General insurance brokers may have to register as tax agents if they give advice on taxation when selling policies.

In an exposure draft on what constitutes tax advice from advisers, the Tax Practitioners Board (TPB) says it applies to any entity that carries on a financial services business in Australia.

Licensees’ authorised representatives need not be registered as individuals.

The TPB also says the regulations – effective from July 1 – will apply to personal and general advice that involves discussions about tax.

“This means the service will usually take the form of tax advice that can reasonably be expected to be relied on for tax purposes for the purpose of helping to fully inform a client about their current and future financial affairs,” the draft says.

“It could be given as part of a strategic discussion about a client’s long-term financial objectives; in the course of advising a client about the relative merits of particular financial products; or in the course of advising… about non-financial products such as real property.”

The National Insurance Brokers Association says it took part in discussions when the TPB was drafting the requirements for financial advisers giving tax advice.

“We are in the process of assessing the drafts and will see what the impact will be on brokers that might be giving some form of tax advice,” CEO Dallas Booth told insuranceNEWS.com.au.

In a separate draft, the TPB says brokers that register as tax advisers must have professional indemnity cover of $2 million for each potential claim.

“The TPB requires cover to be approximately equal to actual or expected revenue from tax (financial) advice services – up to a maximum limit of $20 million,” the board says.

And in another exposure draft the TPB says advisers must undertake 60 hours of continuous professional education during a three-year period to meet requirements for ongoing registration. 

The board has not specified what the education process should include, but it must be relevant to the skills and knowledge required of a tax adviser.

Submissions on the drafts will close on April 6.