The Joint Bodies have lodged a joint submission to the Tax Practitioners Board (TPB) on the following draft guidance materials relating to the new breach reporting obligations:

• draft TPB Information Sheet TPB(I) D53/2024 breach reporting under the Tax Agent Services Act 2009 (the draft Information Sheet)
• draft summary of breach reporting obligations, and  
• draft high-level flowchart and decision tree on breach reporting.

In our view, the draft guidance falls short of being practically useful to practitioners in determining their reporting obligations. This is due, in part, to the extensive use of undefined terms in the legislation (which accordingly take their ordinary meaning), and the nature of the reporting requirements that depend on the facts and circumstances of each case. 

We also emphasised the importance of the TPB not taking an overly expansive interpretation of the breach reporting rules, as Case Study 1 seems to reflect.  We noted that the legislative intent behind the provisions was to ensure that serious and egregious breaches are reported including those likely to cause substantial harm. However, low level or insubstantial breaches should not be caught. Therefore, the setting of materiality needs to be carefully considered by the TPB. We recommended that the TPB consider ASIC’s approach and guidance, and also consider how materiality under the NOCLAR standard applicable to accountants may assist with setting the appropriate level at which breaches should be reportable. Tax agents should not have to become investigators and auditors for the TPB and/or ATO.

Our key observations and recommendations to improve the draft guidance as a matter of high priority are summarised as follows: 

• The draft Information Sheet requires further interpretive guidance on the new breach reporting requirements and further relevant case studies to be practically useful for practitioners. The Joint Bodies offered to collaborate with the TPB to provide common scenarios that should be incorporated into the guidance.
• The definition of ‘significant breach of the Code’ involves a complex analysis based on evidence and legal concepts.  The term ‘otherwise significant’ lacks a specific definition.  Likewise, ‘material loss or damage’ requires an assessment and the exercise of judgment on materiality.  The term ‘reasonable grounds to believe’ similarly requires an objective assessment of the facts and circumstances. Practitioners may not have sufficient information or skills to make such assessments. While the draft Information Sheet acknowledges this limitation, it should provide practical guidance on how to address it. 
• The draft Information Sheet and case studies should make it clear who has the reporting obligation.  When a company or partnership is registered as well as a sufficient number of registered individuals, it is unclear whether the individual, the entity, or both, should be reporting.  Further, the guidance should clarify whether self-reporting or peer-reporting applies in cases where there are multiple individuals and associated entities involved.
• The draft Information Sheet outlines varying degrees of evidentiary requirements that may result in confusion and practical challenges for practitioners.  It should provide a clearer and more concise framework for practitioners to follow that consolidates the evidentiary requirements throughout the guidance and better explains how the varying requirements should be met.  

The draft Information Sheet should provide further guidance on the following: 

• the repercussions of frivolous, vexatious or malicious complaints
• the repercussions of failing to comply with reporting obligations by the due date
• whistleblower protection for unrelated practitioners
• consequences and resolution of cases where a practitioner disagrees with the TPB’s position on being required to report a breach, and
• the action to be taken by a recognised professional association (RPA) upon receiving notification from a practitioner about a significant breach of the Code by another practitioner who is a member of that RPA, beyond their existing oversight, disciplinary and professional conduct processes. 

Our further recommended improvements to the draft guidance and the TPB’s administration of the rules included establishing an ethics officer or hotline for practitioners to seek guidance on ethical dilemmas and their obligations under the TASA, preferably on an anonymous basis, so as to avoid superfluous claims being made.