Public accountants are pleased financial advisers will finally have to comply with a stringent regime which includes possible penalties up to $27,000 when providing tax advice from July.
The controversial Tax Agent Services Act (TASA) comes into play for advisers who provide tax advice on 1 July, after a year’s postponement.
“Advisers now have to be competent at providing tax advice. Now there’s an obligation on them that when they provide tax advice, they are accountable,” Institute of Public Accountants senior tax adviser Tony Greco told Wealth Professional.
“Advisers have always been reluctant to accept that when they provide financial advice the tax stuff is not just ‘incidental’ or someone else’s problem. They’ve dodged this bullet for a long time. There’s now a recognition that they do provide tax advice and they have to be competent to provide that advice because the client is relying on them.”
What is the most important part of the act advisers need to watch out for?
“If their client is a small business and they’re selling that business they can get into some pretty heavy tax issues. If they’re managing an investment, simply buying and selling, it’s different. So it depends on the needs of the client,” said Greco.
“But as soon as advisers get into an area they are not familiar with, the obligation under TASA is that they don’t provide advice. So act within your competence and don’t provide advice which you don’t understand.”
Although the act’s provisions are not yet set in stone for advisers, there will be ongoing education requirements governed by the Tax Practitioners Board, which oversees TASA. Advisers will also have to stick to a code of conduct.
Extra regulation naturally comes with extra penalties – but just how stringent they are might come as a shock down the track.
The penalties for advisers are still being tweaked, but judging from the “pretty stiff” penalties for tax agents operating outside the registration system, they will not be light, said Greco.
A tax agent practicing without being registered with the Tax Practitioners Board can be fined $27,000. “But if you’re not competent then there will be a lesser penalty than that, you will probably just have to go off and do more training,” said Greco.
He sees TASA as protection for consumers seeking advice.
“It’s been a long journey but it’s come to a point in time where it’s acknowledged that advisers do provide tax advice and they recognise those responsibilities. The Tax Practitioners Board will oversee that regardless who the public gets tax advice, there is minimum competence and standards out there.”
The Financial Planning Association launched a comprehensive education campaign yesterday to prepare planners for the implementation of TASA.
The campaign includes a series of four webinars, national roadshows around the country for FPA members in April to June, and a TASA online ‘toolkit’ containing easy reference guides, FAQ sheets and an article library.
“Our priority is to support the financial planning profession, which in turn has the best interest of Australian investors at heart,” FPA CEO Mark Rantall said.
“We are constantly in discussions with the FPA community about the issues that are top of mind for planners and practice owners. One concern that consistently comes up is the challenge of adapting to new legislation and regulations.
"So, we have made it a priority to provide a variety of resources designed to equip planners to continue providing best-practice advice up to the highest professional standards.”
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