Advisers Will Need New Tax Disclaimer From 1 July

From 1 July 2013, the majority of advisers will be required to include an additional disclaimer in their advice disclosures to clients, if the ‘TASA Bill’ is passed by Parliament this month.

The Parliamentary Joint Committee for Corporations and Financial Services (PJC) has completed its review of the regulatory framework for tax (financial) advice services, recommending that the reforms proceed relatively unchanged. The new legislation would amend the Tax Agent Services Act (TASA) to bring financial advisers under the regulation of the Tax Practitioners Board (TPB).

… advisers who are not registered with the TPB will need to provide a disclaimer to their clients …

Despite calls from the financial advice industry to delay the implementation of the framework until further details are made available, the PJC determined that the two Schedules relating to the framework should be reinserted into the original Bill (tabled in the House of Representatives at the beginning of this month), and passed.

The Bill sets out the registration requirements for financial advisers who provide tax advice in the course of their dealings with clients. As part of the transitional arrangements included in the Bill, advisers who are not registered with the TPB will need to provide a disclaimer to their clients explaining that they are not authorised to provide tax advice.

The PJC has recommended that the Bill be amended to stipulate that from 1 July 2013 to 31 December 2013, unregistered financial services licensees and representatives may provide tax (financial) advice services on the condition that they accompany such service with a disclaimer that states:

(a) The provider of the advice is not a registered tax agent under the Tax Agent Services Act 2009; and

(b) 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 which states that:

(a) The provider of the advice is not a registered tax (financial) adviser under the new law; and

(b) 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.

From 1 January 2014 to 31 December 2014 only the second disclaimer may be used.

The Coalition members of the PJC issued a dissenting report, saying that the Schedules should not proceed through Parliament because the proposed changes have not been properly assessed, are incomplete, and do not align with other recent regulatory changes impacting the industry.

‘There are now less than two weeks to go before the changes proposed by the government which would move financial advisers into the TASA regime would come into effect if this legislation was passed. Yet even strong supporters of the change concede that there are still a lot of unanswered questions,’ the report said.

The Financial Planning Association’s (FPA) CEO, Mark Rantall, said:

“The FPA stands by its recommendation to provide a 12 month extension of the exemption to allow for the negotiation and implementation of what are wide-ranging reforms. We call on the Government to extend the exemption in order for the significant detail of this legislative change to be worked through.

“We believe, as an example, the regulatory requirement issued by Treasury today for a higher level study of Commercial Law, is excessive when added to Tax Law course. A 12 month extension of the exemption is appropriate whilst we continue to work with Treasury, ASIC and the Tax Practitioners Board to finalise this legislation.”

The FPA said it would continue to work with Treasury, ASIC and Tax Practitioners Board to ensure the detail of the legislation is sensible and commercially viable.