On 8 October 2024 the revised Legislative Instrument titled Tax Agent Services (Code of Professional Conduct) Amendment (Measures No. 2) Determination 2024 (the LI) was registered.

On 24 October 2024 the Tax Practitioners Board (TPB) released six draft TPB Information Sheets in relation to the final legislative instrument.

What does this mean to you?

In this article we will identify what the changes mean to tax practitioners in relation to the two most controversial code items being False or misleading statements and Keeping your clients informed.

The TPB draft Information Statements (IS) in relation to False or misleading statements and Keeping your clients informed are available on the TPB website

The original position in respect of the eight additional code items is outlined in the Banter Blog article https://taxbanter.com.au/new-code-obligations-for-tax-agents/

False or misleading statements

This code item has become colloquially known as “dob in a client”.

This item requires registered tax practitioners to correct statements that the practitioner knows are false or misleading or indeed not to make or direct someone else to make a false or misleading statement in the first instance. Perhaps the most controversial part of the requirements is that if a tax practitioner advises their client to correct a false or misleading statement and the practitioner is not satisfied that their client has corrected it, the practitioner will be required to withdraw their services from the client and will potentially be required to report them to the TPB or the Commissioner and take whatever further action is necessary in the public interest.

What are the notable changes in the revised LI?

The revised LI clarifies that innocent or genuine errors aren’t intended to be captured by the obligations. Tax practitioners will have an obligation to take action where there has been a failure to take reasonable care or there was intentional disregard or recklessness.

What does the draft TPB IS add to our understanding?

While the IS includes questions for consultation it also attempts to provide more detail than the LI in respect of the terms used and the obligations from a more practical perspective. An example of this is that the LI clarifies that where a tax practitioner is required to withdraw their services from a client, they are also required to withdraw from all professional relationships they have with the client. If the tax practitioner also provides other services such as business advisory, accounting, audit or financial services, they must also be withdrawn.

The IS also provides case studies and exceptions to taking further action. However, even with the guidance provided in the IS it will be necessary for tax practitioners to exercise judgement in determining whether:

• there is an obligation to correct a false or misleading statement
• they are required to withdraw services and other professional relationships they have with a client
• they have an obligation to report a client to the TPB or Commissioner
• they have to take further action in the public interest

Keeping your clients informed

This code item item requires registered tax practitioners to advise all current and prospective clients, in writing, of any matter that could significantly influence the decision on whether to engage the practitioner.

A major concern in relation to the original LI was that it could be interpreted to require the tax practitioner to disclose matters that do not relate to their ability to provide tax agent services as a fit and proper person, perhaps extending to matters such as suffering from mental health issues.

What are the notable changes in the revised LI?

The revised LI sets out an exhaustive list of the matters and events that must be disclosed to current and prospective clients in writing if they have occurred within the last 5 years. These broadly include:

• registration being suspended or terminated by the TPB
• matters relating solvency of the tax practitioner
• any conviction relating to serious tax offences
• any conviction relating to fraud or dishonesty
• serving or being sentenced to a term of imprisonment in Australia for six months or more
• any sanction or order in relation to promoting or engaging in a tax avoidance or evasion scheme under the tax law
• the Federal Court has ordered the tax practitioner to pay a pecuniary penalty for contravening a civil penalty provision under the Act
• any conditions applying to current registration

If applicable, disclosures should be made when engaging or re-engaging the client or within 30 days if the existing client has not otherwise been advised.

What does the draft TPB IS add to our understanding?

Consistent with the IS regarding false and misleading statements, while this IS includes questions for consultation, it also attempts to provide more detail than the LI in respect of the terms used and the obligations from a more practical perspective. An example of this is that the LI notes that the TPB will consider that the tax practitioner has given information to all their current and prospective clients if they:

• publish the information on a publicly accessible website that the registered practitioner uses to promote the tax agent services they offer
• include the information in letters of engagement or re-engagement, given to each of their clients
• provide their clients, upon engagement or re-engagement, with a copy of the TPB’s factsheet on general information for clients

The IS also provides three case studies in respect of whether the tax practitioner would have breached the code in the scenarios put forward.