Senate committee recommends tough rules for disqualified tax agents to return to work

Tough rules to make it harder for defrocked tax agents to find work in a tax advisory practice should pass the Senate unamended, according to an economics committee report.

The committee, chaired by Labor senator Jess Walsh, received 122 submissions and conducted a one-day public hearing before finalising its view that legislation making it more difficult for rogue practitioners to return to providing tax services after being disciplined by the Tax Practitioners Board (TPB) must pass unchanged.

Amendments proposed in the bill are that a firm or individual that is a ‘disqualified entity’ — such as a person with a terminated tax-agent registration, like former PwC partner Peter Collins — cannot be used by a registered agent to do tax work for them without the TPB’s approval.

The explanatory memorandum to the bill says the definition of ‘disqualified entity’ is based on the criteria in the Tax Agent Services Act 2009, which is used to determine whether people or organisations are ‘fit and proper’ for registration purposes.

This proposed amendment to the law adds further elements to the definition of ‘disqualified entity’, such as someone having committed a serious offence as defined in the income tax legislation, evidence of a sanction by the TPB, termination or suspension of a registration, and the refusal of a registration for reasons other than a lack of appropriate work experience or educational qualifications.

Another provision of the bill would allow the relevant minister, assistant treasurer Stephen Jones, to add to the code of professional conduct regulating registered agents using a regulation rather than having to go through the longer process of amending the principal act.

A recommendation from the committee to get the provisions passed without change is in contrast to the concerns expressed by representative bodies for tax and legal professionals that form the TPB’s tax practitioner governance and standards forum during the committee’s inquiry into the bill.

The forum is made up of Chartered Accountants Australia and New Zealand, CPA Australia, the Institute of Public Accountants, the Taxation Committee of the Law Council of Australia’s Business Law Section, The Tax Institute, the Australian Bookkeepers Association, The Institute of Certified Bookkeepers and the SMSF Association.

A submission from the forum members says the inclusion of a notion of tax agent services being provided in connection with an arrangement with a disqualified entity is broad and “introduces uncertainty, creates interpretative complexity and potentially anomalous, unintended consequences for both the TPB and tax practitioners”.

The key concern is that an entity does not need to be a tax practitioner to be disqualified under the proposed law.

Forum members were also concerned about giving the minister the power to add new obligations to the code without the full scrutiny of the parliamentary legislative process.

“Giving the minister power to change the code by legislative instrument conflates the roles of ministers and parliament,” the submission says.

“As the code is the centrepiece of the [law], we consider that it is too important to be capable of change by a single minister via a legislative instrument rather than by our elected representatives, with appropriate legislative scrutiny.”

This article was first published by The Mandarin.