There was one stand-out problem that was identified early in relation to the closure of the tax agent portals and its replacement with the Online Services for Agents facility. The problem was the issue of tax practitioners being legally unable to access deceased taxpayers’ information through the new online services even though the taxpayer had been a client of the tax agent while they were alive.
Tax Counsel at Tax & Super Australia, John Jeffreys, says that while agents could access the required information for clients who had died under the portals, the new regime was destined to operate with an unavoidable change in the legal standing of that access.
“Why has it changed? Well the fact is that the ATO has probably been doing something that wasn’t really in keeping with the law for many years,” John says. “In Section 355 of Sch 1 to TAA 1953, this gives rules about what tax officers can and can’t give out by way of information.”
The twist in the tale, he says, is that once a client dies the tax agent can no longer represent them as “the taxpayer has ceased to exist”, John says. “A new taxpayer has arisen, being the trust, of which the LPR is the legal representative. As the legislation currently stands, the ATO cannot give information access to a representative of a LPR, thus excluding tax agents.”
This deceased estate access problem has been a lingering issue that obviously required a solution when the portals shut down. The matter is now urgent because the tax agent portals close on 29 November 2019.
The proposed “fix” has just been released by the ATO in the form of an exposure draft legislative instrument, Taxation Administration (Remedial Power—Disclosure of Protected Information by Taxation Officers) Determination 2019.
The proposed instrument makes use of the Taxation Commissioner’s remedial powers — a rarely used option that bestows the Commissioner of Taxation limited powers to modify the operation of tax law in circumstances where entities will benefit, or at least be no worse off, as a result of the modification.
The instrument, made under section 370-5 in Sch 1 to The Taxation Administration Act 1953, modifies subsection 355-25(2) as if the following paragraph were added to the end of that subsection:
- or (h) the primary entity is an individual who has died and the covered entity is:
- (i) a registered tax agent or BAS agent of an executor or administrator of the primary entity’s estate; or
- (ii) a legal practitioner representing an executor or administrator of the primary entity’s estate in relation to the primary entity’s affairs relating to one or more taxation laws.
Comments on the exposure draft are due by 20 December 2019.
Tax Counsel John Jeffreys points out that once the legislative instrument is introduced into parliament it needs to sit in both houses for 15 sitting days (not counting the day it is introduced). “A legislative instrument made by the Commissioner under the remedial power can only take effect on or after the first day that the instrument is no longer able to be disallowed by parliament,” he says.
He says that given the draft sitting calendar for 2020, this means the earliest the legislative instrument could take effect is probably from 13 May 2020, adding that any delays to it being introduced could have significant impact on the timing of when the legislative instrument could take effect.
“So the earliest possible date that the Commissioner will be able to directly give deceased taxpayer information to a tax agent will be 13 May 2020. In the meantime, tax agents can only obtain this information if the LPR appoints the tax agent as the tax agent of the deceased estate and the deceased individual.”
In the period before the legislative instrument becomes operable, the ATO can only send information concerning the deceased person to the LPR. During this time, it is prevented by law from sending this information to a tax agent. Accordingly, the LPR will need to request whatever information is needed from the ATO. The LPR will then have to convey that information to the appointed tax agent.