The APESB is proposing to amend APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) to incorporate changes made by the International Ethics Standards Board for Accountants (IESBA) to the Non-Assurance Services (NAS) provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the IESBA Code).

Paragraphs R604.4 and 604.4 A1 of the IESBA NAS revisions use the terminology that ‘the firm is confident’ that the tax treatment is ‘likely to prevail’. The APESB is concerned that the phrase ‘likely to prevail’ could be interpreted as not a sufficiently high threshold. These paragraphs also include a subjective assessment by the firm, that the ‘firm is confident’ rather than an objective assessment by a reasonably informed third party, which is generally used in the Code.

To address such concerns in respect of tax advisory and tax planning services, the APESB is also proposing the following two options for Australian-specific amendments, along with a requirement to document the factors considered and conclusions reached in determining that at least one of the specified conditions has been met:

1. Changing the phrase “likely to prevail” to “almost certain to prevail”.
2. Including guidance to clarify that the phrase “likely to prevail” is indeed a high bar.

In our submission we support the APESB’s proposals to incorporate the IESBA NAS revisions into APES 110. With respect to tax services, we recommend the APESB consider retaining the original form of the IESBA Code. However, of the two options presented we believe only proposed Option 2 would be workable, we do not support Option 1. Option 2 is also consistent with the approach taken in New Zealand.