Australia: Draft legislation to improve tax system

Treasury released for consultation four pieces of draft legislation that seek to strengthen the Australian tax system and give greater powers to regulators.

The draft legislation includes:

• Tax promoter penalty reforms
• Tax secrecy reforms
• Whistleblower reforms
• Tax Practitioners Board reforms

Consultation on all four sets of draft legislation will close 4 October.

To strengthen the integrity of the tax system, the draft legislation would enhance the tax promoter penalties to deter and punish advisers and firms promoting tax avoidance by:

• Increasing maximum penalties for advisers and firms that promote tax avoidance schemes from $7.8 million* to over $780 million
• Expanding tax promoter penalty laws so they are easier for the Australian Taxation Office (ATO) to apply to advisers and firms that promote tax avoidance
• Increasing the time limit for the ATO to bring federal court proceedings on promoter penalties from four years to six years after the conduct occurred

To increase the power of regulators, the draft legislation would:

• Modernise tax secrecy rules by:
  • Removing limitations in tax secrecy laws that were a barrier to regulators
  • Enabling the ATO and Tax Practitioners Board to refer ethical misconduct by advisers (including but not limited to confidentiality breaches) to professional associations for disciplinary action
• Protect whistle blowers when they provide the Tax Practitioners Board with evidence of tax agent misconduct
• Strengthen the Tax Practitioners Board’s investigations and transparency by:
  • Giving the Tax Practitioners Board more time—up to 24 months—to complete complex investigations
  • Improving the Tax Practitioners Board’s public register of practitioners, so that people have more transparency over agent and firm misconduct

_{*$=Australian dollar}