Dob-in provisions to lead to ‘devastating outcomes’ for tax agents, Tax Institute warns
The new breach reporting rules in July will create a challenging environment for tax agents and could see practitioners falsely accused of misconduct, the association cautions.
The dob-in provisions or breach reporting rules are one of the most significant changes passed in the new provisions to the Tax Agent Services Act in November, according to Robyn Jacobson, senior advocate at the Tax Institute.
The new provisions, which were introduced as an amendment to the Treasury Laws Amendment (2023 Measures No. 1) Bill 2023, will require tax agents to notify the Tax Practitioners Board (TPB) if they have reasonable grounds to believe that another registered agent has breached the code and that breach is significant. The provisions apply from 1 July this year.
“This is an obligation to dob in another agent where you think they have significantly breached the code,” said Ms Jacobson in a recent Accountants Daily webcast.
“If you fail to dob in that registered agent who you believe has breached the code in a significant manner, then you will be facing a penalty.”
Tax agents will also be required to dob themselves into the TPB where they believe they have breached the code in a significant matter.
“If you’re dobbing yourself in, then of course you’ll face some sort of sanction from the board for having breached the code. If you fail to dob yourself in, you will have breached this new obligation,” said Ms Jacobson.
“If it relates to another agent, then you should dob them in and if you fail to do so you will be penalised for failing to dob them in.”
Where there are two unrelated tax agents, the tax agent will still have the same obligation to dob the other agent in where the conditions are met but not their staff, Ms Jacobson explained.
“So, we're not dobbing in lawyers and lawyers have no obligation to dob in, it is one registered agent in respect of another registered agent, whether or not they are in the same firm,” she said.
This could create significant issues where there is a disgruntled tax agent, she warned.
“What if I am disgruntled with you? What if you took over one of my clients, this would be a really great way to stick you up and create a false allegation. There’s no particular protection for you, it would be investigated and even though at the end it may be determined that I made a false representation, it could have significant reputational damage.”
Ms Jacobson said the new rules will also apply where a tax agent has picked up a new client and see that the previous agent has not managed Division 7A or FBT obligations, or logbooks, for example, they will also have an obligation to dob in if it is a material significant breach.
A significant breach under the provisions includes indictable offences or offences involving dishonesty.
“Now, these sorts of offences could be bribery, corruption, fraud, embezzlement, money laundering, social security fraud, tax and GST fraud, theft or dishonest use of position. It could also be a breach of civil law, criminal law, Commonwealth or state law. So you can see it is extremely broad,” said Ms Jacobson.
“I’m still trying to work through in practice how would I, as an agent, determine if you had been involved in some sort of embezzlement or making a false or misleading statement.”
Ms Jacobson said while the provisions only apply where the tax agent has reasonable grounds to believe there has been misconduct, they are not required to prove it.
“It’s still going to be a very challenging environment for agents to operate in. We are concerned that in their current form, [these provisions] could have a devastating impact on an agent who was falsely accused of misconduct.”
Ms Jacobson said the Tax Institute along with other industry bodies will continue to work with the government and TPB to understand how this can become as practical and as straightforward as possible to implement.
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