House of Representatives

Explanatory Memorandum

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

Chapter 1 - Consequential and other amendments

Outline of chapter

1.1 Items 1 to 22 and item 25 of Schedule 1 to this Bill provide for the amendments to existing legislation that are necessary as a result of the commencement of the Tax Agent Services Act 2009 (TAS Act).

1.2 Items 27 to 30 of Schedule 1 to this Bill provide for amendments to the TAS Act.

Context of amendments

1.3 The new framework for the registration of tax agents is contained in the TAS Act, which replaces Part VIIA of the Income Tax Assessment Act 1936 (ITAA 1936) (the current law).

1.4 As a consequence of the repeal of the current law, certain references in existing Acts, such as references to the current law and references to, and definitions of, 'tax agent', require amendment.

1.5 Other amendments are made to existing Acts to reflect changes associated with the transfer of the general administration of the provisions relating to the registration of tax agents from the Commissioner of Taxation (Commissioner) to the Tax Practitioners Board (Board).

1.6 Minor amendments are also made to the TAS Act to correctly reference provisions in this Bill and correct minor typographical errors.

Summary of new law

1.7 This Bill:

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repeals provisions in the law that will no longer have any effect due to the commencement of the TAS Act (such as Part VIIA of the ITAA 1936 regarding the registration of tax agents);

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amends, repeals or inserts relevant definitions and references in other Acts to ensure consistency with the TAS Act;

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amends certain provisions in the Taxation Administration Act 1953 (TAA 1953) to reflect the enhanced independence of the Board from the Commissioner as provided for in the TAS Act;

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expands the definition of 'taxation law' to include the TAS Act, and associated regulations; and

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amends the TAS Act to correct typographical errors and to expand the circumstances in which the Board can disclose information to the Commissioner.

Detailed explanation of new law

Amendment to the A New Tax System (Goods and Services Tax) Act 1999

1.8 The Bill repeals the definition of 'registered tax agent' in section 195-1 which is 'as defined in Part VIIA of the ITAA 1936', because Part VIIA will also be repealed by the Bill. The term 'registered tax agent' is not used in the A New Tax System (Goods and Services Tax) Act 1999 , and therefore no replacement definition is required. [ Schedule 1, item 1, section 195 - 1 of the A New Tax System ( Goods and Services Tax) Act 1999 ]

Amendment to the Corporations Act 2001

1.9 The Bill replaces a reference in paragraph 766B(5)(c) to 'tax agent registered under Part VIIA of the Income Tax Assessment Act 1936' with a reference to 'registered tax agent or Business Activity Statement (BAS) agent (within the meaning of the Tax Agent Services Act 2009'). The amendment updates the reference and maintains the same effect of the paragraph. [ Schedule 1, item 2, paragraph 766B(5)(c) of the Corporations Act 2001 ]

Amendments to the Fringe Benefits Tax Assessment Act 1986

1.10 The Bill repeals Part IX of the Fringe Benefits Tax Assessment Act 1986 . Part IX provides for administrative penalties for:

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unregistered entities advertising to prepare fringe benefits tax returns; and

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tax agents that allow unregistered entities to prepare fringe benefits tax returns or conduct any business relating to fringe benefits tax returns on the tax agent's behalf.

1.11 This Part will become redundant upon commencement of the new regulatory regime as administrative penalties which cover services related to fringe benefits tax returns are contained in the TAS Act. [ Schedule 1, item 3, Part IX of the Fringe Benefits Tax Assessment Act 1986 ]

1.12 The Bill repeals the definition of 'registered tax agent' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 , which is 'as defined in Part VIIA of the Income Tax Assessment Act 1936', and replaces it with a new definition of 'registered tax agent', which states that 'registered tax agent has the meaning given by subsection 90-1(1) of the Tax Agent Services Act 2009'. These amendments update the reference and maintain the same effect of the definition. [ Schedule 1, item 4, subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 ]

Amendments to the Income Tax Assessment Act 1936

1.13 The Bill repeals the definition of 'registered tax agent' in subsection 6(1), which 'has the meaning given by section 251A' of the ITAA 1936. Section 251A is in Part VIIA of the ITAA 1936 and is repealed by the Bill. With the repeal of Part VIIA, all occurrences of the term 'registered tax agent' in the ITAA 1936 are repealed. Therefore no replacement definition is required. [ Schedule 1, item 5, subsection 6(1) of the ITAA 1936 ]

1.14 The Bill amends paragraph 16(4)(b) of the ITAA 1936 to allow the Commissioner, or other person authorised by the Commissioner, to communicate information to a board, or a member of a board, for the purpose of the board performing its functions or exercising its powers under a taxation law. [ Schedule 1, item 6, paragraph 16(4)(b) of the ITAA 1936 ]

1.15 This amendment maintains the existing ability of the Commissioner to disclose information to the state-based Tax Agents' Boards (state Boards). The amendment is necessary because, unlike the current state Boards, the Board will not be a board exercising a function under an Act administered by the Commissioner (but will be a Board exercising a function under a taxation law, see paragraph 1.22).

1.16 This provision will allow, for instance, the Commissioner to disclose information about unregistered entities, which may assist the Board in its new role of monitoring and taking action against entities providing tax agent services for a fee without registration. This is a function that is currently performed by the Australian Taxation Office (ATO).

1.17 The Bill repeals Part VIIA of the ITAA 1936. Part VIIA contains the current law concerning the registration of tax agents and is being replaced by the new framework contained in the TAS Act. [ Schedule 1, item 7, Part VIIA of the ITAA 1936 ]

Amendments to the Income Tax Assessment Act 1997

1.18 The Bill repeals section 214-185 of the Income Tax Assessment Act 1997 (ITAA 1997). The effect of section 214-185 is that persons giving a franking credit return or making an objection for the purposes of Part 3-6 (dealing with the imputation system) of the ITAA 1997 are subject to the tax agent registration requirements in the current law. This section is no longer needed as those persons will be covered by the TAS Act, given that the definition of 'tax agent service' in the TAS Act includes ascertaining or advising on liabilities, obligations or entitlements under a taxation law. (The current law applies to income tax-related services.) [ Schedule 1, item 8, section 214 - 185 of the ITAA 1997 ]

1.19 The Bill replaces a reference to a 'registered tax agent' in the definition of 'recognised tax adviser' in subsection 995-1(1) with a reference to a 'registered tax agent or BAS agent', reflecting the broadening of the regulatory regime to include the regulation of entities providing BAS services for a fee or other reward as BAS agents. [ Schedule 1, item 9, definition of ' recognised tax adviser' in subsection 995 - 1(1) of the ITAA 1997 ]

1.20 Consistent with this amendment, the Bill inserts a new definition of 'registered tax agent or BAS agent' which links to the definition in the TAS Act. [ Schedule 1, item 11, subsection 995 - 1(1) of the ITAA 1997 ]

1.21 The Bill also replaces the existing definition of 'registered tax agent' to link into the new definition provided for in subsection 90-1(1) of the TAS Act. [ Schedule 1, item 10, definition of ' registered tax agent' in subsection 995 - 1(1) of the ITAA 1997 ]

1.22 'Taxation law' is defined in subsection 995-1(1) of the ITAA 1997 to mean an Act of which the Commissioner has the general administration, or regulations made under such an Act. The Bill expands the definition of 'taxation law' to include the TAS Act and regulations made under the TAS Act, despite the fact that the Board and not the Commissioner will have general administration of the TAS Act. This ensures that the Board can rely on certain provisions in the taxation law, such as those relating to the prosecution of offences contained in Part III of the TAA 1953. [ Schedule 1, item 12, at the end of the definition of ' taxation law' in subsection 995 - 1(1) of the ITAA 1997 ]

Amendment to the Income Tax (Transitional Provisions) Act 1997

1.23 The Bill repeals section 214-130 of the Income Tax (Transitional Provisions) Act 1997 , a provision that ensures that the current law regarding the registration of tax agents operates in relation to the imputation system. As noted in paragraph 1.18, this provision will no longer be required as persons providing services in relation to the imputation system will be covered by the TAS Act. [ Schedule 1, item 13, section 214 - 130 of the Income Tax ( Transitional Provisions) Act 1997 ]

Amendments to the Taxation Administration Act 1953

1.24 A number of amendments are made to the TAA 1953 to ensure that references are appropriately updated to account for new definitions introduced by the TAS Act and to ensure that relevant 'machinery provisions' in the TAA 1953 are effectively applied to the TAS Act and the Board.

Amendment to terms

1.25 The Bill replaces references to a 'registered tax agent' in paragraph 8AAZLH(2A)(b) and in subsection 8J(2A) with references to a 'registered tax agent or BAS agent', reflecting the broadening of the regulatory regime to include the regulation of entities providing BAS services for a fee or other reward as BAS agents. [ Schedule 1, item 17, paragraph 8AAZLH(2A)(b) of the TAA 1953 and item 19, subsection 8J(2A) of the TAA 1953 ]

1.26 The Bill inserts a new definition of the term 'registered tax agent or BAS agent' in subsection 2(1) of the TAA 1953, which states that 'registered tax agent or BAS agent has the same meaning as in the Tax Agent Services Act 2009'. This definition is required because of the amendments to paragraph 8AAZLH(2A)(b) and subsection 8J(2A) as noted above. [ Schedule 1, item 14, subsection 2(1) of the TAA 1953 ]

Applying machinery provision in the TAA 1953 to the TAS Act

1.27 The TAS Act already applies sections 3D and 3E of the TAA 1953 as if references to the Commissioner were references to the Board. This effectively gives the Board the authority to disclose information, protected under the TAS Act, to certain law enforcement agencies and Royal Commissions (see section 70-45 of the TAS Act).

1.28 In addition to applying sections 3D and 3E, this Bill makes amendments to the TAA 1953 to ensure that other machinery provisions apply to the Board and the TAS Act.

1.29 Part III contains prosecution and offence provisions. The Bill amends Part III to apply that Part in relation to the TAS Act as if references (with certain exceptions) to the Commissioner, or an office of the Commissioner, were references to the Board. [ Schedule 1, item 18, section 8AC of the TAA 1953 ]

1.30 The amendment allows the Board to initiate criminal proceedings for offences against certain provisions in Part III of the TAA 1953 that relate to the TAS Act, rather than requiring it to rely on the Commissioner to commence such proceedings.

1.31 Not all references to the Commissioner will be deemed to be references to the Board. The exceptions are those provisions that:

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provide for an offence for failing to lodge an instrument with the Commissioner for assessment (paragraph 8C(1)(b)); or

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relate to the payment of money to the Commissioner (sections 8HA, 8W, 8WC, 8ZE, 8ZG and 8ZH).

1.32 These provisions are excepted because the Board's functions do not include receipt of instruments concerning assessment and the Board does not have the power to receive money on behalf of the Commonwealth. It is therefore appropriate for references to the Commissioner (or an office of the Commissioner) to be retained in relation to the TAS Act in these circumstances.

1.33 References to the Commissioner in sections 8AB and 8AC which provide for the application of Part III to the Development Allowance Authority Act 1992 and the TAS Act, respectively, will also remain unchanged.

1.34 By ensuring that it is the Board and not the Commissioner that can undertake prosecution action with respect to offences committed in the context of the new regulatory regime, the Board's independence from the Commissioner is enhanced.

Example 1.1

The Board has requested that Allan appear before it in relation to an investigation that the Board is conducting.

At the investigation hearing, Allan refuses to answer a question posed by the Board and is therefore guilty of an offence under section 8D of the TAA 1953 for failing to answer questions when attending before the Board.

Rather than relying on the Commissioner to initiate criminal proceedings under section 8D of the TAA 1953, the Board has the power to initiate criminal proceedings against Allan in relation to the offence committed.

1.35 Another 'machinery' provision being applied to the Board is section 15 of the TAA 1953. This provision specifies certain persons that are able to represent the Commissioner or an office of the Commissioner in any action, prosecution or other proceeding under, or arising out of, a taxation law and which is instituted by or on behalf of the Commissioner or an office of the Commissioner.

1.36 The Bill amends section 15 to apply that section in relation to the TAS Act as if references to the Commissioner, or an office of the Commissioner, were references to the Board, and as if references to a Second Commissioner or to a Deputy Commissioner were omitted. [ Schedule 1, item 20, subsection 15(3) of the TAA 1953 ]

1.37 The Board will therefore be able to be represented by certain persons in any action, prosecution or other proceeding under, or arising out of, a taxation law that relates to the TAS Act. This will enable the efficient use of the Board's resources.

1.38 The persons that may represent the Board are:

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a person enrolled as a barrister, solicitor, barrister and solicitor or legal practitioner of a federal court or of the Supreme Court of a State or Territory; and/or

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a person authorised by the Board, by instrument in writing, to appear.

1.39 Section 15A of the TAA 1953 will also be applied to the Board. This provides that the Commissioner may certify a copy or extract of a document obtained pursuant to a taxation law to be a true copy or true extract. [ Schedule 1, item 21, subsection 15A(12) of the TAA 1953 ]

1.40 This amendment will allow the Chair of the Board to certify a copy or extract of a document to be a true copy or extract, when the document is obtained by the Board pursuant to a taxation law that relates to the TAS Act (for example, pursuant to section 8D of the TAA 1953). It would be inappropriate to require the Board to seek the Commissioner's certification of documents obtained pursuant to a taxation law that relates to the TAS Act, particularly given the Board has the general administration of that Act.

1.41 Under paragraph 20-20(2)(a) of the TAS Act the Board may require an application for registration under section 20-20 of the TAS Act to be accompanied by any documents. The amendments ensure that the Board can certify a copy or extract of the document provided by virtue of paragraph 20-20(2)(a), as the documents will be obtained by the Board pursuant to a taxation law (the TAS Act is now included in the definition of 'taxation law', see paragraph 1.22 above).

1.42 As a consequence of applying machinery provisions in the TAA 1953 to the Board, further amendments of the TAA 1953 need to be made.

1.43 Section 3B of the TAA 1953 provides that the Commissioner is required to publish in his annual report information regarding certain actions taken under provisions in the TAA 1953 (such as disclosing information to law enforcement agencies under section 3D and 3E). The Bill ensures that, to the extent that action is taken by the Board under any of the provisions, the Commissioner does not have to include such action in his own annual report. [ Schedule 1, item 15, subsection 3B(1C) of the TAA 1953 ]

1.44 Reporting on the working of these provisions insofar as they apply in relation to the TAS Act (and are undertaken by the Board) will be included in an annual report required to be prepared by the Board under the TAS Act (see section 60-130 of the TAS Act).

1.45 Another amendment is made to section 3C of the TAA 1953. This provision governs the use and disclosure of taxpayer information obtained under or for the purposes of the TAA 1953. The Bill amends section 3C to ensure that these secrecy provisions do not apply to the Board to the extent that it receives or discloses information under a provision of the TAA 1953 that has been applied to the Board. Instead, the use and disclosure of such information will be governed by the secrecy provisions in the TAS Act (see section 70-35 of the TAS Act). [ Schedule 1, item 16, subsection 3C(1AB) of the TAA 1953 ]

1.46 Further amendments to the TAA 1953 are made to ensure that the appropriate machinery provisions in the TAA 1953 apply to the civil penalty regime created by the TAS Act. As civil penalties are imposed by a court it is appropriate to treat them differently to other liabilities (such as ordinary taxation liabilities) that arise under a taxation law. This is consistent with the manner in which civil penalties imposed under the promoter penalty regime (see Division 290 of Schedule 1 to the TAA 1953) are treated.

1.47 To achieve this result, civil penalties that arise under the TAS Act are specifically excluded from the definition of 'tax-related liability' provided for in subsection 255-1(1). Similarly, the civil penalty machinery provisions contained in Subdivision 298-B are specifically applied to civil penalties that arise under the TAS Act. [ Schedule 1, item 22, subsection 255 - 1(2) of Schedule 1 to the TAA 1953 and item 25, section 298 - 80 of Schedule 1 to the TAA 1953 ]

Amendments to the Tax Agent Services Act 2009

1.48 The Bill amends paragraph 20-5(4)(a) of the TAS Act to ensure that the provision refers to item 7 of Schedule 1 to the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 , rather than item 12 of Schedule 1 to the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 . This reflects a change in numbering in this Bill. [ Schedule 1, item 27, paragraph 20 - 5(4)(a) of the TAS Act ]

1.49 The Bill also amends subparagraphs 50-30(1)(c)(iii) and (2)(c)(iii) of the TAS Act to replace the words 'or control' with 'and control', to ensure consistency with the wording in the subparagraphs. The amendment is needed to amend the typographical error. [ Schedule 1, item 28, subparagraphs 50 - 30(1)(c)(iii) and ( 2)(c)(iii) of the TAS Act ]

1.50 The Bill also amends section 70-40 of the TAS Act which outlines the circumstances in which the Board is able to disclose information to the Commissioner (in addition to those circumstances covered by subsection 70-35(2)). The amendments remove the requirement that the Board be 'satisfied' that the information is relevant to a particular purpose. A reference to the Board's satisfaction is not required as the onus is on the Board, prior to disclosure, to ensure that the proposed disclosure does fall within the exemption in section 70-40. [ Schedule 1, item 29, subsection 70 - 40(1) of the TAS Act ]

1.51 Section 70-40 is further amended to allow the Board to disclose information to the Commissioner for the purposes of a civil penalty provision in the taxation law. This would ensure, for instance, that the Board can provide evidence of a tax agent's involvement in the promotion of tax schemes (the promoter penalty regime creates a civil penalty - see Division 290 of Schedule 1 to the TAA 1953). [ Schedule 1, item 30, subsection 70 - 40(2) of the TAS Act ]

1.52 This expanded disclosure is not intended to limit the Board's ability to disclose information to the Commissioner for the purposes of a civil penalty created under the TAS Act. Such disclosures, if required, would fall within subsection 70-35(2) of the TAS Act.

Commencement

1.53 Sections 1 to 3 of the Bill commence on the day on which this Bill receives Royal Assent. These sections include the short title of the Bill, the commencement provisions and provisions relating to the Schedules. [ Section 2 ]

1.54 Schedules 1, Part 1 and Schedule 2 to the Bill commence immediately after the commencement of Part 2 of the TAS Act. [ Section 2 ]

1.55 Schedule 1, Part 1 provides for the consequential amendments to be made following the commencement of the TAS Act and Schedule 2 contains the provisions to allow a smooth transition from the existing law requiring the registration of tax agents in the current law to the new regulatory regime for the provision of tax agent services contained in the TAS Act.

1.56 As outlined in the TAS Act, Part 2 of that Act will commence on a single day to be set by Proclamation. However, Proclamation must occur within nine months of this Bill receiving Royal Assent.

1.57 This ensures that the key regulatory provisions in the TAS Act (including Part 2 of the TAS Act) and the provisions contained in Schedules 1, Part 1 and Schedule 2 to this Bill will commence at the same time.

1.58 The commencement of Schedule 1, Part 1 and Schedule 2 to the Bill is referred to as 'commencement' throughout this explanatory memorandum.