Joint bodies push for further detail on proposed civil penalty provisions

The joint bodies said that further information was needed on how the significant civil penalty provisions in the draft bill would apply across different types of circumstances.

Amendments to the draft legislation introduce two new civil penalty provisions: contravention of the Code of Professional Conduct by registered tax practitioners and false or misleading statements to the Commissioner of Taxation or the TPB by unregistered preparers.

In line with the broader amendments to civil penalty maximum amounts in the exposure draft, the maximum penalties applicable for these new provisions would be 2,500 penalty units for individuals, and 50,000 penalty units for bodies corporate and significant global entities.

The explanatory memorandum noted that the Tax Agent Services Act (TASA) currently has eight sections, which include civil penalty provisions targeting a range of undesirable conduct by both registered practitioners and unregistered preparers.

The joint bodies said that the draft legislation would see a substantial increase in the "breadth and quantum of civil penalties that can be imposed on regulated tax practitioners".

One of the issues identified in the submission is that the draft legislation does not distinguish between sole practitioners and multinational organisations that operate companies.

"Many smaller tax practitioners do not consider that this is appropriate," the submission read.

"It is understood that this drafting follows usual practices of specifying the maximum penalty and leaving the Federal Court appropriate scope to impose a fitting penalty that is proportionate to the registered tax practitioners’ circumstances and the gravity of the breach.

"It would be helpful if the draft explanatory memorandum contained an explanation and example of how the significant civil penalty provisions are intended to apply across a variety of circumstances and how the Federal Court will consider a range of factors, including the size and structure of the tax practice, the capacity to pay, and the gravity of the breach."

The bodies said the explanatory memorandum for the draft bill should also include a clear confirmation that seeking the imposition of civil penalties by the Federal Court for breaches of the Code of Professional Conduct can only occur after lower-range sanctions have been considered or applied, and not for minor breaches of the TASA.

Once the legislation is passed, the bodies said the TPB should also produce regulatory guidance, similar to ASIC's regulatory guides, to explain how and when the TPB would exercise these specific powers in the TASA.

The joint bodies said that, overall, they welcomed the introduction of stronger sanctions for the TPB.

"The ability to issue infringement notices, participate in enforceable undertakings, and issue interim and contingent suspensions of a tax practitioner’s registration will help ensure that the TPB has appropriate sanctions for a wider range of contraventions of the Tax Agent Services Act 2009 (Cth) (TASA)," they said.

"The reintroduction of criminal sanctions and the introduction of an additional civil penalty for unregistered preparers are strongly supported."