Individuals, partnerships, and companies aiming to register as tax agents in Australia must now demonstrate good governance according to new proposed changes. A consultation paper released by the Australian government on July 2 outlines that organizations seeking registration under Australia’s regulatory regime would need to show they have sufficient governance arrangements in place to comply with the law.
Prime Minister Anthony Albanese’s government has suggested these changes to tighten the criteria for companies and partnerships wishing to become tax agents, ensuring that internal and quality control processes are evaluated before a practice can be registered. This move comes as a recommendation from a 2019 review by eminent tax practitioner Keith James, which has gained urgency following the PwC Australia tax leak incident, emphasizing the need to implement the James Review.
As part of disciplinary action, PwC Australia was directed by the Tax Practitioners Board (TPB) to adjust its internal processes. Additionally, the firm has been mandated to report to the tax agent regulator every six months for two years to show it has rectified its internal operations.
In Australia, the TPB administers the registration of tax agents. The proposed changes would require firms to provide greater assurance to the regulator about their practice management, including how they supervise tax advisers under their registration. This new governance systems requirement aligns with a recent, albeit controversial, update to the Code of Professional Conduct, which mandates practices to have appropriate quality management systems. This update has faced criticism from ten key Australian professional organizations over the past month.
“Treasury proposes that this new registration requirement aligns with the new TPB Code requirements relating to quality management systems that have been separately implemented by the government,” states the consultation paper. “Aligning the registration requirement to the recent changes to the Code will ensure tax practitioners incur no further compliance costs from this proposal. The addition of a governance requirement to the registration framework will require applicants to have these arrangements in place at the application and renewal stage for TPB registration, as well as being an ongoing eligibility requirement.”
The consultation paper also suggests changes to make it simpler for the TPB to consider various kinds of appropriate experience when registering individuals. It calls for the elimination of professional association pathways as a means of registering as an individual tax agent and proposes changes to the ‘fit and proper’ provisions for tax agent registration.
Changes to the fit and proper rules under TPB laws would enhance the declaration process for conflicts of interest and governance arrangements. This would also introduce mandatory disclosure of spent convictions and potentially revise the requirement to consider events from the past five years to assess the fitness and propriety of a practitioner seeking tax agent registration.
Australian tax advisers, whether individuals, companies, or partnerships, have until August 7 to respond to the government’s proposals before the Treasury begins finalizing amendments to the relevant laws.
By fLEXI tEAM
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