In response to the tax adviser misconduct saga that unfolded during 2023, the government has identified several priority areas for action, including strengthening the regulatory regime and increasing the power of regulators. More details have now been released on its proposal to enhance the Tax Practitioners Board (TPB) sanctions regime, with a consultation paper recently published.

The TPB regulates tax practitioners to protect consumers, aiming to ensure that practitioners meet the appropriate standards of professional and ethical conduct. It is an independent statutory body and is responsible for administering and investigating practitioners, and making disciplinary decisions and applying sanctions in appropriate cases. However, gaps in the regime have been exposed by recent events, with the more prominent ones being that:

• the TPB lacks the additional sanction powers to allow for more graduated and proportionate responses to practitioner misconduct – for example, it only has the ability to issue either low-level sanctions (eg written cautions and further education) or high-level sanctions (ie suspension or termination of registration and civil penalties), with nothing in between;
• the TPB is currently unable to act quickly in certain circumstances where urgent action is required (eg where investigations are ongoing, but there are concurrent risks associated with allowing the practitioners to continue to practise).

The enhanced TPB sanctions regime therefore proposes to increase the power of TPB to issue a range of additional sanctions consisting of:

• low-level sanctions: infringement notices and enforceable voluntary undertakings in addition to written cautions and orders such as education directions;
• medium-level sanctions: infringement notices (eg multiple notices can be issued for misconduct that contravenes multiple provisions of the code), enforceable voluntary undertakings (eg undertakings become more onerous proportionate to wrongdoing), and interim and contingent suspensions; and
• high-level sanctions: criminal sanctions for unregistered practitioners will be available to the TPB in addition to suspension/termination of registration, court injunctions and civil penalties.

In addition to the above, criminal penalties will be reintroduced for unregistered preparers, a measure which will target the most serious unregistered contraveners, such as repeat offenders or those engaged in intentional wrongdoing. Prior to the formation of the TPB and passage of the associated legislation, criminal penalties existed in the ITAA 1936 in relation to offences regarding unregistered tax practitioners. The consultation paper proposes that the pre-existing offences and corresponding penalties be reintroduced. The penalty under the previous regime for unregistered practitioners who provide taxation services for fee was 200 penalty units (equating to $62,600).

The proposal is to also expand the circumstances in which the TPB can apply to the Federal Court to impose civil penalties, introduce new civil penalty provisions for breaches of the code, and increase existing penalties. If it is implemented, the TPB would be able to make applications to the Federal Court for the imposition of civil pecuniary penalties for a range of behaviours that are not in line with the code and community expectations of a registered tax practitioner.

According to the consultation paper, the range of expected behaviours include acting honestly, avoiding conflicts of interest, keeping client information confidential, providing services competently and acting lawfully and in the best interests of a client. The proposed maximum penalty units would also be increased from 250 penalty units ($78,250) to 2,500 penalty units ($782,500) for individuals, and the greater of 50,000 penalty units ($15,650,000) or 10% of aggregated turnover to a cap of $782.5m for bodies corporate or significant global entities.

This is just one of the many steps the government is taking to increase the power of regulators and strengthen regulatory frameworks. Future treasury consultations will include TPB registration requirements, ATO investigations and information-gathering powers, fraud against the ATO and abuses of the tax system, and tax promoter penalty laws, to name a few.