House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Treasurer, the Hon Wayne Swan Mp

General outline and financial impact

Regulation of the provision of tax agent services

This Bill ensures that tax agent services are provided to the public in accordance with appropriate professional and ethical standards.

The key elements of the Bill are:

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the establishment of a national Tax Practitioners Board (Board) to replace the existing state-based boards;

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the registration and regulation of entities providing Business Activity Statement (BAS) services (ie, BAS agents) in addition to tax agents;

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a legislated Code of Professional Conduct (Code) to govern tax agents and BAS agents;

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a wider and more flexible range of disciplinary sanctions which may be imposed by the Board; and

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civil penalties and injunctions to replace criminal penalties for certain misconduct by agents and unregistered entities.

Date of effect: Most of the provisions in the Bill will commence on a single day to be fixed by Proclamation, within nine months of the Tax Agent Services (Transitional Provisions and Consequential Amendments) Bill receiving Royal Assent. Some of the provisions in the Bill (in particular those relating to the establishment of the Board) will commence on the day on which this Bill receives Royal Assent. These dates of effect are outlined in paragraphs 1.25 to 1.29 in Chapter 1 of this explanatory memorandum.

Proposal announced : These proposals were announced by the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs in Media Release No. 039 of 29 May 2008.

Reform of the existing regulation of tax agents was first announced in 1998.

Financial impact: The revenue impact of the measure is as follows:

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It is expected that the impact of replacing criminal penalties with civil penalties will result in a small gain to revenue. This gain is not expected to exceed $1 million over four years.

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There is expected to be a cost associated with the introduction of 'safe harbour' provisions which exempt taxpayers from administrative penalties in certain circumstances when they use a tax agent or BAS agent, however this cost is unquantifiable.

Compliance cost impact: Transitional compliance costs of the measure are estimated to be:

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small for tax agents and BAS agents with the appropriate qualifications for registration purposes; and

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potentially large for those individuals seeking registration as a BAS agent who do not currently meet the minimum standard of educational qualifications.

Ongoing compliance costs of the measure are estimated to be:

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nil/minimal for tax agents; and

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small, at $1 million per annum, for BAS agents (approximately $67 each per annum).

Summary of regulation impact statement

Regulation impact on business

Impact: The Bill improves the regulatory environment for the provision of tax agent services for a fee or other reward by increasing the consistency in registration and providing appropriate, but flexible, regulation and greater certainty for agents.

Main points:

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The establishment of a national Board will benefit tax agents and BAS agents by providing nationally consistent regulation. It will enable the Board to allocate and use its resources more efficiently, and is expected to increase certainty for agents in the way in which the legislation will be administered.

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Registration and regulation of tax agents and BAS agents, including the introduction of the enforceable Code, will provide certainty and clarity for agents as to what is expected of them, and is therefore expected to reduce compliance costs. BAS agents will face certain barriers to entry, but will benefit from the clarity provided by a move away from the partially regulated but unenforced arrangement in place currently. This will improve taxpayer confidence in the industry.

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The introduction of a wider range of more constructive and educative administrative sanctions which may be imposed by the Board will encourage agents to comply with the Code and will improve their performance.

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Replacement of criminal penalties with civil penalties and injunctions will benefit agents and the integrity of the tax system, by providing appropriate consequences for misconduct and by providing effective disincentives to act inappropriately.