Treasury releases draft amendments to code of conduct instrument

Treasury published draft amendments to the Tax Agent Services (Code of Professional Conduct) Determination 2024 and an updated explanatory statement yesterday which aims to provide further clarity on the obligations.

The draft amendments follow significant backlash from the professional bodies and the wider accounting industry towards the obligations set out in the original determination.

The latest amendments make changes to section 15, which relates to false and misleading statements and section 45, which is in relation to keeping clients informer of relevant matters.

The amendments repeal subsection 15(2) and replace it with an updated subsection to clarify the provision.

The new subsection expressly states that the obligation applies only to statements made or prepared by the practitioner (or permitted or directed someone else to make or prepare the statement).

It also aligns the situations in which a tax practitioner will have an obligation to take some action to only those cases where they have reasonable grounds to believe that the statement was relevantly and materially false or misleading because of a failure by someone involved in preparing or making the statement to take reasonable care, or because someone involved in preparing or making the statement intentionally disregarded, or was recklessly to the operation of, a taxation law.

The new subsection also outlines the factors determining what amount of time is a reasonable amount of time for a tax practitioner, a client or former client to provide a defensible explanation or to take action to correct a false or misleading statement.

It also outlines that in cases where the client does not act to correct a false or misleading statement, after being advised by the practitioner, within a reasonable time period, the practitioner’s obligation is, depending on the circumstances of the case and the likely harm caused by the client’s actions, is to take reasonable steps:

– To withdraw services from the client where the false or misleading statement is due to recklessness as to the operation of a taxation law or intentional disregard of a taxation law; and

– If substantial harm has been caused, is being caused, or is likely to be caused, due to the client’s actions (or inaction), to notify the Board or Commissioner (as the case requires) that they have advised their client that a correction should be made to a previously made statement, and to the practitioner’s knowledge that advice has not been acted upon, and to take further action as the practitioner reasonably considers is needed in the public interest.

It also makes clear that the obligations set out in the second dot point do not apply where taking such a course of action would pose a reasonable risk to the practitioner’s personal safety, or the safety of a member of their family or staff, or to the extent that such action would be unlawful under another law of the Commonwealth, or of a state or territory.

The amendments also repeal and replace subsection 45(1) of the determination which sets out the different types of information that clients must be advised of by tax practitioners. The updated subsection 45(1) clarifies the current provision by listing each of the matters, events and circumstances that tax practitioners need to disclose to current and prospective clients.

Subsection 45(1) will still require tax and BAS agents to fully inform clients of information that may significantly influence their decision to engage or re-engage the practitioner.

This includes advising the client that the Board maintains a register of tax agent and BAS agents, how they can access and search the register, and how they can make a complaint about a tax agent service the practitioner has provided.

In addition, tax and BAS agents will need to disclose the following events that occurred within the last 5 years:

• Certain breaches of the Act or instruments made under the Act that have led to penalties or other sanctions;

• Matters relating to the solvency of the tax practitioner; • any conviction relating to an offence involving fraud or dishonesty;

• Any sanction or order in relation to promoting or engaging in a tax avoidance or evasion scheme under the tax law;

• Any conviction relating to serious tax offences.

• Any current conditions applying to registration;

CPA Australia regulations and standards lead Belinda Zohrab-McConnell said the amendments propose substantial changes to the Code of Professional Conduct obligations that were released in July.

Together with the other joint bodies representing tax practitioners, Zohrab-McConnell said CPA Australia has been working hard to secure crucial amendments to the determination.

“Over recent weeks, our policy & advocacy team has helped to secure agreement to amend sections 15 and 45 of the determination," she said.

“Crucially, we have succeeded in aligning the mandatory reporting requirements more closely with the obligations in APES 110, including that there must be a risk of substantial harm, and removing the obligation to inform clients of “any matter”, replaced by a defined list of issues that need to be disclosed."

Zohrab-McConnell said while significant progress has been made, CPA acknowledges that many of its members will continue to hold understandable concerns with sections of the determination.

“The bar for mandatory reporting obligations will be significantly higher than in the original determination, however CPA Australia and other joint bodies are continuing to make the case for its removal and potential replacement with the obligations in APES 110," she said.

CPA Australia noted that a second motion to disallow the determination in full has been tabled and is scheduled to be heard and voted on in the Senate on October 8.