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Financial Planners Providing Tax Advice Under Scrutiny

Canberra, Australia (News4us.com) April 08, 2011

Financial Planners Providing Tax Advice Under Scrutiny

Financial Planners Providing Tax Advice Under Scrutiny

The Assistant Treasurer and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP, yesterday met with representatives from the financial planning, tax and accounting bodies, the Treasury, the Tax Practitioners Board (the Board) and the Australian Securities and Investments Commission (ASIC) and agreed a broad set of principles that will be used to develop regulatory arrangements for financial planners who provide tax advice within the context of providing financial advice.

This meeting was part of ongoing consultation started in November 2010 with the release of an options paper by the Assistant Treasurer.  A series of meetings have been held since December 2010 to reach agreement on key aspects of a regulatory model.

“I am encouraged by the enthusiasm and constructive engagement of industry in this consultation process.  The agreement of the key elements of a practical model will benefit the finance, tax and accounting industries. For consumers, this means they can expect to receive quality financial planning services that include competent advice on related tax issues,” Mr Shorten said.

Meeting participants agreed to the following:

  • The current exemption of financial planners from the tax agent services regime will be extended to 30 June 2012 to allow for the regulatory model to be developed and legislation to commence on 1 July 2012.
  • As far as practicable, financial planners and consumers will interact with ASIC in relation to financial planning services.  ASIC and the Board will collaborate closely under the proposed arrangements, with the Board dealing with tax‑specific complaints, complex matters referred by ASIC, competencies, recognition and investigations.  Under this collaborative approach, streamlined arrangements will be implemented as far as possible. For example, there will be one set of tax competencies.
  • Financial planners would be required to be registered through ASIC with the Board to provide tax advice within the context of providing financial advice.  A public register would be created.
  • The scope of services that can be provided by financial planners is determined according to the type of registration held.
    1. A financial planner can provide general factual tax information (not tax advice).
    2. If a financial planner has an additional form of registration, they can provide tax advice within the context of providing financial advice. The scope of tax advice that will be permissible within this category will depend upon the competencies that are required.
    3. Tax agents registered under the Tax Agent Services Act 2009 provide full tax agent services including preparing or lodging returns or representing a taxpayer in their dealings with the Commissioner of Taxation.
  • Financial planners registered to provide tax advice within the context of providing financial advice would also need to abide by tax specific obligations that currently apply to registered tax agents.  These obligations would be under a code of conduct that would ensure that services are provided to consumers in accordance with appropriate professional and ethical standards.
  • Financial planners that wish to obtain this additional form of registration should have sufficient competency to provide reliable tax advice within the context of providing financial advice.  To attain these competencies financial planners would be required to have certain tax related qualifications to ensure that quality advice is provided and consumers can rely on this advice.  Further consultation would be carried out by the Board and ASIC on the nature of these competencies and the proposed level of the additional qualifications.  Without pre-empting the outcome of this process, participants thought that the level of the qualification may be equivalent to that of a Diploma. Tax competencies would be determined by the Board after these consultations.

A transitional framework would operate from 1 July 2012 that would enable financial planners (existing and new) to be eligible for a simple initial registration for a period of three years.  This period can be used to attain competencies to deliver quality tax advice as part of financial planning advice.

The details of the model will be developed in consideration of the Future of Financial Advice reforms.

Treasury, in consultation with the Board and ASIC, will now progress the details of the model to be determined by the Government with a view to consultation on exposure draft legislation later in the year.

Further details of the agreed model

  • Financial planners wishing to provide tax advice within the context of providing financial advice would need to be registered through ASIC with the Board under the Tax Agent Services Act 2009.  These services would not extend to preparing or lodging tax returns or making representations to, or interacting with, the Commissioner of Taxation.  To provide these more extensive services a person must be registered as a tax agent.
  • Initial registration and re-registration every three years would be facilitated through applications made to ASIC.
  • Not every financial planner within an entity that holds an AFSL will necessarily need to be registered to provide limited tax agent services.  Existing supervisory arrangements would continue.
  • Existing consumer protection mechanisms in the financial services and tax agent services regimes will continue to operate.
  • ASIC and the Board would have the ability to undertake joint investigations and also refer matters arising out of investigations to each other.
  • The Board and ASIC will:
    • further develop the competencies and qualifications that a financial planner must attain and release an exposure draft paper for comment; and
    • develop guidance material to clearly explain to financial planners the types of tax advice that can be provided under each level of registration.

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