This article discusses the March 2025 budget announcements regarding the proposed expansion of the Tax Practitioners Board (“TPB”) sanctions.

Background

The 2019 James review of the TPB found, and the government response to that review acknowledged, that there is a gap in the range of sanctions that the TPB can impose. Currently the TPB can impose light touch sanctions such as education requirements and very tough sanctions such as termination or suspension of registration. What is missing is a range of sanctions in the middle and the ability to act swiftly to prevent harmful conduct, and this reduces the effectiveness of the TPB.

In December 2024, when the government was pushing legislation through Parliament regarding breach reporting for tax agents, Treasury released a consultation paper entitled ‘Enhancing the Tax Practitioners Board’s sanctions regime’. The joint bodies, which consists of 10 professional and industry organisations, responded with one voice. Copies of these documents are included below.

The joint bodies support the TPB having a wider range of sanctions, as it is important to deter misconduct and ensure that penalties are proportionate to the level of wrongdoing. This will support the reputation and integrity of the tax profession as a whole and ensure that the community has confidence in the operation and administration of the tax system.

March 2025 budget announcements

In the March 2025 budget, the government has announced that it will:

• For unregistered preparers:
  • Reintroduce criminal penalties.
  • Broaden and increase the amount of civil penalties for false and misleading statements made by unregistered practitioners.

These are measures that the tax profession has been advocating for, and are welcomed.

• For registered tax practitioners, introduce low to mid-level sanctions such as:
  • enforceable voluntary undertakings
  • infringement notices penalties for alleged contraventions
  • interim and contingent suspensions
• For registered tax practitioners, broaden and increase the amount of civil penalties for breaches of the Code of Professional Conduct (Code) for high level sanctions
• Extend the maximum period a terminated practitioner can be banned from 5 to 10 years.

Civil penalties

Broadly civil penalties are financial penalties for breaches of the law which are heard by civil, not criminal, courts. The standard that needs to be satisfied is ‘on the balance of probabilities not ‘beyond reasonable doubt’. So, it is easier to impose civil penalties, but the penalty needs to be imposed by a court – the TPB does not have the power to impose a civil penalty.

A civil penalty unit is currently $330, at the time of the consultation paper it was $313, and the consultation paper noted that the civil penalties that are currently in the Tax Agent Services Act (TASA) are set at a maximum of 250 penalty units for an individual ($78,250) or 1,250 penalty units for a company ($391,250).  The Treasury consultation proposed to increase the maximum penalty to 2,500 penalty units for an individual ($782,500) and the greater of 50,000 penalty units for a company ($15,650,000) or 10% of aggregate turnover (capped at $782.5M which is equivalent to 2.5M penalty units). The joint bodies expressed concern about the 10-fold increase for individuals and 40-fold increase for companies and suggested that given the broad range of entities covered by the TASA that a more nuanced approach with at least two bands be considered for companies. The March 2025 budget does not specify the amount of the expected increase or whether this suggestion has been accepted.

The TPB can already apply for civil penalties for breaches of Division 50 of the TASA – these relate to a registered tax practitioner making false or misleading statements to the Commissioner, employing or using the services of individuals or firms that have been deregistered by the TPB or signing off on documents that have not been prepared them or another registered tax/BAS agent.

Breaches of the Code can range from minor administrative errors through to egregious behaviour. It appears from the consultation paper that only serious matters are meant to be captured, and that they were only meant to apply after lower-level sanctions had been applied. The consultation paper proposed that “the range of behaviours that would enliven the expanded civil penalty provisions would include behaviours that go against fundamental aspects of the provision of tax agent services, including acting honestly, avoiding conflicts of interest, keeping client information confidential, providing services competently and acting lawfully and in the best interests of a client.” Careful drafting is needed to ensure that legislation is fit for purpose and right sized for tax practitioners.

Infringement notices

The Attorney General’s department recommends that infringement notices only apply to contraventions that can be determined by automatic operation of the law or where an assessment of a contravention can easily be made based on straightforward factual question. It also states that it is not appropriate for infringement notices to be used for complex provisions or provisions with significant penalties.

The Treasury consultation paper proposes that the TPB would be able to issue infringement notices where, on the balance of probabilities, it concludes that the civil penalty provisions applicable to unregistered preparers and registered tax practitioners have been enlivened and that the TPB would not be required to undertake a formal investigation to issue an infringement notice. The example in the consultation paper is about failing to maintain skills and knowledge – presumably the proposed civil penalty offence of not providing services competently. This paper proposes that the maximum penalty be 12 penalty units ($3,756) where the person is an individual, or 60 penalty units ($18,780).

Other issues that the joint bodies will be discussing is how to prevent one breach resulting in multiple infringement notices, and when infringement notices would appear on the details about a tax practitioner.

Enforceable voluntary undertakings

These are written agreements provided by a tax practitioner to the TPB which set out certain things the tax practitioner agrees to do and/or refrain from doing that can be enforced by a court. They are used by many regulators and the joint bodies have supported their use as a form of mid-range sanction alternative for the TPB that fosters a flexible co-operative approach which helps ensure public confidence. The ACCC publishes a list of undertakings, and it is expected the TPB would do so as well.

Interim and contingent suspensions

The consultation paper proposes that contingent suspension powers be introduced for breaches of the Code, and in cases where a tax practitioner ceases to meet their tax practitioner registration requirements or breaches a condition of their registration. Interim suspensions would enable the TPB to immediately suspend a tax practitioner’s registration without the need to commence or finalise an investigation to stop further harm to clients or tax system while the TPB is conducting its activities. These sanctions will be reviewable and in the case of interim sanctions limited to 90 days before being reviewed to determine if they can be extended.

These are powerful sanctions, and care will be needed to ensure that the right balance is achieved between consumer protection and protecting tax practitioner’s livelihoods and reputation. The joint body submission suggested safeguards, such as the threshold level of seriousness and urgency of harm to enliven the power, and the right to a merits review. The budget announcement did not comment upon safeguards, but it is expected that they will be subject to consultation.

Consultation will be conducted in relation to those announcements. CA ANZ, along with other associations, will be actively engaging with government, Treasury and the TPB about these changes in a united voice. To have your say about these potential changes please email [email protected].

The changes to TPB sanctions are expected to take effect from 1 July 2026.  However, with an election being called and the prospect of a hung Parliament in both houses of Parliament it is unclear whether this timeline will be achievable.