House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

General outline and financial impact

Creating a regulatory framework for tax (financial) advice services and other amendments

Schedule 1 amends the Tax Agent Services Act 2009 to bring entities that give tax advice in the course of giving advice that is usually provided by financial services licensees within the regulatory regime administered by the Tax Practitioners Board. This ensures the consistent regulation of all forms of tax advice, irrespective of whether it is provided by a tax agent, a BAS agent or an entity in the financial services industry.

In addition, Schedule 2 to this Bill makes a number of other amendments to the Tax Agent Services Act 2009 to correct a range of technical issues.

Date of effect: The amendments in Schedule 1 mostly commence from 1 July 2014 with a three-year transitional period before the new regime commences in full on 1 July 2017. This transitional period ensures those in the financial services industry have time to adapt to the new regulatory requirements. The amendments in Schedule 2 apply from the day after this Bill receives Royal Assent

Proposal announced: On 29 November 2010, the then Assistant Treasurer and Minister for Financial Services and Superannuation released an options paper 'Regulation of tax agent services provided by financial planners' for public consultation. Following an ongoing consultation process with industry stakeholders, these amendments were announced in the 2012-13 Mid-year Economic and Fiscal Outlook.

Financial impact: Nil.

Human rights implications: These Schedules do not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.169 to 1.176.

Compliance cost impact: Medium. Entities in the financial services industry that give tax advice in the course of giving advice that is usually provided by financial services licensees will need to register with the Tax Practitioners Board and meet standards of relevant qualifications and experience.

Summary of regulation impact statement

Regulation impact on business

Impact: These amendments will affect entities in the financial services industry that provide tax advice in the course of giving advice that is usually provided by financial services licensees.

Main points:

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Entities in the financial services industry may currently provide their clients with tax advice without being subject to the application of the Tax Agent Services Act 2009 . This exemption expires on 30 June 2013.

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There are three courses of action available to address the situation arising from the expiry of this exemption.

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Entities in the financial services industry would need to comply with all the requirements in the Tax Agent Services Act 2009 .

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The current exemption could be extended.

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A co-regulatory model between the Tax Practitioners Board and the Australian Securities and Investments Commission could be implemented to streamline the regulation of entities in the financial services industry that provide tax advice.

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A co-regulatory framework best meets the objectives of ensuring the consistent regulation of all forms of tax advice and minimising the compliance costs on entities in the financial services industry.

Deductible gift recipients

Schedule 3 amends the Income Tax Assessment Act 1997 to update the list of specifically listed deductible gift recipients (DGRs).

Date of effect: The listings of the Australian Council of Social Service Incorporated and Make a Mark Australia Incorporated apply to gifts made after 30 June 2013.

Proposal announced: The listings of the Australian Council of Social Service Incorporated and Make a Mark Australia Incorporated have not been previously announced.

Financial impact: The revenue implications of this measure are as follows:

Human rights implications: This Schedule does not raise any human rights issues. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.11 to 3.15.

Compliance cost impact: Nil.