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Corporations and Financial Services-Parliamentary Joint Committee Regulatory framework for tax (financial) advice services (previously Tax Laws Amendment (2013 Measures No. 2) Bill 2013, Schedules 3 and 4) Report, incorporating a dissenting report, June 2013


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June 2013

Parliamentary Joint Committee on Corporations and Financial Services

Regulatory framework for tax (financial) advice services (previously Tax Laws Amendment (2013 Measures No. 2) Bill 2013, Schedules 3 and 4)

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 Commonwealth of Australia 2013

ISBN 978-1-74229-868-9

Printed by the Senate Printing Unit, Parliament House, Canberra

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Members of the Committee

Ms Deborah O'Neill MP, Chair NSW ALP

Senator Sue Boyce, Deputy Chair QLD LP

Senator the Hon. Kim Carr VIC ALP

Senator Mathias Cormann WA LP

Senator Anne Urquhart TAS ALP

Mr Paul Fletcher MP NSW LP

The Hon. Alan Griffin MP VIC ALP

The Hon. Tony Smith MP VIC LP

Ms Laura Smyth MP VIC ALP

SECRETARIAT

Dr Richard Grant, Acting Secretary

Mr Colby Hannan, Senior Research Officer

Ms Madeleine Willis, Administrative Officer

PO Box 6100 Parliament House Canberra ACT 2600

T: +61 2 6277 3583 F: +61 2 6277 5719 E: corporations.joint@aph.gov.au W: www.aph.gov.au/joint_corporations

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Duties of the Committee

Section 243 of the Australian Securities and Investments Commission Act 2001 sets out the Parliamentary Committee's duties as follows:

(a) to inquire into, and report to both Houses on:

(i) activities of ASIC or the Panel, or matters connected with such activities, to which, in the Parliamentary Committee's opinion, the Parliament's attention should be directed; or

(ii) the operation of the corporations legislation (other than the excluded provisions), or of any other law of the Commonwealth, of a State or Territory or of a foreign country that appears to the Parliamentary Committee to affect significantly the operation of the corporations legislation (other than the excluded provisions); and

(b) to examine each annual report that is prepared by a body established by this Act and of which a copy has been laid before a House, and to report to both Houses on matters that appear in, or arise out of, that annual report and to which, in the Parliamentary Committee's opinion, the Parliament's attention should be directed; and

(c) to inquire into any question in connection with its duties that is referred to it by a House, and to report to that House on that question.

Table of Contents

Members of the Committee ............................................................................... iii

Duties of the Committee ..................................................................................... v

Abbreviations ..................................................................................................... ix

List of recommendations ................................................................................... xi

Chapter 1: Introduction ..................................................................................... 1

Conduct of the inquiry ............................................................................................ 1

Structure of the report ............................................................................................. 2

Overview of the proposed measures ...................................................................... 2

Chapter 2: The need for reform ........................................................................ 7

The problem ............................................................................................................ 7

Costs and benefits of the proposed changes ........................................................... 9

The policy development process .......................................................................... 12

Chapter 3: Key issues ....................................................................................... 17

Definitional issues ................................................................................................ 17

Minimising regulatory duplication ....................................................................... 24

The interplay between the Tax Agent Services Act 2009 and the best interests duty in the Future of Financial Advice reforms ................................................... 26

Transitional arrangements .................................................................................... 31

Impact on new financial planners ......................................................................... 35

Concluding comments .......................................................................................... 37

Coalition Members' Dissenting Report ........................................................... 39

Further details ....................................................................................................... 42

Concluding remarks .............................................................................................. 49

Appendix 1: Submissions and tabled documents ........................................... 51

Appendix 2: Public hearings and witnesses .................................................... 53

Abbreviations

ABA Australian Bankers' Association

AFA Association of Financial Advisers

AFSL Australian Financial Service Licence

ASIC Australian Securities and Investments Commission

BAS Business activity statement

Corporations Act Corporations Act 2001

FOFA Future of Financial Advice

FPA Financial Planning Association of Australia

FSC Financial Services Council

ICA Institute of Chartered Accountants Australia

PI insurance Professional indemnity insurance

RG175 ASIC's Regulatory Guide 175, Licensing: Financial product advisers—Conduct and disclosure, dated December 2012

RIS Regulation impact statement

TASA Tax Agent Services Act 2009

TPB Tax Practitioners Board

List of recommendations

Recommendation 1

3.47 The committee recommends that the Australian Securities and Investments Commission, in consultation with stakeholders including the Taxation Practitioners Board (TPB), consider the case for amending Regulatory Guide 175 along the lines proposed by the Financial Services Council and the Financial Planning Association. The prime consideration must be to protect the integrity of the principles underpinning the best interests duty.

3.48 The committee suggests that as part of this process, the TPB should discuss with relevant stakeholders the current requirement in the Tax Agent Service Act 2009 for a 'sufficient number' of individuals to be registered as tax agents before a company is eligible for registration.

Recommendation 2

3.58 The committee recommends that the transitional arrangements be amended to stipulate that, from 1 July 2013 until 31 December 2013, unregistered financial services licensees and representatives may provide tax (financial) advice services on condition that they accompany such a service with a disclaimer which states that:

(a) the provider of the advice is not a registered tax agent under the Tax Agent Services Act 2009; and

(b) if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent.

or which states that:

(a) the provider of the advice is not a registered tax (financial) adviser under the new law; and

(b) if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent or a registered tax (financial) adviser.

3.59 However, the amendments should ensure that from 1 January 2014 to 31 December 2014 only the second disclaimer outlined above may be used.

Recommendation 3

3.72 Subject to recommendations 1 and 2, the committee recommends that the proposed amendments contained in schedules 3 and 4 to the version of the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 that was read a first time in the House of Representatives be reintroduced and passed.

Chapter 1

Introduction

1.1 On 29 May 2013, the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 was introduced into the House of Representatives. This omnibus bill proposes a number of distinct amendments to Australia's tax laws. Two of the schedules— schedules 3 and 4—contained proposed amendments that would bring financial advisers who provide tax advice into the tax agent regulatory regime overseen by the Tax Practitioners Board (TPB).

1.2 On 6 June 2013, government amendments to the bill were passed by the House of Representatives. One of the amendments agreed to was the removal of schedules 3 and 4 from the bill.1 Later that day, the House of Representatives referred to the Parliamentary Joint Committee on Corporations and Financial Services an inquiry into the creation of a regulatory framework for tax (financial) advice services to be based on the schedules 3 and 4 that were originally part of the bill.

1.3 In conducting this inquiry, the House directed that the committee particularly focus on:

(a) the application (ie definition) of the regime to ensure that the regime is applied to the appropriate persons;

(b) steps that can be taken to minimise regulatory duplication on industry participants;

(c) the interplay of the Tax Agent Services Regime with the Future of Financial Advice (FOFA) reforms, in particular the best interests duty;

(d) ensuring that new advice providers are not prohibited from employment in the future; and

(e) what further transitional relief may be required.2

1.4 The House of Representatives set a reporting date of 17 June 2013.

Conduct of the inquiry

1.5 The committee advertised the inquiry on its website and wrote directly to a number of organisations inviting written submissions. To allow the longest possible time for interested parties to provide a submission, the committee agreed to a date of

1 House of Representatives, Votes and Proceedings, 2010-11-12-13, No. 171 (6 June 2013), p. 2383-84. The amended bill was subsequently passed by the House of Representatives and is currently before the Senate.

2 House of Representatives, Votes and Proceedings, 2010-11-12-13, No. 171 (6 June 2013), p. 2387.

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14 June 2013 for receipt of submissions. The committee received 13 submissions, which are listed in Appendix 1.

1.6 The committee held a public hearing in Sydney on 12 June 2013. It took evidence from relevant industry and professional associations, as well as from Treasury and the Australian Securities and Investments Commission (ASIC). Further details about the hearing can be found in Appendix 2.

1.7 The committee thanks the organisations that lodged submissions and the witnesses who gave evidence at the public hearing, particularly given the short period of time during which the inquiry was conducted.

Structure of the report

1.8 This report is structured as follows:

 The remaining sections of chapter 1 provide an overview of the proposed

measures.

 Chapter 2 provides a discussion on the issues that the proposed measures

sought to address. It also discusses the evidence that the committee received regarding the costs and benefits associated with the proposed changes and scrutinises the policy development and consultation processes.

 Chapter 3 examines the key issues with the proposed amendments identified by stakeholders and in the inquiry's terms of reference (see paragraph 1.3). The committee's overall conclusions and recommendations can be found at the end of that chapter.

Note on terms used

1.9 Unless otherwise stated, references to 'the bill' refer to the version of the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 that was read a first time in the House of Representatives; not the amended version that was subsequently passed.

Overview of the proposed measures

1.10 Schedule 3 to the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 proposed to amend the Tax Agent Services Act 2009 (TASA) to bring into the existing tax agent regulatory regime entities that give tax advice in the course of giving advice that is usually provided by a financial services licensee or a representative. Schedule 4 proposed various technical amendments to TASA.

1.11 While tax agents and business activity statement (BAS) agents3 are currently regulated by the TPB, entities that give tax advice in the course of giving advice that is usually provided by a financial services licensee or a representative are not. Under

3 A BAS service is a tax agent service 'that is limited in its application to BAS provisions in the taxation laws'; explanatory memorandum, paragraph 3.11.

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the exemption that currently applies, financial product advice is not a tax agent service provided that such advice is accompanied by a disclaimer in the form set out by the regulations.4 This issue is discussed further in chapter 2.

1.12 To bring financial advisers into the tax agent regulatory regime, the bill proposed that a new type of regulated service—a 'tax (financial) advice service'—be inserted into TASA.5 The definition does not extend to the provision to clients of tax-related factual information.6

1.13 To provide tax (financial) advice services, an entity will need to register with the TPB and comply with certain regulatory requirements. Separate registration frameworks were envisaged for individuals, partnerships and companies. Unregistered entities that provide tax (financial) advice services while unregistered may be subject to civil penalties.

1.14 To be considered eligible to become a registered tax (financial) adviser, it was proposed that an individual, partnership or company would need to meet the requirements that apply to tax agents and BAS agents contained in subsection 20-5(1) of TASA. The requirements that would apply are outlined in Table 1.1.

Table 1.1: Proposed eligibility framework for entities seeking registration

Registration type Eligibility criteria

Individuals (a) the individual is a fit and proper person; and (b) the individual meets the requirements prescribed by the regulations (including, but not limited to, requirements relating to qualifications and experience) in respect of registration as a registered tax

(financial) adviser; and (c) the individual must maintain professional indemnity insurance that meets the TPB's requirements; and (d) for renewal applications, the individual must have completed

continuing professional education that meets the TPB's requirements.

4 Tax Agent Services Regulations 2009, r. 13(2). The disclaimer must state that (a) the provider of the advice is not a registered tax agent under TASA; and (b) if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent.

5 Essentially, the proposed definition for this term incorporated the elements of a tax agent service (a defined term in TASA) to the extent that the service provided by a financial services licensee (or a representative) relates to ascertaining an entity's tax liabilities and advising an entity about their actual and potential tax liabilities—that is, the definition does not encompass the third function of a tax agent service which is to represent an entity in their dealings with the ATO. The proposed definition is examined further in chapter 3.

6 Explanatory memorandum, paragraph 3.47.

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Partnerships (a) each partner (who is an individual) is: (i) aged 18 years or more; and (ii) a fit and proper person;

(b) if a company is a partner: (i) each director of the company is a fit and proper person; and (ii) the company is not under external administration; and (iii) the company has not been convicted of a serious taxation

offence or an offence involving fraud or dishonesty during the previous five years; and (c) the partnership has a sufficient number of individuals, being registered tax agents or registered tax (financial) advisers, to provide

tax (financial) advice services to a competent standard, and to carry out supervisory arrangements; and (d) the partnership must maintain professional indemnity insurance that meets the TPB's requirements.

Companies (a) each director of the company is a fit and proper person; and (b) the company is not under external administration; and (c) the company has not been convicted of a serious taxation offence or an offence involving fraud or dishonesty during the previous five

years; and (d) the company has a sufficient number of individuals, being registered tax agents or registered tax (financial) advisers, to provide tax

(financial) advice services to a competent standard, and to carry out supervisory arrangements; and (e) the company must maintain professional indemnity insurance that meets the TPB's requirements.

Source: Tax Agent Services Act 2009, s. 20-5; Tax Laws Amendment (2013 Measures No. 2) Bill 2013 [as read a first time in the House of Representatives], schedule 3, items 3-8; schedule 4, items 1-3.

1.15 Once registered, tax (financial) advisers will be subject to the same ongoing obligations as tax agents and BAS agents. A key obligation is compliance with the Code of Professional Conduct contained in TASA. The Code requires registered entities to:

 act honestly and with integrity;

 comply with the taxation laws in conducting your personal affairs;

 act lawfully and in the best interests of your clients;

 have in place adequate arrangements for managing conflicts of interests;

 maintain client confidentiality except where otherwise required by law or

permitted by the client;

 not knowingly obstructing the proper administration of the taxation laws; and

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 respond to requests and directions from the TPB in a timely, responsible and

reasonable manner.7

Transitional arrangements

1.16 The bill included arrangements for transitioning to the new framework. While the amendments were drafted to commence on 1 July 2013, the full framework would not be in place until 1 July 2016. During this period of time, relaxed registration requirements would be in place, and for the first 18 months entities could continue as they would under pre-1 July 2013 arrangements provided that any advice given to a client is accompanied by a revised disclaimer.8 The transitional arrangements are examined further in chapter 3.

1.17 From 1 July 2016, all entities would need to meet the ongoing registration requirements to successfully apply to register or to renew a registration obtained during the transitional period.

7 Explanatory memorandum, paragraph 3.75. The Code is contained in Division 30 of TASA.

8 Explanatory memorandum, paragraphs 3.149, 3.154. The disclaimer is similar to that which financial advisers currently give clients under the carve out from TASA, however, the wording is updated to reflect the new term 'registered tax (financial) adviser'.

Chapter 2

The need for reform

2.1 This chapter examines the current regulatory arrangements that apply to financial advisers who provide tax advice and the 'problem' that has been identified which the proposed amendments in the bill sought to address. The chapter also examines the potential costs and benefits associated with the reforms and the consultation process used by the government while developing the measures.

The problem

2.2 Following the enactment of the Tax Agent Services Act 2009 (TASA), a national framework for the regulation of tax agent services was introduced with effect from 1 March 2010. The object of TASA is to ensure that 'tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct'.1 However, the framework does not currently apply to financial advisers who may provide their clients with tax advice. When financial advice turns into tax advice can be difficult to pinpoint, as the explanatory memorandum notes:

In practice, a core part of giving well-considered and comprehensive advice about an entity's financial affairs will often include information about the tax implications of certain strategies and investments. However, giving this

information will not necessarily be a tax agent service … Nonetheless, it is often a fine line between whether an entity is merely providing general information about the tax implications of particular financial products or giving tax advice that could reasonably be expected to be relied on and therefore a tax agent service.2

2.3 As part of TASA, the government provided a carve out from the regulatory regime for tax agent services provided by financial services licensees and their authorised representatives (on condition that the entity advised the client that they are not a tax agent). The result is that while tax agents and BAS agents3 are currently regulated by the Tax Practitioners Board (TPB), financial advisers are not.4 The regulation impact statement (RIS) suggests that there are three reasons as to why the current framework is undesirable. The first reason is because of the 'regulatory

1 Tax Agent Services Act 2009, s. 2-5.

2 Explanatory memorandum, paragraphs 3.13, 3.15.

3 A BAS service is a tax agent service 'that is limited in its application to BAS provisions in the taxation laws'; explanatory memorandum, paragraph 3.11.

4 The explanatory memorandum notes that this was intended as 'an interim measure, and to provide time to develop a suitable regulatory framework that takes into account the existing regulatory regime in the Corporations Act 2001 … applying to those in the financial services industry'. The carve out expires on 30 June 2013. See explanatory memorandum, paragraphs 3.16-3.18.

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anomaly' that arises from the regulation of tax advice given by tax agents but not the provision of tax advice by financial advisers. Second, various risks (consumer protection, professional accountability and the integrity of the tax system) exist as

financial advisers are not subject to the ethical and professional standards imposed upon tax agents by TASA in order to guarantee the standard of tax advice. Finally, the RIS suggests that there is a 'lack of legislative clarity regarding the legal position of financial advisers who provide tax advice'.5

2.4 CPA Australia and the Institute of Chartered Accountants Australia (ICA), both of which support the bill, argued in their joint submission that the 'provision of tax advice is a highly specialised service which requires a high level of skill, knowledge and experience'. They argued that:

Consumers of tax advisory services deserve to have the comfort of knowing that those providing them with advice are appropriately registered, qualified, monitored and regulated by an oversight body, and that consumer protection measures exist to safeguard their interests.6

2.5 The Tax Institute noted the 'inherently complex' nature of tax as a discipline— quoting the former Chief Justice of the Federal Court and current High Court Justice Patrick Keane who has previously remarked that 'opening the Tax Act is like entering the door to a parallel universe'. The Institute provided the following reasoning of how the proposed amendments would address the problem that it perceives exists with the current framework:

In the context of the legislation before as today, it is very important to realise that what we are talking about is ensuring that those people who are trying to navigate through that parallel universe have the appropriate professional and ethical standards and the appropriate educational qualifications and experience to make that journey safely. That is also important for those who are relying on those people doing the navigation— that is, in this context, the people receiving the tax advice … The problem is that any consumer, anyone from the general public, who speaks to a financial planner and receives advice of any nature regarding tax—the complex parallel universe of tax—has no protection should this legislation not pass, and has no protection should that advice be incorrect. So this legislation makes sure that the Tax Agent Services Act applies to that advice. What that means is that the extensive code of conduct within the legislation and the extensive disciplinary procedures of the Tax Practitioners Board, which is the agency charged with administering the Tax Agent Services Act, can apply to anyone who gives tax advice incorrectly and does not do that in a fit and proper way.7

5 Explanatory memorandum, paragraphs 4.11-4.12.

6 CPA Australia and the Institute of Chartered Accountants Australia, Submission 9, p. 2.

7 Mr Robert Jeremenko, Senior Tax Counsel, The Tax Institute, Proof Committee Hansard, 12 June 2013, pp. 26, 27.

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2.6 Within the industry, the need for reform has been acknowledged. Following a meeting held in April 2011 between the Minister for Financial Services and Superannuation and representatives from the financial planning, tax and accounting bodies and government agencies, a broad set of principles for developing regulatory arrangements were agreed to. The Minister noted that he was:

… encouraged by the enthusiasm and constructive engagement of industry in this consultation process. The agreement of the key elements of a practical model will benefit the finance, tax and accounting industries. For consumers, this means they can expect to receive quality financial planning services that include competent advice on related tax issues.8

2.7 Although noting that the tax advice provided by financial advisers is most frequently general information in nature, the Financial Services Council (FSC) advised that it supports amending TASA to create 'a specific and appropriate type of tax adviser' that relates to the type of advice a financial adviser provides. The FSC recognises that 'increased advice provider competency is a public good and will enhance the quality and value an advice provider delivers to their client'.9

Costs and benefits of the proposed changes

2.8 As part of the development of the proposed amendments, a RIS was produced and published on the Department of Finance and Deregulation's website. The RIS is also included in the explanatory memorandum. The RIS provides Treasury's assessment of the costs and benefits of various options for creating a regulatory framework for tax (financial) advice services. As noted earlier in this chapter, the key benefit associated with the proposed amendments arises from improving the consumer protection regime in place for taxpayers by raising the standard of advice provided by those financial advisers who provide tax advice. The RIS also notes benefits from strengthening the integrity of the tax system that arise from similar regulation applying to all providers of tax advice.10

2.9 It is generally the case that the benefits to consumers that arise from measures dealing with consumer protection are difficult to quantify. Unsurprisingly, the RIS does not provide a dollar figure on the benefits that consumers will receive. Nevertheless, the benefits can still be considered. CPA Australia, the ICA and Treasury noted, in general terms, examples where consumers had received poor advice from financial planners. Treasury's evidence on this point is particularly instructive:

CHAIR: I ask a question that is really at the heart of why this legislation has come to the parliament and is before us today. The question was put

8 The Hon Bill Shorten MP, 'Future regulation of financial planners providing tax advice', Media release, 2011 no. 49 (7 April).

9 Financial Services Council, Submission 7, p. 4.

10 Explanatory memorandum, paragraphs 4.18.

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earlier … what is the problem? The question is: what are the consequences for people who have received incorrect tax advice? Do you have any real-world examples for the record of what happened when somebody got incorrect advice from a financial adviser because of a taxation knowledge deficit?

Mrs Macdonald: There have been a number of high-profile collapses, plus there have been other cases of people who have lost money as a result of being sold financial products where the tax advice has not been accurate or correct.

Mr Antioch: I will just add to that. There are always proximate causes for why something may not have worked out as people had intended. The bill—and the whole process, as I understand it, of linking tax services with financial service advice—is to make a seamless, integrated kind of industry which is better for consumers. They can go and get tax advice and financial advice from a properly regulated and administered system. One other thing that is worth bearing in mind is that, with the tax system … a degradation of quality standards is not felt immediately. One imagines that that also applies to the financial services area. It builds up. So this is like an integrity to keep both systems operating well and to a standard where consumers feel confident that they are getting the services that they are paying for, ultimately.11

2.10 However, the Financial Planning Association of Australia (FPA) argued that there is 'no substantive evidence' to suggest that consumers are not sufficiently protected. The FPA pointed to reports produced by various bodies to support its argument:

The primary external dispute resolution system, the EDR scheme, used by the advice profession is the current Financial Ombudsman Service— currently known as FOS. There is no evidence in any of our reports that there are any complaints or systemic risks on tax advice failings by financial planners. It is also our understanding from the reports publicly available from ASIC, including Shadow Shopper reports, that there are no systemic problems of consumer risk issues with financial planners providing inappropriate or incorrect tax advice within the context of financial planning. The FPA can also confirm that our own surveillance and complaints reports do not highlight any concerns with tax advice provided by our members. Further, the introduction of the Future of Financial Advice reforms from 1 July 2013 will further enhance existing consumer protections, especially with the introduction of the best-interest duties, the removal of conflicted remuneration and enhanced ASIC powers.12

11 Mr Gerry Antioch, General Manager, Tax System Division, Treasury; Mrs Leslie Macdonald, Manager, Tax Administration Policy Unit, Treasury, Proof Committee Hansard, 12 June 2013, p. 35.

12 Mr Mark Rantall, Chief Executive Officer, Financial Planning Association of Australia, Proof Committee Hansard, 12 June 2013, pp. 14-15.

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2.11 The Tax Institute responded to the FPA's reasoning:

Tax advice being what it is, often poor tax advice does not manifest itself for years to come, so I do not think a lack of a stream of claims against incorrect advice is necessarily evidence that things are okay now.13

2.12 While estimates of the likely benefits are not available, estimates of the costs associated with the proposed amendments have been put forward. However, the figures reached by Treasury and other stakeholders varied significantly. The FSC estimated that the cost to the industry of compliance by 1 July 2013 would be $1 billion.14 The key sources of costs identified by the FSC were:

• the need to replace documents and update websites to amend current disclosure statements with the revised statement contained in the bill (including documents that were recently updated to comply with the FOFA reforms); and

• during the transition period, financial advisers will need to undertake

education to comply with the competency requirements.15

2.13 The ICA disagreed with the FSC's assessment of the costs that the industry faces. The ICA's General Manager, Leadership and Quality, stated:

I find it hard to grapple with the notion that there are considerable costs associated with shredding documents, when we all know that by and large most organisations, small and large now, deliver their advice electronically and print it out at the time of the provision of the advice. If that advice has been prepared beforehand, there might be some questions about whether or not that advice has been sufficiently tailored for the client's circumstances. That may be one issue, but the reality of the matter is that, but for that modest change of disclaimers and wording of disclaimers, financial planners will be able to continue to provide the same advice after 1 July as they are providing right now.16

2.14 A senior officer at Treasury also stated that he was 'puzzled' by the FSC's estimate. The officer advised the committee that this figure had not been put forward at previous consultations with the industry that Treasury had conducted.17 Treasury provided the committee with its summary of the costs that the industry would face,

13 Mr Robert Jeremenko, Senior Tax Counsel, The Tax Institute, Proof Committee Hansard, 12 June 2013, p. 29.

14 Mr John Brogden, Chief Executive Officer, Financial Services Council, Proof Committee Hansard, 12 June 2013, p. 5.

15 Ms Cecilia Storniolo, Senior Policy Manager, Financial Services Council, Proof Committee Hansard, 12 June 2013, p. 1.

16 Mr Yasser El-Ansary, General Manager, Leadership and Quality, Institute of Chartered Accountants Australia, Proof Committee Hansard, 12 June 2013, p. 23.

17 Mr Gerry Antioch, General Manager, Tax System Division, Treasury, Proof Committee Hansard, 12 June 2013, p. 34.

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highlighting in particular that the transitional arrangements for registration mitigate the potential costs associated with changing the disclaimer:

[To register] the cost would be $400 for three years for a non-individual and $200 for an individual for three years. We went on to say the education costs are estimated to range between $680 and $1,060 in order to acquire appropriate qualifications that someone may not have. In relation to the disclaimer, there will be just a couple of words that will be changing and it is only for those who do not register. If you choose to register with the Tax Practitioners Board, then you do not put on the disclaimer. For those who choose not to register and use a disclaimer, they can do that [until] after 31 December 2014.18

Committee comment

2.15 The committee has asked the FSC for further details regarding its $1 billion estimate of the total cost to industry associated with implementing these measures. Treasury's RIS advises that there is between 8,000 and 17,000 financial advisers in Australia who could be providing tax advice for a fee or other reward.19 However, one stakeholder directed the committee to evidence received during a previous inquiry, where ASIC advised that, as at 10 May 2013, there were 5,027 entities that held AFSLs and 51,147 authorised representatives of AFSL holders.20 Regardless of the figure used, the compliance costs per adviser appear overstated when based on a $1 billion cost to industry. Given the evidence provided by Treasury, CPA Australia and the ICA, and the extended transitional arrangements that means the full regime would not be in effect until 1 July 2016, it is difficult to believe that the $1 billion estimate of costs has not been based on an unrealistic analysis. However, the committee would welcome further clarification from the FSC on this issue.

2.16 In any case, the committee is eager to ensure that any compliance costs during the transitional period are minimised. Issues related to this are examined in chapter 3.

The policy development process

2.17 The consultation undertaken by Treasury regarding the government's policy and the amount of time that industry had to respond to the specific amendments were matters that were raised by stakeholders during this inquiry. However, noticeably different views about the consultation process were put forward.

18 Mrs Leslie Macdonald, Manager, Tax Administration Policy Unit, Treasury, Proof Committee Hansard, 12 June 2013, p. 33.

19 Explanatory memorandum, paragraph 4.51.

20 ASIC also advised that there is a total of 59,564 links to AFSL holders—the higher number for links than what would be reached if the number of AFSL holders and authorised representatives were simply added together is 'due to the fact that some are authorised representatives of more than one licensee'. ASIC, answer to question on notice, Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, received 13 May 2013, p. 1. See Financial Planning Association, Submission 8A, p. 1.

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2.18 CPA Australia and the ICA stated that the development of a new regulatory environment for tax advice 'has been in development for more than 20 years, culminating in the passage of the Tax Agent Services Act 2009'.21 The Tax Institute characterised the policy and legislation development process as involving 'substantial consultation' noting that since 2010 a number of meetings have been held to discuss the policy; in particular, the Tax Institute suggested that the definition of tax (financial) advice service had been 'consulted on substantially'.22

2.19 Other witnesses, however, made some critical comments about the process for developing the bill. For example, the Association of Financial Advisers described it as 'sporadic, with large gaps' and, although there had been engagement with the industry more recently, in its view 'it has been quite limited with not a lot of detail provided'.23 These perspectives led to some stakeholders suggesting that the implementation of the measures should be delayed by up to 12 months. Additionally, the FSC noted that draft regulations, competency requirements and information about available training courses and the accreditation process have not been released.24 In response to this

discussion, however, Mr Paul Drum, Head of Policy at CPA Australia remarked that 'we would all love certainty in every element of law, but we do not always get it':

We accept that there are matters of fine detail and interpretation that will of course need to be worked through as part of the implementation of this new framework. Any new policy or regulatory framework is always going to be subject to the need for interpretive guidance to be provided to those impacted once the rules are in place. We draw parallels with how new tax laws are enacted and then become the subject of rulings by the Australian tax office or indeed the introduction of the new FOFA reforms, which are now only just being subject to regulatory guidance from ASIC. So this is not a new approach to legislation and interpretation.25

2.20 Various stakeholders have provided the committee with information on the consultation process that led to the introduction of the bill. This evidence, supplemented by relevant information from the explanatory memorandum, the RIS and other publicly available information, is presented in Figure 2.1.

21 CPA Australia and the Institute of Chartered Accountants Australia, Submission 9, p. 1.

22 The Tax Institute, Submission 5, p. 2.

23 Mr Philip Anderson, Chief Operating Officer, Association of Financial Advisers, Proof Committee Hansard, 12 June 2013, p. 8.

24 Mr John Brogden, Chief Executive Officer, Financial Services Council, Proof Committee Hansard, 12 June 2013, pp. 1, 7.

25 Mr Paul Drum, Head of Policy, CPA Australia, Proof Committee Hansard, 12 June 2013, pp. 19-20, 21.

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Figure 2.1: Key stages in the development of the proposed amendments

13 November 2008 Tax Agent Services Bill 2008 is introduced into the House of Representatives.

March 2009 Tax Agent Services Bill is passed by Parliament. The Act commences on 1 March 2010.

23 April 2010 The government announces further details about the coverage of the tax agent service regime, including that public consultation would take place on regulatory arrangements for tax agent services and advice provided by financial planners. Also announced that financial planners will be exempt from TASA until 30 June 2011.

29 November 2010 The government releases an options paper for public consultation: Regulation of tax agent services provided by financial planners. The paper set out two possible options for regulation.

15 December 2010 Assistant Treasurer Sherry meets with representatives of finance and accounting bodies to discuss possible regulatory frameworks for financial advisers.

8 February 2011 Minister Shorten, representatives from the financial planning, tax and accounting bodies, Treasury, the TPB and ASIC meet to discuss principles for future regulation.

6 April 2011 Minister Shorten and government agencies meet with industry

representatives. A broad set of principles for developing regulatory arrangements is agreed to and announced. Also announced is an extension to 30 June 2012 of the exemption of financial planners from TASA.

27 February 2012 Confidential meeting between Treasury and financial planning, tax and accounting bodies, the TPB and ASIC takes place.

May 2012 Confidential consultation between Treasury and industry associations on the framework takes place.

30 April 2012 An extension of the exemption of financial planners from TASA to 30 June 2013 is announced.

October 2012 The government's proposal for regulation is announced in 2012-13 Mid-year Economic and Fiscal Outlook.

8 February 2013 Treasury releases for public consultation an exposure draft of the bill that would give effect to the government's policy. Submissions due 8 March 2013.

May 2013 Confidential discussions held (at association level) with Treasury and Assistant Treasurer Bradbury's office regarding the definition of tax (financial) advice services.

29 May 2013 Bill introduced to the House of Representatives.

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3 June 2013 The House of Representatives Standing Committee on Economics discharges an inquiry into the bill.

4 June 2013 ASIC writes to key stakeholders regarding the interaction of TASA and FOFA.

6 June 2013 The House of Representatives agrees to a motion moved by the

government that amends the bill to remove the schedules relevant to this inquiry. The matters covered by the former schedules are referred to the Parliamentary Joint Committee on Corporations and Financial Services.

14 June 2013 Treasury releases a discussion paper on the proposed educational and experience requirements for tax (financial) advisers. Submissions are due to close on 11 July 2013.

Sources: Senator the Hon Nick Sherry, 'Coverage of Tax Agent Services Regime', Media release, 2010 no. 72 (23 April); The Hon Bill Shorten MP,' Communiqué: Future regulation of financial planners providing tax advice', Media release, 2011 no. 27 (10 February) and 'Future Regulation of Financial Planners Providing Tax Advice', Media release, 2011 no. 49 (7 April); explanatory memorandum, paragraphs 4.38, 4.40, 4.89; Financial Services Council, Submission 7, p. 12; Ms Joanna Bird, Australian Securities and Investments Commission, Proof Committee Hansard, 12 June 2013, p. 32.

2.21 Regardless of opinions about the consultation process, among stakeholders there was broad agreement that the legislation needs to proceed in some form, or that a further extension to the TASA carve out needs to be granted, given that the current exemption expires after 30 June 2013. Mr John Brogden from the FSC summed up this issue well:

The worst outcome of all would be if the legislation did not proceed in any form, because that would leave the financial advice industry in a perilous situation where an enormous number of advisers simply would be in breach and be unable to comply. That is not an acceptable environment for Australians and their financial advice.26

Committee comment

2.22 The committee considers that the process for developing this legislation has been thorough and consultative. The committee commends the government and Treasury officers for the ongoing engagement with industry that has occurred since 2010. As with many new pieces of legislation, there will be various legislative instruments and policies that need to be developed to ensure that the primary legislation operates as intended. However, it is difficult for public consultation on these to be conducted prior to the primary legislation being passed.

26 Mr John Brogden, Chief Executive Officer, Financial Services Council, Proof Committee Hansard, 12 June 2013, p. 3.

2.23 The committee also notes that, given the TASA exemption ceases on 1 July 2013, there is a clear need for legislation to be enacted before this date to ensure that financial advisers are not immediately brought into the full TASA regime. Accordingly, the approach taken by the government in seeking to guide legislation through the Parliament that would prevent this outcome is clearly appropriate.

Chapter 3

Key issues

3.1 This chapter examines the matters that were included in the terms of reference for this inquiry. The issues examined include:

• the definition of tax (financial) advice service;

• minimising regulatory duplication;

• interplay of the Tax Agent Services Regime with the Future of Financial

Advice (FOFA) reforms, in particular the best interests duty;

• the proposed transitional arrangements; and

• consequences of the measures for new advice providers.

3.2 The committee's overall conclusion and final recommendations can be found at the end of this chapter.

Definitional issues

3.3 A matter of some conjecture is the definition of tax (financial) advice services. The definition, which would be set in statute, would effectively determine the scope of the legislation. The way in which a tax (financial) advice service is defined will determine the number of Australian Financial Service Licence (AFSL) holders that will be required to register with the Taxation Practitioners Board (TPB). If the definition is set narrowly, comparatively fewer AFSL holders will be required to register with the TPB than if the definition is broadly based. The following section considers these issues.

The meaning of tax (financial) advice service

3.4 A key threshold issue relating to the proposed measures is the definition of a tax (financial) advice service. Proposed section 90-15 of previous schedule 3 to the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 contained the following definition:

(1) A tax (financial) advice service is a *tax agent service (other than within the meaning of subparagraph (1)(a)(iii) of the definition of that expression) provided by a *financial services licensee or a *representative of a financial services licensee in the course of giving advice of a kind usually given by a financial services licensee or a representative of a financial services licensee to the extent that:

(a) the service relates to:

(i) ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise, under a *taxation law; or

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(ii) advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a taxation law; and

(b) the service is provided in circumstances where the entity can reasonably be expected to rely on the service for either or both of the following purposes:

(i) to satisfy liabilities or obligations that arise, or could arise, under a taxation law;

(ii) to claim entitlements that arise, or could arise, under a taxation law.

(2) The Board may, by legislative instrument, specify that another service is a tax (financial) advice service.

(3) However, a service is not a tax (financial) advice service if:

(a) it consists of preparing a return or a statement in the nature of a return; or

(b) it is specified in the regulations for the purposes of this paragraph.1

3.5 The explanatory memorandum notes that a tax (financial) advice service consists of two elements:

• providing a tax agent service; and

• providing that service in the course of giving advice that is of a kind usually

given by a financial services licensee or a representative.2

3.6 The explanatory memorandum clarifies that former schedule 3 would define a tax (financial) advice service as a tax agent service. The effect would be to integrate tax (financial) advice services within the existing legislative framework of the Tax Agent Services Act 2009 (TASA) where the concept of a tax agent service defines and limits those services regulated by the TPB.3

3.7 Importantly, services that are not tax agent services will not be tax (financial) advice services. Tax agent services are defined in the Tax Agent Services Regulations 2009. The explanatory memorandum also notes that where an entity in the financial services industry gives a client tax-related factual information it does not provide a tax agent service and therefore the advice will not be a tax (financial) advice service.4

1 Asterisks are used in TASA to identify defined terms. The definitions of these terms are compiled in Division 90 of that Act.

2 Explanatory memorandum, paragraph 3.32

3 Explanatory memorandum, paragraph 3.44.

4 Explanatory memorandum, paragraph 3.47.

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3.8 In terms of defining a tax (financial) advice service through advice 'that is of a kind usually given by a financial services licensee or a representative', the explanatory memorandum makes the following point:

The relevant test is whether the tax agent service is given in the course of advice that is usually given by a financial services licensee or a representative. This broader advice is a necessary condition as it provides the context for the tax agent service and distinguishes tax (financial) advice services from other tax agent services. In effect, this means that the tax agent services will usually take the form of tax advice that can reasonably be expected to be relied on for tax purposes that is given for the purpose of helping to fully inform a client about their current and future financial affairs. As such, it could be given:

• as part of a strategic discussion about a client's long-term financial objectives;

• in the course of advising a client about the relative merits of particular financial products or other investments; or

• in the course of advising a client about non-financial products such as real property.5

3.9 The explanatory memorandum provides examples of where this broader advice is given. It notes the case of a financial adviser who provides advice on a client's options for a transition to retirement strategy, which includes a discussion on the capital gains tax discount and the small business tax concessions. This advice is usually provided by financial services licensees.

3.10 On the other hand, the explanatory memorandum notes that where a registered tax agent provides tax agent services that do not take into account a client's financial affairs and objectives more generally, it is not advice usually provided by a financial services licensee, and the service will not be a tax (financial) advice service. If a tax agent does provide a tax agent service when giving advice that is usually provided by a financial services licensee, they do not need to separately register with the TPB as a registered tax (financial) adviser.6 The explanatory memorandum advises that this is because registered tax agents can also provide tax (financial) advice services without contravening TASA.

Arguments to amend the definition of a tax (financial) advice service

3.11 The committee heard some arguments that the definition, as stated in proposed section 90-15 of previous schedule 3 to the bill, should be redrafted. It heard that the definition proposed in the exposure draft of the bill had been too tightly cast, while the definition proposed in schedule 3 is too broad. The Financial Services

5 Explanatory memorandum, paragraph 3.41.

6 Explanatory memorandum, paragraph 3.43.

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Council (FSC) and the Association of Financial Advisers (AFA) strongly support the following definition which, they argued, is a sensible midpoint:

A tax (financial) advice service is a tax agent service (other as within the meaning of subparagraph (1)(a)(iii) of the definition of that expression) provided in the course of providing financial advice services as defined below that relates to ascertaining an entity's tax liabilities, obligations or entitlements or advising an entity about tax liabilities, obligations or entitlements.

For the purpose of this option, financial advice services would mean advice in respect of a client’s financial affairs specifically related to wealth management, retirement planning, estate planning, risk management and related advice, including:

(b) advice on financial products as defined in s764A carried out pursuant to an Australian Financial Services License;

(c) advice and dealing in financial products as defined in section 766B and 766C of the Corporations Act;

(d) non-financial product advice including financial strategies or structures; and

(e) taxation advice which is related to advice provided under (a) or (b) or (c).

For the avoidance of doubt, a tax (financial advice) service does not include preparing, or lodging, a return or a statement in the nature of a return.7

3.12 This definition avoids mention of the phrase 'usually given by a financial services licensee'. Instead, it sets out what these services are as they relate to definitions of 'financial products' in the Corporations Act 2001.

3.13 The FSC noted in its submission that in closed consultations a fortnight before the bill was introduced into Parliament, this alternative definition was supported by 'all associations including industry super, accounting and tax bodies, financial planning bodies'.8 In addition to the FSC, the AFA and the Financial Planning Association (FPA) also told the committee that they strongly support this 'industry definition' with its link to financial product advice.

3.14 The FSC, the AFA and the FPA all identified the breadth of the definition in proposed section 90-15 of previous schedule 3 as a matter of concern. The FSC told the committee that the bill's definition is a 'broad principles-based definition, and may

result in unintended consequences'. It claimed that while principles-based approaches are generally preferable, in this instance the proposed definition 'captures all AFSLs'.9 Ms Cecilia Storniolo, Senior Policy Manager at the FSC, told the committee that

7 Financial Services Council, Submission 7, p. 7.

8 Financial Services Council, Submission 7, p. 16.

9 Financial Services Council, Submission 7, p. 16.

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proposed section 90-15 would not only capture financial advisers but also insurance companies, superannuation funds and fund managers. She added:

That was never our understanding of the regime. That was not what was announced in the numerous press releases by the government across a couple of years. So we were very surprised when the bill was tabled that that was the definition the government had chosen to go with. In consultation that was had with the industry two weeks prior to the bill being tabled, peers in other association bodies, some of which are represented here, all agreed that that definition was not an appropriate definition; it was too broad. We recommended that the government consider the recommendation that we have included here in our submission, which specifically aims to narrow the definition to apply this category to advice providers, not generally to AFSLs.10

3.15 Similarly, Mr Phil Anderson, Chief Operating Officer of the AFA, told the committee that it was unfortunate that a definition was rejected that specifically addressed what financial advisers do. Of the proposed definition in schedule 3, Mr Anderson commented:

A financial services licensee is a very broad category. What does 'of a kind usually given by a financial services licensee or a representative of a financial services licensee' actually mean?

…It is our understanding that the TASA amendment was targeted at financial advisors, but a financial services licensee included a wide range of different types of entities and is much broader than just financial advisors. An FSL holder also includes product providers, managed investment schemes, superannuation funds, life insurers, general insurers, custodians, stock brokers, research businesses and so on. This opens up the question as to whether the TASA legislation is expected to apply to stock brokers, general insurance brokers, research companies, fund managers, platform operators and others who might be caught under this definition. We believe that this is an important point and would like to see Treasury reconsider the use of the definition that the industry collectively recommended.11

3.16 The FPA, which also supports the industry definition, expressed the same concerns with the breadth of the definition proposed in previous schedule 3. Mr Mark Rantall, the Association's Chief Executive Officer, told the committee:

The FPA believes the scope of this definition captures anyone being paid to operate and provide advice under a licence. It does not consider who should be captured versus who is captured or, similarly, the type of advice that should be captured versus the type of advice that is captured. For example, it is our understanding that the definition captures superannuation funds

10 Ms Cecilia Storniolo, Financial Services Council, Proof Committee Hansard, 12 June 2013, p. 3.

11 Mr Phil Anderson, Association of Financial Advisers, Proof Committee Hansard, 12 June 2013, p. 8.

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such as intra-fund advice, financial advice provided for wholesale or sophisticated investors, general advice including that provided even by bank staff, stockbrokers, general insurance brokers and mortgage brokers, to name a few.12

Tax information in the context of general advice

3.17 The Australian Bankers' Association (ABA) also expressed concern that the bill's definition would cover all AFS licensees across a range of financial services and business operations. It argued that this would include information and advice offered by banks and banking groups. Of particular concern for the ABA, however, is that general tax information, which is provided by banks 'in a number of contexts and in a number of ways by banks and bank staff', would be captured by the bill. Staff providing this general information would be required to become registered tax (financial) advisers. The ABA was adamant:

We strongly believe this is contrary to the policy intent of the legislation to ensure that persons or entities providing tax advice, which is not merely incidental or general tax information, are covered by the legislation.13

3.18 The FSC also argued that legislation should explicitly exempt from definitions of a tax (financial) advice service a service that provides tax information in the context of general advice.14 In other words, AFSL holders providing generally available tax information should be exempted from having to register with the TPB.15

3.19 The committee notes that paragraph 3.47 of the explanatory memorandum clearly states that where an entity in the financial services industry gives a client tax-related factual information (therefore not providing a tax agent service), that advice will not be a (tax) financial advice service. As the explanatory memorandum should be read in conjunction with the Act and is used by the courts to determine the meaning of legislation, the committee believes that the wording in paragraph 3.47 is clear and adequate.

3.20 The committee also notes that general tax information is currently exempted from tax agent registration under TASA. However, the committee suggests that an explicit carve-out of banks and their staff providing general tax information could be inserted in the regulations, as allowed under paragraph 3(b) of proposed section 90-15 of previous schedule 3.

12 Mr Mark Rantall, Chief Executive Officer, Financial Planning Association, Proof Committee Hansard, 12 June 2013, p. 15.

13 Australian Bankers' Association, Submission 10, p. 2.

14 Ms Cecilia Storniolo, Senior Policy Manager, Financial Services Council, Proof Committee Hansard, 12 June 2013, p. 3.

15 Financial Services Council, Submission 7, p. 19.

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Treasury's view on the definition

3.21 The committee asked Treasury to explain why it had opted for the definition in proposed section 90-15 of previous schedule 3. Treasury responded:

The definition that is currently in the bill consists of two key elements. One is that the service has to be a tax agent service. That is an existing concept in the Tax Agent Services Act. The other element of the definition is that it needs to be a service given in the course of giving advice that is of a kind usually given by a financial services licensee or representative. That second part of the definition is to limit the types of services that financial advisers can provide, and it is to provide a connection with the other work that they do.16

3.22 Treasury explained to the committee the basis for its adoption of a principles-based definition of a tax (financial) advice service in previous schedule 3. This definition was reached following industry disquiet that the initial proposal would not cover the full remit of financial advisers' services, and Treasury's concern that a definition based on the concept of 'financial product advice' may similarly fail to cover all types of services that financial advisers may be providing. Treasury told the committee:

The definition has evolved since the exposure draft, where it went out on the basis of it being a tax agent service and being given in the course of advice on one or more financial products. The concern that industry had with that definition was that it was very narrow and that it would not adequately cover all of the types of services that financial advisers would be providing. There are various ways of being able to widen the definition in relation to that aspect. One possibility could be connecting it to the concept of financial product advice, which is in the Corporations Act…

The concern was that if the legislation were limited to financial product advice then, again, it might not cover all the types of services that financial advisers may be providing. Where we ended up with the definition is trying to take a principled approach by saying that, on the basis that the registration requirements would include the need to be a financial services licensee or a representative of a financial services licensee, the second element of the definition would be that it is a tax agent service that is given in the course of giving advice that is of a kind usually given by a financial services licensee or a representative so that it best matches the types of registration requirements which would be required under this regime with the types of services that those entities would be providing.17

3.23 The committee asked Treasury to comment further on the concern about the industry association's proposed definition based on 'financial product advice'. Treasury responded:

16 Mr Philip Ackroyd, Adviser, Revenue Group, Law Design Practice, Treasury, Proof Committee Hansard, 12 June 2013, p. 30.

17 Mr Philip Ackroyd, Treasury, Proof Committee Hansard, 12 June 2013, p. 31.

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The concern is that, if there is a reference to financial product advice in this definition and then there are other advice aspects in addition to financial product advice, that suggest[s] that those additional advice aspects are not incorporated in the definition of financial product advice. The definition of financial advice is a Corporations Act concept and it is administered by ASIC. There would be a concern that, if we were to adopt a definition which said 'financial product advice plus other advice aspects', that could throw into doubt how ASIC is administering the Corporations Act, which is not the purpose of these amendments.18

3.24 The committee asked the Australian Securities and Investments Commission (ASIC) to comment on this observation. ASIC told the committee:

The phrase 'financial product advice' is a defined term in the Corporations Act and it covers not the entire field but basically the whole field of what financial advisers do. The one obvious gap is that often financial advisers will give advice in relation to real property. That is not caught by the Corporations Act definition of financial product advice unless it is advice to an SMSF trustee. That is just a technical wrinkle. I have not seen these other definitions so it is hard for me to engage. But, as a general principle, we would be concerned if there was some suggestion that the definition of financial product advice in the Corporations Act did not cover, apart from that limited exemption I have referred to, the breadth of activities that financial advisers conduct.19

Committee view

3.25 The committee is concerned that the definition proposed by the industry associations may create uncertainty about the role of a financial adviser and that it may interfere with ASIC's administration of the Corporations Act. This should not and must not happen. The committee sees more merit in the broad, principles-based approach that was included in schedule 3. This will ensure that typical financial advisers can be registered as a tax (financial) adviser rather than a full tax agent.

Minimising regulatory duplication

3.26 One of the features of the proposed regulatory arrangements is that it will be a co-regulatory regime involving both the TPB and ASIC. In theory, a co-regulatory regime could create confusion for industry participants and lead to regulatory duplication. This risk, and ways to address it, seems to have been adequately considered during the policy development process. In fact, the explanatory memorandum expressly states that a key objective of the new regime is 'to minimise compliance costs by avoiding regulatory overlap' between the TPB and ASIC. The explanatory memorandum adds that this is intended to be achieved by 'removing

18 Mr Philip Ackroyd, Treasury, Proof Committee Hansard, 12 June 2013, p. 31.

19 Ms Joanna Bird, Senior Executive Leader, Australian Securities and Investments Commission, Proof Committee Hansard, 12 June 2013, p. 31.

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legislative impediments to the TPB and ASIC sharing information about those entities regulated by both agencies'.20 It adds that the TPB and ASIC are currently developing a memorandum of understanding 'to underpin their future relationship with a commitment to work closely together through an open and consultative approach and to provide each other with positive assistance wherever possible'.21

Stakeholder views

3.27 The FPA suggested that ASIC remain the primary regulator of financial planning and that registration with the TPB should be facilitated through ASIC's licensing process. The FPA also noted that the co-regulatory model could lead to confusion for clients as to which regulator to approach with a complaint, although it noted that most complaints are referred to the holder of the AFSL in the first instance.22

3.28 Noting that the education and competence requirements are not yet finalised, the ABA suggested that 'it is unlikely that the training and competency requirements would do anything more than be a duplication' of requirements expressed in ASIC's Regulatory Guide 146. Accordingly, it called for the regulations to clearly deem that existing requirements and competencies are satisfactory.23

3.29 The FSC provided a number of suggestions on how regulatory duplication could be minimised. The first suite of its recommendations focused on the proposed professional indemnity insurance (PI insurance) requirements, noting that it is a

licensing requirement for an AFSL to have PI insurance cover. The FSC called for the TPB to consider for its requirements a number of PI insurance arrangements, including:

• the PI insurance held by a licensee where it already insures the licensee for tax advice;

• an AFSL's PI insurance cover (when considering individual entity

registrations); and

• whether there are circumstances where self insurance may be a viable alternative to extra PI insurance requirements, such as when licensees can demonstrate sufficient financial strength.24

20 Explanatory memorandum, paragraph 3.21.

21 Explanatory memorandum, 3.87.

22 Financial Planning Association of Australia, Submission 8, p. 17.

23 Australian Bankers' Association, Submission 10, p. 2.

24 Financial Services Council, Submission 7, pp. 23-24.

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Committee view

3.30 The committee notes the views expressed by stakeholders regarding PI insurance and the education requirements. On the potential for regulatory duplication that can arise from these issues, the committee is not of the opinion that the proposed legislative amendments would need to be reviewed. The committee is confident that the regulators will develop a sensible and appropriate approach to PI insurance and competency matters.

The interplay between the Tax Agent Services Act 2009 and the best interests duty in the Future of Financial Advice reforms

3.31 This inquiry's third term of reference directs the committee's attention to how TASA interacts with the 'best interests' duty in the recently passed FOFA legislation. This was a matter of some concern for several submitters and witnesses.

3.32 Section 961B of the Corporations Act relates to the best interests duty of financial advisers. These obligations require the adviser to identify:

• the objectives, financial situation and needs of the client that were disclosed to the provider by the client through instructions;

• the subject matter of the advice that has been sought by the client (whether explicitly or implicitly); and

• the objectives, financial situation and needs of the client that would

reasonably be considered as relevant to advice sought on that subject matter (the client’s relevant circumstances).

3.33 In addition:

• where it is 'reasonably apparent' that information relating to the client's

relevant circumstances was incomplete or inaccurate, the adviser must make reasonable inquiries to obtain complete and accurate information;

• the provider must assess whether they have the expertise to provide the client advice on the subject matter sought and, if not, they must decline to provide the advice (paragraph 961B(2)(d));

• if, in considering the subject matter of the advice sought, it would be reasonable to consider recommending a financial product, the provider must conduct a reasonable investigation into the financial products that might achieve those objectives and needs of the client that would reasonably be considered as relevant to advice on that subject matter;

• the provider must base all judgements in advising the client on the client's

relevant circumstances; and

27

• take any other step that at the time of the advice would reasonably be regarded

as in the best interest of the client. This is the best interest 'safe harbour' (paragraph 961B(2)(g)).25

3.34 In December 2012, ASIC released Regulatory Guide 175 (RG175) to explain how these obligations will operate when they come into effect on 1 July 2013.26 Paragraphs 298 to 301 of RG175 relate to 'assessing the expertise of the advice provider'.

3.35 The AFA has expressed strong concerns about the interplay between the TASA experience requirements and paragraph 961B(2)(d) of the Corporations Act. As noted above, this provision requires the adviser to assess whether they have the expertise to provide the advice. The AFA noted in its submission that the TASA legislation:

…will lead to the establishment of a standard for taxation qualifications that is likely to be above the current level for a significant proportion of advisers. We believe that there is a risk that financial advisers, who provide advice without this qualification, will be in breach of the Best Interest Duty. 27

3.36 In other words, TASA will set a qualifications standard that many financial advisers (required to register as tax (financial) advice service providers) are not able to meet, and they may therefore fall foul of the best interests expertise provisions in

paragraph 961B(2)(d) of the Corporations Act. The AFA explained that this matter was discussed with ASIC on 3 June 2013. According to the Association, ASIC responded by suggesting that 'it will be possible for an adviser to satisfy both these obligations' with some guidance material to be provided 'further down the track'. However, the AFA expressed concern that:

… there may subsequently be conditions related to the manner of supervision, which may present issues in terms of how the financial advice

25 Corporations Act 2001, s. 961B. ASIC's regulatory guide explains that in terms of the 'safe harbour' provision the adviser may additionally need to: (a) explain clearly to the client the advice service that is and is not being provided; (b) if the advice includes a product recommendation, provide related strategic recommendations that benefit the client; (c) depending on the subject matter of the advice, specify in the advice that the client should review any decision made about financial products on the basis of the advice provided: (i) once after a period of time; (ii) regularly (e.g. every one or two years); or (iii) if the client’s circumstances change; (d) offer to provide advice (or refer the client to someone who can provide advice) on any other key issues identified by the advice provider within the subject matter of the advice sought by the client. Australian Securities and Investments Commission, Licensing—Financial product advisers: conduct and disclosure, Regulatory Guide 175, December 2012, paragraph 340.

26 Australian Securities and Investments Commission, Licensing—Financial product advisers: conduct and disclosure, Regulatory Guide 175, December 2012.

27 Association of Financial Advisers, Submission 11, p. 4.

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industry is structured. We have illustrated this point to highlight the potential for conflict between TASA and the Best Interests Duty. FoFA is a very complex piece of legislation, and therefore it would be necessary to give the issue of inconsistency between the legislation much greater thought. No one has had the opportunity to do this.28

3.37 The AFA also has concerns about the mechanism in TASA that requires that only a 'sufficient number' of tax agents need to be registered with the TPB. The Association questioned whether this would mean that only one person in a financial advice practice needs to be registered. It noted that a clear answer to this issue is important to understand the registration process and education requirements of tax

(financial) advice service providers under the new legislation and how these requirements interact with the best interests duty.29

3.38 A further (related) concern of the AFA is the interplay of experience requirements in TASA and for gaining an AFSL under section 911A of the Corporations Act. In its submission, the Association observed that while there is no experience requirement in the AFSL regime, by 2016, there will be a requirement for tax (financial) advisers to pass an experience requirement of at least 12 months before being able to apply for registration with the TPB. The AFA claimed that the TASA experience requirement will:

… fundamentally change the recruitment of new advisers into the financial advice industry. This is another area where there is potential inconsistency between the AFSL regime and the TASA regime. It is difficult to understand the full implications of this without being able to understand who will need to be registered under the 'sufficient numbers' requirement.30

3.39 The FSC recommended that ASIC amend RG175 to enable an advice provider to comply with the best interest duty safe harbour. Specifically, it argued that a statement such as the following be included in paragraph 298 of RG175:

with regards to tax (financial) advice services, an individual advice provider need not be registered with the Tax Board to demonstrate expertise but may provide tax advice under the supervision of a registered tax (financial) advice services entity.31

3.40 Paragraph 301 of RG175 currently sets out a range of factors that an advice provider must consider in determining whether they have the necessary expertise to deliver the advice. The FSC also recommended that subparagraph 301(d) be amended to read:

28 Association of Financial Advisers, Submission 11, p. 4.

29 Association of Financial Advisers, Submission 11, p. 4.

30 Association of Financial Advisers, Submission 11, p. 4.

31 Financial Services Council, Submission 7, p. 10.

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an individual advice provider need not have the expertise in the provision of tax (financial) advice services as demonstrated by registration with the Tax Board provided the individual advice provider is working supervised by a registered tax (financial) advice services entity.32

3.41 In verbal evidence to the committee, the FPA outlined its concern with the interplay between TASA and FOFA. Mr Dante De Gori, General Manager of Policy and Conduct, put the following position:

Specifically our main concern is around the best interest duty obligation, the fact that the Future of Financial Advice reforms are proceeding down a path of individual accountability and responsibility on the advice provider, and the tax agent services regime is very much at a supervisory level, if you like, as opposed to individual responsibility and accountability. The two regimes do not work together in respect of the way in which one gains the experience and ability for them to be able to operate and be able to provide the services that they have been employed to provide. The sticking point is that even though it is the same regulated family, as in financial advisers, and there are two separate regulatory regimes that can operate in isolation, they are actually regulating the same activity, which is the provision of financial advice. That is the concern.33

3.42 The FPA requested in its submission that ASIC review paragraphs 298-301 of RG175. It recommended the same amendments to paragraphs 298 and 301 as proposed by the FSC.34 The ABA also recommended that ASIC should amend RG175 to enable the advice provider to comply with the best interests duty safe harbour in the provision of financial advice.35 It did not provide details of how this might be done.

3.43 Other submitters and witnesses downplayed concerns that TASA was incompatible with the FOFA requirements. In his opening statement to the committee, Mr Paul Drum, Head of Policy at CPA Australia, observed:

The new tax advice services regime for financial planners is complementary and consistent with the AFSL framework which applies under the Corporations Law. Meeting the obligations of acting in the best interests of your client for FOFA purposes under the Corporations Law will be entirely consistent and compatible with acting in the best interests of your client for tax advice purposes. We have received written confirmation on this point from ASIC in the last few days.36

32 Financial Services Council, Submission 7, p. 10.

33 Mr Dante De Gori, General Manager of Policy and Conduct, Financial Planning Association, Proof Committee Hansard, 12 June 2013, p. 16.

34 Financial Planning Association, Submission 8, p. 19.

35 Australian Bankers' Association, Submission 10, p. 2.

36 Mr Paul Drum, Head of Policy, CPA Australia, Proof Committee Hansard, 12 June 2013, p. 19.

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Committee view

3.44 The committee notes that TASA and its regulations also have a 'best interests' duty and competency and experience requirements. Section 20-5 states that 'an individual, aged 18 years or more, is eligible for registration as a registered tax agent or BAS agent if the Board is satisfied that … the individual meets … requirements relating to qualifications and experience … in respect of registration as a registered tax agent or BAS agent'. Subsection 30-10(4) of TASA (the Professional Code of Conduct) states that 'you must act lawfully in the best interests of your client'. Subsection 30-10(7) states: 'you must ensure that a tax agent service that you provide, or that is provided on your behalf, is provided competently'.

3.45 Nonetheless, the committee does recognise differences in how competence is tested under TASA and as a financial services provider under the Corporations Act. The committee asked ASIC if it could comment on concerns raised by industry associations about the expertise requirements in the two regimes. ASIC responded:

… 'expertise' is a broad concept in the best interest duties, so it does not just relate to competence; it also relates to things such as whether the individual adviser has authorisation to advise on the particular subject matter et cetera. But clearly, one part of expertise is having the competence to provide the advice sought. The idea is that if you do not have the competence you should not give the advice. Under the Tax Agent Services Act, as I understand it, not all individual advisers will be registered with the Tax Practitioners Board. In fact, competence will be tested at a higher level.

There was some concern expressed to us from industry that if there were an individual adviser who was not actually registered with the Tax Practitioners Board that we would take the view that they were not competent to give advice if it related to taxation issues. We said, 'No, it is just that the TASA regime tests competence at a particular level, but it still requires everybody who gives tax advice to be competent'. So we did not see any inconsistency, and we would be happy to provide guidance to that effect. This would simply say something like, 'An adviser may still have the expertise required to give advice even if they are not individually registered, because they operate under the supervision model'. So they are supervised by somebody who is competent, and we would of course also expect them to have met the training standards that we impose on individual advisers.37

3.46 The committee finds this clarification useful. It will be important for ASIC and the TPB to explain clearly in guidance material how the competence tests in TASA and under the Corporations Act differ. The key point is that despite differences between TASA's supervisory model of registration—under which a 'sufficient number' of individuals must be registered as tax agents—and registration of individual advisers

37 Ms Joanna Bird, Senior Executive Leader, Australian Securities and Investments Commission, Proof Committee Hansard, 12 June 2013, p. 32.

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under the Corporations Act, there is a requirement that the service provider is competent.

Recommendation 1

3.47 The committee recommends that the Australian Securities and Investments Commission, in consultation with stakeholders including the Taxation Practitioners Board (TPB), consider the case for amending Regulatory Guide 175 along the lines proposed by the Financial Services Council and the

Financial Planning Association. The prime consideration must be to protect the integrity of the principles underpinning the best interests duty.

3.48 The committee suggests that as part of this process, the TPB should discuss with relevant stakeholders the current requirement in the Tax Agent Service Act 2009 for a 'sufficient number' of individuals to be registered as tax

agents before a company is eligible for registration.

Transitional arrangements

3.49 The bill included detailed arrangements for transitioning to the new framework. While the amendments were drafted to commence on 1 July 2013, the full regime would not be effective until 1 July 2016. This three year transitional arrangement, described by two witnesses as 'very generous',38 was divided into two 18 month periods, as follows:

• The notification period (1 July 2013 to 31 December 2014). During this period, to become registered an entity would need only to notify the TPB that they are providing tax (financial) advice services and that they are either a financial services licensee or an authorised representative. Unregistered entities may continue to give tax (financial) advice during this period provided that it accompanies such a service with the required disclaimer (this aspect is discussed further below).39

• The transitional period (1 January 2015 to 30 June 2016). During this time entities may be registered without having satisfied all of the ongoing registration requirements that would apply under the full framework. For example, individuals would need only to satisfy the TPB that they have sufficient experience to be able to provide tax (financial) advice services to a competent standard, rather than satisfy any specific registration requirements. However, unlike the notification period, an entity would only be registered once the TPB has notified the applicant that their application was successful.40

38 Mr Yasser El-Ansary, General Manager, Leadership and Quality, Institute of Chartered Accountants Australia, Proof Committee Hansard, 12 June 2013, p. 19; Mr Robert Jeremenko, Senior Tax Counsel, The Tax Institute, Proof Committee Hansard, 12 June 2013, p. 26.

39 Explanatory memorandum, paragraphs 3.149, 3.154.

40 Explanatory memorandum, paragraphs 3.160-3.161.

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The disclaimer

3.50 The disclaimer is similar to that which financial advisers currently give clients under the carve out from TASA, however, the wording is updated to reflect the new term 'registered tax (financial) adviser'. Specifically, if financial advisers do not take advantage of the notification-based registration framework that is proposed to be in place from 1 July 2013 to 31 December 2014, they will need to provide a disclaimer to their clients that confirms that they are not a registered tax (financial) adviser. This is broadly similar to what advisers are required to do under the current carve out from TASA; to illustrate, the existing disclaimer and the proposed disclaimer are reproduced below.

Disclaimer valid until 1 July 2013

(a) the provider of the advice is not a registered tax agent under the Tax Agent Services Act 2009; and

(b) if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent.

Disclaimer available from 1 July 2013 to 31 December 2014 to financial services licensees and authorised representatives that are not registered tax (financial) advisers

(c) the provider of the advice is not a registered tax (financial) adviser under the new law; and

(d) if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent or a registered tax (financial) adviser.

Views on the transitional arrangements

3.51 The FSC and the AFA are concerned that the commencement date of 1 July 2013 would require that, to comply with the new law, financial advisers would immediately need to use the new disclaimers until they obtain their registration via the notification process. The FSC suggested that:

… it will be impossible for the majority of the industry to comply with this requirement on 1 July 2013. Currently, most participants in the industry use a simple warning informing the client to seek tax advice from a qualified tax adviser. Therefore the current warnings would not comply with the TASA warning proposed.41

3.52 The AFA advised that the changes that would need to be made include 'system changes, process changes and training, all at a time when key resources are focussed on FOFA'. It provided some specific examples:

41 Financial Services Council, Submission 7, p. 35.

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There are many hundreds of licensees and there are thousands of advice practices. With financial advice software, it is often necessary to get system providers to make these changes. This is not as simple as changing some words in a word processing template. There are other documents such as Financial Services Guides that need to be changed. In some cases Licensees run this centrally, so this represents a logistics exercise of significant proportion. On the product side, we are also talking about changing Product Disclosure Statements, right across the industry. This is an absolutely enormous task. Given the scale of the task, the industry would need to have at least 6 months to make this change.42

Committee view

3.53 As discussed in chapter 2, substantially different estimates of the costs involved in complying with the new framework were provided to the committee. It is noteworthy that the segment of costs that the FSC first advised would result from the proposed amendments was attributed to compliance with the new disclaimer from 1 July 2013.43

3.54 The committee is sympathetic to concern about the need to comply with the new disclaimer from 1 July 2013. Even if an entity takes advantage of the simple registration process that is available during the notification transition period, there will

be a period of time, however brief, when they will be unregistered and will need to comply with the revised disclaimer requirement. The committee is also of the view that there should be greater time for affected industry participants to become aware of and understand their obligations.

3.55 The committee notes that essentially there is little difference between the two disclaimers. If the proposed amendments are enacted from 1 July 2013, the statements contained in the current disclaimer still appear to be accurate.44 Therefore, while the overall framework should commence on 1 July 2013, some relief from the disclosure requirement should be provided.

3.56 It appears to the committee that there are two options that could resolve this. They are:

42 Association of Financial Advisers, Submission 11, p. 5.

43 Mr John Brogden; Ms Cecilia Storniolo, Financial Services Council, Proof Committee Hansard, 12 June 2013, p. 6.

44 The first statement is certainly correct—the adviser would not a registered tax agent under TASA. The second statement would no longer fully inform the client of the options available to them as it does not acknowledge the existence of tax (financial) advisers and, perhaps, disadvantages registered tax (financial) advisers as the client may not seek advice from them. However, the statement directs the client to a registered tax agent which appears to be an acceptable outcome from a consumer protection perspective given that the tax agent will be qualified to assist the client.

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• delete the new disclaimer and instead legislate to allow the existing disclaimer

to be used from 1 July 2013 up to 31 December 2014; or

• legislate to allow a period of time, perhaps six months, during which both the current disclaimer and the new disclaimer can be used.

3.57 The committee prefers the second option. Allowing a six month period during which both the current disclaimer and the new disclaimer can be used will allow entities that intend to remain unregistered for some time during the notification period to move to the new disclaimer at a time of their choosing between 1 July 2013 and 31 December 2013. It removes the risk of immediate non-compliance with the new disclaimer required after 1 July 2013. Alternatively, a period of six months will provide entities with sufficient time to register under the simplified notification process and, therefore, avoid altogether any costs that may arise from changing disclaimer statements. Provided that the transition timeframe is not otherwise changed—that is, that the full regime still commences on 1 July 2016—a six month period where the transition has commenced, but during which effectively nothing has

changed, will allow affected industry participants an appropriate amount of time during which they can better understand their new obligations without risking non-compliance.

Recommendation 2

3.58 The committee recommends that the transitional arrangements be amended to stipulate that, from 1 July 2013 until 31 December 2013, unregistered financial services licensees and representatives may provide tax (financial) advice services on condition that they accompany such a service with a disclaimer which states that:

(a) the provider of the advice is not a registered tax agent under the Tax Agent Services Act 2009; and

(b) if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent.

or which states that:

(c) the provider of the advice is not a registered tax (financial) adviser under the new law; and

(d) if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent or a registered tax (financial) adviser.

3.59 However, the amendments should ensure that from 1 January 2014 to 31 December 2014 only the second disclaimer outlined above may be used.

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Impact on new financial planners

3.60 Another issue raised by industry regarding the proposed amendments is the impact that they may have on new advice providers, particularly in light of the new requirements regarding qualifications and experience.

3.61 Under the transitional arrangements, from 1 July 2013 to 31 December 2014 financial services licensees and authorised representatives that provide tax (financial) advice services may register with the TPB simply by notifying the TPB. At the public hearing, a Treasury officer observed that advisers who register during this period will be registered for three years without having been required to satisfy the educational and experience requirements, which will only need to be met when they apply for the registration to be renewed.45 However, regarding this stage of the transition process, the AFA suggested that limiting the registration to licensees and authorised

representatives will have implications for new advisers:

If advisers need to meet these experience requirements before providing advice, this will fundamentally change the recruitment of new advisers into the financial advice industry. The legislation only allows for AFSLs and authorised reps to register during the notification period, which is 1 July 2013 to 31 December 2014. So representatives or salaried advisers will be unable to register during this notification period. What are the implications for salary channels and the supervision of advisers during this period?46

3.62 From 1 January 2015 to 30 June 2016 applicants for registration will need to satisfy the TPB that they have sufficient experience to be able to provide tax (financial) advice services to a competent standard. From 1 July 2016 the full framework will come into effect and applicants will need to meet the specific eligibility requirements prescribed by the regulations. In its submission, the FPA detailed its concern about the potential impact that the experience requirement will have on new planners:

While the FPA supports the proposal for a combination of education and experience requirements, we are concerned about how new entrants to the profession can meet the experience requirements. This would create restrictions on entry to the profession and serve as a deterrent particularly to graduates and young students considering career options.

The experience requirements create a situation where new entrants to the profession cannot register with the TPB as in most cases they will not meet the relevant experience requirements. However, under TASA individuals are required to be registered with the TPB when doing the work required in order to gain the 'relevant experience' required by the TPB, resulting in new

entrants breaching the law in these circumstances.

45 Mrs Leslie Macdonald, Manager, Tax Administration Policy Unit, Treasury, Proof Committee Hansard, 12 June 2013, p. 35.

46 Mr Philip Anderson, Chief Operating Officer, Association of Financial Advisers, Proof Committee Hansard, 12 June 2013, p. 8.

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For example, Griffith University offers an integrated learning course in financial planning which requires students to undertake two years full-time study, followed by one year working in the financial planning industry, and a final year of study. It is unlikely that these people would be authorised under the Corporations Act or registered with the TPB.

A graduate may take position as a paraplanner which includes determining the tax liabilities of clients. Cadetships commonly offered within the financial planning industry, are another example.47

3.63 The FSC provided further evidence on how the transitional arrangements may affect new planners. It argued that the maximum relevant experience that could be prescribed in the regulations not exceed the three year transition period:

Otherwise, it will be nonsensical that any new entrant to the industry on 1 July 2013 is unable to qualify for registration under the transitional relief. If we look to like competency regimes such as the removal of the accountants exemption from Licensing (under the Corporations Act), the profession has been afforded six years transition until 30 June 2019 to comply with all AFLS [sic] competency requirements.48

3.64 A common complaint expressed by various industry associations was that draft educational and experience requirements have not been released for consultation. However, at the public hearing Treasury advised that a draft version of the relevant regulations will be released shortly. A Treasury officer also noted that they have recently discussed the draft educational requirements with key industry associations.49

3.65 On 14 June 2013, Treasury released a discussion paper on the proposed educational and experience requirements for tax (financial) advisers that an individual would need to meet to be registered as a tax (financial) adviser.50

Committee view

3.66 It is clearly vital to ensure that new advice providers are not prohibited from employment in the future as a result of the changes. It appears that, to some extent, the concern about the education and experience requirements that will be required stems from the relevant regulations not having been released for public comment.

3.67 Now that Treasury has commenced formal consultation on the proposed educational and experience requirements, the committee considers that concerns about the possible consequences that qualifications and experience requirements may have

47 Financial Planning Association of Australia, Submission 8, p. 20.

48 Financial Services Council, Submission 7, p. 26.

49 Mrs Leslie Macdonald, Manager, Tax Administration Policy Unit, Treasury, Proof Committee Hansard, 12 June 2013, p. 34.

50 Treasury, Proposed registration requirements for registered tax (financial) advisers, Discussion paper, June 2013.

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for new advice providers should be considered through that targeted process. This is particularly the case given that Treasury is accepting submissions until 11 July 2013— that is, the consultation period is open for four weeks—and as it does not appear necessary for these issues to be resolved by the primary legislation.

Concluding comments

3.68 The proposed amendments that the committee has been tasked with reviewing will be an important regulatory change. It is clear that by bringing financial advisers who provide tax advice into the existing regulatory regime that applies to other

providers of tax advice, such as tax agents and BAS agents, the regulatory environment that applies to tax advisory services will be strengthened. As a result, all tax advice that is provided for a fee or other reward will be consistently regulated.

3.69 The important feature of the changes, however, is that they will further protect consumers. If the proposed measures are enacted, financial advisers that provide tax advice will need to meet the new standards of relevant qualifications and experience. Accordingly, consumers of tax advice can be confident that the standard of advice they receive is of a similar professional standard to that provided by tax agents.

3.70 It needs to be recognised that these measures have not been suddenly announced and then thrust onto the industry. It is clear that there has been ongoing consultation with industry since the measures were first proposed in 2010. The committee acknowledges that their remains some uncertainty as the relevant regulations and policies have not yet been released; however, this is not an uncommon feature of the legislative process. Importantly, the measures include a generous three year transitional arrangement with the full regime not commencing until 1 July 2016. For an 18 month period from 1 July 2013, financial advisers could effectively continue to provide services in the same manner they do today.

3.71 Another feature of the transition period is that it will allow registrations to occur in an orderly fashion and for the necessary additional detail about the regime to be developed and enacted. The committee also expects the TPB and ASIC to work together to minimise any unnecessary regulatory overlap and to reduce compliance costs for financial advisers. Nevertheless, the committee has made some recommendations in this report that are intended to minimise any burden on industry participants during the transition period. The committee notes, however, that a far more significant burden will be imposed on the industry if the currently regulatory exemption from TASA that exists until 31 June 2013 expires without a suitable

replacement being enacted. Accordingly, the committee urges that the measures be reintroduced into the Parliament and passed.

Recommendation 3

3.72 Subject to recommendations 1 and 2, the committee recommends that the proposed amendments contained in schedules 3 and 4 to the version of the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 that was read a first time in the House of Representatives be reintroduced and passed.

Ms Deborah O'Neill MP

Chair

Coalition Members' Dissenting Report

A regulatory framework for tax (financial) advice services (previously Tax Laws Amendment (2013 Measures No. 2) Bill 2013, Schedules 3 and 4)

1.1 Coalition members of the Committee consider that these government proposals—to impose additional regulatory requirements on financial planners and advisers who give tax advice—should not be proceeded with at this point.

1.2 In short, the proposed changes need more work to get them right.

1.3 That's why Coalition members of the Committee strongly recommend that the Parliament insist on proper process before progressing proposals to move financial planners and advisers into the Tax Agent Services Act (TASA) regime.

1.4 There are now less than two weeks to go before the changes proposed by the government which would move financial advisers into the TASA regime would come into effect if this legislation was passed. Yet even strong supporters of the change concede that there are still 'a lot of unanswered' questions.

1.5 That’s just not good enough.

1.6 As a fundamental principle, when the Parliament passes a law, those upon whom duties are imposed under that law should be in a position to know what their duties are and to comply with them, by the time the legislation takes effect. Government should inform itself of the amount of preparation time required for a citizen to be in a position to comply and factor that time into the implementation period allowed for the legislation. That is particularly the case where compliance is a complex and costly business affecting many thousands of businesses and individuals, and requiring them to incur expenses, change their business practices, print new standard form documents, change IT systems, vary training procedures and go through many other time consuming and resource intensive processes before they can be in a position to meet their new compliance obligations.

1.7 It is not satisfactory to pass legislation which imposes duties on citizens which take effect within a matter of weeks of the legislation being passed, allowing affected citizens inadequate time for preparation, and to state that regulatory authorities will not enforce compliance strictly from day one. Regrettably, however, this is the course of action the government proposes with this legislation—and it is not a course of action which the Coalition considers to be acceptable.

1.8 The Coalition recognises that the financial services and advice industry provide Australians with a very important service—helping them with their financial health and wellbeing.

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1.9 The Coalition also recognises the significant value of the very important services provided by accountants to their clients.

1.10 We appreciate the need for a consistent approach to the regulation of genuine tax advice whether it is provided by accountants or financial advisers.

1.11 However, it is our view that the current changes to the Tax Agent Services Act 2009 (TASA) before the Parliament are incomplete, have not been properly assessed and raise serious questions about their interaction with other recent regulatory changes impacting on the financial services and advice industry.

1.12 More specifically, the government has already legislated wide-ranging changes to the financial services and advice industry which includes the introduction of a best interests duty for financial advisers and expanded ASIC powers. Provision has also been made for increased adviser competency standards - although these are yet to be finalised.

1.13 The Coalition recognises therefore that in so far as they apply to the financial services and advice industry, these two substantive regimes must work together effectively in a manner which does not create uncertainty or unnecessarily increase compliance costs for no consumer benefit.

1.14 Unfortunately, notwithstanding a 1 July 2013 'hard' start date for the Future of Financial Advice (FoFA) changes, critical aspects of those reforms also remain outstanding. Given significant elements of the TASA regime also remain incomplete, Coalition members of this committee believe it is not possible for the Parliament to properly consider the application of these measures at this time.

1.15 Evidence provided to the committee demonstrated that the TASA regime in its current form is:

 complex and substantially incomplete;

 too broad in its application, capturing providers the regime is not intended to regulate;

 potentially inconsistent with FoFA;

 likely to impact the ability of the financial services and advice industry to

operate with certainty over the next 3 years, particularly in respect of the employment of new advisers (beyond the transition period); and

 likely to impose a significant cost burden on the industry, with some estimates

putting the implementation cost as high as $1 billion.

1.16 Based on the evidence provided to the committee, Coalition committee members do not support the passage of these changes in their current form at this time.

1.17 We are unable to recommend that the changes be passed until there is evidence that the fundamental flaws in the scope of the regime have been addressed; there has been a proper public consultation process on all of the relevant outstanding

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elements of the regime; and proper consideration of the interaction between these changes and the recently legislated FoFA changes, also due to come into effect on 1 July 2013, has occurred.

1.18 We recommend that the current transitional arrangements, deferring the application of the TASA regime to financial planners and advisers, be extended by another 12 months (to 1 July 2014).

1.19 This will enable orderly consideration of all the outstanding issues and ensure that all those impacted by the regulation changes have at least the opportunity to comply with them.

1.20 Without such an extension, financial planners will be even worse off: they will face an obligation to be registered as full tax agents from 1 July 2013, with no transition, as the current exemption for planners in the regulations ends on 30 June 2013.

1.21 These schedules are another example of the government following bad process, conducting inadequate consultation, and ending up with law that is:

 poorly drafted with many questions unanswered;

 excessive in its scope (according to industry consensus);

 unclear yet costly to those that will have to comply with it (financial

planners); and

 justified as providing better financial advice and consumer protection, but

where rigorous demonstration of that claimed benefit has not been provided.

1.22 It also reflects bad timing and indecent haste. It is just not reasonable to foist significant regulatory change on an industry just two weeks before the start date. This is compounded when that same industry has other enormous regulatory changes to grapple with by that same start date, namely the FoFA and MySuper changes.

1.23 Further, it pits (tax) accountants against financial planners. While the former have advocated proceeding with the legislation, its provisions have no practical effect on their businesses while very substantially affecting the businesses of the latter.

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Further details

Insufficient consideration and consultation (despite the three-year timeframe)

1.24 The industry bodies representing the financial planners and advisers (Financial Planning Association of Australia (FPA), Association of Financial Advisors (AFA) and the Financial Services Council (FSC)) are unanimous in their view that too little consideration and consultation has occurred with these proposed amendments.

1.25 The timeline provided by the FPA1 shows that, while it has been three years since the start of TASA (1 March 2010), no consultations occurred in the 2011 or 2012 years - only extensions of the deferral arrangement for financial planners were announced in those years.

1.26 In February 2013, draft legislation was exposed for the first time for consultation. A brief period of further, but limited and confidential, consultation occurred in May 2013 before the schedules were tabled in a bill before Parliament on 29 May 2013.

1.27 According to the FPA:

It was only at the eleventh hour that Treasury was permitted to commence consultation on the draft Bill, resulting in the inappropriate and unworkable legislation that this Bill proposes.2

1.28 According to the AFA:

The consultation process has been ineffective and too drawn out. The industry has actively engaged when something has been put to us.3

Poor drafting and unanswered questions need further work

1.29 In the joint media release on 6 June 2013 by CPA Australia and the Institute of Chartered Accountants Australia—after Parliament had decided to excise the TASA schedules from the Bill and send them to the committee for inquiry—Mr Paul Drum (CPA) said that:

This is a missed opportunity to deliver better outcomes and better protections for consumers of financial advice.4

1 Financial Planning Association, Submission 8, pp. 6-7.

2 Financial Planning Association, Submission 8, p. 7.

3 Email of summary points the AFA sent through for hearing (sent 12 June 2013 at 11.54am by Mr Phil Anderson and circulated by Committee Secretariat the same day at 1.24pm.)

4 'Delay in tax advice reform jeopardises much-needed consumer protections', Joint Media release, 6 June 2013 by CPA Australia and the ICAA.

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1.30 Yet at the inquiry's hearing, the CPA admitted that many questions or issues around these proposed amendments had not been resolved.

Mr Drum: … Some of matters raised here quite rightly identify that every issue has not been—

CHAIR: Perfectly resolved.

Mr Drum: Correct. There are still a lot of unanswered questions. I guess our concern is that, if the bill does not proceed in any shape or form now, it may drop off the radar. We may have a change of government later this year and financial planners may not be brought into the regime for some time. We would prefer to see the bill pass and, if there are amendments that need to be done, to look at those amendments later through an ongoing process. We would even be prepared, if the committee saw fit, to grant further extensions. There is already an 18-month extension that financial planners have—18 months plus 18 months.5 (emphasis added)

No cost-benefit analysis

1.31 Moreover, the FSC and other witnesses confirmed at the hearing that they had not seen any Treasury cost-benefit analysis of the proposed changes nor had they been asked to contribute to such an analysis.

Senator CORMANN: No, but are you aware of a cost-benefit analysis?

Ms Storniolo: No, I am not aware of any, Senator, just what was included in that document.

Senator CORMANN: Has anybody ever asked you how much it would cost across your industry?

Ms Storniolo: No.

Senator CORMANN: So I am the first person to have asked you that question, am I?

Mr Brogden: Yes.

Senator CORMANN: So presumably the government cannot have taken that into account in their considerations.

Mr Brogden: You would have to think so.6

1.32 This was similarly the case in FPA testimony.7

1.33 While Treasury officials stated that they had conducted a cost-benefit analysis—which oddly they did not produce to the committee, simply referring us to the website of the Department of Finance—it is clear that Treasury's analysis excluded many cost components which the industry has highlighted that it will incur:

5 Mr Paul Drum, Head of Policy, CPA Australia, Proof Committee Hansard, 12 June 2013, p. 20.

6 Proof Committee Hansard, 12 June 2013, p. 5.

7 Proof Committee Hansard, 12 June 2013, p. 17.

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Mr FLETCHER: Can I just be clear. If I am hearing you correctly I think what you are saying is in the cost-benefit analysis that was done there was no explicit consideration of the implementation costs in the financial industry.

Mrs Macdonald: This is on the Department of Finance website. We said the main costs will be incurred by financial advisers who provide tax advice. These costs are associated with the inquiry, the appropriate qualifications and registration to be compliant with the act. Some of the costs are the $400 fee.

Mr FLETCHER: Understanding that, it sounds like there is a simple difference of view or indeed of factual difference between Treasury on the one hand which says you do not believe there are going to be any significant implementation costs for industry and industry on the other hand which is saying to the committee this afternoon it believes there will be significant implementation costs.

Mrs Macdonald: Yes, we estimated that if they register under the regime there will be a registration cost. Bear in mind that under the notification period, which is 1 July 2013 to 31 December 2014, and they will register for three years and they have no registration costs for three years. There is a scale in there as well. If you notify, you do not have to pay anything for a minimum of three years.8

Extra cost burden at a very bad time

1.34 The FSC's testimony at the hearing made clear the compliance cost implications of FoFA and the added stress that businesses would be under having to comply with TASA also by 1 July 2013.

As we have indicated publicly before, the cost of compliance with FoFA alone by 1 July 2013 is, for the retail sector alone, $1.5 billion. The stress load on the industry to make that date is enormous. That is before you overlay TASA.

Our consultation over the last few days with our industry indicates that the additional cost of compliance for TASA by 1 July is an additional $1 billion—I just had to clarify to make sure that was right. That is an extraordinary figure.9

1.35 Other bodies, including the AFA, supported this view:

With companies and employees focused upon FoFA, the introduction of another regulatory regime at the same time is simply not possible.10

8 Proof Committee Hansard, 12 June 2013, p. 33.

9 Mr John Brogden, Chief Executive Officer, Financial Services Council, Proof Committee Hansard, 12 June 2013, p. 5.

10 Email of summary points the AFA sent through for hearing (sent 12 June 2013 at 11.54am by Mr Phil Anderson and circulated by Committee Secretariat the same day at 1.24pm.)

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1.36 These costs particularly arise from the need to amend product disclosure documents and disclaimers. They are also associated with extra registration fees.

Few consequences to a delay in implementation - questionable benefits of proceeding

1.37 Submissions suggested that any delay in implementation would not likely have significant consequences in terms of lesser professionalism in the industry or lower consumer protection. According to the AFA:

Suggestions that a delay in the commencement will detrimentally impact upon consumer protection, are incorrect. Advisers already have a base level understanding of taxation and dispute resolution services will continue to operate under the AFSL regime, as they have in the past. There are no dispute resolution services under TASA.11

1.38 According to FPA testimony at the hearing, there is no evidence of systemic failures (or trends towards such outcomes):

Mr Rantall: There has been no demonstration of a systemic issue of advice in terms of a lack of competency in tax, and there has been no cost-benefit analysis done on this proposal.

Mr De Gori: If the question is, 'Are the competencies too low?' then the more efficient answer to that question is: 'Raise the education standards under ASIC.'12

1.39 When the Institute of Chartered Accountants was asked to explain the damage that would result from delaying implementation, when weighed up against the danger of a rushed implementation which had been highlighted by the peak bodies in the financial planning and advisory sector, the explanation provided was unconvincing and lacking in any evidence of specific harm which would result.

Mr FLETCHER: … What is the damage we ought to be weighing up as we weigh that up against the implementation risks of going ahead to implement this bill with effect from 1 July?

Mr El-Ansary: My response to that, Mr Fletcher, would be to say that the damage is the integrity of a tax advice regulatory framework which is intended to—and has always been intended to, not just by the current government but by successive governments over the last 20-plus years— ensure the highest levels of competence and standards in the delivery of tax advice to consumers in Australia. In this country over 70 per cent of the working population rely on advice from professionals on their tax obligations and that is not just about getting their tax returns down with the

11 Email of summary points the AFA sent through for hearing (sent 12 June 2013 at 11.54am by Mr Phil Anderson and circulated by Committee Secretariat the same day at 1.24pm.)

12 Mr Mark Rantall, Chief Executive Officer, Financial Planning Association and Mr Dante De Gori, General Manager, Policy and Conduct, Financial Planning Association, Proof Committee Hansard, 12 June 2013, p. 18.

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proverbial shoe box of receipts; that is about advice on all manner of issues that you might encounter in your working life or in your business life, everything from superannuation to estate planning and business structures and your own individual financial affairs.

We have to do better in this country. That is what the tax advice framework was all about. That is why the accounting profession were leading advocates of this regulatory change when it was brought in. And guess what? Where were the leading advocates of this regulatory change, yet we were the ones who stood to be impacted the most. We were leading advocates because, as Paul mentioned in his opening statement, we are always interested in and will always be supporters of better outcomes for consumers and outcomes which are in the public interest, even if that means there is a price for us to pay as a profession.13

Scope of current definition is too broad

1.40 There is a strong consensus within the financial services industry that the definition of "tax (financial) advice service"—as currently drafted—is too broad and will lead to significant and serious unintended consequences.

1.41 According to the FPA, as currently drafted, the definition:

… is extremely broad as is captures any tax advice service provided in circumstances in which an entity can reasonably expect to rely on it for tax purposes, where any form of payment has been received for that service. The FPA believes the scope of this definition captures anyone being paid to operate and provide advice under a license. It does not consider who should be captured versus who is captured; and similarly the type of advice that should be captured versus the advice that is captured.14

1.42 The question of who and what is to be captured has not been adequately resolved and the following activities/providers have not been consulted yet are captured within the definition:

 Personal financial advice provided by superannuation funds, such as Intra-fund 'personal' advice;

 Personal financial advice provided to a 'wholesale' and/or 'sophisticated' investor;

 General advice, including that provided by bank tellers;

 Stockbrokers;

 General insurance brokers;

 Life insurance brokers; and

13 Mr Yasser El-Ansary, General Manager, Leadership and Quality, Institute of Chartered Accountant Australia, Proof Committee Hansard, 12 June 2013, pp 23-24.

14 Financial Planning Association, Submission 8, p. 14.

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 Authorised credit licensees/representatives such as Mortgage Brokers.15

1.43 According to the AFA:

The definition of a tax (financial) adviser is too broad and could unintentionally capture a range of non-financial advice AFSLs (REs, Super Funds, custodians, research companies etc).16

1.44 According to the Australian Bankers' Association (ABA), the current definition will capture the activities of bank staff providing factual information and general advice across all business units where they also provide "general tax information". According to its submission, some examples include:

 Information about not providing a Tax File Number (TFN) when opening a bank account (in a basic banking context);

 Information about how different companies or entities are taxed (in a small business context);

 Information about the concessional tax treatment of superannuation funds (in a superannuation context);

 Information about how life risk insurance can be tax deductible (in a wealth management context); and

 Information about how a mortgage offset account (a separate savings account to a borrower’s home loan) can offset interest applied to the savings account to the loan (in a credit and basic banking context).17

1.45 It is astonishing that the industry reached its own consensus on the scope and definition of "tax (financial) advice service" after a discussion paper released by the Treasury in February 2013 had a definition of insufficient scope. Rather than the definition then being broadened to reflect this consensus, the one drafted and put before Parliament went broader than this without proper justification.

1.46 According to the FPA, the consensual definition:

… was developed and agreed upon by participants of the financial services industry (including the Financial Services Council (FSC); CPA; The Tax Institute; Australian Superannuation Funds Association (ASFA); Association of Financial Advisers (AFA); SPAA; and the FPA).18

15 Financial Planning Association, Submission 8, p. 14.

16 Email of summary points the AFA sent through for hearing (sent 12 June 2013 at 11.54am by Mr Phil Anderson and circulated by Committee Secretariat the same day at 1.24pm.)

17 Australian Bankers' Association, Submission 10, pp 1-2.

18 Financial Planning Association, Submission 8, p. 14.

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1.47 It is rare to get such industry consensus around the scope of a definition in the tax or regulatory domain. It is even rarer for such a consensus to be in effect ignored and without effective justification, as FPA testimony revealed.

Senator CORMANN: So across the FPA, FSC, AFA there is consensus around what the definition should be?

Mr Rantall: That is correct.

Senator CORMANN: Presumably, you would have put this definition to the government. Why hasn't the government adopted this definition if there is consensus around it? What is the concern with your definition that they have expressed to you?

Mr De Gori: It is a very good question. I am sure you can ask the others as they step up, but we were in a room together and industry was in unison in terms of the definition it would propose to government.

Senator CORMANN: The government started with a narrow definition. From what I understand, what you are proposing is not as broad as what is now in the legislation. On the face of it, should this be straightforward as an amendment to the government to accept?

Mr De Gori: Yes.

Mr Rantall: Yes.19

Interplay and potential conflicts with FoFA

1.48 Submissions to the inquiry and/or its hearing by the ABA, FSC, FPA and AFA all described deep concerns with the interplay and potential conflict between the TASA and FoFA regimes, particularly in relation to the "best interest duty" which will apply to advice providers.

1.49 According to the FPA:

Key to this concern is the ability for individual advice providers to rely on the (FoFA) Best Interest Duty safe harbour whilst complying with s961B(2)(d) of the Corporations Act which requires as ASIC Regulatory Guide 175 at paragraph 301 states, that the individual advice provider must have the expertise to provide the advice or refer the client on (decline to advise the client).20

1.50 The FPA add that it:

… requests ASIC's guidance on the interplay between FoFA's best interest duty safe harbour and the TASA (specifically advice provided by an unregistered person working under a supervisor).

We seek ASIC's review and amendment of RG175.298-305 (paragraphs 298 and 301 in particular) to capture the TASA concept.

19 Proof Committee Hansard, 12 June 2013, p. 17.

20 Financial Planning Association, Submission 8, p. 19.

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1.51 According to the ABA:

It is important for this legal uncertainty to be resolved prior to the commencement of the TASA regime.21

1.52 And that:

Specifically, we note that fundamental aspects of the TASA regime are yet to be settled ahead of its commencement and that the interaction between the TASA regime and the FOFA regime has not been properly worked through with the financial services industry or ASIC.22

1.53 The AFA have similar views:

We hold concerns about the interplay between FoFA (Best Interests Duty) and TASA.23

1.54 The FSC go further by tabulating eight other duplications and inconsistencies between the two regimes that need redress before financial planners and advisers are also exposed to the TASA regime.24

1.55 This makes it clear that these amendments, as currently proposed, need a lot more work before they can be responsibly implemented.

Concluding remarks

1.56 Coalition members of the committee consider that the Parliament should not allow passage of these schedules into law at this time. The government should be forced to do more work and conduct proper consultations on these proposed amendments. As currently drafted, they are not clear to those that must comply with them and, according to industry consensus, their scope is excessive.

1.57 Moreover, they impose significant costs on financial planners without commensurate benefits for consumers in terms of better financial advice and protection.

1.58 As such, Coalition members of the committee make the following recommendations:

21 Australian Bankers' Association, Submission 10, p. 2.

22 Australian Bankers' Association, Submission 10, p. 2.

23 Email of summary points the AFA sent through for hearing (sent 12 June 2013 at 11.54am by Mr Phil Anderson and circulated by Committee Secretariat the same day at 1.24pm.)

24 Financial Services Council, Submission 7, p. 29.

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Recommendation 1

1.59 That Parliament insist that the government:

 defer the proposed changes to bring financial planners and advisers into the TASA regime by 12 months to 30 June 2014; and

 extend current transitional arrangements exempting financial planners and advisers from the TASA regime by 12 months to 30 June 2014;

so that the government and the Tax Practitioners Board can finalise all of the legislation and associated regulations to enable an orderly transition and implementation period.

Senator Sue Boyce Senator Mathias Cormann

Deputy Chair

Paul Fletcher MP Tony Smith MP

Appendix 1

Submissions

1 Taxsifu

2 Fluid Financial Planning Pty Ltd

3 Institute of Certified Bookkeepers

4 Institute of Certified Bookkeepers

5 The Tax Institute

6 Australian Financial Markets Association

7 Financial Services Council

8 Financial Planning Association of Australia

(8A) Supplementary submission

9 CPA Australia and Institute of Certified Accountants Australia

(9A) Supplementary submission

10 Australian Bankers' Association

11 Association of Financial Advisers Ltd

12 Law Council of Australia

13 Australian Institute of Superannuation Trustees and Industry Super Network

Tabled documents

1 Opening statement, Association of Financial Advisers, 12 June 2013, Sydney

2 Opening statement, Financial Planning Association of Australia, 12 June 2013, Sydney

Appendix 2

Public hearings and witnesses

Sydney, 12 June 2013

Association of Financial Advisers

Mr Philip Anderson, Chief Operating Officer Ms Deborah Kent, New South Wales State Director

Australian Securities and Investments Commission

Ms Joanna Bird, Senior Executive Leader

CPA Australia

Mr Paul Drum, Head of Policy Ms Keddie Waller, Policy Adviser, Financial Planning

Financial Planning Association of Australia

Mr Dante De Gori, General Manager, Policy and Conduct Mr Mark Rantall, Chief Executive Officer

Financial Services Council

Mr John Brogden, Chief Executive Officer Ms Cecilia Storniolo, Senior Policy Manager

Institute of Chartered Accountants Australia

Ms Donna Bagnall, Senior Tax Policy Advisor Mr Yasser El-Ansary, General Manager, Leadership and Qaulity Mr Hugh Elvy, Head of Financial Advisory Services

The Tax Institute

Ms Stephanie Caredes, Tax Counsel Mr Robert Jeremenko, Senior Tax Counsel Mr Steve Westaway, President

Treasury

Mr Philip Akroyd, Adviser, Revenue Group, Law Design Practice Mr Gerry Antioch, General Manager, Tax System Division Mr Greg Clark, Analyst, Retail Investor Division Ms Leslie Macdonald, Manager, Tax Administration Policy Unit