Financial planners require an understanding of tax laws in nearly all the activities undertaken in providing professional advice to a client. Financial planners consider the tax implications for clients when advising on super, investments, savings mechanisms, estate planning, debt management, government benefits, insurance needs and retirement planning. The tax implications are at the core of planners’ considerations in nearly all aspects of financial advice.
Recognising that tax is integral to the advice they provide, financial planners have been required to include the following disclaimer in all Statements of Advice since the introduction of the TASA regime back in 2010:
■ the provider of the advice is not a registered tax agent or tax
(financial) adviser under the new law; and
■ if the receiver of the advice intends to rely on the advice to satisfy liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law, the receiver should request advice from a registered tax agent or a registered tax (financial) adviser.
The disclaimer was a last-minute trade-off to give the industry more time to come to grips with operating under the TASA regime.
The disclaimer must continue to be used during the transitional period until the financial planner registers with the TPB.
TASA requires anyone charging a fee for ascertaining or advising about the liabilities, obligations or entitlements of an entity or person under a taxation law to register with the TPB. This includes financial planners who consider the tax implications for clients when providing professional financial advice.
The objective is to bring all providers of tax advice within the TASA regime. Considering that valuers and quantity surveyors have had to register with the TPB since TASA was first introduced, financial planners have been lucky to delay coming under the TASA regime until now.
To facilitate the development of requirements appropriate to the tax advice provided by financial planners, the government has amended the Tax Agent Services law to introduce a new third category of tax (financial) adviser service.
This new category of tax adviser allows financial planners to provide tax advice that is associated with the provision of financial advice.
Once a tax (financial) adviser is registered with the TPB, the adviser will be permitted to give tax advice covering any tax matter, provided it is in the course of providing financial advice. The only exclusion is lodgement of returns and representing taxpayers with the tax commissioner.
If you provide ‘personal advice’, you will likely fall under the definition of providing a tax (financial) advice service and will be required to register with the TPB.
If you only provide factual information about tax laws or general advice about tax laws, then you are unlikely to be captured by the TASA regime, as it does not take into consideration the client’s specific circumstances, so it is not reasonable to expect that someone will rely on the advice.
Registration
From 1 July 2014, financial planners have a three-year transition period to register with the TPB and comply with the requirements of the regime and the TASA code. Licensees and authorised representatives will be able to be registered directly with the TPB during the notification phase, which lasts for 18 months, ending on 31 December 2015.
AFS licensees and authorised representatives who do not notify the TPB must continue to use the disclaimer when providing tax (financial) advice services for a fee or other reward. The disclaimer will only be effective until 31 December 2015. After this date, unregistered entities that continue to provide tax (financial) advice services for a fee or other reward may be liable for civil penalties, regardless of whether they
use a disclaimer.
It’s important to note that while you are not required to have completed any education or training requirements during the notification phase, once you have notified the TPB, you are subject to TASA’s Code of Professional Conduct (see below).
Transitional option – 1 January 2016 until 30 June 2017
From 1 January 2016, all AFS licensees and their representatives will be able to apply to register with the TPB if they meet the transitional or standard eligibility requirements. This applies to all representatives, not just authorised representatives, and includes:
■ employees or directors of the AFS licensee;
■ employees or directors of a related body corporate of the AFS licensee;
■ other individuals acting on behalf of the AFS licensee.
At the time of writing, there are four registration options available when applying for registration. These include a combination of qualification and experience criteria. Similar to tax agents, there will also be a registration option based on voting membership of a recognised professional association. If the applicant is a voting member and has six years of full-time, relevant experience in the preceding eight years, they will not have to complete any TPB-approved courses in commercial law or taxation law.
In effect, a financial adviser will be allowed to give tax advice despite not having undertaken any education in Australian tax law or commercial law.
Given that a tax (financial) adviser will be able to provide tax advice covering any tax matter, the IPA is concerned that there is no requirement for any formal education standard.
It has already been noted that the RG146 training of a financial adviser lacks any comprehensive education on Australian taxation law. Given this lack of prior tax-related education, we have reservations about the competency of financial planners registering with the TASA regime under this option.
Code of Professional Conduct
From 1 July 2014, financial planners who register as tax (financial) advisers will need to comply with the TASA Code of Professional Conduct.
This demands that you must:
■ act honestly and with integrity;
■ act lawfully in the best interests of your client;
■ not disclose any information relating to a client’s affairs to a third party without your client’s permission;
■ ensure that the service you provide is provided competently, and maintain knowledge and skills relevant to the tax agent services that you provide;
■ maintain the professional indemnity insurance that the TPB requires you to maintain;
■ respond to requests and directions from the Board in a timely, responsible and reasonable manner.
The TPB guidance on continuing professional education is 60 hours over a three-year period, with a minimum of six hours of relevant CPE in any given year.
With respect to professional indemnity insurance (PII), the TPB has proposed recognising existing PII insurance policies during the implementation period from 1 July 2014 to 31 December 2016.
However, upon lapse of that policy or by 1 January 2017 – whichever occurs first – a tax (financial) adviser must obtain a policy that complies with the TPB’s requirements.
Having dodged the TASA bullet up to this point, the financial planning industry must now come to grips with the obligations imposed by TASA. It is important that all providers of tax advice are singing from the same hymn sheet, which was one of the fundamental principles behind the TASA regime when it was introduced.
Accountants wanting to provide financial advice are similarly looking at the various licensing options under the AFSL regime, which is responsible for the regulation of all providers of financial advice.
Welcome to the world of convergence.
