Member Login

You are not logged in.

- Members Area Login
- First Time Access
- Password Lookup

NTAA AGM 15 November 2007

The NTAA recently held its AGM and the directors were pleased to report another successful year in terms of increased income and levels of service to members.

In particular, the directors reported:

• Seminar prices
  
  With venue, food, accommodation and all other costs continuing to rise, the NTAA was able to maintain its seminar prices at their historically low price of $418 per seminar.  A mere $26 rise over their 2000 year price.
  
• Annual subscription fee
  
  Again, with rising wages and other costs, the NTAA was able to keep the annual subscription fee to $245 – meaning that, in effect, (we believe) there has been no rise in the price of that fee since 1993.
  
• Hotline
  
  NTAA service levels have continued to meet the mark with calls rising from 16,323 in 2005/06 to 16,779 in 2006/07. 
  The NTAA Hotline reports that it is meeting and exceeding member expectations in all facets of its operation.
  
• Membership
  
  The number of current annual subscribers to the NTAA has risen to 7,464 at the end of June 2007 (up from 7,169 at the end of June last year).
  
  As most of these are firms of public practitioners, this means that the NTAA has over 70% of the nearly 10,000 firms of practitioners as members.
  
• Fellowship
  
  Fellowship numbers continue to rise.  At the end of June 2007 numbers of Fellows were 854 compared to 782 at the same time last year.
  
• Seminars
  
  NTAA seminars are continually rated by seminar attendees as the best and our numbers continue to expand across the whole range of seminars now provided for the NTAA's members. 

The NTAA and the proposed New law for Tax Agent Services

Shortly before the AGM, one of our members queried why it appeared that we had not lodged a submission to Treasury on the proposed new law (now lapsed) for Tax Agent Services.  The following is an explanation of our role and the reasons why we have not yet lodged a formal submission.  Although the following explains our involvement in the process, the NTAA still reserves the right to make a submission or submissions where it will benefit members.

Background to the legislation and the NTAA's role in its development

In July 1992, a steering committee was set up to undertake a National Review of Standards for the Tax Profession. 

In November 1994, a publication entitled “Tax Services for the public” was issued by the participants of the steering committee which proposed wide ranging changes.  These changes would have a direct effect on tax agents, their clients, and the Tax Office. 

Further, it would introduce a new National Tax Agents' Board.

As part of these changes, the concept of 'safe harbour' was born which effectively meant that penalties that were formerly imposed on the clients of registered tax agents would be transferred to the tax agent themselves.

This report was recommended to the tax agent community by the representative bodies on the committee – the ASCPA, the ICAA, the NIA, the TIA, the Law Council of Australia and Taxpayers’ Association.  (Note:  The NTAA was not part of this committee).

After this document became public, the NTAA became extremely concerned about its effect on the tax agent community and their businesses. 

The NTAA waged an ongoing campaign against all the inequities that were contained in the proposals.

Subsequently, we approached the Commiss-ioner of Taxation directly and lobbied to become part of the consultative process. 

The NTAA advised the Tax Office that the issue was explosive from our members' point of view and that the situation required the NTAA’s input.

The Commissioner agreed and Tony Jones was appointed as the NTAA's representative to negotiate on behalf of its membership while he was CEO of the NTAA. 

Despite resigning as CEO of the NTAA in 2006, he has been contracted to continue to act as spokesperson to assist members' interests with this Review.

Current State of Play

On 7 May 2007, the (then) Minister for Revenue and Assistant Treasurer, Peter Dutton, released the draft Tax Laws Amendment (Tax Agent Services) Bill 2007 and associated draft Taxation Administration Regulations Amendments, along with relevant explanatory materials, for public consultation and comment.

The key features of the Bill and Regulations were:

• the establishment of a National Tax Practitioners Board;
• a Code of Professional Conduct that governs the provision of tax agent services;
• a wider range of disciplinary sanctions available to the new Board, including a civil penalty for certain serious misconduct by tax practitioners;
• registration and regulation of Business Activity Statement (BAS) service providers; and
• a ‘safe harbour’ for taxpayers from tax shortfall penalties for making false or misleading statements, where a taxpayer demonstrates that they have taken reasonable care by engaging a registered tax practitioner and providing the tax practitioner with all relevant taxation information.

Member input to the announcement

Since then, the NTAA received 14 written responses from members to advise of their concerns in relation to the New Legislative Regime for Tax Agent Services.

Almost exclusively, these concerns related to:

• the new safe harbour provisions for clients and the legislative requirement for tax agents’ having to exercise reasonable care; and
• the new civil penalties that would apply to tax agents' conduct.

How the NTAA influenced the original Safe Harbour provisions

The recommendations published by the representative bodies in 'Tax Services for the public' (the 1994 publication) proposed the insertion of the 'safe harbour' provisions into the ITAA.

Specifically the proposal stated:

• provided to a tax agent a copy of their last lodged income tax return, if any; and
• can establish the shortfall is not due to a failure by the taxpayer:
  • to meet record keeping requirement; or
  • to provide accurate information in response to questions asked by the tax agent; or
  • to conform with the tax agent's advice; or
  • where the taxpayer has business income, to bring to the attention of the tax agent information the taxpayer(s) could be expected to have known was relevant to the preparation of the return.”

These proposed ‘safe harbour’ provisions were to form the basis of any legislative framework.

The Problem

The problem from a tax agent perspective was that it was very clear that the proposed provisions required the tax agent to elicit information from the taxpayer.

Editor:  The term "elicit" basically meant that tax agents were 'under the gun' to make sure that clients made a full and true disclosure.  If they didn't "elicit" the information and mistakes were made, the agent could become liable for penalties the ATO would have normally imposed on the client.

Under the original proposed system:

• it was quite possible that tax agents would be put in a position of having to audit their clients;
• tax agents and their clients might well be put at odds where clients claimed safe harbour in the event that a tax shortfall occurred; and
• it was quite possible that tax agents' professional indemnity insurance and possibly even their tax agent's registration would be at risk if they were penalised in the event that clients claimed the safe harbour protection and contended that the tax agent had failed to take reasonable care.

The negotiated solution

The new Bill is substantially different from the 1994 publication.

Rather than the tax agent having to "elicit" information  from the client, it is the client's responsibility to 'provide' tax agents with all relevant taxation information.  Only then do the safe harbour provisions apply.

The new Bill reflects the substantial concessions that were achieved by the NTAA in consultation with the other professional associations, the Taxation Office and ultimately Treasury.

To demonstrate that they have provided all relevant taxation information to their tax agent or BAS service provider, a taxpayer must:

• provide accurate and complete information in response to questions asked by the tax agent or BAS service provider; and
• bring to the tax practitioner's attention all information which they would reasonably expect to be necessary to enable the provision of the tax agent service or BAS service correctly.

This is a substantial turnaround as tax agents are now:

• not required to elicit information from their clients; and
• not required to audit them.

How the NTAA influenced the penalty provisions

The 1994 publication proposed a Code of Practice for Tax Agents (the Code).

Under that code, tax agents would be obliged to 'exercise reasonable care in the professional dealings on behalf of clients'.

Failure to comply with the Code could give rise to disciplinary action which might include the imposition of monetary penalties.

The Problem

The NTAA was extremely concerned that the 1994 publication was recommending the imposition of monetary penalties for:

• (often) minor transgressions; or
• what amounted to differences of opinion between a tax officer and the tax agent of how the client should be dealt with.

Some instances that the 1994 publication contemplated as failures to exercise reasonable care included:

• the client not signing the return;
• the tax agent had not signed the agent's declaration and completed the agent's reference numbers;
• in the case of a new client, the tax agent did not ask the client questions that the client would encounter when working through Tax Pack and other appropriate follow-up questions;
• the arithmetic and coding was not checked; and
• the agent did not provide adequate (in the opinion of the ATO) professional advice.

The impact of such a damaging and potentially coercive lever being placed into the hands of tax officers and auditors, and its effect on tax agents, their practices, and their professional indemnity cover, could not be calculated.  This was not acceptable to the NTAA or its members.

The NTAA, now in association with the other professional bodies, vigorously and effectively resisted such penalties and argued that they be imposed only in conspicuous situations of gross negligence or fraud.

The final negotiated solution
The new Bill bears very little relationship to the 1994 publication.

Under the proposed Bill, the Tax Practitioners' Board would investigate complaints into the conduct of tax agents.

Following any investigation, the Board would be able to impose an administrative sanction or apply to the Federal Court for a civil penalty for certain specified misconduct (see below).

Most complaints would normally result in a caution or direction for education or re-education.

Administrative sanctions

If the Board finds that a tax practitioner has breached the Code, it may impose one or more of a range of administrative sanctions. 

The sanctions the Board may impose on the tax agent or practitioner include:

• a caution;
• requiring them to undertake a course of training;
• imposing restrictions on how they conduct their practice;
• requiring them to practise under supervision; and/or
• suspending or terminating their registration. 

Penalty provisions – serious misconduct

The Board may also apply to the Federal Court for a civil penalty order against a tax practitioner for certain serious misconduct. 

The Board can apply for a civil penalty order where a tax practitioner deliberately:

• makes a false or misleading statement;
• employs the services of deregistered practitioners; and/or
• signs a declaration or other statement for a taxpayer in relation to a document that was prepared by someone else.

Summary

In 1992, the Taxation Office and the other professional bodies embarked on a project to regulate the tax industry.

Driving this process were the problems arising from self assessment, increasing complexity of the law  and the penalties that might be placed on taxpayers, many of whom were moving to use the services of registered tax agents.

One of the core principles was the safe harbour provision that would effectively transfer the onus for getting returns correct from the taxpayer to their tax agent.

The NTAA’s major concern was that the tax agent was to become an unpaid tax auditor and the new provisions would drive a wedge between members and their clients.

The 1994 publication contained 138 recommendations, all of which were put back on the table when the NTAA was invited to participate.

Some of these included:

• mandatory quality assurance reviews every five years;
• tax agents being required to prove that they had:
  • documented standards of service for clients;
  • procedures for training staff to deliver services to clients; and 
  • quality control checks in place to supervise staff.

None of these remain, and most of the 138 recommendations have been amended in consultation with the ATO and other bodies. 

The final result is a negotiated compromise but it is radically different from the original proposal and more ‘tax agent friendly’ than the original proposal.

In particular, it aims to reduce unnecessary and costly compliance obligations on tax agents.

The NTAA remains committed to continuing consultation with the ATO and Treasury on behalf of members on the proposed Bill (assuming it is reintroduced) in the direct and effective manner it has been pursuing.

Seasons Greetings

Christmas/New Year Holiday Break

We hope you have a happy and a safe Christmas and New Year and return recharged and ready for the 2008 year.

We'll be shutting down for our Christmas break at 11.30am on 21 December and re-opening at 9am on Monday 14 January 2008.

All the best from us here at the NTAA!