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Tax agent registration – 16 May 2007 update
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16 May 2007 update 
 
On 16 May 2007, the Institute received a further letter from the Chair of the Victoria Tax Agents’ Boards in relation to registration of tax agents and trusts. A copy of the letter can be viewed here. 
 
The letter seeks to clarify the re-registration process the Tax Agents Boards are adopting where an agent, in lodging its application for re-registration, provided information that suggested a service trust may form part of their business structure. In particular, the Chairs of the Tax Agents Boards have advised that:

“subject to the normal integrity checks that are made when an application for re-registration is received, provided the business for which registration is being sought is conducted by the registered tax agent, re-registration will ordinarily be granted without any investigation being conducted into whether or not a service trust is used to employ staff engaged in the preparation of tax returns and other tax related activities. 
 
However, where the Boards become aware that the trustee of a service trust is not a registered tax agent, for example, where an application for registration is received from a person employed by the unregistered trustee of a service trust, the Boards are unable to ignore the breach of section 251N. Generally the Board concerned will write to the registered tax agent involved informing them of its concern. The Board may also advise the Commissioner of Taxation of the apparent breach. 
 
Typically a breach of section 251N is remedied without any need for a restructure of business operations, simply by registering the trustee of the service trust as a tax agent and if necessary ensuring that the shareholding and directorships of a corporate trustee meet the requirements of the law.”
30 April 2007 
 
The Australian National Audit Office (ANAO) has recently released a report titled "The Australian Taxation Office's management of its relationship with tax practitioners: follow-up audit", which highlighted that business structures used by some tax agents may be in breach of sections of the Income Tax Assessment Act (ITAA) 1936 (see paragraphs 30 to 35 of the report). In particular, service trust arrangements have been mentioned as potentially in breach of subsection 251N(1) of the ITAA 1936. 
 
From the ATO's response on page 55 of the ANAO report as well as our subsequent discussions with them, we understand that, pending the release of the new legislative framework for tax practitioners legislation, the ATO will not be actively pursuing these business structures. 
 
We have also received a letter from the Chair of the Victoria Tax Agents' Board on the registration of tax agents and trusts. This letter follows from the Tax Agents' Board Chairs Conference in February 2007, which was also noted in the ATO Tax Practitioners Forum (ATPF) meeting held on 23 February 2007. A copy of the letter is also posted on the Tax Agents' Boards website. 
 
The Institute's CEO, Graham Meyer, has raised concerns on this matter with the ATO at the recent CEO meeting. We have also informally raised this issue with the Office of Minister for Revenue and Assistant Treasurer. We have been and will continue to also raise this issue with the ATO and the Tax Agents' Boards.