Australia Consults On Tax Advice Standards

by Mary Swire, Tax-News.com, Hong Kong

15 April 2011

The Tax Institute in Australia is optimistic about the progress of a consultation process to ensure consumers are protected when they receive tax advice from financial planners.


The Institute’s Senior Tax Counsel, Robert Jeremenko, has said the progress of the development of an appropriate regulatory model is satisfactory following another meeting held in Melbourne between the Tax Institute, Assistant Treasurer Bill Shorten, the Australian Securities and Investments Commission (ASIC), the Tax Practitioners Board and other relevant stakeholders.



There are approximately 18,000 financial planners, including those who offer some tax agent services, currently regulated through the ASIC-administered Australian Financial Services Licence. Tax agents, on the other hand, are regulated through the tax agent services regime administered by the Tax Practitioners Board.

This ongoing consultation started in November 2010 with the release of an options paper by the Assistant Treasurer on the most appropriate means of regulating financial planners who also provide tax advice. The paper presented two options for consideration. The first was to bring tax agent services provided by financial planners permanently within the tax agent services regime and be regulated by the Tax Practitioners Board, but in a way that minimizes any additional compliance burden. The second option was to investigate and implement what changes, if any, might be made to the Australian Financial Services Licensing regime or its enforcement to ensure financial planners offering tax agent services are regulated to the same standards imposed on tax agents.

At the meeting participants agreed to the following:

• The current exemption of financial planners from the tax agent services regime will be extended to June 30, 2012 to allow for the regulatory model to be developed and legislation to commence on July 1, 2012.
• As far as practicable, financial planners and consumers will interact with ASIC in relation to financial planning services. ASIC and the Board will collaborate closely under the proposed arrangements, with the Board dealing with tax-specific complaints, complex matters referred by ASIC, competencies, recognition and investigations. Under this collaborative approach, streamlined arrangements will be implemented as far as possible. For example, there will be one set of tax competencies.
• Financial planners would be required to be registered through ASIC with the Board to provide tax advice within the context of providing financial advice. A public register would be created.
• The scope of services that can be provided by financial planners is determined according to the type of registration held.
• A financial planner can provide general factual tax information (not tax advice).
• If a financial planner has an additional form of registration, they can provide tax advice within the context of providing financial advice. The scope of tax advice that will be permissible within this category will depend upon the competencies that are required.
• Tax agents registered under the Tax Agent Services Act 2009 provide full tax agent services including preparing or lodging returns or representing a taxpayer in their dealings with the Commissioner of Taxation.
• Financial planners registered to provide tax advice within the context of providing financial advice would also need to abide by tax specific obligations that currently apply to registered tax agents. These obligations would be under a code of conduct that would ensure that services are provided to consumers in accordance with appropriate professional and ethical standards.
• Financial planners that wish to obtain this additional form of registration should have sufficient competency to provide reliable tax advice within the context of providing financial advice. To attain these competencies financial planners would be required to have certain tax related qualifications to ensure that quality advice is provided and consumers can rely on this advice. Further consultation would be carried out by the Board and ASIC on the nature of these competencies and the proposed level of the additional qualifications. Without pre-empting the outcome of this process, participants thought that the level of the qualification may be equivalent to that of a Diploma. Tax competencies would be determined by the Board after these consultations.

A transitional framework would operate from July 1, 2012 that would enable financial planners (existing and new) to be eligible for a simple initial registration for a period of three years. This period can be used to attain competencies to deliver quality tax advice as part of financial planning advice.

The details of the model will be developed in consideration of the Future of Financial Advice reforms.

Jeremenko said: “There is much more work to be done on the details, but The Tax Institute is pleased with the broad direction in which we are all moving.”

"The sometimes disparate voices of the relevant stakeholders have all coalesced around the need for strong consumer protection. The Tax Institute has long been advocating that people relying on tax advice should be entitled to expect that their adviser meets the high standards set by the Tax Agent Services regime, and that they are also covered by the sorts of protective measures contained within it, such as safe harbour rules."



“Financial planners with a limited registration will be able to provide certain types of tax advice within the context of providing financial advice, but only in line with the scope of their competencies.



“The three-tier system we are moving towards would allow for financial planners to be subject to appropriate levels of regulation, depending on the type of advice provided."



“The Tax Practitioners Board will continue to play a strong role in registration and enforcement of obligations.
The interests of consumers remain paramount in resolving outstanding issues like education requirements, a uniform code of conduct and transitional arrangements."

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