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16 May 2007
Dear Professional Association
Registration of Tax Agents and Trusts
I am writing to you on behalf of the Tax Agents Boards to clarify the re-registration process the Boards are adopting where an agent, in lodging its application for re-registration, provided information that suggested a service trust may form part of the business structure.
Since writing to you on 19 April 2007 which, in part, outlined the view of the Tax Agents Boards that section 251N of the Income Tax Assessment Act 1936 requires an employment or other relationship described in that section to exist between the registered agent and the person providing the service and that the use of a service trust, where the registered agent is not the trustee of that trust, is in breach of that section, concerns have been expressed that where an agent uses a service trust the agent would need to restructure its business operations to obtain re-registration.
I can advise you that this is not the case.
The Chairs of each of the Tax Agents Boards have advised that, subject to the normal integrity checks that are made when an application for re-registration is received, provided the business for which registration is being sought is conducted by the registered tax agent, re-registration will ordinarily be granted without any investigation being conducted into whether or not a service trust is used to employ staff engaged in the preparation of the tax returns and other tax related activities.
However, where the Boards become aware that the trustee of a service trust is not a registered tax agent, for example, where an application for registration is received for a person employed by the unregistered trustee of a service trust, the Boards are unable to ignore the breach of section 251N. Generally the Board concerned will write to the registered tax agent involved informing them of its concern. The Board may also advise the Commissioner of Taxation of the apparent breach.
Typically a breach of section 251N is remedied without the need for a restructure of business operations, simply by registering the trustee of the service trust as a tax agent and if necessary ensuring that the shareholding and directorships of a corporate trustee meet the requirements of the law.
Where the employees of a service trust provide only administrative or secretarial services there is no issue under section 251N.
Yours faithfully
JE Faure
Chair Tax Agents Board
Victoria
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