'Unacceptable risk': Tax Institute raises major concerns with proposed powers for TPB

In a recent submission on the draft bill, the Tax Institute expressed significant concerns about the breadth of the interim suspension powers as drafted and the "limited procedural fairness protections that accompany them".

While the draft EM states that interim suspension is intended to apply only in very exceptional circumstances, the Tax Institute said the legislative threshold does not reflect this intent.

"Proposed subparagraph 40-17(1)(b)(i) allows the TPB to suspend a practitioner’s registration if one or more clients are likely to suffer loss or damage if the registration is not suspended," it stated.

"We are concerned that this threshold is too low, as it does not required the loss or damage to be serious or substantial; the harm to be immediate or a clear nexus between the alleged conduct and a significant risk to clients or the tax system.

The Tax Institute warned that the powers as currently drafted could apply to minor or technical issues that cause some sort of loss or damage.

"The absence of procedural fairness safeguards in the interim suspension process substantially compounds these concerns," it said.

The Tax Institute noted that under the draft reforms, the TPB is not required to commence or complete an investigation before exercising the power and the practitioner is not given notice or opportunity to be heard before suspension.

The decision to impose an interim suspension is also not subject to immediate merits review by the Administrative Review Tribunal.

The submission warned that Interim suspension decisions can have immediate and potentially irreversible consequences, including loss of the ability to practice; disruption to client affairs and tax obligations and severe reputational damage, which may not be capable of being undone even if the decision is later overturned.

"Given the seriousness of these consequences, we are concerned that the proposed framework allows for such outcomes without early hearing rights or effective review mechanisms," it said.

"Reliance on post-suspension review processes does not adequately address these risks, as the most significant harm often occurs at the point the suspension is imposed."

The Tax Institute said the combination of a low statutory threshold, broad discretionary power and limited procedural safeguards "creates an an unacceptable risk of unjust or disproportionate outcomes and undermines confidence in the regulatory framework".

The submission recommended that the threshold for interim suspension should be explicitly raised in the legislation to require a serious and immediate risk of substantial harm to clients or to the integrity of the tax system, consistent with the stated legislative intent.

The procedural fairness safeguards, it said, should also be strengthened to provide practitioners with an opportunity to be heard before suspension, except in the most extreme and urgent circumstances.

The submission said safeguards should also be added to ensure timely access to independent merits review of interim suspension decisions.

"We consider that these changes are essential to ensure that interim suspension powers are effective, proportionate, and consistent with fundamental principles of fairness," it said.