Law firm sounds alarm on TPB suspension powers in TASA amendments

This power would apply in cases where the TPB is satisfied that either:

• There is or may be a significant risk of material loss or damage to a client of a practitioner if registration is not suspended.

• It is in the public interest to do so, because there is or may be a significant risk to Commonwealth revenue or the integrity of the tax system if registration is not suspended.

Law firm Cadena Legal previously warned Treasury that the interim suspension powers for the TPB should be tightened, as the provisions were too broad and that it was "potentially unconstitutional to attempt to legislate away natural justice".

During the consultation on the draft legislation, the law firm called for two sets of changes to the provisions, which have been ignored by Treasury in the final legislation introduced into parliament this month.

In its submission for the consultation, the firm warned that while the TPB should have the power to act swiftly where clients face imminent harm, the complete exclusion of natural justice "was disproportionate and unnecessary to achieve that objective".

It also cautioned that the power may not even be permitted under the Constitution, as it may be considered to be either "an attempt to oust the original jurisdiction of the Courts" or "be repugnant or incompatible with the Constitution".

"An interim suspension takes effect within 24 hours of notification. It prevents the practitioner from providing any tax agent services, destroying client relationships and reputational standing before any finding of misconduct has been made," the submission read.

"A 90-day interim suspension that prevents a practitioner from working looks like a punitive determination of rights by an executive body. If it is characterised as judicial power, it cannot constitutionally be vested in the TPB and this proposed law could fail."

The firm proposed a number of amendments to the proposed emergency suspension powers in its submission including replacing the phrase "satisfied on reasonable grounds" with "has sufficient evidence" in subsection (1) of the draft legislation.

"Reasonable grounds amount to suspicion, i.e. a belief that need not be supported by actual evidence. Sufficient evidence requires the Board to establish each element on the balance of probabilities before acting," the submission read.

"This is proportionate to a decision that will immediately and likely permanently destroy a practice before any finding of misconduct has been made."

It also urged Treasury to replace "there is or may be a significant risk" with "there is a substantial and imminent risk" in subsection (1)(b)(ii) of the draft legislation.

Cadena Legal explained that the use of the phrase "may be" in the subsection reduced the threshold for the powers to speculation and would enable almost any allegation to satisfy the provision.

The firm said a proportionality requirement should also be added, as this would prevent the board from suspending as a first resort where less drastic action, such as conditions on registration or a direction to cease specific conduct, would adequately address the risk.