Tax agent breach reporting obligations: TPB clarifies concerns

This article was current at the time of publication.

From 1 July 2024, registered tax practitioners have additional breach reporting obligations to the Tax Practitioners Board (TPB) under the provisions of the Tax Agent Services Act 2009 (TASA).

They follow legislative amendments to the TASA that was passed as part of a deal between the government and the Australian Greens without consultation.

The TPB provided draft guidance around the new breach reporting requirements in TPB(I) D53/2024 Breach reporting under the Tax Agent Services Act 2009 in late April, and has since published further information on the changes including a question and answer section as well as links to webinars and presentation slides.

Concerns from practitioners

TPB chair Peter de Cure says the need for extensive guidance around breach reporting obligations stems from the rapid speed at which the legislative amendments to the TASA were passed through Parliament following the PricewaterhouseCoopers breaches of the Code.

“We’re doing our level best to communicate with the profession properly to make sure that they understand how we’re going to interpret and implement the changes.”

The guidance around breach reporting has been finalised through the Tax Practitioner Governance and Standards Forum, which considered a range of feedback from professional accounting and tax bodies, including CPA Australia] and the broader tax profession.

“Getting some definition around what ‘significant’ means has been one of the areas of concern, and one of the other things that they’ve been worried about is whether the obligations apply in any way retrospectively,” de Cure says.

“And the absolute piece of clarity that I want to give is that this law only applies to breaches of the Code that happen on or after 1 July 2024. Practitioners don’t need to be trolling through the past, so to speak. There’s absolutely no retrospective application.”

The fundamentals

The breach reporting obligations require all practitioners, including tax agents and BAS agents, to notify the TPB in writing within 30 days if they have reasonable grounds to believe they have committed a significant breach of the Code of Professional Conduct in the TASA.

They also require practitioners to notify the TPB and their recognised professional associations within 30 days if they believe another registered tax practitioner, either within their own firm or externally, has committed a significant breach of the Code.

Significant breaches of the Code are defined as breaches that are an indictable offence, or an offence involving dishonesty, under Australian law, and which result, or are likely to result, in material loss or damage to another entity (including the Commonwealth).

Subsection 90-1(1) of the TASA also defines a “significant breach of the Code” as a breach that is otherwise significant, including considering one or more of the following:

• the number or frequency of similar breaches by the tax practitioner
• the impact of the breach on the tax practitioner’s ability to provide tax agent services
• the extent to which the breach indicates that the tax practitioner’s arrangements to ensure compliance with the Code are inadequate; or 
• is a breach of a kind prescribed by the Tax Agent Services Regulations 2022 (TASR).

The TPB states that determining if a breach of the Code is a “significant breach” must be decided on a case-by-case basis, having regard to the particular facts and circumstances.

Getting up to speed

With the new legislation already in effect, all practitioners need to be fully aware of their professional responsibilities and obligations in relation to significant breaches of the Code.

“It’s incumbent on them, if they have reasonable grounds to be aware, to do what’s necessary to confirm if a significant breach has occurred, and if it has, then report it,” de Cure notes.

“If they don’t, well, it’s like any sort of non-disclosure. The difficulty then comes, if we become aware of a significant breach, and it hasn’t been self-reported, then there’s a matter to discuss there.”

De Cure points out that the Commonwealth’s statute law under the TASA overrides all private non-disclosure agreements.

Failure to comply with any of the breach reporting obligations constitutes a breach of the Taxation Administration Act 1953, which may carry criminal sanctions, and the TASA, specifically Code item 2, which requires tax practitioners to comply with the taxation laws in the conduct of their personal affairs.

Breaches of the TASA can result in several sanctions, including a written caution, an order, suspension of registration, and termination of registration.

Vexatious complaints 

De Cure says the TPB will “frown on” any malicious or vexatious complaints made by practitioners against colleagues or external practices, which “would reflect poorly on their own registration and their compliance with their obligations”.

“The last thing we want to set up is a set of circumstances where everybody within a firm is suspicious of everybody else and they’re wondering whether they have to dob in their partners or employer,” he says.

“We want to see firms engage with this law through appropriate policies, procedures, and practices within their own business. The vast majority of tax practitioners are doing the right thing, day in, day out.”