CPA flags ‘duplication risk’ with proposed registration requirements

Treasury's proposal to include governance requirements in the registration criteria for companies and partnerships is unlikely to add value to or enhance the checks and balances that are already in place, CPA Australia has told Treasury in a recent submission.

In a recent consultation paper, Treasury suggested the codification of government requirements for companies and partnerships could help meet the objectives of the Tax Agent Services Act of maintaining integrity of the tax system and providing adequate professional and ethical safeguards to consumers.

CPA Australia noted that Accounting Professional & Ethical Standard APES 320 Quality Management for Firms that provide Non-Assurance Services (APES 320) already requires firms that provide non-assurance service to establish and maintain policies and procedures with respect to the firm’s quality management processes.

The standard specifies that the elements of quality management are governance and leadership, professional standards, acceptance and continuance of client relationships and specific engagements, resources, engagement performance, information and communication, and monitoring and remediation.

"APES 320 applies to members of relevant professional bodies (and their membership) that have adopted it," CPA Australia said.

It also highlighted that the recently released Tax Agent Services (Code of Professional Conduct) Determination 2024 requires for tax practitioners to establish and maintain a quality management system under section 40 of the determination.

"For members of CPA Australia, this obligation should be satisfied where they have a system of quality management in accordance with APES 320 or Auditing Standard ASQM 1 (where required)," the professional body said.

"Accordingly, there is already a significant risk of duplication of compliance obligations, additional obligations could further increase the likelihood of inconsistency, confusion, and error."

CPA explained that the codification of governance requirements in registration criteria for companies and partnerships is expected to largely impact company and partnership practitioners at the small or micro end of the market if the codified requirement goes beyond the requirements of APES 320.

"This would remove the TPB’s discretion to administer these practitioners fairly and appropriately and place an undue burden on entities that are not the intended targets of these changes," CPA Australia said.

The professional body stressed the importance of retaining the principles-based approach within the current Code of Professional Conduct to ensure the TPB has the flexibility to administer the TASA in a way that best meets the facts and circumstances of each case.

CPA Australia also raised similar concerns to the Institute of Public Accountants (IPA) about the broader changes proposed by Treasury creating significant barriers to entry into the tax profession that "dissproportionately impact small and medium practitioners".

"We are concerned that proposed changes to the Tax Agent Services Act 2009 (TASA), in particular proposals concerning registration as a tax practitioner, duplicate several extant and newly introduced TASA Code of Professional Conduct (Code of Professional Conduct) obligations, increasing the likelihood of inconsistency, confusion, and error," the professional body said.

"We are also concerned that there has been insufficient consideration given to the way changes proposed by this consultation would interact with the recently introduced breach reporting obligations included in TASA."

The professional body opposes the proposal to remove the tax agent registration pathway for voting members of Recognised Professional Associations (RPA) pursuant to Reg. 206 of the Tax Agents Services Regulations 2022 (TASR) (Reg. 206).

"We disagree with the assertions made in the Consultation paper in relation to TPB independence and regulatory capture, and do not accept this as a premise to remove the RPA pathway," said CPA Australia interim head of policy and advocacy, Ram Subramanian.

Subramanian noted that substantial number of registered tax agents currently utilise the RPA registration pathway and that this has increased in recent years.

"To date, no evidence has been presented to CPA Australia that there is a particular concern or concentrated risk with tax practitioners registered under Reg. 206," he said.

"To remove this pathway may impede migrating tax professionals from registration as a tax agent and disregards the high education standards and the level of scrutiny and defined standards required by RPAs such as CPA Australia from their current and prospective members, beyond any statutory requirements."