Does cloud computing mean software providers should be registered tax agents?

The challenge of train

Does cloud computing mean software providers should be registered tax agents? Ian Taylor, TPB chair is looking at ways around this conundrum.

Changes brought about by cloud computing, the oversight of tax financial advisers, and streamlining its services are some of the challenges the Tax Practitioners Board (TPB) is facing over the next 12 months.

Just like the broader tax and accounting profession, the TPB is responding to the challenges thrown up by increasing IT capability and cloud storage of information.

Chair of the TPB, Ian Taylor FCPA, says it is providing guidance on these trends. 

“We’re seeing a very marked change in the way people do business digitally,” he says. “We’re getting an increasingly electronic interchange of information and interaction with the Australian Taxation Office (ATO). That means changes for agents, because a number of agents previously used to lodge only by paper.”

The trend also raises issues for the providers of accounting software themselves. A lot of this software provides the technology that actually communicates with the ATO, so its makers have to be careful not to put themselves in a position where they need to become registered tax agents.

“We’ve talked to them about ways they can avoid the need to register with the TPB. Ultimately the responsibility for that information and the responsibility for that decision should be with the user of the software, so that they approve or authorise it before it’s transmitted,” says Taylor.

Tax and BAS agents are, of course, not allowed to disclose client information to a third party without the client’s permission or being under a legal obligation to do so. Yet by sending data to a cloud provider that is effectively what they are doing, says Taylor. “If you use cloud storage of client information, that’s effectively a distribution to a third party. Third parties may be able to access this, so agents need to be aware that if they’re doing that, it should be part of their disclosure to their clients and they should obtain their consent for that disclosure,” he says.

Outsourcing and offshoring of tax services, mainly by larger firms, raises similar issues. “Registered agents must ensure they are providing a competent service. If you’ve got 100 people working in a processing centre in India, and they don’t fully understand Australian tax law and are not appropriately supervised, then there is potential for problems,” Taylor says.

"If you've got 100 people working in India who don't fully understand Australian tax law ... then there is potential for problems. "

The TPB has extended its 2013 to 2015 strategic plan for another year, ahead of the appointment of a new board early next year.

“We would hope to revise that plan with a new board in the first half of next year,” Taylor explains. “They’ll obviously assess what direction they want to take and, hopefully, there won’t be a significant shift from where we’re at at the moment.”

The TPB’s primary role, says Taylor, is to protect consumers of tax agent services, and it does this by first registering tax practitioners and then ensuring they comply with their various obligations. If need be, the TPB will take action where practitioners fail to comply with the regulatory regime.

The TPB already registers tax agents and BAS agents and, since 1 July 2014, also financial advisers who provide tax advice in the context of a financial service. These financial advisers are known as tax (financial) advisers. 

Registration of tax (financial) advisers is a new initiative. Until December this year they are being registered by what’s called a notification process. “Tax (financial) advisers who are providing a tax (financial) advice service can simply notify the TPB that they are providing such a service and they will automatically be registered. We don’t at that point test their qualifications or their experience,” Taylor says.

However, from 1 January 2016, tax (financial) advisers will have to meet more stringent registration requirements. If they register under the standard option, they will have to meet the full qualification and relevant experience requirements. There will also be a transitional registration option available until 30 June 2017, which allows applicants more time to meet the long-term qualification requirements if they can demonstrate 18 months of sufficient experience.

Taylor says he believes the tax profession has a “reasonably good reputation” among the public. “We’d say that 99 per cent of tax agents do the right thing and it’s really only a very small proportion that do the wrong thing,” he says.

With more than 55,000 registered tax and BAS agents in Australia, and more than 16,000 tax (financial) advisers, the TPB oversees a total of almost 72,000 tax professionals, yet received only 1600 complaints last year.

The most common complaints are around how trust monies are dealt with – particularly where the agent does not pass on a tax refund to a client in a timely manner.
Consumers also complain about the competence of their tax agents. 

“Sometimes that may be simply that the tax agent doesn’t understand their client’s tax position correctly. The client may complain in some instances; in other instances we get referrals from the ATO where they’ve done an audit of a particular agent’s clients and there may be overclaiming or false claims in a group of taxpayers’ returns,” says Taylor.

"We'd say that 99 per cent of tax agents are doing the right thing."

In the first instance, the TPB’s approach is to try to change the behaviour of agents, by bringing the matter to their attention. Where this action has not resolved the matter, or such action is not appropriate, the TPB, following a formal investigation, may impose a range of administrative sanctions. These could include requiring agents to do additional study or work under the supervision of another tax professional.

Terminating a practitioner’s registration is a last resort. In the year to 30 June 2015, only 44 agents were terminated. “At the end of the day, we need to remember that when a person makes a complaint we need to back it up with evidence, because ultimately if we terminate or suspend a person’s registration, we’re having a pretty significant impact in terms of their practice, their business and their livelihood,” Taylor says. 

The TPB has recently redesigned its complaint form to make it more accessible and much easier for the public to fill out.

The TPB is also redesigning and streamlining its online interaction with tax practitioners. It deals with about 30,000 renewals and new applications a year and is aiming to meet the government’s red-tape reduction targets by making interactions simpler and faster. Forms are being redesigned to make them faster and easier to fill out.

Finally, the TPB has released a registered agent symbol, which it would like registered tax and BAS agents to use on their letterheads, business cards, websites and shopfronts as a way of reminding consumers to avoid unregistered agents. “More than 11,000 symbols have been requested so far, with many tax and BAS agents operating under either a company or partnership symbol,” says Taylor.

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March 2020
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