The paper considers, among other things, whether the Tax Agent Services Act 2009 (TASA) should be amended to require legal practitioners who provide tax agent services for a fee or reward to be registered with the TPB, which is responsible for the regulation of tax agents, BAS agents, and tax advisers across the country.

“Legal practitioners who provide legal services, which includes tax advice, are regulated in their respective state and territory and are generally exempt from registration with the TPB. It is only where that legal service includes preparing, or lodging, a return (or a statement in the nature of a return, such as an income tax return or a business activity statement) that the legal practitioner is required to register with the TPB,” the paper said.

“The 2019 TPB Review considered it was appropriate that the general exemption from TPB registration remain, noting the regulatory overlaps that would otherwise exist. Treasury seeks views on the appropriateness of this exemption continuing and whether legal practitioners should be required to register with the TPB to provide tax agent services for a fee, even if it does not include the preparation or lodgement or a return or a statement in the nature of a return.”

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CPA’s submission

In its response to the consultation paper, CPA Australia – a professional accounting body with over 20,000 members Down Under – said earlier this month that it welcomes the proposal to bring legal practitioners who provide tax agent services into the tax practitioner regime.

“The differences in the regulatory environment for lawyers providing tax-related advice is not lost on our members. There are concerns about the lack of a level playing field,” the body said.

“An assessment of the regulation of the legal protection and the protections afforded to consumers who receive bad or incorrect legal advice (as it relates to tax) should be undertaken. The regulatory regime should ensure that there is consistent oversight of all participants in the tax profession.”

“Members have put to us that lawyers may be just as, if not more, likely to be giving complex or possibly aggressive tax advice.

“While the policy presumption is that lawyers are already regulated and shouldn’t be over-regulated, we question how effective this is in practice.”

Lawyers’ pushback

In a recent LinkedIn post, Thomson Geer partner Arthur Athanasiou wrote that he found the accounting body’s position to be “disturbing”.

“CPA’s position, in my personal view, is both ill-considered and regrettable,” he penned online.

While robust regulation of the provision of taxation services is “imperative for an efficient taxation system and generally welcomed by the profession”, WRP director Christopher Annicchiarico told Lawyers Weekly, the proposal to require legal practitioners providing taxation advice to be registered with the TPB “raises a range of issues for no ostensible benefit”, he said.

“Legal practitioners are already subject to stringent ethical obligations owed to clients, the court, and the administration of justice, and are regulated by their state or territory bodies. Further regulation is unnecessary and would invariably increase the cost of legal services,” he said.

Dentons managing associate Jack Aquilina said that the proposal to subject lawyers to the TASA “at best, misunderstands the role and function of lawyers and, at worst, would dangerously undermine a lawyer’s ability to fulfil their obligations to the court and the administration of justice”.

Our tax system “is what it is”, Athanasiou mused – that is, “incredibly cumbersome, virtually impossible to keep up with and requires the input of both tax agents and lawyers for it to continue to work”.

“If Treasury follows CPA’s position and it is ultimately mandated as law, I am certain that many lawyers will choose to no longer provide any form of tax advice as a legal service,” he said.

“I have no doubt that the tax system, as it currently stands, would then collapse.”

Logistical issues

The clash of a lawyer’s legal obligations to clients would “clash” with new duties under TASA, Bartier Perry partner Lisa To said, which would “raise significant concerns”.

“The broad definition of ’tax agent services’ under s90-10 of TASA could inadvertently encompass any form of legal tax advice, however minor, subjecting lawyers to registration and potential conflicts with their fundamental duties to clients. This includes the preservation of confidentiality and client legal privilege,” she said.

“Imposing a duty to uphold the integrity of the tax system could conflict with a lawyer’s obligations to their client and the judicial system, particularly when a client’s interpretation of tax laws diverges from the Commissioner’s views. Such conflicts could compromise the legal profession’s core principles and the administration of justice.”

Lawyers and tax agents bring different skill sets and attributes for the benefit of taxpayers and the government, Athanasiou wrote in support.

He said: “Assume that a lawyer is now required to be registered as a tax agent and bound by the code (and the determination). How can that lawyer provide competent advice to a tax agent for the benefit of a taxpayer, where there is no longer the benefit of legal professional privilege and the lawyer might have to ‘dob-in’ the agent and advise the TPB, if a significant breach is detected?”

The “many difficulties” created by extending TASA to lawyers, Aquilina noted, would also include having to define what constitutes a tax lawyer.

“If a lawyer acting in a property transaction is required to obtain CGT clearance, are they required to be registered under TASA? How do you reconcile the lawyer’s fundamental obligation to keep all client matters confidential with the TASA obligation to report certain actions?”

Best practice moving forward

Athanasiou remarked that “lawyers are already heavily regulated under various state laws, and that further regulation in the tax space was unnecessary”.

Aquilina went further, arguing that Australian lawyers are “some of the most regulated professionals in the world”.

“They are subject to stringent legislative standards, enforced by regulators daily, in addition to their sworn and paramount duty as officers of the court. Lawyers have strict obligations to act with independence and objectivity and provide critical advice on matters affecting the rights and obligations under the law,” he said.

“Tax lawyers not only provide legal advice to taxpayers or revenue authorities, but to tax agents. They do not lodge tax returns.”

Rather than implementing further regulatory overlay, Annicchiarico submitted, the preference would be for the relevant bodies to “work collaboratively to enhance the provision of continued education for legal practitioners on the items of concern”.

This is necessary, he suggested, “to ensure we are best equipped to promote an efficient and effective taxation system whilst upholding our fundamental duties (as legal practitioners) and providing optimal service delivery to our clients”.

Given the fundamentally different roles and functions of lawyers and tax agents, Aquilina added, different approaches to regulation are “permissible and desirable”.

“As such, the current arrangements best serve the interests of taxpayers and the tax system; they must be maintained,” he said.