A peak accounting body believes financial planners offering tax advice services have “compromised” consumer protection and has called on Treasury to regulate advisers under the Tax Agent Services Act (TASA).
In a submission on draft legislation titled Creating a regulatory framework for tax advice (financial product) services and other amendments, the Institute of Public Accountants (IPA) said bringing financial planners within the existing regulatory regime is vitally important to ensure consistent regulation of all forms of tax advice, irrespective of who provides the services.
While it is not uncommon for financial planners to give general tax advice in the course of providing financial advice, many are concerned that the requirements to become part of the TASA regime will result in them facing extra compliance burdens at the same time that the Future of Financial Advice (FoFA) reforms take affect.
Others argue that the definition of “tax advice (financial product) service” is unclear and that the proposed registration model is not appropriate for the financial advice industry.
However, with anecdotal evidence suggesting that there may be up to 17,000 financial advisers providing tax advice for a fee or other reward, the IPA argues that other incidental tax advice providers, including groups such as valuers and quantity surveyors, have not had the benefit of TASA exemption since it was introduced back in 2010.
“We are therefore pleased that the government is now proceeding with bringing financial planners within the TASA regulatory regime,” said Tony Greco, a senior tax adviser with the IPA.
“While the carve-out from TASA exists for this group, consumer protection has been compromised, which is an unsatisfactory situation.”
How the great carve out began
In March 2010, the government introduced TASA to regulate providers of tax agent services and to ensure minimum professional and ethical standards apply.
When this legislation was introduced, the government carved out tax agent services provided by financial services licensees and their authorised representatives.
The proposal in the draft legislation provides for an initial 18-month notification phase, starting on July 1 and ending on December 31, 2014, for existing financial service licensees and their representatives to notify the Tax Practitioner Board (TPB).
The IPA believes the proposed notification period is excessive given that it will apply retrospectively.
“We advocate a far shorter notification period to ensure tax advice provided by financial planners is subject to professional and ethical standards as required by TASA,” said Greco.
“Financial planners have already had the benefit of a three-year holiday from having to be regulated under the TASA regime. A shorter notification period will reinforce entities’ professional and ethical responsibilities under the TASA regime.”
