Deborah O'Neill (Robertson, Australian Labor Party) Share this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services I present the committee's report, incorporating a dissenting report, entitled Regulatory framework for tax (financial) advice services, previously Tax Laws Amendment (2013 Measures No. 2) Bill 2013 Schedules 3 and 4, together with the evidence received by the committee, and I ask leave of the House to make a short statement in connection with the report.

In accordance with standing order 39(f) the report was made a parliamentary paper.

by leave—This inquiry was based on schedules 3 and 4 to the first reading version of the Tax Laws Amendment (2013 Measures No. 2) Bill 2013. These schedules proposed amendments to the Tax Agent Services Act 2009 and the Income Tax Assessment Act 1997 that would bring financial advisers who provide tax advice into the tax agent regulatory regime overseen by the Tax Practitioners Board.

The proposed amendments that the committee has been tasked with reviewing will be an important regulatory change. It is clear that bringing financial advisers who provide tax advice into the existing regulatory regime will strengthen the overall regulatory environment that applies to tax advisory services. The changes would mean that all tax advice that is provided for a fee or other reward would be consistently regulated, regardless of whether it is provided by a tax agent, a BAS agent or a financial adviser. This is important because consumers of these services simply expect to go to the service providers within that sector and find a standard that is consistent, regardless of who it is they interact with.

The enactment of these measures will complete a process that has been many years in the making. It will end the need for the financial advisers' carve-out from the Tax Agent Services Act which has been in place since 2010 and reviewed on an annual basis. The most important outcome of the changes, however, is the further protection for consumers they will provide. If the proposed measures in this report, and in the bill, are enacted, financial advisers who provide tax advice will need to meet a new standard of relevant qualifications and experience. Accordingly, consumers of tax advice can be confident that the standard of advice they receive is of a similar professional standard to that provided by registered tax agents.

It needs to be recognised that these measures have not suddenly been announced and thrust onto the industry, despite what may be said in the explanation of the dissenting report. It is clear that there has been ongoing consultation with the industry since the measures were first proposed in 2010. For those who would like to find the detail, we have very clearly set out the dates when that period of interaction occurred in our report in a quite full and very clear tabled manner.

Importantly, the measures include a generous three-year transitional arrangement, with the full regime not commencing until 1 July 2016. The transitional arrangements mean that, for an 18-month period from 1 July 2013, financial advisers could effectively continue to provide services in the same manner as they do today. I do want to stress that the length of the transition period is three years, so any sense of creating alarm about a sudden change here is misrepresenting the reality of what this legislation seeks to do.

It is also important to be aware that industry participants are genuinely supportive of the overall policy intent. The Financial Services Council, which certainly did have some reservations, stated in its submission that the FSC is supportive of the amendment of the Tax Agent Services Act to create a specific and appropriate type of tax adviser which is congruent with the tax advice a financial adviser gives in the context of financial planning. The FSC is supportive of the regime on the basis that increased advice-provider competency is a public good. It will enhance the quality and value an advice provider delivers to their client.

The Financial Planning Association of Australia also noted the benefits that the regulatory changes will have. At the committee's public hearing, the FPA's chief executive officer stated that:

The FPA understands and supports consumer protection objectives of the tax agent services regime, which include firstly that providers of tax advice are appropriately and adequately trained; secondly, that proper complaints handling and redress is available to consumers; thirdly, that enforceable ethical and professional conduct requirements are imposed on providers; and, finally, a strong regulatory oversight in relation to the Australian tax law system.

While the industry accepts the policy intent, the committee acknowledges that the industry had some concerns about the detail. After taking evidence from key industry organisations and Treasury at a public hearing, the committee has made some recommendations in its report that are intended to minimise any burden on industry participants during the three-year transition period that lies ahead. These recommendations, and the evidence provided by Treasury and the Australian Securities and Investments Commission, should help allay concerns about any of the measures in the bill.

The committee has recommended that the measures be reintroduced into the parliament and passed. The committee would also like to highlight the urgency that is required in this regard. If the current regulatory exemption from the Tax Agent Services Act that exists for financial advisers expires on 30 June—this month—without a suitable replacement being enacted, a significant burden will be imposed on the industry. As the chief executive officer of the Financial Services Council, Mr John Brogden, told the committee:

The worst outcome of all would be if the legislation did not proceed in any form, because that would leave the financial advice industry in a perilous situation where an enormous number of advisers simply would be in breach and be unable to comply. That is not an acceptable environment for Australians and their financial advice.

The committee shares Mr Brogden's view that such a result would be unacceptable. The enactment of these measures prior to 1 July 2013 not only would prevent this clearly undesirable outcome but also would commence a three-year transition to a better regulatory environment, one that is absolutely and clearly focused on consumer protection and ensuring the provision of quality taxation advice.

On behalf of the committee, I would like to thank the organisations that lodged submissions and the witnesses who gave evidence at the committee's public hearing, particularly given the short period of time in which the inquiry was conducted. I stress once again the general agreement across the profession about the need for this legislation to go forward and for care in the transition period to be attended to, if necessary through amendments and certainly through consultation and ongoing discussion with relevant agencies and regulatory authorities. I commend the report to the House.

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