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19 April 2007
Dear Professional Association,
Registration of Tax Agents and Trusts
For some time the Tax Agents’ Boards have been concerned about the confusion that appears to exist on the ability to conduct a tax agent business through a structure involving a trust and the registration of individuals and companies as tax agents where those individuals and companies conduct or intend to conduct a business in the capacity as a trustee. The Boards have also been concerned about the perception in the community that it is not possible to seek such registration.
At a meeting of the Chairs of the Tax Agents’ Board earlier this year it was considered appropriate that the Boards’ view on the registration of individuals and companies conducting business in the capacity as trustees and in relation to the use of service trusts be clearly communicated to your association. The purpose of this letter is to provide that communication.
Despite the confusion that arose in relation to the obtaining of digital certificates and the need for trusts to have a separate ABN, the view of all Boards is, and always has been, that an individual or company that otherwise meets the legislative requirements for registration as a tax agent can be registered as a tax agent irrespective of whether or not that person operates their business in the capacity of trustee of a trust.
The relevant provisions of the Income Tax Assessment Act 1936 dealing with the registration of tax agents only recognise individuals, partnerships and companies as entities that are capable of registration as tax agents. An appropriately qualified individual, partnership or company will be registered as a tax agent, as such, without the existence or otherwise of a trust being recorded in the register. The fact that an individual, partnership or company is a trustee and intends to conduct its business in that capacity will not and does not prevent registration.
The Boards assess each case on its merits but, generally speaking, where the registered tax agent is the trustee of the trust through which the business operates or is intended to operate, that business structure is within the scope of the legislation and will be accepted provided the trustee is a registered tax agent and carries on the business as the legal owner.
If a tax agency business is conducted through a trust and the registered tax agent is not the trustee, the business structure is outside the scope of the legislation, the agent would not be complying with the law and would need to rectify the structure through which the business is conducted to avoid that breach continuing.
You should also note that the use of a service trust where the registered tax agent is not the trustee to employ persons involved in the preparation of tax returns or objections or to conduct directly or indirectly any business relating to any income tax return or income tax matter is a breach of section 251N of the Income Tax Assessment Act 1936. In this respect, the Boards’ view is that section 251N requires an employment relationship to exist between the registered tax agent and the person providing the service and that mere supervision and control by the registered agent or nominee is not sufficient to avoid a breach of its terms.
Where a service trust is so involved, the Boards are unable to ignore the breach of the law and generally write to the registered tax agent involved and advise the Commissioner of the breach for such action as the Commissioner may decide to take.
You are requested to draw this letter to the attention of your members. A copy will be posted on the Boards’ website.
Yours faithfully,
J E Faure
Chair Tax Agents’ Board
Victoria
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