By
Tom Ravlic
Treasury is still grappling with reform issues put into the law-making sausage machine following the PwC tax leaks scandal, which the Tax Practitioners Board revealed just over two years ago.
A media release issued by the TPB on January 23, 2023, revealed former PwC partner Peter Collins had been disciplined for sharing information that was subject to confidentiality agreements.
The TPB disciplined PwC Australia itself and has only recently concluded its two years of compliance reporting to the tax agent regulator that was part of an order designed to ensure the firm tightened its internal controls and training processes.
While the firm’s ordeal of reporting to the TPB frequently may be over the government is still using the PwC case study as a prompt to press for further change.
Two consultation papers — one on reforming legal professional privilege and another dealing with tax regulator secrecy provisions — have emerged as a result of the government’s laundry list of policy issues that it wanted to tackle.
The first paper on legal professional privilege riffs only in part on the issues PwC and the Australian Taxation Office fought over regarding documents the firm was ordered to produce.
Both of these papers have a February 28 deadline for responses — a deadline that happens to coincide with the next round of Senate estimates during which the ATO, the TPB and the Australian Federal Police are likely to receive questions about how they are progressing with investigations and queries associated with the initial confidentiality breach.
The TPB had dispensed with four of nine investigations during the past year because four individuals, according to the tax agent regulator, had no case to answer.
Five cases remain on the TPB’s books, and these cases as well as the AFP’s ongoing investigations will be used by the Department of Finance — as well as PwC Australia’s own work on changing its governance structure — when it considers later this year whether the firm is ethically sound to do government contract work.
It is clear that the heat surrounding the confidentiality breach for which PwC Australia was punished is slowly diminishing, but there is still some time before the burning embers are completely snuffed out.
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Treasury's consultation on new oversight body ‘inadequate’, says CPA
Regulation
Both CPA Australia and CA ANZ have raised questions and concerns regarding the government’s plans to merge Australia's three financial reporting bodies.
Under the proposed plan, the Australian Accounting Standards Board (AASB), Auditing and Assurance Standards Board (AUASB) and the Financial Reporting Council (FRC) would be merged into a single body containing various expert committees.
Both CPA Australia and CA ANZ have expressed concerns regarding the short consultation window for the plan, highlighting that the changes could have major implications for Australian businesses.
“Given the complex and sophisticated nature of the professional services industry, such a substantial change to its reporting infrastructure needs to be considered very carefully to avoid any unintended consequences,” said Tiffany Tan, audit and assurance lead for CPA Australia.
“We emphasise the importance of adequate consultation and co-design with key stakeholders.”
“Having less than a month to consult over such wide reaching changes to the profession and all of the subsequent implications is inadequate.”
This sentiment was echoed by CA ANZ, which expressed its support for the overhaul while flagging key concerns regarding the new body's operation.
Amir Ghandar, CA ANZ assurance and reporting leader, said: “CA ANZ supports the overall objective of a more flexible arrangement for standards setting to deal with evolving market needs.”
“However, a 30-day consultation period is not long enough to provide feedback on the most significant shake-up to the Australian standards setting bodies in decades.”
CA ANZ warned that the government’s proposed plan will require further refinement, including “clarifying the demarcation between oversight and standard setting activities, striking a balance between independence and current practical expertise, as well as clarity on how this fits and interacts with other ongoing Treasury consultation processes involving the profession.”
CPA Australia raised similar concerns, advising the Treasury that it should take care to preserve existing functions of the financial reporting bureaus including independence, resource allocation and technical skills.
“Broad technical expertise across multiple sectors is another key foundational pillar to the current standard-setting structure which needs preserving under the new model,” Tan said.
“The independence of the two standard-setting boards under the current structure is an important contributor to high quality financial reporting, sustainability reporting and assurance standards,” she continued.
“It is not clear from the proposals whether this critical element will be preserved under the new structure.”
The government is currently seeking feedback regarding the proposed body’s structure, its model for issuing standards, and its mechanisms to ensure transparency and address conflicts of interest.
The consultation will be open until 21 February, and the paper is available on the Treasury website.
TPB sheds light on required standards for breach reports
The Tax Practitioners Board has clarified that practitioners are not required to report breaches where a claim is based solely on hearsay or simple opinions.
<Miranda Brownlee 27 January 2025Speaking in a recent webinar, Tax Practitioners Board chair Peter de Cure said while the breach reporting obligations don't make a distinction between actual or alleged breaches, there must be reasonable grounds to believe that there has been a significant breach.
"This is an objective test and it looks at whether a reasonable person in your position would form the same belief in the same circumstances," de Cure said.
"We're not asking you to have conclusive proof that a breach has occurred, but you should be able to appropriately substantiate or corroborate your claim as an appropriate claim."
De Cure said this means that beliefs based solely on hearsay or simple opinions of other people which are not substantiated or supported, do not meet the standards of 'reasonable grounds to believe'.
He also warned tax practitioners that the TPB may take action against registered practitioners if it believes they have made a frivolous or vexatious report such as a claim involving a false or misleading statement.
"Should this situation occur, it may raise issues about a tax practitioner's compliance with other requirements of the TASA such as being a fit and proper person and the other code items requiring honesty and integrity," he said.
"So I think people should take some care around determining the facts of any situation."
The TPB gave an example involving a tax agent, Tamara, who lost a client to Max, a tax practitioner at another firm.
Tamara is unhappy about this and overhears colleagues discussing rumours that Max had been involved in fraudulent tax claims. She doesn’t make enquiries but reports a significant breach to the TPB.
"Although it would be reasonable for Tamara to conclude that a fraudulent claim involving a substantial sum of money would be a significant breach of the code, she's done nothing to turn her mind to the relevant tests. She's done nothing to ascertain the facts of substantiate the claim," de Cure said.
"We would look at this set of circumstances [as a] false, malicious or potentially vexatious notification because really, what she's trying to do is embarrass Max and cause problems for him."
Given the circumstances surrounding the breach notifications, and concerns that Tamara may not be acting honestly and with integrity by making vexatious claims, the TPB would likely investigate her conduct, the regulator said.
De Cure explained that where the TPB receives breach reports, it undertakes some preliminary analysis to validate the breach and determine whether the practitioner had reasonable grounds for believing there had been a significant breach of the code.
The TPB also gave another example of Brittany, a BAS agent who attends monthly BAS discussion group sessions and is a member of an online forum that discusses new and emerging issues for BAS agents.
"Brittany overhears attendees gossiping about a mutual acquaintance, Chris, saying he has been falsifying CPE certificates. She also overhears that Chris made false statements to the TPB," the TPB explained.
"Brittany made no further enquiries regarding what she had overheard. She doesn’t have any independent evidence and recalls seeing Chris at several discussion groups, and two recent workshops."
De Cure explained that in these circumstances, Brittany doesn't have a breach reporting obligation to notify the TPB.
"She wouldn't be considered to have reasonable grounds to believe that Chris had breached the code because reaching a belief like that would have been founded solely on the gossip that she overheard at a group discussion session. So we don't think that that would require a report."
