iscover TPB’s interim suspension powers needs safeguards: CA ANZ
BusinessThe professional body has argued that interim suspension powers proposed in the TPB sanctions reforms draft legislation should only be used in limited circumstances.
CA ANZ has released its submission to Treasury on draft regulations and determinations accompanying the proposed reforms that would give the TPB a broader range of sanctions to address misconduct by tax practitioners.
The draft legislation – released in April – amended the Tax Agent Services Act 2009 and introduced tougher penalties for misconduct by tax practitioners, as well as criminal penalties for unregistered tax return preparers.
In its submission, the professional body said it supports the TPB having a greater range of sanctions and the proposed public listing of certain sanctions only where there is “egregious and immediate harm”.
Indeed, CA ANZ supported the draft regulations and determination on the condition that the bill is amended to require an imminent risk of harm before the interim suspension power can be used.
It noted that the bill as currently drafted aims to give the TPB interim suspension powers where there are reasonable grounds to believe a practitioner’s behaviour poses a risk of serious and immediate harm to tax clients or the tax system.
However, it pointed out that the draft bill does not explicitly include the “immediate harm” requirement.
CA ANZ said it is concerned that this omission could allow the TPB to use the interim suspension powers without first providing natural justice to the practitioner, even in cases where a full investigation could be conducted before deciding on a suspension or lesser sanction.
“This is concerning because use of the interim suspension power is likely to have immediate and severe consequences for a tax practitioner’s business,” the submission read.
“A practitioner who is subject to an interim suspension must notify current and prospective clients as soon as possible that their registration has been suspended. The suspension is also recorded on the public register of tax practitioners.”
In addition, the ATO is notified of the suspension, which could mean the tax practitioner is excluded from ATO Online services and agents, CA ANZ pointed out.
“These consequences could cause irreparable harm to a tax practitioner’s business and reputation. The resulting reputational damage would be extremely difficult to repair and may prevent the practitioner from rebuilding their practice,” it said.
“The bill does not currently include appropriate safeguards, including a requirement that there be an imminent risk of harm to a client or to revenue before the interim suspension power may be used. Further amendments are needed to ensure the Bill reflects these requirements.”
Language should reflect how power can be used
Furthermore, CA ANZ said the language used in the explanatory material regarding interim suspensions fails to accurately reflect the limited circumstances in which the power is intended to be used.
The language in the explanatory statements mainly reflected the language used in the explanatory memorandum of the bill currently before parliament.
“The interim suspension is intended to enable the TPB to act quickly to stop a tax practitioner from causing further harm to clients, the community, the profession and/or the tax system while the TPB is conducting compliance activities,” it read.
However, CA ANZ said that this does not reflect the fuller statements about interim suspensions in the explanatory memorandum, which highlight that interim suspensions must not be used lightly.
"The TPB can only impose an interim suspension in response to highly egregious behaviour and where the TPB is satisfied that the behaviour poses a risk of serious harm in the future to tax clients and/or to the tax system,” it read.
As such, one of CA ANZ’s key recommendations is to amend the explanatory statement to accurately reflect the limited circumstances in which the interim suspension power should be used.
It also called for amending the explanatory statement to the determination to avoid any suggestion that tax practitioners may disclose confidential client information beyond what is specified.
Consultation period too short
Alongside this, CA ANZ expressed its disappointment in its submission about the short consultation periods for the bill and related instruments.
It noted that although the James Review recommendations were made in 2019, consultation did not begin on those recommendations until 10 December 2023, and it closed on 21 January 2024. Similarly, both the subsequent consultation on the exposure draft legislation for the bill currently before parliament and the current consultation have had a short two-week window.
“Given that these measures have the potential to significantly affect the rights, obligations and professional livelihoods of registered tax practitioners, stakeholders should be provided with sufficient time to properly consider their practical implications and provide informed feedback,” the submission read.
“Adequate consultation is essential to ensuring the reforms are balanced, workable and capable of achieving their intended policy outcomes.”
Commenting on the submission, CA ANZ tax, superannuation, and financial services leader Susan Franks said CA ANZ supports expanding the TPB's sanction powers.
“A broader range of sanctions will help ensure the TPB has proportionate and targeted responses available for different types of misconduct,” Franks said.
The body said it looks forward to working with Treasury and the TPB to ensure the reforms strike the right balance between effective enforcement and procedural fairness.
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