Double TPB CPE not as clear cut as it seems

12th February 2021

The Tax Practitioners’ Board (TPB) has released Exposure Draft Explanatory Paper D44/2021 – Continuing professional education policy requirements for registered tax (financial) advisers. This draft paper proposes to dramatically alter the CPE requirements for tax (financial) advisers from July 1, 2021.

In this month’s Industry Insights we examine the TPB’s draft explanatory paper and consider what it might mean practically for advisers.

How did we get here?

Following a stoush on legal semantics after tax agent law was federalised in 2009, financial advisers found themselves in a unique position amongst professionals, and it was not an enviable one. Financial advisers found themselves with two separate regulators to whom they were directly answerable, ASIC (latterly assisted by FASEA and soon to be unassisted again) and the TPB.

Rather than taking the logical approach and choosing to streamline the two sets of regulatory requirements through one of the regulatory bodies, both retained their full powers (although this has been under review). With this came overlapping obligations for financial advisers – a major one being continuing education requirements.

As it stands, most advisers are required to complete 40 hours of Continuing Professional Development (CPD) under the policies of FASEA as well as 60 hours every three years under the TPB’s Continuing Professional Education (CPE) policy. The saving grace of this over-supervision is that the TPB’s CPE policy for financial advisers, or tax (financial) advisers in the TPB’s own language, has been quite broad, and one hour of CPD can often count towards both CPD and CPE requirements.

In March 2020, the TPB released a consultation paper and hit the press, suggesting it was looking to align with FASEA on CPD/CPE requirements. Unfortunately, a detailed reading of that consultation paper revealed that, while a streamlined approach was one potential outcome, a massive blow-out in annual training hours could also eventuate.

This brings us to the TPB’s new draft explanatory paper.

CPE requirements to double

As forewarned in the earlier consultation paper, the most dramatic element of this draft explanatory paper is the TPB’s plan to double the CPE requirements for tax (financial) advisers from 60 to 120 hours every three years. This headline grabbing proposal is tempered somewhat by the TPB’s statement that it will:

accept the registered tax (financial) adviser’s compliance with their association’s CPE/CPD requirements, or FASEA’s CPD requirements…

The draft paper also states:

The TPB expects that at the end of a registered tax (financial) adviser’s CPE period, a registered adviser who is relying on the CPE completed for a recognised professional association, or for compliance with the Corporations Act 2001, should be able to demonstrate that they have complied with their CPE obligations with the recognised professional association and/or the Corporations Act 2001. In doing so, they will also comply with their TPB CPE obligations.

This does make it sound as though completion of an adviser’s FASEA/ASIC-enforced CPD requirements will be sufficient to meet the TPB’s CPE requirements. There is one additional clause, however, that also survives from the original consultation paper, that casts doubt on this blanket approval. It is that:

the activities completed must be relevant to the tax (financial) advice services provided…

There are FASEA CPD activities that will not relate to providing tax (financial) adviser services, directly or indirectly. In the technical competence CPD area, training on topics such as aged care, social security and some investments may contain no tax component. Furthermore, CPD in the areas of client care and practice, regulatory compliance and consumer protection, professionalism and ethics, and in FASEA’s general category may not be viewed as directly related to providing tax (financial) adviser services. That said, the TPB’s draft explanatory paper offers a broad definition of what relates to the provision of tax (financial) services, and such client and professionalism-focused areas may well meet that definition.

That said, the TPB’s unwillingness to completely cede training oversight to FASEA could see advisers undertaking annual ongoing training of over 40 hours. Alternatively, advisers could gravitate towards CPD that can meet both their FASEA and TPB obligations, allowing crucial, yet underserviced, advice areas such as aged care continue to be neglected.

Additionally, the TPB’s draft explanatory paper makes no concession for part-time financial advisers who have an annual FASEA CPD requirement of only 36 hours.

Other points worth considering

The proposed increase in CPE requirements is set to take place effective July 1, 2021. Under the TPB’s rules, tax (financial) advisers are required to renew their registration every three years (with their CPE requirement aligned to that three-year period). This means that the vast majority of advisers will have this hour increase take effect midway through a registration period.

While the draft explanatory paper is not particularly prescriptive, it states that CPE requirements will be pro-rated for those for whom the increase occurs mid-registration period. This means that their three-year period won’t have a 60-hour CPE requirement, or a 120-hour requirement, but a number midway between those two figures, depending on when their renewal falls.

This will mean that advisers will need to be right on top of their required CPE hours during their registration period that straddles July 1, 2021 to ensure they don’t fall short.

CPE records

The draft explanatory paper does allow leeway for tax (financial) advisers to use their FASEA-obligated CPD records to evidence that they meet the TPB’s CPE requirements. The paper, in fact, goes further than that, stating:

…verification may be in the form of registered tax (financial) advisers having to provide a record of their CPE activities (such as a CPE log) with their renewal application form, or such other form of verification (that is, declaration) that the TPB considers appropriate.

This suggests a written declaration may be sufficient – a welcome reduction in red tape for advisers if adopted.

Record keeping

The TPB’s draft explanatory paper also proposes to decrease record-keeping requirements from 6 years to 5 years. This is a curious turn-around as the previous consultation paper had proposed to increase the requirement to 7 years (to align with FASEA).

Provide feedback

The upshot of the TPB’s draft explanatory paper is that, while it has largely aligned with FASEA/ASIC on the issue of CPE/CPD, it has failed to go all the way. The sliver of additional requirements proposed by the TPB would serve to add unnecessary complexity that could be avoided if the TPB just accepted their co-regulator’s policies and enforcement.

The movement in the TPB’s position since it issued the initial consultation paper shows that it is open to industry views. The TPB are accepting submissions on the draft paper until March 11, and advisers would be well served not to let this consultation pass without comment.

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