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Thursday, 13 November 2008
Page: 10844

Mr BOWEN (Minister for Competition Policy and Consumer Affairs, and Assistant Treasurer) (9:12 AM) —I move:

That this bill be now read a second time.

This bill will improve the regulatory environment for the provision of tax agent services.

The bill has three main objectives. Firstly, it aims to improve consistency in the registration of tax agents and other intermediaries in the tax field and to regulate the provision of tax agent services in an appropriate but flexible way.

Secondly, the bill aims to enhance the protection of consumers of tax agent services, thereby reducing the level of uncertainty for taxpayers and the risks associated with the self-assessment tax system.

The third objective is to strengthen the integrity of the tax system and the tax industry.

This bill will replace the existing law regulating tax agents in part VIIA of the Income Tax Assessment Act 1936. This part was introduced in 1943 and is now out of date and out of step with the current tax and commercial environment.

Indeed, Australia’s tax environment has changed significantly since 1943. For example, the self-assessment tax system was introduced during the 1980s. In addition, the tax base has expanded significantly over the past 20 years or so, with an associated increase in the volume of the tax laws and the number of interactions within them. These changes in the tax environment correspond with significant growth in the number of taxpayers seeking professional assistance from tax agents to prepare and lodge their tax returns. In 1980, for example, only around 20 per cent of individuals used tax agents to lodge their tax returns. This figure has now grown to 74 per cent.

Given the number of taxpayers who use agents to comply with their tax obligations, it is important that such agents are appropriately and adequately regulated, that there are mechanisms in place to ensure they are adequately supported, and that there are incentives for new agents to enter the market.

The Tax Agent Services Bill aims to deliver this balance through a number of key elements that I would like to outline.

The bill will establish an independent national Tax Practitioners Board to replace the existing state based tax agents boards. The board’s key functions will be to register agents and to regulate the provision of tax agent services. The establishment of a single, national board will make the registration process consistent and standardise the way in which entities providing tax agent services are regulated across the country. It will also enable greater efficiency in the allocation and use of the board’s resources.

The bill proposes to establish the board as a statutory authority within the Australian Taxation Office. The board’s funding will be quarantined from the tax office’s annual appropriation and its functions and powers under the bill will be vested independently from the Commissioner of Taxation, thus providing all possible practical independence.

A formal post-implementation review of the proposed governance arrangements for the board will be conducted in three years time to assess whether the independence of the board is impaired in any way because of its continued connection with the tax office, and whether an alternative arrangement should be considered.

The second key element is the requirement for certain entities that provide tax agent services for a fee to be registered. In addition to requiring tax agents to be registered, the bill introduces a registration requirement for entities providing BAS services. This ensures that a level playing field across industry exists, by broadening the scope and application of the regulatory framework to reflect the broader scope of services provided, given the expansion in the tax base.

The definition of ‘tax agent service’ in the bill and the relevant paragraphs in the explanatory memorandum clarify the intention that financial services licensees can provide tax advice that is incidental to financial services, provided that service would not be relied upon in satisfying a tax obligation or claiming an entitlement under the taxation laws.

Thirdly, the bill will introduce a legislated code of professional conduct which will govern the provision of tax agent services by tax agents and BAS agents. The code will define the professional and ethical standards required of agents, and their roles and responsibilities. It will therefore provide clarity and certainty around the standards expected of agents. It will also provide a benchmark against which the board and taxpayers can evaluate the tax agent services being provided.

The fourth key element is the establishment of a wider and more flexible range of administrative sanctions than those existing under the present arrangement. In cases of noncompliance with the code, the board will be able to impose a sanction that is commensurate with the severity of the misconduct, ranging from a written caution or an order to undergo training or work under supervision, through to termination of registration. The introduction of a range of constructive and educative sanctions for noncompliance will improve the standard of services provided to the public.

The fifth and final element is the introduction of a specific civil penalties regime for certain specified misconduct by registered agents and unregistered entities, which will replace the criminal penalties in the current law. For example, civil penalties will apply where an unregistered entity provides tax agent services for a fee, and where an agent knowingly or recklessly makes false or misleading statements.

Reform of the regulatory framework for tax agent services was first contemplated during the mid-1990s and was first announced by the previous government in 1998. The framework has been developed and refined over the course of many years. The key elements of the bill have been supported unanimously by the key players in the tax industry, including tax agents, bookkeepers, representatives of the tax and accounting professional associations as well as the legal professional associations, taxpayers and the tax office.

Introduction of this bill therefore represents a positive outcome, following a long journey for many stakeholders, particularly those individuals and entities practising in the field, providing tax agent services to the community.

The full details of the provisions in the Tax Agent Services Bill are contained in the explanatory memorandum.

Debate (on motion by Mr Lindsay) adjourned.