House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon Wayne Swan MP)

Chapter 3 - Transitional arrangements for registration

Outline of chapter

3.1 Part 1 of Schedule 2 to this Bill provides for the meanings of defined terms used in Schedule 2.

3.2 Part 2 of Schedule 2 to the Bill provides for the transitional arrangements for certain entities that are providing tax agent services as defined in the Tax Agent Services Act 2009 (TAS Act) before the commencement of the TAS Act.

3.3 Part 3, Division 1 of Schedule 2 to the Bill provides for the transitional arrangements for entities that have applied for registration or re-registration under Part VIIA of the Income Tax Assessment Act 1936 (ITAA 1936) (the current law requiring the registration of tax agents (current law)) and the relevant state Tax Agents' Board (state Board) has not decided their application before the commencement of the TAS Act.

3.4 Part 3, Division 2 of Schedule 2 to the Bill provides for the transitional arrangements for entities that have not made an application for registration under the current law, but the time period for making such applications has not expired at the time of commencement of the TAS Act.

3.5 Part 3, Division 3 of Schedule 2 to the Bill makes provision for new applications (under section 20-20 of the TAS Act) from entities that are not registered under the current law, but are providing specialist tax agent services (notably, this includes research and development (R & D) specialists). There are similar provisions for entities providing Business Activity Statement (BAS) services.

3.6 Part 5 of Schedule 2 to the Bill provides that certain decisions of the Tax Practitioners Board (Board) related to registration are reviewable by the Administrative Appeals Tribunal (AAT).

3.7 Part 8 of Schedule 2 to the Bill provides the form in which notification must be given to the Board.

Context of amendments

3.8 As the current law is repealed by the Bill (refer to paragraph 1.17), provision needs to be made to facilitate the transition of entities registered under the current law into the new regulatory regime for the provision of tax agent services provided in the TAS Act. Likewise, provision needs to be made to allow entities that are currently legally providing tax agent services or BAS services (within the meaning of the TAS Act) for a fee without registration to transition into the regime in the TAS Act.

3.9 Transitional provisions are also required to deal with applications for registration and re-registration that are on foot under the current law upon commencement.

Summary of new law

3.10 Existing registered tax agent and nominee registrations and re-registrations are deemed to be registrations and renewals under the TAS Act and existing but undecided applications for registration and re-registration that were lodged with a state Board are decided in accordance with the current law by the Board.

3.11 Certain entities that are currently providing tax agent services for a fee legally without being registered or that otherwise satisfy the conditions for the provision of those services (because such services are not currently regulated) are transitioned into the regime under the TAS Act.

3.12 Certain entities providing specialist tax agent services that apply for registration as a registered tax agent under the TAS Act are eligible for registration regardless of whether they meet the qualifications and relevant experience requirements for registration. This is intended to transition certain specialist tax service providers (such as those in the R & D field) who are not currently registered.

3.13 Certain entities that apply for registration as a registered BAS agent under the TAS Act before the end of the three-year period from commencement are eligible for registration regardless of whether they meet the qualifications and relevant experience requirements for registration.

3.14 Certain terms used in Schedule 2 to the Bill are defined in that Schedule. Other expressions used in Schedule 2 have the same meaning in that Schedule as in the TAS Act or in the Income Tax Assessment Act 1997 (ITAA 1997).

Detailed explanation of new law

Explanation of the use of defined terms in Schedule 2 to the Bill

3.15 An expression used in Schedule 2 to the Bill that is also used in the TAS Act has the same meaning in Schedule 2 as it has in that Act. Likewise, but subject to those expressions used in the TAS Act, an expression used in Schedule 2 to the Bill that is also used in the ITAA 1997 has the same meaning in Schedule 2 as it has in that Act. [ Schedule 2, subitems 1(2) and ( 3 )]

3.16 When the term 'commencement' is used in Schedule 2 to the Bill, it means the commencement of Part 1 in Schedule 1 to the Bill. Refer to paragraphs 1.50 to 1.55 for further information about commencement. [ Schedule 2, subitem 1(1 )]

3.17 When the terms 'old law' and 'new law' are used in Schedule 2 to the Bill, they mean 'Part VIIA of the ITAA 1936 as in force immediately before commencement' and 'the TAS Act', respectively. [ Schedule 2, subitem 1(1 )]

3.18 For the purposes of this explanatory memorandum, current law has the same meaning as 'old law', being 'Part VIIA of the ITAA 1936'.

3.19 When the term 'Board' is used in Schedule 2 to the Bill, it means the Board established under section 60-5 of the TAS Act. [ Schedule 2, subitem 1(1 )]

Transition of entities providing tax agent services and BAS services

3.20 The transitional provisions facilitate the transition of entities registered in the current tax agent registration regime into the new regulatory regime introduced by the TAS Act. The transitional provisions enable entities to continue to provide the services they were able to provide before commencement of the TAS Act, after commencement of the TAS Act. Entities will therefore be able to continue their day to day provision of services without disruption due to the change in law and without a detrimental impact on their livelihood.

3.21 Entities contemplated by Part 2 of the Bill are 'taken to be registered' under section 20-25 of the TAS Act. Accordingly, all of the provisions in the TAS Act (for example, obligations, responsibilities, powers of the Board) apply to those entities. To continue registration beyond the registration period specified in the relevant item in Part 2 of the Bill, an entity will apply for renewal in accordance with section 20-50 of the TAS Act.

Continuation of existing registration of registered tax agents and nominees

3.22 If, immediately before commencement an entity was a registered tax agent or registered nominee within the meaning of the current law, the entity is taken to be a registered tax agent under the TAS Act. [ Schedule 2, subitem 2(1) and item 3 ]

3.23 Registered tax agents under the current law will be deemed to be registered tax agents under the TAS Act, as the requirements for registration under the current law are not substantially different from the requirements for registration under that Act, other than the removal of the 'carry on business' requirement. It is therefore appropriate that those entities that are registered under the current law be automatically transitioned into the new regulatory regime under the TAS Act.

3.24 Registered nominees under the current law will be deemed to be registered tax agents under the TAS Act. This is because the TAS Act removes the concept of 'nominees'. Such 'nominees' are therefore now registered tax agents in their own right and not subject to the registration of their host tax agent.

Period for which registered tax agents and nominees transitioning will be taken to be registered tax agents under the TAS Act

3.25 Registered tax agents and nominees transitioning into the new regime are taken to be registered tax agents under the TAS Act for the period:

•

beginning on commencement; and

•

ending on the earliest of the following:

-

for a registered tax agent transitioning - the day on which the entity's registration would have expired under the current law, were it not repealed (refer to paragraph 1.17);

-

for a nominee transitioning - the day on which the entity's registration would have ceased under the current law by virtue of the expiry of the nominee's host tax agent's registration (a nominee's registration ceases to be in force when the nominee's host tax agent's registration expires);

-

the day on which the entity's registration is cancelled under the current law (despite the repeal of the current law), where item 17 of Schedule 2 to the Bill applies and the Board decides to cancel the entity's registration (item 17 provides for the continuation of inquiries by a state Board - refer to paragraphs 4.18 to 4.28); and

-

the day on which the entity's registration is terminated under Subdivision 30-B (termination for failure to comply with the Code of Professional Conduct (Code)) or 40-A (termination of registration on certain other grounds) of the TAS Act.

(During the period when an entity is taken to be a registered tax agent after commencement, the Board may still suspend the entity under the TAS Act.) [ Schedule 2, subitem 2(1) and item 3 ]

Example 3.1

Immediately before commencement (assume 1 January 2010), Hayden was a registered tax agent whose registration was due to expire on 1 April 2010. From commencement, Hayden will be taken to be a registered tax agent within the meaning of the TAS Act until 1 April 2010 (unless Hayden's registration is terminated prematurely).

Hayden will need to apply for renewal of his registration under, and in accordance with, the TAS Act, which specifies that the application for renewal must be made at least 30 days before the day on which the registration expires. If Hayden makes an application for the renewal of his registration on 20 February, Hayden's registration will continue in accordance with the TAS Act until a decision has been made by the Board.

Registered tax agents that are also nominees/multiple nominees

3.26 If an entity is both a registered tax agent and a registered nominee of a registered tax agent under the current law, then that entity simply transitions using its 'tax agent' status and hence their registration will continue under the TAS Act on the basis of their registered tax agent registration under the current law.

3.27 Likewise, if an entity is a registered nominee of more than one registered tax agent, the registration of such a nominee is, after commencement, taken to expire on the latest day that their registration could have continued under the current law - that is, its expiry will be determined with reference to whichever of the nominee's host tax agent's registration would have continued the longest.

Entities that are suspended at commencement

3.28 If, immediately before commencement, an entity was taken not to be a registered tax agent within the meaning of the current law because its registration was suspended, the entity's registration is taken to have been suspended under section 30-25 (provisions regarding suspension) of the TAS Act. [ Schedule 2, subitem 2(2 )]

3.29 Entities whose registration is suspended at commencement are therefore transitioned into the regime under the TAS Act, even though they are not taken to be registered tax agents or nominees (for most purposes) upon commencement.

3.30 In accordance with subsection 30-25(4) of the TAS Act, such entities will be taken not to be a registered tax agent except for the purposes of Part 2 (registration), Subdivision 30-C (notifying a change of circumstances) and Part 4 (termination of registration). This means that during their period of suspension the Board may, amongst other things, impose further sanctions on the entity such as a further period of suspension.

3.31 Such an entity's registration is taken to be suspended under the TAS Act for the period:

•

beginning on commencement; and

•

ending on the day on which the suspension would have ended under the current law, were it not repealed.

[ Schedule 2, subitem 2(2 )]

3.32 Once the period of suspension ends, the entity is taken to be a registered tax agent within the meaning of the TAS Act for the period:

•

beginning on the day immediately after the day on which the suspension ends; and

•

ending on the earliest of the following:

-

the day on which the entity's registration would have expired under the current law, were it not repealed;

-

the day on which the entity's registration is cancelled by the Board under the current law (the Board may continue inquiries initiated by the state Boards and can continue to impose sanctions under the current law - refer to paragraphs 4.18 to 4.34); and

-

the day on which the entity's registration is terminated under Subdivision 30-B (termination for failure to comply with the Code) or 40-A (termination of registration on certain other grounds) of the TAS Act.

[ Schedule 2, subitem 2(3 )]

Example 3.2

Commencement is 1 January 2010. Prior to commencement, Sally's registration as a registered tax agent was suspended until 17 September 2010 in accordance with the current law, after she was found guilty of incorrectly keeping records with the intention of deceiving or misleading the Commissioner of Taxation (Commissioner).

Upon commencement, as Sally was suspended, Sally is taken to have been suspended under the TAS Act. Sally's suspension under the TAS Act will end on 17 September 2010. After that time, Sally will be taken to be a registered tax agent under the TAS Act until the original expiry date under the current law (unless Sally's registration is terminated before that time).

Special rules for entities that are not currently required to register

3.33 The TAS Act regulates a slightly broader range of services than the current law. As a result, the Bill ensures that those entities providing a service that they are not currently required to be registered for, but will be required to register for under the TAS Act, are considered to be a registered tax agent or BAS agent after commencement. (Note that this transitional provision is not intended to cover those entities currently providing tax agent services where such entities are required to be registered. This would include R & D specialists. Special transitional rules apply to such entities. See paragraphs 3.87 to 3.93).

Entities providing tax agent services (that are not BAS services)

3.34 An entity that is not currently required to register to provide tax agent services (other than a BAS service) for a fee will be taken to be a registered tax agent within the meaning of the TAS Act for a period of two years beginning immediately after commencement. However the entity:

•

must have been providing a tax agent service, other than a BAS service (within the meaning of section 90-10 of the TAS Act), for a fee immediately before commencement;

•

must not have been required to register under the current law; and

•

must notify the Board (notification must be in a particular form) that they are such a person within the three-month period beginning immediately after commencement.

[ Schedule 2, subitem 4(1 )]

3.35 As the entity must notify (rather than apply to) the Board, there is no requirement for the Board to consider an application. Notification gives the Board a record of those entities that are taken to be registered tax agents during the two-year period.

3.36 It is appropriate to provide a three-month limit within which such entities are able to access this transitional arrangement. This is because these entities are currently unregistered and can gain the benefits of registration through simply notifying the Board. They therefore represent a higher risk category of all those transitioning.

3.37 Refer to paragraphs 3.49 to 3.57 for the form of notification and the period and conditions of registration under this transitional provision.

Entities providing BAS services

3.38 Under the current law only registered tax agents and certain persons listed in subsection 251L(6) (entities exempt from registration) can provide BAS services for a fee. A transitional rule is necessary to ensure that these exempt entities are able to transition into the new law under the TAS Act.

3.39 A BAS service is defined under subsection 251L(7) of the current law as any of the following:

•

preparing or lodging an approved form about a taxpayer's liabilities, obligations or entitlements under a BAS provision;

•

giving advice about a BAS provision; or

•

dealing with the Commissioner, or a person who is exercising powers or performing functions under a taxation law, in relation to a BAS provision.

3.40 Under subsection 995-1(1) of the ITAA 1997, BAS provision means:

•

Part VII of the Fringe Benefits Tax Assessment Act 1986 ;

•

the indirect tax laws; and

•

Parts 2-5 and 2-10 on Schedule 1 to the Taxation Administration Act 1953 (which are about the pay as you go system).

3.41 Entities who were providing BAS services (within the meaning of the current law) immediately before commencement, for a fee, but are currently exempt from the requirement to register (except for Customs brokers licensed under Part XI of the Customs Act 1901 ) will be taken to be a registered BAS agent within the meaning of the TAS Act for a period of two years beginning immediately after commencement. However, to access this transitional arrangement the individual must notify the Board (notification must be in a particular form) within the six-month period beginning immediately after commencement that:

•

they are exempt from registration under the current law (subsection 251L(6)); and

•

they were providing a BAS service immediately before commencement.

[ Schedule 2, subitem 5(1 )]

3.42 Customs brokers licensed under Part XI of the Customs Act 1901 are exempt from registration under subsection 251L(6) of the current law. Customs brokers will not be transitioned into the new regime because the new regime provided for by the TAS Act continues to exempt such individuals from the requirement of registration (since they cannot be subject to a civil penalty under the TAS Act for providing the certain BAS service that they are exempt from registration for under the current law, without registration).

Example 3.3

Before commencement, Jordan is a bookkeeper working under the direction of a registered tax agent and is therefore not required to be registered under the current law (subsection 251L(6)). If Jordan notifies the Board in writing, within the six-month period after commencement, that he has been working as a bookkeeper under the direction of a registered tax agent to provide BAS services, he will be taken to be a registered BAS agent for the two-year period beginning immediately after commencement.

3.43 The TAS Act introduces a broader concept of BAS service than that used in the current law. Significantly, section 90-10 of the TAS Act includes in the definition of BAS service services relating to ascertaining liabilities, obligations and entitlements arising under a BAS provision (rather than merely preparing or lodging BAS forms about a taxpayer's liabilities, obligations or entitlements under a BAS provision).

3.44 As a result of the broadening of the definition of BAS service, this Bill ensures that those entities providing a BAS service under the TAS Act (where that service is not currently considered to be a BAS service) will, upon commencement, be taken to be a registered BAS agent within the meaning of the TAS Act for a period of two years beginning immediately after commencement. However, to access this transitional arrangement the entity must notify the Board (notification must be in a particular form) within the six-month period beginning immediately after commencement that:

•

they were not a person providing a BAS service within the meaning of the current law who was exempt from registration; and

•

they were an entity providing a BAS service within the meaning of the TAS Act.

[ Schedule 2, subitem 5(2 )]

Example 3.4

Alli completes calculations for her clients regarding the goods and services tax credits they can claim on the purchases they have made. She does not, however, prepare and lodge the BASs for her clients and is therefore not providing a 'BAS service' within the meaning of the current law.

Although the provision of Alli's services is not regulated by the current law, Alli will be required to register under the TAS Act in order to continue to provide her services for a fee. This is because she is providing a BAS service within the meaning of section 90-10 of the TAS Act, namely services that relate to ascertaining clients' entitlements arising under a BAS provision.

If Alli notifies the Board in writing, within the six-month period after commencement, that she was unregistered but legally providing services that are now captured by the definition of BAS service in the TAS Act, she will be taken to be a registered BAS agent for a two-year period commencing from commencement.

In this situation, it would not be unusual if the Board placed conditions on Alli's registration as a registered BAS agent.

Example 3.5

Deaken is a bookkeeper and is providing BAS services for a fee to his clients before commencement. Deaken is not a registered tax agent and is not exempt from registration under subsection 251L(6) of the current law. He is therefore providing BAS services illegally.

Deaken is not a person that will be transitioned into the new regulatory framework under the TAS Act as he is not legally providing BAS services within the meaning of the TAS Act immediately before commencement.

3.45 An entity is taken to be a registered BAS agent for the two-year period beginning immediately after commencement, provided it assesses itself against the criteria correctly and, if applicable, notifies the Board that it is an entity to which the transitional provision applies. As the requirement is to notify, not to apply, the Board is not required to consider the notification.

3.46 Refer to paragraphs 3.49 to 3.57 for the form of notification and the period and conditions of registration under this transitional provision.

What is meant by 'immediately' before?

3.47 The transitional provisions in Part 2 of the Bill use the wording 'immediately before commencement', in relation to when an entity was registered/the state of an entity or when an entity was providing a particular service.

3.48 Immediately before commencement is not intended to mean only a period of time just prior to commencement but is also intended to convey the notion of a continuing provision of services. For example, if an entity provided one tax agent services the day before commencement, it would not be expected that the entity be able to access the transitional provisions. Guidelines may be provided by the Board in relation to such terms, indicating how the Board will administer the provisions.

Period and conditions of registration

3.49 Notification to the Board must be in a form approved by the Board, contain any information, statement or document required by the Board and be provided in a manner required by the Board. [ Schedule 2, item 25 ]

3.50 The Board may find it helpful to specify what additional information it would like to know about the transitioning entity. Likewise, upon receiving a notification, the Board has the power under the TAS Act to seek additional information from the entity or commence an investigation if it considers it necessary.

3.51 Entities taken to be a registered BAS agent or registered tax agent within the meaning of the TAS Act are taken to be registered under section 20-25 of that Bill for a two-year period beginning immediately after commencement. At least 30 days before expiration of the two-year period, the entity needs to apply to the Board for renewal of its registration, and then registration is taken to continue until the Board decides the application in accordance with section 20-50 of the TAS Act. (Refer also to paragraphs 3.94 to 3.100 for an explanation of further provisions that may be accessed by entities taken to be registered BAS agents under the TAS Act after the two-year transitional period has ceased.)

3.52 All of the provisions in the TAS Act (for example, obligations, responsibilities, powers of the Board) apply to entities that are 'taken to be registered' under the TAS Act. Therefore, entities taken to be registered tax agents by virtue of these transitional provisions will be subject to the Code and civil penalty provisions under the TAS Act. Accordingly, any of the sanctions under the TAS Act may apply to the entity. This ensures that those transitioned into the regulatory regime under the TAS Act are competent to provide tax agent services.

3.53 The Board may consider pre-commencement conduct when applying sanctions under the TAS Act. The Board may consider pre-commencement conduct/actions when deciding to terminate the registration of entities that have transitioned into the new regulatory regime, including those that transition via notification. For example, if the Board is not satisfied, once receiving notification and information from an individual, that the individual does not meet the fit and proper person requirements because of pre-commencement actions (for example, becoming an undischarged bankrupt), the Board can terminate the individual's registration under paragraph 40-5(1)(b) of the TAS Act, because the individual would cease to meet one of the tax practitioner registration requirements. (The term 'tax practitioner registration requirements' is defined in section 90-1 of the TAS Act.)

3.54 Even though the individual was an undischarged bankrupt at the time it transitioned into the new regulatory regime and therefore did not technically meet the tax practitioner registration requirements at that time, the Board may still terminate the individual for ceasing to meet the requirements. (Paragraphs 4.29 to 4.34 relate to the Board's power to consider pre-commencement conduct.)

3.55 To avoid doubt, if an entity is taken to be registered as outlined in paragraphs 3.34, 3.41 or 3.44, the Board may, in accordance with the TAS Act, impose conditions to which the entity's registration is subject and/or require the entity to maintain professional indemnity insurance as if that entity had applied for registration and the Board had decided to grant the application. [ Schedule 2, subitems 4(2 ), 5(3) and ( 4 )]

3.56 It would be expected that many entities accessing the transitional provisions by virtue of item 4 or subitem 5(2) of the Bill will have a condition placed on their registration by the Board to limit the tax agent services it can provide. It would be expected that the condition would enable the entity to provide only those tax agent services the entity was providing before commencement. This allows the entity to continue to provide services, while also managing the consumer risk associated with transitioning entities that are not within the current regulatory regime.

3.57 A decision by the Board to impose conditions and a decision by the Board to require an entity to maintain professional indemnity insurance are reviewable by the AAT under section 70-10 of the TAS Act, for which the entity can make an application to the AAT. Refer to paragraph 4.46. [ Schedule 2, subparagraphs 18(2)(a)(i) and ( ii) and 18(2)(b)(i) and (ii)]

Pending applications for registration and re-registration

3.58 Broadly, decisions made by the Board regarding registration applications or re-registration applications that are on foot upon commencement are made in accordance with the current law. The time frames for making decisions are consistent with the TAS Act.

Tax agents and nominees

3.59 Where an entity has applied for original registration as a registered tax agent or re-registration as a registered tax agent under the current law (section 251J or 251JB, respectively) and the relevant state Board has not decided the application before commencement, then the Board must decide the application in accordance with the registration requirements in the current law (being section 251JA for original registration and section 251JC for re-registration). [ Schedule 2, paragraphs 6(1)(a) to ( c) and 7(1)(a) to (c)]

3.60 Sections 251JA and 251JC of the current law require companies and partnerships that apply for registration or re-registration to specify an original nominee of the entity. Given that, on commencement, all nominee registrations are taken to be registrations as a registered tax agent (refer to paragraph 3.10), in deciding an application in accordance with the current law, the Board will need to ensure that the original nominee specified in the application is a partner (in the case of a partnership application) or an employee (in the case of a company application) who is taken to be a registered tax agent on commencement.

3.61 Where an entity has applied for registration or re-registration of a nominee under the current law (section 251KB) and the relevant state Board has not decided the application before commencement, then the Board must decide the application in accordance with the nominee registration and re-registration requirements of the current law (being section 251KC). [ Schedule 2, paragraphs 8(1)(a) to ( c) and 9(1)(a) to (c)]

3.62 The Board must decide registration and re-registration applications for both registered tax agents and nominees within six months after commencement. This is consistent with the time limits for registration decisions under the TAS Act and provides finality to those applications that are pending upon commencement. (The current law does not impose a time frame on registration decisions by the state Boards.) [ Schedule 2, paragraphs 6(1)(c ), 7(1)(c ), 8(1)(c) and 9(1)(c )]

3.63 If the Board decides to grant the application for registration or re-registration in accordance with the current law, the Board:

•

must register the entity or nominee (as appropriate) as a registered tax agent under section 20-25 of the TAS Act;

-

In accordance with section 20-25, the Board may impose conditions to which the entity's registration is subject.

•

must notify the entity and nominee (if appropriate) of its decision in accordance with section 20-30 of the TAS Act; and

-

Under section 20-30 the Board must notify of its decision to grant registration within 30 days of its decision. Notification by the Board must be in writing and must include the period of registration and any conditions to which the registration is subject.

•

may require the entity or nominee (as appropriate) to maintain professional indemnity insurance in accordance with subsection 20-30(3) of the TAS Act.

[ Schedule 2, paragraphs 6(1)(d ), 7(1)(d ), 8(1)(d) and 9(1)(d) and subitems 6(3 ), 7(3 ), 8(3) and 9(3 )]

3.64 If the Board decides to grant the registration, it is reasonable that the entity (and nominee, where appropriate) be notified in accordance with the TAS Act. Notification under that Bill also ensures that the Commissioner is notified of the Board's decision.

3.65 If the Board decides to reject the application, the Board must notify the entity and nominee, where appropriate, of its decision in accordance with the current law as follows:

•

for a registration decision - notification must be in accordance with subsection 251JA(3) (for registered tax agents) or 251KC(3) (for nominees) and section 251QB (regarding statements to accompany notification of decisions); and

•

for a re-registration decision - notification must be in accordance with subsection 251JC(3) (for registered tax agents) or 251KC(3) (for nominees) and section 251QB.

[ Schedule 2, paragraphs 6(1)(e ), 7(1)(e ), 8(1)(e) and 9(1)(e )]

3.66 Subsections 251JA(3), 251JC(3) and 251KC(3) of the current law require the Board to notify the entity in writing of the decision to reject the application and the reasons for that decision. Section 251QB requires the Board to include a statement in certain notices, including notices made under subsections 251JA(3), 251JC(3) and 251KC(3), stating that the entity has the right to make an application to the AAT for review of the decision, if it is dissatisfied with the decision.

3.67 The Board is taken to have rejected the application if it has not made its decision within six months after commencement. This is consistent with the approach adopted in the TAS Act. [ Schedule 2, subitems 6(2 ), 7(2 ), 8(2) and 9(2 )]

Additional rules for re-registration applications

3.68 An entity whose application for re-registration is pending upon commencement is taken to be a registered tax agent for the period:

•

beginning on commencement (for an explanation of 'commencement', see paragraphs 1.50 to 1.55); and

•

ending on the earlier of:

-

the day on which the Board makes its decision regarding the application for re-registration; or

-

the day that occurs six months after commencement.

[ Schedule 2, subitems 7(4) and 9(4 )]

3.69 This approach is broadly consistent with the approach taken in subsection 251JC(4) of the current law, with the addition of a six-month limitation. Subsection 251JC(4) provides that in the case where a state Board decides to refuse a registered tax agent's re-registration application and the notice of the refusal occurs after the date of the registered tax agent's registration expiry, then the registered tax agent is taken to be registered for the period from expiry until the time of notification of the state Board's decision. This additional rule for pending re-registration applications will ensure that entities will not be considered unregistered and hence have to cease providing services simply because they have not been notified by the Board of its decision.

3.70 Under the current law, entities seeking re-registration must normally make their application during the period 60 to 30 days before expiry. They may, however, request that a state Board allow them to make their application during the 30 days before the expiry date. If such a request has been made to a state Board under paragraph 251JB(4)(b) (for registered tax agents) or paragraph 251KB(4)(b) (for nominees) and the relevant state Board has not made a decision before commencement, then the Board must make a decision in accordance with section 251JB (in the case of registered tax agents) or 251KB (in the case of nominees) of the current law. [ Schedule 2, subitems 7(5) and 9(5 )]

3.71 If the Board decides to allow such a request, the entity may apply for re-registration within the time decided by the Board. When the entity applies for re-registration, even though the TAS Act will be in force, the entity is taken to have applied to a state Board for re-registration as if it had applied under the current law prior to commencement. [ Schedule 2, paragraphs 7(5)(d) and 9(5)(d )]

3.72 If the Board decides to refuse the request, the Board must notify the applicant (and specified nominee/s, in the case of a company or partnership application) in writing of the decision to refuse the request and the reasons for the decision in accordance with subsections 251JB(5) and 251KB(5) of the current law (which require the Board to provide a notice in writing that sets out its decision to refuse to allow a later time for the making of an application for re-registration and giving reasons for that decision). [ Schedule 2, paragraphs 7(5)(e) and 9(5)(e )]

3.73 The notice must also include a statement informing the recipient/s of the notice that the Board's decision is reviewable by the AAT under section 251QB of the current law. Absence of this statement, however, does not affect the validity of the Board's decision. [ Schedule 2, paragraphs 7(5)(e) and 9(5)(e )]

Successor tax agents - changes in the constitution of a partnership

3.74 Under the current law, when the constitution of a partnership ( original partnership ) changes, the registration of that partnership is terminated. The new partnership can apply to a state Board for a new registration as long as a partner of the new partnership was a partner, and a registered nominee, of the original partnership immediately before the termination, there is no partner who is an undischarged bankrupt and the registration of the original partnership was not suspended immediately before the termination.

3.75 In addition, under the current law a person who was a partner and a registered nominee of the original partnership immediately before the termination may apply to a state Board for registration as a registered tax agent, provided that partner is not an undischarged bankrupt.

3.76 The treatment of partnerships under the TAS Act is quite different. Under that Bill, if the constitution of a partnership changes, the registration of that partnership is not terminated. Therefore a change in the constitution of a partnership does not affect the continuity of that partnership's registration. Under the TAS Act, a registered partnership must notify the Board within 30 days of the day on which the partnership becomes, or ought to have become, aware that the composition of the partnership changed.

Partnership registration terminated and decision not made by state Board before commencement

3.77 If the registration of a partnership was terminated under the current law because there was a change in the constitution of the partnership and, at commencement:

•

a person mentioned in paragraph 3.75 or a new partnership mentioned in paragraph 3.74 had applied to a state Board for registration as a registered tax agent in accordance with subsection 251JE(1) or (2) of the current law, as appropriate; and

•

the relevant state Board had not yet registered the person or new partnership under section 251JF of the current law,

then, despite section 251JD of the current law (termination because of a change in partnership), the original partnership's registration is taken not have been terminated at the time of the change in the constitution of the original partnership. [ Schedule 2, subitems 10(1) and ( 2 )]

3.78 Because the original partnership's registration will be taken not to have terminated, the transitional arrangements described in paragraph 3.22 will apply to the partnership and its nominee/s.

Partnership registration terminated and first application rejected by state Board before commencement

3.79 Under the current law, certain time limits and special provisions apply to the making of applications for registration as a successor tax agent following termination of registration due to a change in the constitution of a partnership. Broadly speaking, an application must be made within 30 days after the original partnership's registration terminated. If a state Board is of the opinion that the application made is not in accordance with the requirements in the current law, and the notice of that opinion is given, at the earliest, 21 days after termination of the original partnership's registration, then the applicant has a further period of seven days (under subsection 251JE(9)) in which to resubmit its application. Because of the changed approach to the continuity of partnerships (and therefore partnership registration in the case of a change in constitution), under the TAS Act, transitional provisions are required to accommodate situations where commencement occurs during the 30-day period or during the subsequent seven-day period granted by a state Board.

3.80 In situations where the seven-day period for resubmitting an application under subsection 251JE(9) of the current law has not expired at commencement, the applicant may resubmit its application for registration as a successor tax agent in accordance with section 251JE within seven days after commencement. The applicant may do so where:

•

a state Board received a document from the entity purporting to be an application made in accordance with section 251JE of the current law (application for registration as a successor tax agent);

•

the state Board was of the opinion that the document was not an application made in accordance with 251JE and notified the entity of that opinion before commencement in accordance with subsection 251JE(8);

•

the seven-day period mentioned in subsection 251JE(9) has not expired at commencement; and

•

the entity has not yet re-made an application under section 251JE as allowed by subsection 251JE(9).

[ Schedule 2, paragraphs 10(3)(a) to (e)]

3.81 If the Board is of the opinion that the entity has applied in accordance with section 251JE of the current law, the Board:

•

must register the entity as a registered tax agent under section 20-25 of the TAS Act;

•

must notify the entity of its decision in accordance with section 20-30 of that Act; and

•

may impose conditions to which the entity's registration is subject and/or require the entity to maintain professional indemnity insurance in accordance with that Act.

[ Schedule 2, paragraph 10(3)(f) and subitem 10(4 )]

Example 3.6

Before commencement, Billy is a partner and a registered nominee of a partnership, YUU & Partners, which is a registered tax agent under the current law. YUU & Partners' registration is terminated because the constitution of the partnership changes.

Within the required timeframe in the current law, Billy submits an application to a state Board for registration as a successor tax agent. Billy was notified by the state Board that it was of the opinion that the document submitted by Billy was not an application made in accordance with section 251JE of the current law. Three days later, the TAS Act commenced.

Billy had not re-made his application for registration as a successor tax agent before commencement. Under the Bill, Billy has seven days from commencement to re-submit his application for registration as a successor tax agent to the Board.

Application not yet made

Successor tax agents - changes in the constitution of a partnership

Partnership registration terminated and application not made before commencement

3.82 If the registration of a partnership was terminated under the current law because there was a change in the constitution of the partnership and, at commencement:

•

a person mentioned in paragraph 3.75 or a new partnership mentioned in paragraph 3.74 had not applied to a state Board for registration as a registered tax agent in accordance with subsection 251JE(1) or (2) of the current law, as appropriate; and

•

the 30-day period within which an application had to be made (as mentioned in subsection 251JE(4) of the current law) had not expired,

then, despite the repeal of the current law, the person or new partnership may apply to the Board in accordance with subsection 251JE(1) or (2) of the current law, as appropriate, within the balance of the 30-day period. [ Schedule 2, subitems 12(1) and ( 3 )]

3.83 If a person or the new partnership makes such an application, then despite section 251JD of the current law (termination because of a change in partnership), the original partnership's registration is taken not to have been terminated at the time of the change in the constitution of the original partnership. [ Schedule 2, subitems 12(2) and ( 4 )]

3.84 These provisions ensure that a person or new partnership retains the ability to make an application to the Board for successor registration under the current law where the 30-day period for making such an application has not expired, notwithstanding the repeal of the current law from commencement. A person or new partnership will have the time from commencement until the 30-day period would have expired under the current law to apply to the Board.

3.85 Provided an application is made which complies with the requirements in subsection 251JE(1) or (2), as appropriate, the original partnership's registration will be taken not to have terminated and the transitional arrangements described in paragraph 3.22 will apply to both the partnership and its nominee/s.

New applications for registration as a tax agent or BAS agent

3.86 The Bill also provides for new applications under the TAS Act for registration as a registered tax agent or as a registered BAS agent. The provisions enable certain entities to be eligible for registration under the TAS Act despite not meeting the qualifications and relevant experience requirements for registration.

Registration as a tax agent - entities providing specialist tax agent services

3.87 Under the current regulatory regime there may be some entities providing specialist tax agent services that are not currently registered. This may include, for instance, individuals providing tax services in the R & D field and quantity surveyors.

3.88 In many instances, such entities are competently providing a tax agent service in a specialised field (in relation to which they are well qualified) and have found, because of the current registration requirements, that they are unable to register as a registered tax agent.

3.89 The new regulatory regime and these transitional provisions provide an opportunity to address these issues and ensure that such specialist tax agent service providers are effectively brought within the new regime.

3.90 This is achieved through ensuring that such entities, despite not meeting the eligibility requirement to be prescribed by the regulations (see paragraphs 20-5(1)(b), (2)(c) and (3)(d) of the TAS Act) are still eligible for registration where:

•

they apply for registration under the TAS Act within six months of commencement;

•

immediately before commencement, the entity was providing a tax agent service within a particular area of the taxation laws; and

•

the Board is satisfied that the entity has been providing that tax agent service to a competent standard for a reasonable period before making the application (what constitutes a 'reasonable period' will be determined by the Board).

[ Schedule 2, subitem 13(1 )]

3.91 Despite not meeting the eligibility requirement to be prescribed by the regulations (including the qualification and relative experience requirements) the entity will still need to meet the fit and proper person requirements in the TAS Act. Therefore, the Board will need to be satisfied that the fit and proper person requirement is met before an entity can transition into the new regime via this item. This will enable the Board, for instance, to distinguish between entities providing a tax agent service that have failed to register for a bona fide reason and other unregistered entities.

3.92 So as to ensure that, prior to the Board making its decision regarding the entity's registration, the entity can continue to lawfully provide tax agent services, the entity will be considered to be registered from commencement until the Board makes its decision. [ Schedule 2, subitem 13(2 )]

Period and effect of registration of specialist entities

3.93 Once the Board makes a decision to grant registration, that registration is granted under the TAS Act, and is therefore for a period of at least three years as determined by the Board. This allows them sufficient time to obtain the necessary qualifications and/or experience in order to meet all of the registration requirements at the time of renewal.

Example 3.7

Tony is an R & D Specialist. Tony provides a tax agent service (advice in relation entitlements under section 73B of the ITAA 1936). (Commencement is 1 January 2010.)

Tony applies for registration as a registered tax agent under section 20-20 of the TAS Act on 1 March 2010. Despite not meeting the eligibility requirement to be prescribed by the regulations (qualification and relevant experience requirements), Tony is eligible for registration if the Board is satisfied that Tony has been providing that tax agent service to a competent standard for a reasonable period before making the application.

Registration as a BAS agent

3.94 Entities seeking registration as a registered BAS agent will benefit from a three-year period during which they can apply for registration without meeting the educational qualifications and relevant work experience requirements to be prescribed by regulations provided certain conditions are met.

3.95 Again, this is achieved through ensuring that such entities, despite not meeting the eligibility requirement to be prescribed by the regulations (see paragraphs 20-5(1)(b), (2)(c) and (3)(d)) are still eligible for registration where:

•

they apply for registration as a registered BAS agent under the TAS Act within three years of commencement; and

•

the Board is satisfied that the entity has been providing BAS services to a competent standard for a reasonable period before making the application.

[ Schedule 2, item 14 ]

3.96 The Board will need to be satisfied that the fit and proper person requirement is met before an entity can transition into the new regime via this item.

Period and effect of registration as a BAS agent

3.97 Once the Board makes a decision to grant registration, that registration is granted under the TAS Act, and is therefore for a period of at least three years as determined by the Board.

3.98 However, the Bill addresses the circumstances where an entity, has transitioned into the new regulatory regime by virtue of item 5 (that is, they were providing BAS services under the current law and were not required to be registered - see paragraphs 3.38 to 3.46) but where they are also eligible to apply for registration without meeting the qualification and experience requirements. In such instances, the entity's transitional registration of two years when coupled with a further registration of three years could mean that the entity could be registered without meeting the required qualification and experience requirements for up to five years following commencement.

3.99 To overcome this situation, the Bill ensures that where an individual has transitioned into the new regime by virtue of item 5 (and is therefore taken to be registered for two years following commencement) and has applied for registration under item 14 without the necessary qualification or experience requirements, the Board is able to grant that additional registration for a period of 12 months (or more). That is, the Board is not restricted to granting a minimum level of three years registration as would otherwise be the case. [ Schedule 2, subitem 14(2 )]

3.100 This arrangement ensures that entities currently providing BAS services without the education or experience required by the new regulatory regime are able to transition into the new regime and will have sufficient, though not excessive, time to obtain the necessary qualifications and/or experience in order to meet all of the registration requirements at the time of renewal.

Example 3.8

On commencement, Tony is taken to be a registered BAS agent under the TAS Act for a period of two years. More than six months before the end of the two-year period after commencement, Tony applies to the Board for registration as a registered BAS agent, although he does not meet the educational qualifications and relevant experience requirements for registration.

Despite not meeting the education qualifications and relevant experience requirements for registration, Tony will be eligible for registration if the Board is satisfied that he has been providing BAS services competently for a reasonable period. If the Board is satisfied that Tony has been providing services competently for a reasonable period, Tony will be registered as a registered BAS agent under the TAS Act for a minimum of 12 months.

In this situation, Tony will have at least, approximately, three years from commencement to transition into the TAS Act and obtain the educational qualifications and relevant experience requirements, provided the Board grants his registration as a registered tax agent.

Refund of lodgment fees in certain circumstances

3.101 If an application is made under certain sections of the current law, being sections 251J, 251JB or 251KB (applications for registration and re-registration of registered tax agents and nominees) and the applicant withdraws the application after commencement, but before a decision is made by the Board in regard to their application, then the Commissioner is required to refund the lodgment fees paid under the current law, to the applicant. [ Schedule 2, item 11 ]

3.102 This saves the current law so it can be applied to registration applications that have been made but not decided before commencement, and those new or pending applications that are made under the current law after commencement. (Although a similar provision exists in the TAS Act, it applies only to applications made under that Act.)