TASA still a minefield

With the financial planning community ‘heads down’ preparing for new obligations under the Future of Financial Advice (FOFA) reforms, the debate around the Tax Agent Services Act 2009 (TASA) continues to raise significant concerns about the nature of the legislation, its governance and the misguided driving forces behind it.

Under TASA, it is proposed that financial planners offering tax advice services will need to satisfy standards set by the Tax Practitioners Board (TPB) in addition to those currently set by the Australian Securities and Investments Commission (ASIC).

Aside from the practical problems presented by TASA in relation to timing, lack of clarity and lack of awareness about the Act, there is one factor in the proposed legislation that cannot be ignored – that financial planners in Australia may be subject to regulation by a body that does not have experience in dealing with the financial planning industry.

Setting the education record straight

Leaving aside the impracticalities of TASA and shifting our focus to the underlying driver of this proposed legislation, it has been alleged recently that the protection of Australian consumers is compromised because financial planners are not regulated under the Tax Agent Services Act.

In response to claims that financial planners are not subject to high enough education standards or are not competent enough to deliver sound tax advice within the context of financial advice, I point to the ongoing efforts of the Financial Planning Association (FPA) and also the taxation content within RG146.

The FPA continues to champion the cause of increased education standards within the financial planning profession. Certified Financial Planner (CFP) certification remains at the pinnacle of financial planning education, with rigorous entry standards and the requirement of an approved university degree set at a global level.

From 1 July 2013, all new Associate Financial Planner (AFP) practitioner members will be required to hold a degree in addition to the existing requirement to complete one year’s professional practice under supervision.

We are campaigning rigorously within the wider financial planning community with one clear message: the FPA is setting both education and ethical standards high, for the benefit of Australian consumers.

The FPA also supports members through ongoing, high quality CPD programmes designed to consistently raise the bar and provide education opportunities that are above and beyond other offerings in the market.

When looking at the current minimum education standard for financial planners set by ASIC, taxation is referred to on 32 separate occasions in RG146 and on 41 occasions in RG175.

Financial planners are expected to understand and consider taxation issues in relation to financial planning advice and in particular when providing advice on superannuation, managed investments and many other areas of the advice process.

Claims that financial planners have no competency and are not required to consider tax within the context of financial advice are not only false and misleading, but show a lack of understanding of the RG146 framework.

Call for ASIC intervention

If there is a need for improved financial planner education and competency in the area of taxation, then it is ASIC’s responsibility and obligation to step forward and address this. There are several compelling arguments:

First, the Tax Practitioners’ Board does not have an appropriate level of understanding of financial planning and how tax advice is embedded into the financial planning process. The Tax Agent Services Act will never deliver on the appropriate level of practical guidance when the legislation is designed and governed by a regulator outside financial planning.

Second, financial planners provide advice on the tax considerations and possible tax implications of financial decisions made during the financial planning process. What they do not do is undertake the same duties as tax agents and accountants, such as the preparation and completion of tax returns on behalf of clients.

Would you require a GP to become a licensed physiotherapist before giving advice about posture? No, but nor would you expect the GP to conduct physiotherapy. Financial planners have provided tax advice within the context of financial advice to clients for many years as an integrated part of the financial planning process and they will continue to do so for many more to come.

Third, the governance of financial planners by two separate regulators can only lead to unnecessary red tape, added complications and governance that is not seamless but flawed. So what is the sensible solution?

ASIC are the industry experts charged with the responsibility of regulating the financial planning profession. In my view, if there is a gap in tax knowledge and competency within the profession, I call upon ASIC to step forward and address this within the framework of RG146.

If RG146 does not contain enough detail around the provision of tax advice, work with the Tax Practitioners’ Board to change it.

Dante De Gori is general manager, policy and conduct, at the Financial Planning Association. He is a certified financial planner and has a graduate certificate in politics and policy.

TASA’s development

1992 – Tax Commissioner Michael Carmody announces the National Review of Standards for the Tax Profession under the auspices of the National Tax Liaison Group and sets up an ATO steering committee

1994 – Steering committee delivers the Tax services for the Public report to the Commissioner, offering 138 recommendations

1998 – Assistant Treasurer Rod Kemp announces a new “legislative regime” to regulate the tax agent services area, providing professional and ethical standards around tax return service provision

1999 – Effective date of new legislation postponed due to lobbying from the tax profession following the introduction of the GST and findings of the Ralph Review

2000 – Treasury working group convened to consider how to proceed with the announced reform package

2006 – A $57.5 million allocation handed down in the May Budget for the implementation of the new regime over four years

2007 – Exposure draft of the Tax Laws Amendment (Tax Agent Services) Bill
2007 and Associated Regulations released and public consultation held

2009 – Tax Agent Services Act 2009 passed into law, setting a framework for a new regulatory regime which includes the establishment of a national Tax Practitioners’ Board, a legislated code of professional conduct and registration requirements for BAS agents

2010 – Tax Agent Services Act regulations take effect

2012 – Legislation amended to extend the application of the regulations to Australian Financial Services Licence holders and their representatives, aiming to provide an “appropriate regulatory regime for registered financial planners”

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About Dante De Gori

Dante De Gori is general manager, policy and conduct, at the Financial Planning Association. He is a certified financial planner and has a graduate certificate in politics and policy.