How To Write An Exposure Draft

Transcription

1 21 August 2014 Tax Practitioners Board PO Box 126 HURSTVILLE BC NSW 1481 Dear Tax Practitioner Board Secretary, Australian Bookkeepers Association (ABA) welcomes the opportunity to respond to the Tax Practitioners Board Exposure Draft Information Sheet Payroll Service Providers (the Exposure Draft). Our submission responds to specific issues raised in the Exposure Draft and suggests improvements where relevant. About ABA Australian Bookkeepers Association (ABA) is a non-profit organisation which provides representation and training options for bookkeepers Australia-wide. ABA is accredited as a recognised BAS Agent Association and represents its members in various arenas including at Tax Practitioner Board and Tax Office consultative forums. Our Interest As a registered BAS Agent Association, our members are legislatively required to be registered BAS Agents in their own right under the Tax Agent Services Act (TASA). Any Exposure Draft released by the Board aimed at assisting a sector of the community (in this case payroll service providers) to understand the TASA regime and determine whether they are required to register with the Board therefore automatically attracts our interest. We refer to the Exposure Draft and make the following points: Paragraph 18 and 19 Circumstances where a payroll service provider may need to register as a tax agent or BAS agent These paragraphs would be enhanced if the examples listed were expressed in specific terms; listing the actual tasks (which constitute BAS services or tax agent services) that a payroll services provider may be called upon to undertake on a day-to-day level for a client. As it stands, the examples in these paragraphs are not specific and refer to terminology used in the legislation under which a payroll services provider may be performing BAS services or tax agent services but not the actual payroll tasks themselves. By listing specific tasks (rather than the legislation under which they fall) payroll service providers will be better able to determine whether they are caught by the TASA regime (that, after all, is one of the main purposes of the Exposure Draft) and therefore assess the need to register with the Board. We suggest replacing or augmenting the current list in Paragraphs 18 and 19 with examples of actual tasks undertaken by payroll service providers such as follows: Determining the PAYG withholding liability in a pay run Advising clients as to the quantum of their PAYG withholding and Superannuation Guarantee (SG) obligations Interacting with the Commissioner (via telephone) re a clients PAYG withholding liability Deciding whether PAYG withholding or SG applied to a particular employee s payroll and the quantum of each

2 Advising employers about their PAYG withholding and SG obligations including the treatment of specific items e.g. PAYG withholding and SG on certain allowances Establishing/configuring client payroll systems that determine the calculation of PAYG withholding and SG, or Preparation and or lodging documents with the Tax Office for clients including Empdupe files, Payment Summaries etc. We believe that from a list such as this (which are commonly supplied services) it will be very rare for a payroll service provider to be able to offer an effective payroll outsource for a client without infringing on the definition of a BAS service or tax agent service. Such a list of tasks is more likely to assist payroll service providers in understanding the operation of TASA as it applies to them (which, as stated at Paragraph 1 of the Exposure Draft, is its main purpose) than the current paragraphs 18 and 19. Paragraph 20 If an unregistered payroll service provider provides a tax agent service or BAS service for a fee or other reward, the provider will contravene a civil penalty provision. In this case, the TPB may apply to the Federal Court for an order requiring the provider to pay a civil penalty, or may seek an injunction to restrain the provider from engaging in the unregistered conduct. As stated at paragraph 1 of the Exposure Draft, one of the main purposes of the document is to assist payroll service providers to understand the operation of TASA and alert them to the need to register where required. To this end, the Exposure Draft would be enhanced if the consequences of breaching TASA (by providing tax agent services or BAS agent services as an unregistered party) were plainly spelt out in real terms. Rather than referring to generic terms such as civil penalties, the Exposure Draft should spell out the penalties in real terms such as the possibility of fines ranging from $8 500 to $ (per offence). Knowledge of such significant penalties acts as a strong disincentive for breaching TASA and by implication an incentive to register. Paragraph 22 If a payroll service provider intends to provide a tax agent service or a BAS service for a fee or other reward, the following options are available b] Engage a registered tax agent or BAS agent to provide tax agent services. This can be achieved through the use of contractors who are registered agents to undertake the work personally or to supervise non-registered individuals who are providing the tax agent service. This arrangement may not require the engagement of a registered agent on a full time basis. Having raised the option of supervision by a registered BAS agent or tax agent as an alternative to the payroll service provider registering with the Board in their own right, the Exposure Draft in our view needs to canvass what is entailed and what the Board requires in a supervisory arrangement. It would seem helpful to specify such issues as who charges the client in such arrangements. Is it envisaged in paragraph b in such contractor arrangements that the payroll service provider renders a fee to the client that excludes any BAS or tax agent services? In terms of supervision, the absence of clarity around acceptable contractor arrangements could give rise to a number of poorly structured informal arrangements that do need meet the objectives of TASA. The Board s Information Sheet Supervisory Arrangements and Supervision and Control makes clear that the degree of supervision and control required by the Board is broadly speaking quite rigorous. Listing the considerations and steps that may be taken into account in determining whether there is adequate supervision in place (at paragraphs 19 and 20 of that Information Sheet) would enable a payroll service provider to assess whether this alternative option to registering is viable in their circumstances

3 (i.e. are there adequate supervisory arrangements in place and, if not, is it practical to put them in place?). At the very least, the Exposure Draft should provide a link to this Information Sheet (in the same way that the Exposure Draft provides a link to the Board s Contractors Information Sheet). Paragraph 22 - Example Wayne is a registered tax agent. Wayne outsources payroll-related BAS services to Leigh who is not a registered agent. The nature of this arrangement is such that Leigh is a contractor providing payroll-related services on behalf of Wayne. While direct supervision and control by Wayne is not possible in the circumstances, to comply with his obligations under the Code of Professional Conduct (Code) in the TASA, Wayne must ensure that the payroll services provided on his behalf by Leigh are provided competently by reviewing Leigh s work to ensure its accuracy. Alternatively, if Leigh is a registered BAS agent whose expertise is in payroll services, then Wayne may meet this requirement of the Code without reviewing Leigh s work. In the case where Leigh is not registered and Wayne is reviewing her work, the example is incomplete. Even where the review of the work constitutes adequate supervision for the purposes of TASA, the example then needs to proceed to make clear that Wayne as the registered agent must render the invoice to the client (i.e. charge for the tax agent service). If Leigh were to render the invoice (with her name on it etc.) as would normally be the case for work undertaken for her clients, she would be taken to be providing the service and charging a fee for it which would be in contravention of TASA as she is unregistered. While the example in the Exposure Draft relates to individuals, assume that Leigh is substituted for a medium to large payroll bureau which provides services to a multiple clients (not untypical in the payroll industry where such large specialist organisations are quite common). It would not be commercially credible for a large payroll organisation to have an external individual tax agent (such as Wayne) render the invoice to clients in his name for any payroll services provided by a bureau that constituted a BAS service or tax agent services under TASA. Furthermore, it would be difficult for external individual agents such as Wayne to review or have adequate supervisory arrangements in place across the entire payroll bureau. Given, as stated, such medium to large organisations are not untypical in the payroll services sector, some verbiage in the Exposure Draft on the impracticality of external BAS Agent or Tax Agent supervisory or reviewing arrangements vis-à-vis such organisations would be welcome. Perhaps it is wise to restructure the Wayne example or add an additional example that would pertain to an existing payroll service provider that intends to work with a registered agent in a contractor relationship (option b) as an alternative to registration (option a). The Wayne example seems only to deal with Wayne the registered agent subcontracting his BAS or tax agent work to a non-registered person. In the case of existing bureaus they would have the contractual relationship with the client. Consequently, for such organisations, Option a as outlined in paragraph 22 (i.e. registering as a tax agent or BAS agent in its own right) may be the only viable option. As it stands, the Exposure Draft does not make this clear and is the poorer for it.

4 Qualification Mismatch A logical outcome of the Exposure Draft (paragraph 22 a) is that there may be an influx of payroll service providers looking to register as a BAS or tax agent. The currently legislated pathway insofar as qualifications presents practical difficulties for payroll service providers seeking to register. In order to understand the registration difficulties faced by payroll service providers, it is important to understand the background and career pathway the majority of people who work in the payroll services industry have taken. While some may have taken an accounting or bookkeeping pathway, many more have simply grown up in this industry; commencing work for small and larger outsource payroll organisations. In many cases these people did not have formal tertiary education when they commenced their careers and often those that do have qualifications are more payroll-centric (such as Diploma or Certificate IV in Payroll Services). Increasingly payroll-centric qualifications such as these are becoming the norm due to their increased vocational relevance. For example one Certificate IV in Payroll Services that we have seen has 14 payroll centric units of competency including FNSBKG405A Establish and maintain a payroll system while the Certificate IV in Bookkeeping or Accounting typically has only the FNSBKG405A. Our understanding of the registration pathway for a payroll service provider is one of the two alternative avenues: 1. As a BAS Agent (or qualified BAS Agent Payroll Service Provider) The qualifications requirement for BAS agents is quite narrow. Regulation 101 in Schedule 2 of the Regulations specifies that an individual has been awarded at least a Certificate IV Financial Services (Bookkeeping) or (Accounting). The vast majority of operatives in the payroll industry will not possess these bookkeeping or accounting qualifications as their careers are mired firmly in payroll, not GST, inventory, fixed assets or accrual accounting. Increasingly, operatives in the payroll industry are completing payroll-centric qualifications (such as Diploma or Certificate IV in Payroll Services) which generally have a much stronger payroll learning than either of the two Board-approved benchmark qualifications (Certificate IV Financial Services (Bookkeeping) or (Accounting)) which, at the most, have only a single unit on payroll. It would be helpful if the Board would deem a Diploma or Certificate IV in Payroll Services at least a Certificate IV Financial Services (Bookkeeping) or (Accounting) for registration purposes for the purposes of Regulation 101. If not, a payroll service provider seeking registration as a BAS Agent will be required to complete a Certificate IV in Bookkeeping or Accounting where most of the learning is not relevant to their careers or the BAS agent service they propose to provide. Continuing to use the Certificate IV in Bookkeeping or Accounting as the benchmark qualification may lead to flight of the industry as operatives may be unwilling to complete this expensive qualification which on a day-to-day level has little relevance to their work. Going forward, to new entrants contemplating a career in payroll, the current benchmark qualifications will ill-equip them for the skills required to operate in the payroll space. This will not serve them, or the public that relies on their services, well. Given that consumer protection lies at the heart of the TASA regime, this is an undesirable outcome. 2. As a Tax Agent (or qualified Tax Agent Payroll Service Provider) The tax agent qualification requirements seem a little more accommodating in the sense that the Board seems to have discretion to accept qualifications appropriate to a specialist registration such as

5 a payroll service provider. Regulation 202 (a) (ii) <Tertiary qualifications in another discipline Specialists> permits a degree or award that is approved by the Board from an equivalent institution in a discipline other than accounting that is relevant to the tax agent services to which the application relates. Typically though, it is our understanding that a Tax Agent Registration requires a diploma level qualification. It would be helpful if the Board allows a qualification at a lesser level than diploma (e.g. Certificate IV or Diploma in Payroll Services) as ostensibly the typical payroll operative is really only operating at a level that is a sub-set of BAS Agent Services. If the Board does not allow this, the same issues outlined earlier with respect to the BAS Agent qualification criteria will be at play, namely possible flight from the industry caused by requiring payroll operatives to obtain an expensive and largely irrelevant qualification and, going forward, ill-equipping future entrants to the payroll industry with the skills required to operate in that space. While the registration pathway and in particular the acceptable qualifications may well be outside the scope of the Exposure Draft, we think it would be useful in providing guidance to payroll service providers. The inevitable outcome if this is not done will be heightened level of enquiry and possible delays in registration as TPB staff consider a range of qualifications payroll service providers are likely to hold. Yours sincerely Peter Director