2019 was a very eventful year for yourself and the IPA, and accountants in general. Tell us what the most standout events were for you. In other words, what shaped 2019 for accountants?
Look, I think, interestingly, we saw the accounting profession playing a pretty central role in the federal election earlier this year. In some ways, I hope that we don’t see ourselves as central to future federal election campaigns as we were. We’re looking back on 2019 and saying, well how can we categorise it?
And then, how can we use it almost as a foundation going forward? And I think for me, what it exposed was that we had this underlying attempt to bring focus to something that didn’t actually exist, and that is this sense of distrust in the profession. If I think back to articles referencing things like tax agents facilitating rorting, it just spoke to this lack of respect that the profession had with certain segments in that discourse. And I’m specifically referring to the opposition leader at the time, Bill Shorten, and his comments.
I don’t think any of that was particularly helpful. I’d say there’s that overwhelming sense of the need for respect for the profession, and then making sure that the profession does genuinely communicate with the members’ best interests at heart. And when I say communicate, I genuinely mean that being a two-way street. Professional bodies, in my view, have got a very clear remit to actually engage effectively, and that means listening to members. And if I think about the issue of financial services in particular, we’ve had this discussion around financial advisory services and the accountants’ exemption.
You have been active on that front.
We’ve been engaging with members for over 18 months on this issue itself, and members have said that they want action. They want their voice to be heard by the government. So, we’ve been advocating for them and we’ve been presenting what we think have been very cogent and coherent policy arguments to government explaining that there is market failure. And so, I think that sense of communication is important.
That is a genuine two-way street. Professional bodies simply advocating what they think is in members’ best interests and issuing publication after publication about the future of the profession, need to stop. They need to stop and listen to their members. We have.
Our profession, like other professions, is very good at getting carried away with itself and thinking that it knows the answers to everything. I find it incredibly grounding and sobering to simply say to a member, a small practice, “What’s keeping you awake at night?”
And the conversation takes off … When you have that insight, you’re able to then go to government and articulate a case for change that is much stronger and provides a much clearer policy position, rather than just saying, “Here’s what we think.”
So, if I boil it down, I think that sense of underscoring the importance of respect and leveraging our position to create influence. Now I think what we’re looking for is once we’ve established that, we are, and our members are sitting back saying, “Right. Now it’s time for action.” And we’ve got a few thoughts in that regard as well for 2020.
You mentioned the accountants’ exemption, and that’s been a very hot topic over the past year or so. You recently sat down with Jane Hume, the Assistant Minister for Superannuation, Financial Services and Financial Technology. Are you happy with what has been achieved and can we expect change soon?
Over the past 18 months, members have said to us: “Look, we know it will be hard, but we still want you to have a go.” That’s why we’ve taken it on. And I think what’s important is understanding the parameters the government has, given the backdrop of the royal commission into financial services and the banking sector.
At the moment, there is this very low public trust and confidence in the financial services sector. I’m conscious of the fact that the government certainly can’t be watering down requirements, which is why we think the proposal we’ve put forward is sensible in that it does raise the bar. We wouldn’t categorise it as a return of the accountants’ exemption. We actually look at it as a new licensing or registration regime for accountants, which builds on the qualified accountant definition.
We think what we’ve provided to government is a sensible step forward to ensure that members have the ability to provide advice to clients. And they’re crying out for it, as are our members, because otherwise they would be faced with hefty fees to obtain effectively general and fairly basic advice that they would otherwise get from their accountant. We think it’s a sensible fix.
There is clearly market failure when we look at what’s happening to the number of SMSF start-ups, which has reduced by more than 25 per cent over the last couple of years, since FoFA’s been in place. We think there’s a need to address it.
Where we’re at is, we have provided all the solutions to government and we have reengaged with our colleagues in the other bodies. I’ve spoken with them. It’s not ready for publication as we speak, but we are very well advanced with what that qualified accountant financial services licence or registration looks like and getting the support of the other two bodies for that position.
I would expect that the government will have a very clear statement from the accounting profession that this is the right way to go, and we should be in a position of bringing about that change for members and their clients hopefully by the end of the calendar year, if not early in 2020.
Do you think the government has an ear for accountants and for the IPA’s lobbying work? Are you happy with the direction that relationship has taken?
Look, I’m generally happy with the relationship we’ve forged with the government, with all the Treasury ministers in fact. It’s been helpful. We’ve had very strong responses from the Treasurer and the Treasurer’s office, and have a very good working relationship with them.
Similarly, with the Assistant Treasurer and also with the Assistant Minister, Jane Hume.
Look, I’ve sat on the other side of the fence and received those submissions in a previous life, and I know what it’s like in terms of the conga line of people coming to you for law changes. I know what you need to do to get things done.
I think it’s been helpful that the Assistant Treasurer, who’s responsible for the tax system, said that he and the government genuinely value the role of tax agents. I was actually speaking with a tax agent just this morning. He is a new member, and he said, “That was really encouraging to hear. That’s the first time the government has really clearly stated that we do play a really important role.”
I think it’s our job to reinforce to government that tax agents out there are doing the hard yards, and we need to understand and we need to respect the position they have and do what we can to support them. When it comes to just general levels of respect, I think, the profession was dealt a blow when we had our possible alternative prime minister saying the profession is facilitating rorting.
It does really strike at the heart of the ethics of our profession, which has existed for hundreds of years. I’m not saying for a second that our profession doesn’t have bad apples. Of course there are, and we do our best to work with regulators to get them out. But by labelling our profession that way, it’s certainly unhelpful. Really terrible.
The IPA’s reach expands far beyond Australia and into the UK. How is the IFA doing? How are the accountants in the UK? There are a lot of issues going on at the moment in Britain. How are they fairing and how can we compare that to the situation here?
The landscape of the UK accounting profession is eerily similar to that in Australia. There’s a degree of significant uncertainty, particularly for small businesses around all the economic doubt arising from a post-31 October Brexit deadline. What we’re finding with the engagement with members in the UK is that they are continually being called by their clients and asked, “What does this mean for me?”
I suppose to a lesser extent, but in Australia we also face some economic headwinds. The signals aren’t all that rosy in terms of low wage growth and declining productivity growth. Nothing of the magnitude I think of the UK, but there are similarities in terms of the general level of business uncertainty and what it means for the accountant.
The other similarity in the UK is the very strong push from HMRC around the digitalisation of tax. We’re seeing that similar push in Australia. Now, I’m not necessarily a pessimist when it comes to the role technology plays in our profession.
There are some who say, “Well, artificial intelligence or augmented intelligence will be the end of the accountant.” Well, I actually have, if you like, the opposite view. And that is that AI will play a very important role in our profession globally. It will just mean we can do things faster.
But as good as artificial intelligence is, it will never replace emotional intelligence. And I think the role that we have as advisers, as a human interface, is an important element that our profession brings. Certainly, using AI and using data more efficiently to create a more efficient interaction, but it will still come down to sitting opposite a client, albeit maybe virtually, and relying upon the emotional intelligence of the accountant to interpret the information.
What’s on the cards for next year for the IPA?
What are you expecting out of 2020? Well, the ongoing work is around member engagement, making sure we are genuinely representing the views of our members. But I think there’s a couple of things on the table. One of those in particular relates to the ATO and what we’re pushing for is a fundamental review of its governance structure.
The rationale is that it’s not meant to be disrespectful of the incumbent, Chris Jordan, but the Commissioner of Taxation is an immensely important and increasingly powerful position, and I’m not sure that having a single person at the head of that is sensible.
And if you look at other jurisdictions around the world, if you look at the UK, for example, HMRC has a panel of around seven statutory commissioners. And certainly, there’s someone who chairs it, but there’s a flattening of the structure. The reason I think this is important, and it’s not just change for change’s sake, but I actually think it will be an enabler to a much deeper and sustainable culture at the ATO.
I’m not suggesting they haven’t changed a lot. They have. But I think to continue the change program, there needs to be a review of the governance direction. The last time that happened was when Joe Hockey was treasurer and some recommendations around flattening the structure haven’t really seen the light of day since.
That might not make me very popular with the ATO, but I actually think it’s a fundamental shift. Having a panel of responsible people, essentially reporting to Parliament, will assist the way it operates. We’ll also be continuing to push very strongly to change the approach on the qualified accountants’ financial services licence (or registration), to reopen that market to accountants, but more importantly to clients.
We’re also very firm on pushing the angle around small business productivity to increase productivity growth, which builds on our White Paper theme. And then finally, if you like, the area of mental wellbeing of small business owners and accountants, which will continue to be in the spotlight and we’ll continue to bring into focus.
And from the structural point of view?
From a structural point of view within the IPA, we’re looking to continue our growth trajectory. When I first started, we had around 17,000 members and students. We’re now at about 38,000, and we’re continuing to grow significantly year on year. And so, I want to continue that trajectory.
We’ve boosted our member services teams and our member engagement executives. And we’re really looking at how to fundamentally provide a more streamlined member experience and enable that engagement in real-time almost. That’s about how we digitise our own knowledge management within the IPA. So, there’s a lot to do, and it’s really exciting.
What I’ve seen since working on Public Accountant is that IPA members are really fond of the IPA and of yourself. What do you have to say to that? How do you maintain that family-like environment among your members?
I don’t want to downplay that, because I think it’s a fundamental difference. I don’t want to sound critical of either of our other accounting bodies or other associations, but there is a certain cultural dimension when you come to an IPA event or you engage with IPA members.
IPA members are genuinely very proud of our brand. They’re passionate about it. Part of the way we maintain that, and it’s not contrived or something we do in a deliberate way, is the respect we have for them. Respecting the fact that members have a view, although sometimes we might disagree on policy grounds. So, we never take them for granted.
And I think it’s also about the little things. Members say to me “I still remember when you first called me when I joined as a member,” or, “You sent me a text message with your mobile number saying save my number in your phone”. I still do this by the way. I actually just did a bundle of them this morning.
So, all of that matters and I think the message culturally is, if I’m able to do that as CEO, the expectation of every team member is to do that too. When we engage with a member, it is a real engagement. We don’t just see you as a person who pays their fees every year. I just think there’s a fundamental basis of respect, and that’s what drives the culture and you can’t manufacture that. You can’t transplant it.
And I think we’re very fortunate. It’s led by our board. I think our board have a very clear view of what it means to be a member association. And even our chair, Damian [Moore], was challenged by a journo who said, “Well, this is a bit strange. The president and CEO are giving up their time to take members to the UK on a delegation. It’s a strange use of time. Surely you’d have other better things to do.”
And Damien said, “That’s our culture. You have access to the chair. You have access to the CEO, and it’s our job to take you around.
We want to add value to you.” So, I think the really telling point is this culture that stems from the board and I couldn’t imagine it being any better as a member association. I think we’ve got it right, but our approach is continually improving.
