Planned changes to regulation of tax advisers
The government has announced major reforms to the tax adviser regulatory framework in the wake of the recent tax leaks scandal.
The package of reforms will cover three priority areas:
- strengthening the integrity of the tax system;
- increasing the powers of regulators; and
- strengthening regulatory arrangements to ensure they are fit for purpose.
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Strengthening the integrity of the tax system
According to the government, the current tax promoter penalty laws have largely remained unchanged since they were introduced about 20 years ago. Further, the promoter penalty provisions have only been applied six times since their inception.
To deter tax agents and other tax advisers from misconduct (e.g. using confidential government information to help clients avoid tax), the following changes will be implemented:
- maximum penalties for advisers and firms that promote tax exploitation schemes will be increased to $780 million (up from $7.8 million)
- tax promoter penalty laws will be expanded to make it easier for the ATO to apply them to advisers and firms that promote tax avoidance;
- the time limit for the ATO to bring Federal Court proceedings to enforce promoter penalties will be increased to 6 years after the conduct has occurred (up from 4 years).
Increasing the power of regulators
The government will seek to give regulators the right tools to identify and discipline those that break the law by removing limitations in the tax secrecy laws which were a hinderance to the regulators acting in response to the recent tax leaks scandal.
Changes will also be made to allow the ATO and the Tax Practitioners Board (TPB) to refer ethical misconduct by advisers to professional associations for disciplinary action. This will not be limited to confidentiality breaches.
In addition, the TPB will be given up to 24 months to complete complex investigations and its public register of practitioners will be improved to increase transparency over agent and firm misconduct.
Protection will also be provided to whistleblowers where they provide the TPB with evidence of tax agent misconduct.
Strengthening regulatory arrangements
The Treasury will be consulting over the coming months on the adequacy of regulations and the appropriate governance obligations to coordinate a whole of government response. This work to deliver options that go to the broader integrity of the tax and superannuation systems will be delivered progressively to the government over the next two years.
Some of the more interesting consultation topics include:
- whether the remaining recommendations from the independent review of the TPB, including strengthening the range of sanctions available, should be implemented;
- review of the promoter penalty laws to ensure they adequately address current schemes that are bespoke, complex or cross jurisdictional;
- review of emerging fraud and threats to curb systemic abuse of the tax system by tax agents and other “bad actors”;
- review of the use of legal professional privilege in Commonwealth investigations with options for Government to respond to concerns that some claims are being used to obstruct or frustrate investigations;
- examination of the regulation of consulting, accounting and auditing firms to consider whether reforms are needed.
Further to the above potential future changes, the government has also flagged action which is already underway to improve processes (including legislation to strengthen the TPB) introduced to Parliament earlier in the year, and a $30 million funding boost to the TPB to increase compliance activities in the October 2022-23 Budget. Action to strengthen Commonwealth procurement frameworks are also underway.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.