Lawyers have it, accountants have it in some circumstances and now the question is being asked whether financial planners should be entitled to legal professional privilege (LPP), particularly when they are dealing with clients with respect to tax matters.
Somewhat buried at the bottom end of the Financial Planning Association’s (FPA’s) submission to the Productivity Commission (PC) inquiry into Competition in the Financial Service Industry is the recommendation that the statutory provisions relating to LPP be extended to “all financial services professionals, including the Certified Financial Planner and Financial Planner”.
It said this should occur in defined circumstances, relevant to the areas of law they provide financial advice such as taxation, superannuation, social security and estate planning. The submission noted that planners dealing with tax matters now have to fall under the registration and governance of the Tax Practitioners Board (TPB).
In urging the PC to consider the necessity for such a change, the FPA submission pointed out that, in the 1980s the accounting lobby had successfully argued that the ability of lawyers to claim LPP gave them a competitive advantage over the accounting profession when providing taxation advice.
It said that, in response, the Australian Taxation Office (ATO) issued the ‘Access and Information Gathering Manual’ guidelines recognising that “taxpayers should be able to consult with their professional accounting advisers on a confidential basis” and created self-imposed limits on ATO access to accountant’s papers.
The FPA said this exemption provided different concessions for differing types of documents, such as source documents (i.e. records of transactions), restricted source documents (i.e. advice documents) and nonsource documents (i.e. other advice documents).
“…financial planners have been required to fall under the registration and governance of the Tax Practitioners Board, with progressive registration since 1 July 2014. This change recognises that financial planners provide advice on taxation matters that clients rely on to make informed financial decisions,” it said, noting that while there was scope for the ATO to lift the accountant’s exemption, “there remains a competitive advantage with accountants having access to this exemption while financial planners do not”.
The FPA said it had been noted in a 2007 Australian Law Reform Commission (ALRC) report that the fact that the same advice can be given by accountants and lawyers on taxation matters was the crucial factor in their push for the extension of privilege to taxation advice.
“On the same basis this should also extend to financial planners providing the same advice,” the submission said.
“In 2011 the ALRC provided a submission in response to the Discussion Paper on ‘Privilege in relation to Tax Advice’. This submission covered a number of areas, including the extension of the proposed privilege to BAS agents. The ALRC response was that BAS agents may be included under any extension within their limit to provide advice with respect to taxation law under section 90-10 of the Tax Agent Services Act 2009.”
It said the ALRC had also made a general observation that it was the lawful provision of advice with respect to particular laws that provided the foundation for applying the rationale to other professionals.
The FPA shares the same interpretation that would see the financial planners captured within any law created to extend the provision of LPP (in defined circumstances), the FPA submission said.
