Accounting bodies are split on how financial planners who provide tax advice should be regulated, with one view advocating a co-regulatory model and another calling for the return to no regulation in line with the pre-2016 accountants’ exemption regime.
The differing views were presented by Chartered Accountants Australia and New Zealand (CAANZ) and CPA Australia on the one hand and the Institute of Public Accountants (IPA) on the other as part of their submissions to Treasury’s review of the Tax Practitioners Board (TPB).
As part of that review, Treasury released a discussion paper that put forward a number of regulatory models, including leaving ASIC and the TPB as co-regulators but with variations on which body would sanction advisers, moving all financial planner tax advice regulation to ASIC, or returning to the limited licensing exemption and thus removing financial planners from the TPB regime.
In a joint submission, CAANZ and CPA Australia supported an option presented by Treasury where ASIC and the TPB would operate as co-regulators of financial advisers and the TPB would be responsible for the imposition of sanctions for tax-related matters. At the same time, TPB registration as a tax financial adviser would be automatic for all financial planners, who could opt out of the TPB regime if they did not provide tax advice.
The co-regulatory regime was considered by the two bodies as an interim solution as it negated the need for ASIC to seek further resources, but they recommended a wider review of the regulatory framework related to tax advice should take place.
“Instead of developing these options further, we strongly recommend the final report recommends to government a wholesale review of the current regulatory framework,” the joint submission stated.
“The complexity of the current regulatory framework has been caused by years of layered regulatory reforms, without appropriate consideration as to whether such changes would give consumers access to quality affordable advice from their choice of trusted adviser.”
The IPA, however, adopted an option put forward by Treasury that financial planners who provided only incidental tax advice should not be regulated by the TPB and a reciprocal arrangement be introduced for accountants who provide financial advice related to SMSFs to not be subject to ASIC requirements.
“We consider that this option would reduce the regulatory burden for both financial advisers and accountants, whilst maintaining the integrity of the system, including protecting consumers, whilst also fulfilling the objective of the Future of Financial Advice reforms, which was to provide affordable and accessible financial advice to Australian consumers,” it stated.
“Tax professionals provide tax-related services as their core offering and only a relatively small number operate in the financial advice space. Similarly, financial advisers provide incidental tax advice. The current regulatory environment has created artificial, impractical boundaries which hinder the ability of both groups to have broader-ranging discussions with their clients.”
Despite the IPA position on the reintroduction of the accountants’ exemption being echoed by the Tax Institute in its own submission, the latter took a different position on regulating financial planners in the area of tax advice and called for the TPB to be the sole regulator in this area.
“While we are mindful of the numerous regulators financial planners face, we are not yet aware there is sufficient scrutiny and regulation of the tax aspects of financial planning advice. In our view, the tax aspects of financial planning advice should be regulated by a regulator which has the resources and expertise to undertake this regulation. Currently, the TPB is most equipped to undertake this regulation,” the institute stated.
It also called for more time for the TPB to take on its role as tax advice regulator, claiming insufficient time had passed to fully assess the effectiveness of the TPB in regulating the tax aspects of financial planning advice.