Belinda Neal (Robertson, Australian Labor Party) Share this | Hansard source

I rise to speak today in the debate on the second reading of the Tax Agent Services Bill 2008, on the face of it a dry and unexciting piece of legislation but one that will in fact have a great impact on the general community. There are 14½ million taxpayers in Australia, including over 11½ million individuals and over three million businesses. Over recent years the ATO has made greater efforts to allow taxpayers to prepare their own tax returns by the introduction of downloadable forms and the capacity for online preparation of tax returns. I would like to take the opportunity to congratulate it for these initiatives. It has made the lodgement of tax returns for many taxpayers much more accessible. Despite this, 74 per cent of individuals and 95 per cent of businesses use tax agents to prepare and lodge their tax returns. This means that over 13½ million individuals and businesses are impacted by this legislation. This is because this legislation is designed to protect consumers of tax services, being taxpayers.

The extent of taxpayer reliance on tax agents continues to grow over time with the increasing complexities of the tax system. These include the tax reforms of the 1980s, which resulted in the introduction of the capital gains tax, the fringe benefits tax and the self-assessment regime since 1986-87. This was followed by the greatest increase of complexity, being the so-called tax reforms of the 1990s, which included the introduction of the goods and services tax from 1 July 2000. It has constantly been a mystery to me that a coalition of parties that pleads for simplicity in the tax system could have been responsible, in government, for introducing the greatest complexity in a tax system of all time—and that is what the GST is. Anyone who disagrees with this should run a small business for a short time—or for a long time, as I did for a decade—or even talk to anyone in small business, because generally the greatest complaint of any small business operator is about BAS and the GST.

Going back to the Tax Agent Services Bill 2008, this legislation puts in place a scheme for the registration and regulation of tax agents and BAS agents to ensure appropriate standards are maintained in delivering services to tax-paying consumers. This does not mean there is no regulatory scheme in place at the moment. The present regime is provided for under part VIIA of the Income Tax Assessment Act and part 9 of the Income Tax Regulations 1936. This regime was introduced in 1943 to deal primarily with taxpayer services in relation to income tax. The regime was extended to include the providers of BAS services upon the introduction of the GST from 1 July 2000, as I have already mentioned.

I really do find it very hard to believe that it has been so long since the GST came into force, but it has been nine years. The existing scheme provides a registration process for tax agents and their nominees. The existing scheme states that unregistered tax agents must not charge a fee for listed services that are set out in the legislation but provides exemptions for providers of a BAS service, and certain specified unregistered individuals may provide a BAS service for a fee without being registered under the old scheme. BAS services are defined and include the preparation or lodging of an approved form about a taxpayer under a BAS provision, giving advice with regard to that BAS, or liaising with the commissioner in relation to it. Members of recognised professional associations such as accountants can provide BAS services through an entity. Barristers and solicitors, if they desire to provide this sort of advice, are exempt from the previous legislation. Division 2 of that part currently provides for tax agents’ boards to be established in each state, and these state boards are responsible for the registration of tax agents in their own state. There are also administrative penalties for taxpayers who make false statements to the ATO which reduce the amount of tax payable by them or make late lodgement of their return, whether or not they are using or were using the services of a tax agent.

Despite the presence of this regime, there is a real need for reform and an upgrading of the protections provided to consumers, and they are contained here in this bill. The regulation impact statement says that the need for reform is justified by deficiencies in the existing regulatory framework, and they are: inconsistencies in the regulation of agents, inadequacy of consumer protection, and the threat to the integrity of our tax system.

There are a number of major elements to this bill. The first is the establishment of a national Tax Practitioners Board. The Tax Practitioners Board will have responsibility for registering tax agents and BAS agents. This will ensure that agents have the appropriate skills and knowledge. The board will also have responsibility for investigating complaints against agents and ensuring that unregistered entities do not hold themselves out to be agents.

The second main element of the bill is that it provides a wider scope of registration to include BAS agents. They previously were not provided for. They will be governed in the same way as tax agents, but they will only be able to provide a limited range of services which relate to the taxation laws relevant to BAS provisions under the legislation.

The third element of the bill is that it puts in place registration requirements for tax and BAS agents. Tax agents are required to meet the ‘fit and proper person’ test, as well as minimum educational qualifications and relevant experience requirements, in order to obtain registration to provide tax agent services for a fee or other reward. BAS agents have a lower level of minimum educational qualifications and relevant experience requirements for registration than do tax agents, in recognition of the narrower scope of services provided by BAS agents.

To allow for the registration of ‘specialist’ tax agents and BAS agents, the board may impose conditions on registration. These conditions can limit the scope of the services that an agent may provide to a single area of the taxation laws or a single type of tax agent service. These limitations relate to the prescribed qualifications and relevant experience of an individual agent. In a situation where an agent is part of a partnership or company, the limitations may correspond to the prescribed qualifications and relevant experience of the individuals who work for the agency.

Registration is restricted to individuals, partnerships and companies, but there is flexibility within the regime for a registered entity to conduct its business through a trust. The registered entity is required to be a trustee of the trust and must ensure that the work produced by the trust on behalf of the trustee is of a competent standard.

The fourth element of the bill is that it introduces a code of professional conduct, which governs the ethical and professional standards of tax agents and BAS agents. The code is set out as a statement of principles, and the board may issue binding written guidelines for the interpretation and application of the code. This code is made binding through this legislation to enable the board to impose sanctions for breaches and thereby to enforce compliance with the code.

Under this bill’s regime, if a tax agent or BAS agent has breached the code, the board has a number of alternatives. The board may caution the agent, require the agent to complete a course of training, subject the agent to practising restrictions, require the agent to practise under supervision, or suspend or terminate the agent’s registration. This is a much greater number of options than under the previous arrangements.

The board also has the capacity to apply to the Federal Court of Australia for an order for the breaching tax or BAS agent to pay a pecuniary penalty for particularly serious misconduct, or seek an injunction to prevent the entity from engaging in, or obtain an order to compel an entity to undertake, certain conduct. Such a wide range of sanctions allows the board to tailor its response according to the severity of the misconduct.

A taxpayer who uses a tax agent or BAS agent will benefit from a safe harbour from certain administrative penalties in certain circumstances. Penalties will no longer apply where a false or misleading statement is made carelessly, provided the taxpayer has taken reasonable care to comply with their tax obligations by giving their tax agent or BAS agent the information necessary to make the statement; or where a document is not lodged on time in the approved form due to the tax agent’s or BAS agent’s carelessness, provided the taxpayer gave the agent the necessary information, in sufficient time, to lodge the document on time and in the approved form. In other words, a taxpayer who is doing the right thing, acting reasonably and providing all the information, doing all the necessary things and giving the right information to their tax agent is no longer liable for a penalty. It is essentially a protection from incompetence of agents in those circumstances.

The bill has generally been accepted by the taxation community, particularly because it has been such a long time coming. There has been extensive consultation, an exposure draft and an inquiry. There have been some small concerns but essentially the Taxation Institute of Australia has welcomed the bill and, in a press release on 14 November 2008, Sue Williamson from the Taxation Institute said:

This Bill is an important step forward in supporting a mature tax profession with an appropriate regulatory regime. It ensures that clients can use tax agents with greater comfort in knowing that their tax agent will be expected to meet education requirements and be required to comply with an acceptable code of conduct.

The bill was also welcomed by the CEO of the Financial Planning Association, Jo-Anne Bloch. I certainly welcome the bill myself and I commend it to the House.

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