The federal government is rewriting a controversial set of ethical rules for tax agents, relenting to some, but not all, of the sector’s most significant concerns.
Debate over the requirements levelled on tax and BAS agents entered a new phase on Wednesday, when the Treasury revealed its plan to further amend the Tax Agent Services (Code of Professional Conduct) Determination 2024.
That determination, signed into effect by Assistant Treasurer Stephen Jones in July and launching in 2025, adds new ethical standards and reporting requirements on top of those already prescribed by the sector’s Code of Professional Conduct.
Central to the determination is a requirement for tax agents to disclose incorrect or misleading information provided by their clients to the Australian Taxation Office (ATO) or the Tax Practitioners Board (TPB).
This so-called ‘dob in’ clause, and the requirement for tax agents to disclose matters that might influence a potential client’s decision to do business with them, sparked a significant industry backlash.
Earlier this month, an Opposition-led plan to disallow the determination only failed after Senator David Pocock voted against it, giving the government another chance to consult with the sector.
The results of that consultation are now clear.
Under the government’s draft amendment, released Wednesday, tax agents must only ‘dob in’ their clients if their continued action (or inaction) is likely to cause substantial harm to others.
Tony Greco is general manager of technical policy at the Institute of Public Accountants (IPA), which joined with other leading industry groups to challenge the original ‘dob in’ clause.
“The bar has been raised significantly” by the latest draft amendment, Greco tells SmartCompany.
However, “it’s still something that is uncomfortable for a lot of our members, the fact that they have to dob in a client… ultimately that’s the bit that we prefer not to have, not to be the policeman on behalf of the ATO,” Greco continues.
“To have to undertake that last step, even if those preconditions are satisfied, we prefer that not to be the situation.”
Greco’s preferred solution is to align the determination with rules set out by the Australian Professional & Ethical Standards Board, the industry-led body that sets standards for CPA Australia, CA ANZ and IPA members.
These rules — known as APES — require tax agents to inform their clients of potentially misleading information, and the steps they must take to correct the record.
But they do not require tax agents to flag continually unresolved issues to the ATO or TPB.
The APES standards are “reflected quite strongly in where the government’s landed, but the mandatory nature of it is the issue at stake,” Greco says.
Greco says he looks forward to further discussions with the government over those rules.
Other industry leaders say the proposed changes to disclosure rules are a relief.
Matthew Addison, executive director of the Institute of Certified Bookkeepers, tells SmartCompany the changes to disclosure rules are welcome.
The original registered determination “was devastating for the relationship between all taxpayers and their trusted advisors,” he says.
“All 71,000 registered agents, including the smallest of practices, many of whom are sole traders themselves, were being impacted by requirements designed to target the largest firms with complex matters.”
The proposal to include a ‘dob in’ clause for only “the most egregious of transgressions” is a “significant change,” Addison continues.
Separately, the government’s draft amendment changes what tax practitioners must tell their clients before doing business with them,
The original determination tasks tax practitioners with informing would-be clients of “any matter that could significantly influence a decision of a client to engage you”, which industry groups argued was needlessly broad.
Despite earlier assurances from the government that “any matter” pertained only to professionally-relevant issues, the new amendment spells out what is, and is not, included.
Those disclosures include prior sanctions or convictions in relation to tax offences, their business’ solvency, and if any conditions apply to their registration as a tax agent.
“That’s one of the sections that I think we’ve landed in the right spot,” Greco says.
“Where they started was ridiculous, to say the least.”
Addison says the “significant” change “takes away the uncertainty and the all-encompassing previous provisions”.
Public consultation on the proposed shake-up will open for just a week, closing on October 2.
Time is of the essence for those reforms.
Senator Pocock, whose no vote stopped the last disallowance motion from proceeding, has put his name to a second disallowance motion, set to be heard on October 10.
Should the government and industry stakeholders not come to an agreement before then, the contentious determination may face a total wipe-out in the Upper House.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
