services with respect to specific capital gains tax matters only.615 However, notwithstanding such flexibility, legislative change was required to formally bring TFAs within the TASA regime. Accordingly, a question remains as to whether the TASA is sufficiently flexible.
The IGT recommends that the TPB:
- periodically review the suitability of the educational requirements of the Tax Agent Services Regulations 2009 and its own related guidance with input from practitioners, professional associations, tertiary institutions and the ATO and act upon any findings including requesting the Government to consider legislative change where necessary; and
- consider whether the TASA regime provides sufficient flexibility to manage the range of professionals who may offer tax services and present its findings to the Government.
The TPB agrees with recommendation 6.2(a) and (b).
In relation to recommendation 6.2(a), the TPB will continue to work closely with a variety of educational providers, not just tertiary institutions as well as other regulators of education providers (Tertiary Education Quality and Standards Agency and Australian Skills Quality Authority), to ensure the suitability of the educational requirements in the tax agent services regime, as prescribed by the Tax Agent Services Regulations 2009.
In relation to recommendation 6.2(b), the TPB will continue to review whether the tax agent services regime is sufficiently flexible to manage the range of professionals who may offer tax services.
In relation to recommendations 6.2(a) and (b), the TPB notes that these recommendations may also be appropriately addressed as part of a potential legislative review by Government.
Expansion of the tax profession
6.43 Stakeholders have expressed that given the likely increase in the types of professionals working in the taxation and superannuation systems in the future, it is important to consider what constitutes a ‘tax professional’. Some stakeholders have advocated for a broader definition which seeks to ensure that professionals such as data analysts, DSPs and tax educators are captured as well as traditional tax professionals such as bookkeepers, accountants and lawyers, including ATO personnel. Some have gone even further, suggesting that sections of the judiciary and other external decision makers, who deal with tax matters, should be included. Other stakeholders, however, advocated for a narrower, more traditional definition.
6.44 The notion of including DSPs within a broader definition of tax professionals was interesting as some of the proponents were software providers. In support of such a notion, reference was made to the rapid advancement of technologies, the fundamental role that tax software plays in a practitioner’s service delivery to their clients and the increase in support provided by the DSPs. Opponents to the inclusion expressed concern that it may be opening the profession to unqualified persons, despite the acknowledgment that some DSPs employed registered tax professionals to provide advice during the software development process.
6.45 Statistics provided by the TPB, set out in Table 6.2, indicate that the number of registrations for tax agents has steadily increased between 2010-11 and 2017-18. Over the same period, the numbers of registered BAS agents have remained relatively stable with only minor fluctuations.
Table 6.2: Total numbers of registered tax practitioners
|Financial Year||Registered Tax Agents||Registered BAS Agents||Tax (Financial) Advisers||Total registrations|
Note: The TPB has explained that during the initial period, before TFAs were wholly brought under the TASA regime, an entity could be automatically registered as a TFA by simply notifying the TPB of that intention pursuant to Tax Laws Amendment (2013 Measures No 3) Act 2013, s 49. However, upon expiry of that initial registration, TFAs wishing to renew their registration would need to satisfy the standard qualification and experience requirements (for individuals) or the sufficient number requirement (for partnerships and companies) of the TASA regime. As a result, the TPB indicated that a number of TFAs, who had notified to become registered, did not renew their registrations, leading to a decrease in the overall TFA population in 2017-18.
6.46 As is evident from the above table, the inclusion of TFAs within the TPB’s regulatory framework has resulted in an increase in the number of practitioners brought under its jurisdiction. As the TPB has noted in its 2018-19 Corporate Plan:
The inclusion of tax (financial) advisers into the TPB’s regulatory framework will continue to have implications for the TPB’s resourcing given this has increased the registered practitioner population by approximately 38%. As the processes for the registration and renewal of registration of tax (financial) advisers become more streamlined, our priority will shift to ensure that those registered are compliant with their obligations under the TASA.616
6.47 The ATO has acknowledged that tax practitioners ‘are intermediaries, conduits and influencers of behaviour, providing expert advice to clients to meet their obligations’.617 It is also increasingly important to acknowledge the important role that new intermediaries such as software providers and data analysts play within the tax profession. For example, in 2016 the OECD acknowledged the changing role of tax intermediaries and the increasingly important role played by new entrants such as DSPs.618 The OECD has suggested that new service providers could also be extended to include:
… suppliers of cash registers and point-of-sale systems, software vendors and providers of online services offering invoicing, payment and accounting solutions. In addition, business partners such as banks, telecom operators and other firms that have an indirect impact on tax services need to be taken into account as well.619
6.48 Additionally, academics have also commented that the meaning of the term ‘tax professional’ has evolved over time and that within academic literature, the term is now used interchangeably with other players such as tax preparers, paid preparers and other tax intermediaries.620
6.49 The ATO has stated that it is currently working with the profession to consider the impact of change in the tax industry.621 A key development for the ATO in this space is the formation of the Tax Profession Future State Working Group (TPFSWG) which is designed to bring together tax professionals, professional associations, the TPB and the ATO. The Group is co-chaired by the Deputy Commissioner of Tax Practitioner, Lodgment Strategy and Compliance Support and an industry representative. The focus of the TPFSWG is to reach a level of consensus on what the future of the tax profession will look like and to ensure that tax professionals and the ATO have the capabilities, skills and systems to be well prepared for the future.
6.50 The TPB also works with tax professionals and their representative bodies through two quarterly forums, the Consultative and Financial Adviser Forums. The membership of these forums include the Chair together with another member of the Board, TPB staff (including the Secretary) as well as representatives from all TPB-recognised professional associations and other stakeholders such as the ATO.622 The Forums:
… establish ongoing consultative arrangements with a dedicated group of representatives from TPB recognised professional associations, and other key stakeholders representing the interests of tax practitioners. The forums provide an opportunity to directly engage with the Board of the TPB and facilitate an effective dialogue, to gain a mutual understanding of issues and generally act as a consultative advisory group to facilitate the TPB achieving its overall objective and purposes.623
6.51 Whilst the range of professionals whose work touches on tax or have tax implications may be endless, two specific groups have been identified by the ATO for further consideration. These are namely DSPs and data analysts.
6.52 On 19 October 2016, the Commissioner highlighted the key role played by DSPs, stating that ‘software providers are critical to our success and to modern tax administration’.624 Further, on 19 March 2017, at the Tax Institute’s 30th National Convention the Commissioner stated that, in the future, the ATO’s ‘partnership with DSPs is going to be of growing importance’.625
6.53 The significant role played by DSPs in the current tax environment is also recognised by the TPB whose Corporate Plan 2017-18 states that although DSPs can facilitate and support tax practitioners, they are increasingly providing automated or ‘smart-solutions’ to clients that once used traditional tax practitioner services. In light of these developments, the TPB expects the traditional tax practitioner community to evolve with the DSP community, ‘providing added value to their clients and engaging with the technological developments’.626
6.54 A broad interpretation of the term ‘software providers’ includes ‘entities that develop, write and sell software licences for direct user hosted application or otherwise provide software related systems and services as a complete package’.627 DSPs provide services and products for the ATO to assist businesses and individuals to meet their tax and superannuation obligations. Since April 2017, in light of the increased use of DSPs and to better reflect the evolving tax environment, the ATO has moved away from use of the term ‘software providers’ to use of the term ‘digital service providers’.
6.55 The ATO has established an internal Digital Partnership Office (DPO) which includes the Software Industry Partnership Office (SIPO). The DPO serves as the first point of call for DSPs wanting to interact with the ATO and partners with software providers to design digital solutions to improve the Australian tax system. It also provides services such as webinars about current projects and digital services and sharing research and intelligence.628
6.56 In October 2015, the DPO published tax software demographics demonstrating that there were approximately 1,528 software publishing businesses in Australia and the amount of in-house DSPs was unknown.629 A research report published by the SIPO in April 2016 recommended that the ATO continue to monitor statistics of DSP trends.630
6.57 Unlike tax agents, BAS agents and TFAs, DSPs (and payroll service providers) are not presently governed or regulated by the TPB. However, if DSPs provide a tax agent service, which includes a BAS agent service, they are required to register with the TPB as a tax or BAS agent.631 In July 2015, the TPB released an information sheet to ‘assist software providers who provide tax related software systems to understand the operation and impact of the tax agent services regime’.632 Importantly, this information sheet provides examples of circumstances where DSPs may need to register as a tax or BAS agent, including when:633
- a client outsources their payroll and accounts work to a DSP;
- a DSP configures and customises a software system to deliver a specific tax outcome for their client;
- a DSP offers a help desk which provides customised advice to assist their client to meet a specific tax outcome; and
- a DSP offers written tax related advice to their client that is specific to the client’s circumstances.
6.58 The information sheet also discusses procedures or processes that the DSP should have in place within the software itself to ensure that they do not purport to provide tax agent services directly. For example, the TPB recommends that an appropriately worded declaration be provided to clients to bring to their attention that the DSP is not a registered tax or BAS agent and if they are seeking tax or BAS related advice, to seek assistance from a registered tax or BAS agent. The TPB considers that:634
… ultimately clients of the software provider need to be aware that the software provider is simply being the transmitter of data to the ATO and not the provider of a tax agent service.
6.59 As stated earlier, data analysts are also amongst key professionals increasingly operating in the tax sphere. They are skilled in manipulating and interpreting data for decision making and problem solving. With data volumes increasing exponentially, it is essential that tax firms and the ATO realise the potential of the available data and use it to improve work outputs. In 2014, it was reported that the amount of data available doubles every two years and by 2020, the volume of data will reach 44 zettabytes or 44 trillion gigabytes.635
6.60 While data analysts may be employed by tax practices, large and small, as well as by the ATO, they are not presently seen to be providing tax advice but rather they provide trend data or other information from which advice may be drawn and given to the taxpayer. As noted by the OECD, ‘data analytics, predictive modelling and more advanced decision support systems allow tax practitioners to create a comprehensive understanding of their client’s situation, which provides a basis for the more tailored advice’.636
6.61 The Public Sector Data Management Report released in December 2015 by PM&C found that there is a global under-supply of data and analytics specialists which restricts the benefits that can be gained by it.637 To improve the understanding of data and how it can be harnessed, PM&C, the APSC, other Australian Government entities and the private and academic sectors have formed a partnership to improve the overall data skills and capability across the Australian public service.638
6.62 The role of tax practitioners and new entrants into the profession as well as their relationship with each other and revenue agencies is evolving. Rapid increase in technological developments has created new opportunities for intermediaries such as DSPs to assist taxpayers to comply with their taxation obligations. The task of identifying every professional who may be regarded as a tax professional is difficult but necessary for determining the appropriate regulatory approach. The TPB has undertaken some work in this area and has identified some categories of conditional registrations for professionals such as conveyancers, quantity surveyors and debt or insolvency specialists. The IGT believes others, such as DSPs and data analysts, should also be considered for such conditional registration.
6.63 The key objectives are to protect taxpayers who are seeking taxation services and to ensure that there is a level playing field amongst the professionals offering such services. It is also important to recognise the complexities of the relationship between the various intermediaries and the community. For example, there are those who serve the community directly, such as tax practitioners, and those who do so indirectly by providing services or products to the tax practitioners or revenue agencies.
6.64 Looking into the future, newer entrants to the tax profession may possess similar objectives to traditional tax professionals, namely, they may seek to directly assist their clients to understand and discharge their obligations under tax legislation.639 For example, it would not be inconceivable for DSPs in future to position themselves as ‘independent advisers of their clients’, ‘intermediaries between the tax administration and their clients’, and ‘influencers on the tax system’640 just as tax practitioners are today.
6.65 As new entrants seek to position themselves within the tax profession, issues associated with maintaining a level playing field become more important. Certain technological developments such as Robo-advice, discussed earlier, present both opportunities and risks. On the one hand, it provides tax practitioners with additional services to aid their clients while on the other, it may be used by some as a way to circumvent requirements associated with the provision of financial advice. The latter has been an area of concern for ASIC and the ATO who are seeking to ‘ensure that individuals obtain informed advice and information from an appropriately qualified and licensed professional prior to establishing an SMSF’.641 The IGT understands that ASIC and the ATO have set up a working group to ‘examine and consider the scope of existing automated online SMSF tools and establishment platforms with a view to assessing any potential risks that these arrangements might create’.642
6.66 Furthermore, services in the gig economy on platforms, such as Airtasker and Freelancer, have permeated the tax profession by providing tax advice and compliance assistance as well as bookkeeping and accounting solutions. Regardless of whether these services are provided through traditional channels such as a tax practitioner or accounting firms or through online platforms, the TPB requires the relevant professional to be appropriately registered. However, there is potentially a greater risk that those who provide tax-related services in the gig economy and are not appropriately registered go undetected. It is difficult to quantify the level of risk posed.
6.67 It may be beneficial for the TPB to undertake research to determine the extent to which unregistered professionals are offering tax-related service, particularly in the gig economy, and consider options to protect taxpayers. The TPB may find it useful to consult and collaborate with other agencies on the taxpayer protection strategies, including the ATO, the Australian Competition and Consumer Commission as well as ASIC.
6.68 Similar to those in the gig economy, the technologies mentioned in Chapter 2 and others which have emerged in recent years have essentially removed borders for the provision of tax advice, enabling locally-based tax practitioners to offer advice to those based overseas and vice versa. It has also allowed tax practitioners to outsource some of their work to other parties outside of Australia, a practice which seems to be gaining in popularity and which has led to the TPB issuing guidance to remind practitioners of their ongoing responsibilities under the TASA and the Code.643 In the future, the appropriate regulatory approach for these new developments will grow in importance and consideration needs to be given to whether the current legislative framework requires modification.
6.69 Ensuring that taxpayers have access to independent tax advice from appropriately qualified professionals and that the latter operate on a level playing field will require significant monitoring and responsiveness from the ATO, the TPB, professional bodies and members of the tax profession themselves. The IGT believes that the establishment of the TPFSWG is a positive first step in this development. However, the composition of membership on the working group does not presently appear to include DSPs, TFAs or their representative bodies. There would be utility in the ATO considering expanding membership to include new entrants to the tax profession to provide more holistic input on the way forward. Additionally, the IGT considers that the ATO should also report publicly on the progress of work undertaken by the TPFSWG.
6.70 The above discussion all points to a need to reconsider the current regulatory framework of the tax profession. On the eve of the launch of the TPB, the then Assistant Treasurer emphasised the need for a new regulatory regime given that the world and the tax system had ‘clearly moved on since the 1940s’.644 Almost ten years later, the world and the tax system has changed considerably again and is set to continue to do so at a very rapid pace. As stated earlier, a number of stakeholders have questioned whether the current structure of the TPB is the most appropriate to oversee and regulate the future tax profession. Some have suggested expanding the TPB’s remit to include newer entrants to the tax profession such as DSPs whilst some have gone as far as recommending creating a super regulator to include all tax professionals including new entrants and those that provide tangential services.
6.71 The TPB has considered the role of DSPs and payroll service providers as well as issuing relevant guidance materials.645 However, it has no remit to regulate DSPs or payroll service providers and the current approach of providing guidance to inform the public is unlikely to be sufficient. As mentioned earlier, the issue is not confined to Australia — there have been calls in the USA for Congress to regulate both tax return preparers and tax preparation software companies.
6.72 While there may be a case to be made for expanding the remit of the TPB to include DSPs, the challenge is far beyond regulating just DSPs. It is foreseeable that as technology continues to evolve, a range of different professionals would be able and interested in offering tax or tax-related services to the community.
6.73 On the issue of a super regulator, the IGT is not aware of any public discussion on this issue and, as there is no international equivalent, insight cannot be obtained from reviewing international jurisdictions. While the establishment of such a regulator may result in significant cost savings, the extent of legislative change required and the number of government agencies involved would render it unachievable in the short or medium term. In the IGT’s view, the better option would be to enhance the current role of the TPB incrementally, at pace with technological developments and how they may be employed in the tax sphere.
6.74 As a first step, a broader definition of the tax profession may need to be considered. Such a definition may include all those who, either directly or indirectly, provide services or products which constitute provision of tax advice or otherwise assist taxpayers to comply with their tax compliance obligations. It may encompass traditional tax professionals, such as tax agents, BAS agents and bookkeepers as well as newer entrants such as TFAs, data analysts, software providers and those who have always been tangentially part of the tax profession such as economists, tax educators, ATO officers, lawyers and conveyancers. This approach would provide a central administrative focus around the tax system and the professionals who support it along with its regulation in a manner that may provide the best outcome for taxpayers.
6.75 However, a wider definition of the tax profession and the broadening of the TPB’s remit may be problematic. Many professionals, who may find themselves within the wider definition of the tax profession, may never offer any tax services and would unnecessarily have to bear additional compliance burden. It may, therefore, be beneficial to consider an alternate registration approach whereby professionals may seek registration to broaden their service offerings to the tax sphere. Such an approach would also assist the TPB in ‘future-proofing’ the operation of the TASA to account for, as yet, unknown professionals who may provide tax services in future. Although the TPB has informed the IGT that it believes this may already be achieved through its ability to conditionally register professionals, given the legislative change needed to bring TFAs under its jurisdiction, this postulate needs to be tested and remedial action taken if necessary.
6.76 Any expansion of the TPB’s remit may need to be accompanied by additional resources not only to facilitate registration and provide an appropriate level of guidance but to also adequately risk assess and take compliance action against those who offer tax services without being registered or engage in a range of other inappropriate behaviours such as charging exorbitant fees, or withholding information or credits from the client.
6.77 In ensuring that the TPB is well equipped to deal with misconduct, the range of sanctions and penalties which it may impose should be reconsidered. Currently, the TPB may issue cautions, require remedial action or suspend a tax practitioner’s registration. They may also seek to have a tax practitioner deregistered although such action is rare. It would be important for the TPB, in administering a new and more flexible regime, to be afforded a broader range of sanctions from a mere caution to more serious pecuniary or criminal penalties in instances of serious fraud.
6.78 Some have suggested that with an expanded tax profession, it may be best to dispense with the TPB and devolve their role into the relevant professional bodies. Certainly, Australia seems to more strictly regulate its tax profession than other jurisdictions considered earlier. Even in South Africa where there is a regulator, its role is limited to registration with disciplinary action being referred to recognised professional bodies.
6.79 However, The IGT understands that regulation through professional bodies was considered in the years leading up to the implementation of the TASA regime but was not ultimately adopted. This may be due to tax practitioners not being required to hold membership with a professional body and, where they do hold such membership, they may be subject to different regimes depending on the requirements of the professional body. Given that there is increasingly greater diversity of professionals in the tax space and the larger number of professional bodies involved, there is less likelihood that such an approach would curry favour.
6.80 However, it may be that the professional bodies may be able to further complement the role of the TPB. Consideration may be given to empowering the TPB, in appropriate circumstances, to release information to recognised professional associations to enable them to undertake disciplinary action against their members rather than the TPB directly imposing sanctions. A similar approach is adopted in South Africa as mentioned above as well as in the UK.646 A reciprocal arrangement from recognised professional associations to aid the TPB may also be warranted. The IGT notes that at present, the TASA requires the TPB to share the outcome of its investigations with recognised professional associations if the registered tax practitioner who was subject to the investigation is a member of that association.647
6.81 The regulation of a future tax profession is complex. It requires rigorous discussion and testing with input from all sections of the tax profession, the ATO and the TPB. The IGT has been informed that the Treasury will shortly be commencing a review of the TASA and its administration.648 The matters raised in this report, including the regulation of the tax profession, and the impacts of upcoming changes on the profession, the TPB and the ATO should be considered as part of that review.
The IGT recommends that:
- the Government consider increasing the range of sanctions that the TPB may impose on non-compliant tax professionals, including empowering the TPB to release information to the professional associations, in appropriate cases, to enable the latter to undertake disciplinary action against their members;
- the TPB undertake research to determine the extent to which tax services may be offered in the gig economy by people who are not appropriately registered and engage with other agencies, such as the ATO, the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission to consider options to protect taxpayers from such service providers; and
- the ATO broaden the membership of its Tax Profession Future State Working Group to include new entrants into the tax profession such as digital service providers, tax (financial) advisers and their representative bodies as well as publish more comprehensive information about the work of the Group.
(a) Matter for Government
(b) Matter for the Tax Practitioners Board
The TPB agrees with recommendation 6.3 (b).
The TPB will build on existing work already being undertaken to determine the extent to which tax services may be offered in the gig economy by people who are not appropriately registered, and engage with other agencies to consider options to protect taxpayers from such service providers.
577 Senator the Hon Nick Sherry, Tax agent regulation for a modern economy – launch of the national tax practitioners board (Address to the Institute of Chartered Accountants Australia, Sydney, 23 October 2009).
578 Explanatory Memorandum to the Tax Agent Services Bill 2008, pp 4-5.
579 TPB, Tax Practitioners Board Corporate Plan 2017-18 (August 2017) p 3.
580 Tax Agent Services Act 2009, ss 1 – 15.
581 TPB, Tax Practitioners Board Corporate Plan 2017-18 (August 2017) p 5.
582 ANAO, The Regulation of Tax Practitioners by the Tax Practitioners Board (2013) p 16.
583 Above n 582, p 28.
587 See for example: TPB, 2016 Information Sheets <www.tpb.gov.au>; TPB, 2017 Information Sheets <www.tpb.gov.au>; TPB(I) 27/2016: Code of Professional Conduct - Acting lawfully in the best interests of clients for tax (financial) advisers; TPB(I) 28/2016: Code of Professional Conduct - Reasonable care to ascertain a client's state of affairs for tax (financial) advisers; TPB (I) 29/2016 Code of Professional Conduct – Reasonable care to ensure taxation laws are applied correctly for tax (financial) advisers (13 October 2016); TPB (I) 30/2016 Code of Professional Conduct – Having adequate arrangements for managing conflicts of interest for TFAs (13 October 2016); TPB(I) 32/2017: Code of Professional Conduct - Confidentiality of client information for tax (financial) advisers.
590 See for example: TPB, Registering as an individual tax agent <https://www.tpb.gov.au>; TPB, Registering as an individual BAS agent <https://www.tpb.gov.au/register-individual-bas-agent>; TPB, Registering as an individual tax (financial) adviser <https://www.tpb.gov.au>.
591 TPB, Communication with the IGT (24 August 2018).
592 TPB, Communication with the IGT (24 August 2018).
593 Corporations Act 2001, Div 8, s 921B(2)(a).
594 Tax Agent Services Regulations 2009, Part 3 Div 1.
596 Tax Agent Services Act 2009, s 4(a)(i)-(ii).
597 Tax Agent Services Act 2009, s 4(a)(i)-(ii).
599 James Guthrie, Roger Burritt and Elaine Evans, Challenges for Accounting Pathways in Australia in 2012: An Introduction in Elaine Evans, Roger Burritt and James Guthrie, Emerging Pathways for the Next Generation of Accountants (2012) 1, 9.
601 Jeanette Van Akkeren and Julie-Anne Tarr, ‘Regulation, Compliance and the Australian Forensic Accounting Profession’ Vol 6:3 (2014) Journal of Forensic & Investigative Accounting, p 4.
602 TPB, Communication with the IGT (24 August 2018).
605 Michael Walpole and David Salter, Regulation of tax agents in Australia (November 2014) Vol 12:2 eJournal of Tax Research, 335, p 337.
606 The Parliamentary Joint Committee on Corporations and Financial Services (19 December 2014) and the Financial System Inquiry (20 October 2015).
607 Ibid; Explanatory Memorandum to the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016, para 1.12.
612 Craig Farrow, Pathways for Chartered Accountants in the 21st Century in Elaine Evans, Roger Burritt and James Guthrie, Emerging Pathways for the New Generation of Accountants (June 2012) 35-45, p 36.
616 TPB, Corporate Plan 2018-19 (August 2017) p 5.
618 Above n 73, p 18.
619 Ibid, pp 18-19.
620 Jane Frecknall-Hughes and Margaret McKerchar, Historical perspectives on the emergence of the tax profession: Australia and the UK (2013) 28 Australian Tax Forum 275- 288, p 276.
622 TPB, Communication with the IGT (24 August 2018).
623 TPB, Charter for the Tax Practitioners Board Consultative Forums (9 August 2017), internal TPB document.
624 ATO, Digital Service Providers Internal Communication Strategy 2017 (2017) [Internal ATO document].
625 ATO, The evolving relationship with software developers (19 July 2016) [Internal ATO Document].
626 Above n 616, p 6.
630 ATO, Corporate research and intelligence, Australian and global software development trends (May 2016) p 17.
631 Above n 627.
635 Department of the Prime Minister and Cabinet, Data skills and capability in the Australian Public Service (2016) p 1.
636 Above n 73.
637 Above n 365, p 2.
638 Ibid, p 4.
639 Jane Frecknall-Huges and Erich Kirchler, ‘Towards a General Theory of Tax Practice’ (2015) Vol 24:2 Social & Legal Studies 289-312, p 292.
641 Above n 69.
644 Above n 577.
645 TPB, Communication with the IGT (24 August 2018).
647 Tax Agent Services Act 2009, s 60-125(8)(c)(iia).
648 Explanatory Memorandum to the Tax Agent Services Bill 2008, p 143.