TPB sheds light on required standards for breach reports
The Tax Practitioners Board has clarified that practitioners are not required to report breaches where a claim is based solely on hearsay or simple opinions.
Speaking in a recent webinar, Tax Practitioners Board chair Peter de Cure said while the breach reporting obligations don't make a distinction between actual or alleged breaches, there must be reasonable grounds to believe that there has been a significant breach.
"This is an objective test and it looks at whether a reasonable person in your position would form the same belief in the same circumstances," de Cure said.
"We're not asking you to have conclusive proof that a breach has occurred, but you should be able to appropriately substantiate or corroborate your claim as an appropriate claim."
De Cure said this means that beliefs based solely on hearsay or simple opinions of other people which are not substantiated or supported, do not meet the standards of 'reasonable grounds to believe'.
He also warned tax practitioners that the TPB may take action against registered practitioners if it believes they have made a frivolous or vexatious report such as a claim involving a false or misleading statement.
"Should this situation occur, it may raise issues about a tax practitioner's compliance with other requirements of the TASA such as being a fit and proper person and the other code items requiring honesty and integrity," he said.
"So I think people should take some care around determining the facts of any situation."
The TPB gave an example involving a tax agent, Tamara, who lost a client to Max, a tax practitioner at another firm.
Tamara is unhappy about this and overhears colleagues discussing rumours that Max had been involved in fraudulent tax claims. She doesn’t make enquiries but reports a significant breach to the TPB.
"Although it would be reasonable for Tamara to conclude that a fraudulent claim involving a substantial sum of money would be a significant breach of the code, she's done nothing to turn her mind to the relevant tests. She's done nothing to ascertain the facts of substantiate the claim," de Cure said.
"We would look at this set of circumstances [as a] false, malicious or potentially vexatious notification because really, what she's trying to do is embarrass Max and cause problems for him."
Given the circumstances surrounding the breach notifications, and concerns that Tamara may not be acting honestly and with integrity by making vexatious claims, the TPB would likely investigate her conduct, the regulator said.
De Cure explained that where the TPB receives breach reports, it undertakes some preliminary analysis to validate the breach and determine whether the practitioner had reasonable grounds for believing there had been a significant breach of the code.
The TPB also gave another example of Brittany, a BAS agent who attends monthly BAS discussion group sessions and is a member of an online forum that discusses new and emerging issues for BAS agents.
"Brittany overhears attendees gossiping about a mutual acquaintance, Chris, saying he has been falsifying CPE certificates. She also overhears that Chris made false statements to the TPB," the TPB explained.
"Brittany made no further enquiries regarding what she had overheard. She doesn’t have any independent evidence and recalls seeing Chris at several discussion groups, and two recent workshops."
De Cure explained that in these circumstances, Brittany doesn't have a breach reporting obligation to notify the TPB.
"She wouldn't be considered to have reasonable grounds to believe that Chris had breached the code because reaching a belief like that would have been founded solely on the gossip that she overheard at a group discussion session. So we don't think that that would require a report."
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