CLARITY ON BREACH REPORTING RULES FOR TAX PRACTITIONERS
๐๐น๐ฎ๐ฟ๐ถ๐๐ ๐ผ๐ป ๐ฏ๐ฟ๐ฒ๐ฎ๐ฐ๐ต ๐ฟ๐ฒ๐ฝ๐ผ๐ฟ๐๐ถ๐ป๐ด ๐ฟ๐๐น๐ฒ๐ ๐ณ๐ผ๐ฟ ๐๐ฎ๐ ๐ฝ๐ฟ๐ฎ๐ฐ๐๐ถ๐๐ถ๐ผ๐ป๐ฒ๐ฟ๐
The Tax Practitionerโs Board (๐ง๐ฃ๐) has clarified its position on registered tax practitionersโ breach reporting requirements in relation to the Code of Professional Conduct (๐๐ผ๐ฑ๐ฒ).
Initially set out under the ๐๐ข๐น ๐๐จ๐ฆ๐ฏ๐ต ๐๐ฆ๐ณ๐ท๐ช๐ค๐ฆ๐ด ๐๐ค๐ต 2009 (Cth) (๐ง๐๐ฆ๐), the Code was later supplemented under the ๐๐ข๐น ๐๐จ๐ฆ๐ฏ๐ต ๐๐ฆ๐ณ๐ท๐ช๐ค๐ฆ๐ด (๐๐ฐ๐ฅ๐ฆ ๐ฐ๐ง ๐๐ณ๐ฐ๐ง๐ฆ๐ด๐ด๐ช๐ฐ๐ฏ๐ข๐ญ ๐๐ฐ๐ฏ๐ฅ๐ถ๐ค๐ต) ๐๐ฆ๐ต๐ฆ๐ณ๐ฎ๐ช๐ฏ๐ข๐ต๐ช๐ฐ๐ฏ 2024 (Cth), to strengthen the integrity of the tax system.
However, the breach reporting requirements have been subject to considerable criticism from the industry especially in relation to the subjective nature of the requirements.
In response, the TPB updated its policy guidance to clarify a tax practitionerโs obligations and when, and what kinds of breaches, should be reported.
๐ฅ๐ฒ๐ฎ๐๐ผ๐ป๐ฎ๐ฏ๐น๐ฒ ๐๐ฟ๐ผ๐๐ป๐ฑ๐
Tax practitioners must notify the TPB if they have โreasonable groundsโ to believe they, or another tax practitioner, has breached the Code and the breach is a โsignificant breachโ.
In its latest update to TPB(I) 43/2024, the TPB confirmed that โreasonable groundsโ is a lower standard to that of being certain. It requires a "solid foundation or basis for their belief". Some facts and evidence are required; however, tax practitioners need not have conclusive proof.
At times, a practitioner might be unsure of whether they have โreasonable groundsโ. In these cases, if there is a "reasonable basis or foundation for the claim", they should err on the side of caution and report.
Not all cases are so clear. There are, always, less obvious or 'borderline' cases. Ultimately, guidance indicates tax practitioners need to make a professional judgement call.
๐ฆ๐ถ๐ด๐ป๐ถ๐ณ๐ถ๐ฐ๐ฎ๐ป๐ ๐ฏ๐ฟ๐ฒ๐ฎ๐ฐ๐ต
Section 90-1 of the TASA defines what constitutes a โsignificant breachโ. Unless a breach falls squarely into one of the clearly defined categories, determining whether an โotherwise significantโ breach has occurred, effectively a judgment call, can be, depending on the circumstances, debatable.
Helpfully, new guidance indicates a breach will be more readily identified as โotherwise significantโ if it involves โintentional, negligent or reckless conduct or otherwise egregious behaviourโ. Paragraph 98 of TPB(I) 43/2024 outlines further considerations that may be of assistance.
The above guidance does not negate the tax practitionerโs own obligation to undertake an independent assessment and make a professional judgement call.
Smailes Krawitz assists tax agents understand their obligations under the TASA.
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