Why a looming $18m penalty cap has the profession on edge

The Interim suspension power

With the TPB empowered to suspend a practitioner’s registration for up to 90 days with 14 days’ notice, National Tax & Accountants' Association senior advocate Robyn Jacobson told Accountants Daily that this raises concerns. Through this, she said, the TPB is not required to undertake a formal investigation into the conduct before imposing the suspension.

“A practitioner can have their registration suspended, and their livelihood put on hold, before they’ve had the chance to put forward their side of the story,” Jacobson said.

“Regulation affects the outliers as much as the targeted case, and there will be practitioners whose business could be destroyed by the exercise of this power before any adverse finding is made against them.

“Once clients have left and a reputation is damaged, a later vindication is cold comfort. The 90 days can’t be handed back,” she said. 

Despite the proposed changes clarifying that the suspension is reserved for highly egregious cases with a significant risk of harm to clients, the public, or revenue, Jacobson said practitioners may not feel assured by such representations.

The fear of these sanctions in the profession, she added, stems from the recent regulatory changes.

“Many practitioners feel that some of the changes are an overreach, given the professional misconduct of a few,” she said.

“While these reforms are about giving the regulator credible tools to proportionately deal with genuine misconduct, it is understandable why good practitioners will feel like they are being burdened with more rules.”

In light of the number of civil penalties, Jacobson said that contrary to fears surrounding the proposed forty-fold increase of the maximum civil penalty to 50,000 penalty units to $18.2 million, these are maximums that the Federal Court can impose, not amounts the TPB can hand out.

With the court determining the appropriate penalty, Jacobson said that the profession should expect sensible judgement.

“A sole trader could face a maximum penalty of $910,000. Contrast this with the prospect of a sole practitioner who instead operates through a company being hit with a penalty of more than $18 million,” she said.

“Such an outcome would seem unreasonable in most cases, particularly as the ceiling is calibrated for the multinational firm, not the incorporated sole trader.

“The vast majority of practitioners who do the right thing have nothing to fear from these changes.”

Tax professionals are welcoming the sanctions, but are keeping an eye out as the TPB has yet to release its guidance on the amendment.

“This is all about making our taxation system stronger, driving better behaviour and deterring misconduct,” Treasurer Jim Chalmers said at the bill’s announcement.

The stronger framework for sanctions includes criminal penalties for unregistered tax preparers, new civil penalties for breaches of the Code of Professional Conduct, and increased penalty amounts.

In addition to the interim suspension, Treasury is looking to double the maximum duration of termination of registration to 10 years, giving the TPB more powers to issue infringement notice penalties, enter into enforceable voluntary undertakings and impose contingent and interim registration suspensions.