The Institute of Financial Practitioners Australia (IFPA) has raised concerns over the industry-wide impact and the subjective nature of some aspects included in the information sheets associated with the proposed amendments to the Tax Agent Services Act Code of Professional Conduct.
The professional body expressed its reservations in its most recent submission to the Tax Practitioners Board (TPB) about this matter.
Firstly, IFPA stated the proposed changes to the Tax Agent Services Act Code of Professional Conduct would probably not have been able to prevent the PwC leaks had they been in place at the time and the proposed measures will have a significantly negative impact on smaller practitioners.
“[The PwC] behaviour, as reported in the media, was clearly in breach of the requirement to act honestly and with integrity, and we note that the RTP (registered tax practitioner) involved was deregistered by the TPB for a period of two years for being in breach of sub-section (1) of the code,” it noted.
“The government and the [TPB] need to consider the many thousands of smaller tax and accounting practices that will never be involved in confidential consultations around proposed changes to Australia’s tax laws. Yet they will be directly impacted by a suite of new requirements to comply with which are neither modest nor straightforward.”
It also criticised the subjective nature of the directive imposed on practitioners to ‘dob in’ a client in the event they have been deemed to have made a false or misleading statement.
In making its point, the industry body noted before a practitioner has determined they need to report an incident where a client has made a false and misleading statement to the TPB, “they must first have reasonable grounds to believe the statement is false or misleading in a material particular and that the statement resulted from a lack of reasonable care, recklessness or the intentional disregard of a taxation law”.
The institute further recognised under this obligation the practitioner must then advise the client to correct the false or misleading statement and withdraw from the job if no correction is made.
“Having warned the client and withdrawn from the engagement, the RTP is further required to make the notification to the board or the commissioner where, after a reasonable time since warning the client, the RTP is not reasonably satisfied the client has corrected the statement and the false or misleading statement resulted from negligence or the wilful disregard of a taxation law and the RTP has reasonable grounds to believe that the client’s actions have caused or will cause substantial harm to the interests of others, but again not if doing so creates an unreasonable risk to the RTP, their family or at-risk staff members,” it said.
According to IFPA, most of the requirements practitioners must satisfy here include an element of subjectivity and as such may lead to inconsistent outcomes.
In addition, it suggested the ‘dob in’ a client provision may end up being counterproductive.
“IFPA believes there is a risk that some clients will not grasp the finer details of the response framework and stop being completely truthful in their dealings with their RTP, which would just make matters worse,” it noted.
