Date issued: 28 January 2011
The joint accounting bodies recently made a submission to Treasury in response to the options paper: Regulation of tax agent services provided by financial planners.
The options paper follows the Australian Government's earlier announcement in 2010 that industry would be consulted on how Australian Financial Services (AFS) licensees should be regulated, given the government believes that financial planners do offer what amounts to be tax advice under the tax agent services regime (TAS regime).
Two options were proposed in Treasury's paper:
- Option one — regulation within the TAS regime, provided this imposes minimal additional compliance on AFS licensees
- Option two — comparable regulatory supervision through changes to the AFS licence regime where tax agent services provided by financial planners in connection with financial planning advice would be excluded from the TAS regime and regulated by the Australian Securities and Investments Commission
The joint accounting bodies have long held the view that the provision of tax advice by financial planners should be subject to precisely the same controls and standards that apply to all other registered tax agents.
This view would accord most closely with what is referred to in the options paper as option one.
A single regulatory model has the benefit of ensuring that a consistent level of high quality tax advice is provided by registered tax agents to consumers through stringent compliance monitoring and standard-setting processes. Such a model avoids any unnecessary duplication of administrative efforts associated with registration and enforcement activities.
The solution may be some form of hybrid regulatory model, which is closely aligned with the features of option one, but with some modifications to incorporate elements of option two. If such a hybrid model is adopted, we believe it must still:
- regulate financial planners who provide a tax agent service
- require that financial planners meet certain competencies to ensure they possess an appropriate level of knowledge that is commensurate with the skills required to advise consumers on the application of tax laws in the context of financial product advice
- involve a registration process to ensure that appropriate supervision and monitoring can take place
- maintain the integrity of the TAS regime and the role of the Tax Practitioner Board for consumer protection purposes