The requirements and recommendations
apply to bookkeepers providing BAS services for a fee
and the registered tax agents under whose direction they
are working. It does not apply to employees of a
registered tax agent who must be under the tax agent’s
supervision and control.
The requirements do not apply to
bookkeepers who are not providing, or holding out as
providing, any BAS services beyond entering transactions
and processing data used in preparing a BAS.
Requirement
In order for a bookkeeper to be ‘working
under the direction of a registered tax agent’ the
registered tax agent must have a
risk-based quality assurance process in place to review
the BAS services provided by the bookkeeper for accuracy
and completeness, and be satisfied with the standard of
BAS services provided.
Guidelines
The paper provides guidelines for
developing a robust risk-based quality assurance process
that would meet the requirements of the legislation. The
guidelines are not prescriptive and no one factor is
generally conclusive in determining whether a suitable
process is in place. The facts and circumstances must be
considered on a case-by-case basis.
Whilst not a legislative requirement, we
strongly recommend (for the protection
of all parties, including clients) that the bookkeeper
and the registered tax agent document and maintain
copies of their arrangement as to:
-
the clients the agreement relates to
-
the period it covers, and
-
the details of the agreed risk-based
quality assurance process.
We also strongly recommend
that the agreement documents client privacy and
liability considerations and that both parties consider
appropriate professional indemnity insurance.
The Commissioner of Taxation
cannot determine liability in the event of error.
A tax agent:
-
must be assured that the bookkeeper’s
work is of a satisfactory standard
-
where the work is unsatisfactory,
should ensure that the bookkeeper
-
should review the quality assurance
process to determine if any changes are required.
A bookkeeper:
-
should have the knowledge and skills
appropriate to the level of direction provided by
the tax agent, and maintain their knowledge and
skills
-
should have available all necessary
client documentation to verify the workings from
which any BAS service was provided, and
-
once advised of any unsatisfactory
work, should identify and correct all instances in
other BASs they have prepared and undertake further
learning as necessary.
The quality assurance process between the
bookkeeper and the tax agent must satisfy the tax agent
that the work performed by the bookkeeper is of a
satisfactory standard.
Key principles of a quality assurance
process are:
|
Principle 1 |
Competence:
assurance/evidence/demonstration that the
bookkeeper has the knowledge and skills to
prepare the BAS. |
|
Principle 2 |
Checking: a risk-based sample of
the bookkeeper’s BAS work is checked by the tax
agent. |
|
Principle 3 |
Feedback: corrective action and
feedback is provided where the work is not
accurate or complete. |
The tax agent should incorporate these
principles in the development of the quality assurance
procedures for the bookkeeper working under their
direction.
When designing the quality assurance
process the tax agent must consider the risks involved
when forming an opinion of a bookkeeper’s reputation and
competency. This is a function of three factors:
To reduce the overall risk of forming an
incorrect opinion, the tax agent can decrease one or
more of the contributory risk factors or, alternatively,
a given level of risk can be achieved by adjusting the
individual risk factors.
For example, with an experienced
bookkeeper with recognised accounting qualifications
(lesser inherent risk), using comprehensive checklists
and sophisticated software (lesser control risk), the
tax agent could plan for a higher level of detection
risk (smaller proportion of documents/transactions
checked) and still have a reasonable basis for their
opinion. However, if one of the bookkeeper’s clients had
highly complex affairs (higher inherent risk), the tax
agent may need to check a greater proportion of this
class of documents/transactions.
This principle includes information on
appropriate knowledge and skills and evidence of
knowledge.
Appropriate knowledge and
skills
To complete a BAS accurately and
completely, a bookkeeper must have the appropriate
knowledge and skills. This may include:
-
knowledge of the tax laws relating to
BAS provisions and the Tax Office rulings that
support those laws, and an appreciation of their
practical application in the commercial and business
environment
-
knowledge of relevant Tax Office
administrative policies and procedures regarding the
lodgment of a BAS
-
knowledge of the relevant procedures
and practices on how to complete a BAS from a
client’s source accounting records, and
-
knowledge of software packages used
by their clients, and experience in their use.
Evidence of knowledge
To demonstrate that they have the
knowledge and skills appropriate to complete a BAS
accurately, a bookkeeper may provide evidence including:
-
attainment of a recognised industry
benchmark qualification or standard or membership of
a professional bookkeeper association
-
their previous work experience, or
other demonstrated competence
-
comprehensive procedures that guide a
bookkeeper through all areas of the BAS preparation
– relevant checklists and reconciliations could form
part of the documented procedures supporting the
bookkeeper
-
support from the tax agent or other
qualified providers in relation to BAS preparation
to assist in the resolution of specific issues, and
-
maintaining up-to-date information
and knowledge on new developments relating to BAS
services and the subsequent regular updating of
relevant procedures and documents used by the
bookkeeper.
This principle includes information on
the intent of the legislature, forming a reasonable
opinion, risks, substantiation procedures to be
undertaken and timing.
Intent of the legislature
The intent of the legislature in enabling
bookkeepers to provide a BAS service was to ease the
burden of tax reform on tax agents. It may be implied
that the expectation of the legislature was that a tax
agent providing direction to a BAS service provider
would not be overly weighed down by this responsibility.
The fact that bookkeepers do not have to
be employees of a tax agent to provide BAS services
supports the notion that the supervision and control
requirements were contemplated as being something less
than that required for employees of the tax agent.
However, the tax agent must undertake sufficient review
activities to be reasonably assured that the clients of
the bookkeeper are protected from malpractice and
incompetence.
Forming a reasonable
opinion
By addressing the risks of forming an
incorrect opinion in planning their quality assurance
strategies, the tax agent should be able to form a
reasonable opinion of the bookkeeper’s work without the
need to review 100% of the work.
Risks
The risks to be considered when designing
a quality assurance process include:
Inherent risk and materiality
The first factor includes the
bookkeeper’s level of experience and knowledge and/or
the types of clients and their transactions covered
under the agreement. For example, there is a higher
inherent risk in a less experienced bookkeeper providing
BAS services to a large, complex client.
Factors that may be considered under
inherent risk/materiality include the:
-
experience and qualifications of the
bookkeeper
-
complexity of the bookkeeper’s client
base/transactions entered into, and
-
size of clients’ transactions and the
relative weight of those transactions in the
bookkeeper’s work.
Control risk
Control risk is a function of the
effectiveness of the bookkeeper’s internal control
structure, policies and procedures. Effective internal
controls reduce control risk, whilst ineffective
internal controls increase control risk.
Factors that may be considered under
control risk include:
-
demonstrated use of appropriate
checklists
-
maintenance of detailed working
papers demonstrating how the completed BAS was
generated from the client’s source accounting
records
-
use of appropriate research processes
– that is, how does the bookkeeper research issues
when they are uncertain of the correct treatment,
and
-
demonstration of effectiveness of
controls – that is, the accuracy and completeness of
work previously reviewed.
Detection risk
Detection risk is the risk that issues
will not be identified. It is a function of the
effectiveness of procedures and of their application by
the auditor. Unlike inherent and control risk, the
actual level of detection risk can be changed by varying
the nature, timing and extent of the substantiation
procedures performed.
Factors that may be considered under
detection risk include:
-
sampling – the tax agent must ensure
that the sample checked is representative of the
whole of the bookkeeper’s work, and
-
investigation of the original client
documentation to verify the workings for the
document that was lodged with the Commissioner.
Some substantiation
procedures must be undertaken
It is not appropriate to conclude that
inherent and control risks are so low that it is not
necessary to perform any substantiation procedures for
all of the bookkeeper’s work.
Timing
Effective quality assurance of work
requires that work is checked within a reasonable
timeframe. It is preferable that reviews are performed
prior to the lodgment of a BAS rather than after.
However, it will be up to the tax agent to determine the
appropriate timing of the checking of a bookkeeper’s
work.
An agent may determine, based on the
accuracy and completeness of work previously reviewed,
that a post issue review is appropriate. For example,
where the agent prepares the income tax return of a
client and reviews the BASs prepared by the bookkeeper
as part of the return preparation process.
Where a review of a bookkeeper’s work
identifies a lack of accuracy and/or completeness, the
tax agent must act to ensure that the bookkeeper:
Bookkeeper’s
responsibility to correct similar errors
Where a deficiency is identified, it
would generally be the bookkeeper’s responsibility to
identify and correct all instances where the mistake or
omission occurred, including other BASs they have
prepared. They should also undertake any further
learning required to address their understanding of the
issues involved.
Review of risk-based
quality assurance
The tax agent would also be expected to
review the existing quality assurance process for the
bookkeeper to determine what, if any, changes are
required. This may include changes to:
-
the work checked – for example,
increasing the sample size or a greater proportion
of pre-lodgment reviews, and
-
the quality assurance processes to
correct any identified deficiencies which
contributed to the mistake or omission.
Voluntary disclosures
In the event of errors being identified
in lodged documents, both parties are reminded that
voluntary disclosures of tax shortfall amounts will
generally result in significant reductions of penalties
for the taxpayer – see
Law Administration Practice Statement PS
LA 2004/5 Administration of shortfall penalties under
the new tax system
Tax Office research and consultation with
the industry has identified the need to clarify the Tax
Office view on when a bookkeeper will be considered to
be ‘working under the direction of a registered tax
agent’ in the provision of BAS services.
The Tax Office undertook to:
-
state its view of the legislative
requirements
-
develop principles and guidelines to
assist the parties in meeting the requirements to
ensure complying bookkeepers received the protection
of subsection 251L(6) of the ITAA 1936 from
subsection 251L(1) of the ITAA 1936, and
-
provide guidance to both parties as
to liability implications under section 251M of the
ITAA 1936.
How to use the guidelines
The paper provides guidelines for
developing a robust risk-based quality assurance process
that would meet the requirements of the legislation.
The guidelines are not prescriptive and
no one factor is generally conclusive in determining
whether a suitable process is in place. The facts and
circumstances must be considered on a case-by-case
basis.
The guidelines will help the parties
self-assess whether they have an arrangement which is
likely to be considered compliant with paragraph
251L(6)(b) of the ITAA 1936 and provide guidance around
the practical implementation of the requirements of the
paragraph.
Background to the
subsection 251L(6) amendment
The introduction of the new tax system
was expected to create a demand for tax agent services
by small business for the preparation and lodgment of
BASs. To address concerns in the tax practitioner
industry about the ability of tax agents to meet this
demand, amendments were made to the ITAA 1936 to allow
certain people, other than registered tax agents, to
provide BAS services on behalf of taxpayers. This
included members of a recognised professional
association, or bookkeepers working under the direction
of registered tax agents.
Enabling bookkeepers to provide a BAS
service was intended to ease the burden of tax reform on
registered tax agents. It may be inferred that the
expectation of the legislature was that tax agent/s
providing direction to a BAS provider would not be
overly weighed down by this responsibility.
The fact that bookkeepers do not have to
be either employees of a registered tax agent or under
their supervision and control (per section 251N of the
ITAA 1936) in order to provide BAS services, supports
the view that the ‘working under the direction of’
requirements were contemplated as being something less
than that required for employees or for those under
supervision and control.
Our view
In order for a bookkeeper to be ‘working
under the direction of a registered tax agent’ the
registered tax agent must have a risk-based quality
assurance process in place to review the BAS services
provided by the bookkeeper for accuracy and
completeness, and be satisfied with the standard of BAS
services provided.
Whilst not a legislative requirement, we
strongly recommend (for the protection
of all parties, including clients) that the bookkeeper
and the registered tax agent document and maintain
copies of their agreement as to:
-
the clients the agreement relates to
-
the period it covers, and
-
the details of the agreed risk-based
quality assurance process.
This would provide prima facie evidence
that the bookkeeper was working under the direction of
the tax agent.
We also strongly recommend that the
agreement document client privacy and liability
considerations and that both parties consider
appropriate professional indemnity insurance.
The level of detail in the agreement is
up to the registered tax agent and the bookkeeper under
the terms of their commercial agreement.
How this meets the
legislative requirement
A risk-based quality assurance process
does not require the registered tax agent to review all
of the bookkeeper’s work. Appropriate risk-based
sampling should ensure that the tax agent can obtain
reasonable assurance as to the accuracy and completeness
of the bookkeeper’s work. The tax agent must then be
reasonably satisfied as to the reputation and competency
of the bookkeeper as a result of their assurance
process.
Assistance in designing a
risk-based quality assurance process
The assurance process required by the tax
agent as to the accuracy and completeness of the
bookkeeper’s work is a matter for the agreement between
the tax agent and the bookkeeper. The guidelines list
factors that may assist the tax agent and bookkeeper
when developing a robust assurance process.
Attribution of liability
between the bookkeeper and tax agent
The attribution of any liability between
the tax agent and the BAS preparer would be a matter for
a court to determine and would be dependent on the facts
of each particular case.
Commissioner not a party
The Commissioner of Taxation has no
legislative sanction to regulate the legal rights and
responsibilities between the client and service
provider, and is not a party to any contract for service
between those parties.
Why document the
agreement?
For these reasons, in order to protect
the interests of the taxpayer, the bookkeeper and the
tax agent, the Tax Office strongly recommends that the
bookkeeper and tax agent maintain a written record of
their agreement. This would provide prima facie evidence
that the bookkeeper was working under the direction of
the tax agent as well as assisting in clarifying
responsibility between the tax agent and the BAS
preparer.
Other considerations
Both parties should consider their
privacy obligations with respect to tax file numbers
under the Privacy Act 1988. Additionally, the
Tax Office strongly recommends that both the tax agent
and the bookkeeper consider professional indemnity
insurance.
Under subsection 251L(1) of the ITAA 1936,
a person must be a registered tax agent to be able to
charge or receive a fee for the provision of tax agent
services on behalf of a taxpayer.
This applies to a range of taxation laws as defined in
section 251A of the ITAA 1936 – that is, all laws
administered by the Commissioner other than excise,
customs and sales tax laws.
What are tax agent
services?
-
Preparing or lodging, on behalf of a
taxpayer, a document about the taxpayer’s
liabilities under a taxation law – for example,
returns.
-
Giving advice about a taxation law,
on behalf of a taxpayer.
-
Preparing or lodging, on behalf of a
taxpayer, objections under Part IVC of the
Taxation Administration Act 1953, and applying
for reviews or instituting appeals against objection
decisions.
-
Transacting any business with the
Commissioner or other person exercising powers or
performing functions under a taxation law on behalf
of a taxpayer.
Certain persons allowed
to provide BAS services
Subsection
251L(6) of the ITAA 1936 allows certain persons to
provide BAS services.
These certain persons are:
-
members of a recognised professional
association, excluding student and retired members
-
bookkeepers who are working
under the direction of a registered tax agent
-
entities that provide payroll
services to employers (but only in relation to PAYG
withholding amounts), and
-
licensed customs brokers (but only in
relation to the application of an indirect tax law
to imports and exports).
What are BAS services?
Subsection 251L(7) of the ITAA 1936
defines BAS services as:
-
preparing or lodging
an approved form about a taxpayer’s liabilities,
obligations or entitlements under a BAS provision
-
giving advice
about the taxpayer’s obligations under a BAS
provision, and
-
transacting any business with
the Commissioner on
behalf of a taxpayer in relation to their
obligations under a BAS provision.
No evidential burden
Under subsection 251L(10) of the ITAA 1936
a defendant does not bear an evidential burden in
relation to a matter specified in subsection 251L(6) of
the ITAA 1936.
Section 13.3 of the Criminal Code Act
1995 defines the evidential burden as the burden of
adducing or pointing to evidence that suggests a
reasonable possibility that the matter exists or does
not exist.
This means, where a prosecution is
brought against a bookkeeper for a breach of subsection
251L(1) of the ITAA 1936 – that is, for charging a fee
for a tax agent service – they would not be required to
provide evidence that they were acting under the
exception of subsection 251L(6) of the ITAA 1936, but
rather the prosecutor would need to show beyond
reasonable doubt that they were not.
Under subsection 251M(1) of the
ITAA 1936 if, through the negligence of a registered tax
agent, or of a person exempted under section 251L of the
ITAA 1936, a taxpayer becomes liable to pay a
fine, other penalty or the general interest charge under
a provision of the ITAA 1936,
the registered tax agent, or the person,
as the case may be, shall be liable to pay to the
taxpayer the amount of that fine or other penalty,
additional tax or general interest charge, and that
amount may be sued for and recovered by the taxpayer in
any court of competent jurisdiction.
Appendix 3 – Meaning:
‘Working under the direction of’ not
defined
The words in the phrase ‘working under
the direction of’ are not defined in the ITAA 1936. The
ordinary meaning of the phrase could be taken to cover a
range of working relationships, including that of a
direct supervisory relationship between a bookkeeper and
the registered tax agent. However, the Tax Office view
is that this would be unduly restrictive.
If the ordinary meaning of this phrase is
unclear in the context of the overall structure and
purpose of the ITAA 1936, the Acts Interpretation
Act 1901 (AIA) section 15AB permits recourse to
extrinsic materials including the explanatory memorandum
to the relevant Act.
What the explanatory
memorandum states
Bookkeepers do not have to be employees
of a registered tax agent to provide BAS services.
Working under the direction of a registered tax agent
would require the tax agent to have procedures
and systems in place to ensure
that the work undertaken by the bookkeeper is
reviewed for accuracy and completeness’
(emphasis added).
Meaning of the
explanatory memorandum
Thus, for the bookkeeper to claim the
protection of paragraph 251L(6)(b) of the ITAA 1936, the
tax agent/s under whose direction they are working
must, as per the explanatory
memorandum, have a process in place which:
-
is procedural and systematic
-
ensures that the work undertaken by
the bookkeeper is reviewed, and
-
provides the registered tax agent
with an assessment of the accuracy and completeness
of the bookkeeper’s work covered by their
arrangement.
The purpose of the Act
Section 15AA of the AIA says that a
construction that promotes the purpose or object
underlying the Act (whether expressly stated in the act
or not) shall be preferred to a construction that would
not promote that purpose or object.
The legislature's intention has been
stated by the courts as ‘protecting the community
against the prospect of malpractice or incompetence of
one kind or another on the part of unregistered persons
against whom there may be no adequate redress’.
Application of the
purpose to paragraph 251L(6)(b)
Amendments to this section in 2000
extended the assurance about reputation and competency
to persons providing BAS services. Therefore, the tax
agent must be assured that the
bookkeeper working under the tax agent’s direction is
providing BAS services of a satisfactory standard.
Risk-based quality
assurance process
To obtain an assessment of the accuracy
and completeness of the bookkeeper’s work, and to
reasonably draw from that assessment an
assurance that the bookkeeper’s reputation and
competence is sufficient to protect the community
against malpractice or incompetence, the tax agent must
consider the risks involved in the bookkeeper’s work
when designing the quality assurance processes. That is,
a robust risk-based quality assurance process needs to
be implemented.
Although the legislation states that the
person claiming the protection of subsection 251L(6) of
the ITAA 1936 does not bear an evidentiary burden, the
bookkeeper and the tax agent should consider what
evidence of their intentions and understanding of their
arrangement should be documented in order to protect
themselves and their clients’ interests.
This is particularly relevant to the
bookkeeper who will be relying on paragraph 251L(6)(b)
of the ITAA 1936 for protection in the event of any
prosecution.
The agreement may also assist the parties
in determining liability considerations under
section 251M of the ITAA 1936. The Tax Office would not
be a party to any action under section 251M of the ITAA 1936.
Tax Office
recommendations
The Tax Office strongly recommends that
the arrangement between the bookkeeper and the tax
agent:
-
be documented
-
be kept on file by both the tax agent
and the bookkeeper
-
include/indicate which clients the
agreement relates to and the period it covers
-
includes the details of the agreed
quality assurance process, and
-
considers privacy and liability
obligations and expectations.
Where a tax agent and a
bookkeeper merely share a client (that is, the
bookkeeper provides BAS services and the tax agent
provides other tax agent services, but there is no
agreement that the bookkeeper is working under the tax
agent’s direction), paragraph 251L(6)(b) of the ITAA 1936
has not been satisfied. In these circumstances, the tax
agent does not have any assurance obligations and the
bookkeeper cannot claim to be working under the
direction of that tax agent.
Bookkeepers and the tax agents under
whose direction they are working need to consider the
requirements of both the private sector and tax file
number provisions of the Privacy Act 1988. This
act is administered by the Office of the Privacy
Commissioner.
Protecting tax file
number information
A bookkeeper or tax agent who is
authorised to hold an individual’s tax file number must
comply with the tax file number guidelines issued by the
Privacy Commissioner under section 18 of the Privacy
Act 1988. The tax file number guidelines contained
in schedule 2 of the Act provide rules with regard to
the collection, use and storage of tax file number
information.
Private sector
obligations
The private sector provisions apply to
organisations, including corporations and unincorporated
associations, with an annual turnover of more than
$3 million. These provisions also apply to all health
service providers, regardless of turnover, and some
small businesses with an annual turnover of $3 million
or less.
The private sector provisions of the
Privacy Act focus around 10 National Privacy Principles
(NPPs) which set out how private sector organisations
should collect, use, secure and disclose personal
information. The Federal Privacy Commissioner has
written Guidelines to the National Privacy
Principles to assist organisations to meet their
obligations when handling personal information of
clients.
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Last Modified: Monday, 6 February 2006
What the ATO have to say about bookkeepers providing BAS
services
The following information on the ATO web site is designed to provide bookkeepers
with the ground rules for their profession. Although
some of their examples - Norm in
particular - tend to increase the confusion rather
than helping the situation, the majority are quite clear
and well worth reviewing for clarification of a
bookkeepers role in lodging BAS returns and giving GST
advice.
Important information
for bookkeepers providing BAS services
If
you are a bookkeeper who provides business activity
statement (BAS) related services to clients as part of a
business, you need to be aware of the legal restrictions
regarding who can charge a client for the provision of
tax advice.
This information does not relate to
employees preparing their own employer’s activity
statements in the course of their normal duties.
It is an offence to knowingly or
recklessly charge a fee for the provision of tax
services if you are not a registered tax agent or a
person eligible for an exemption. Offenders can be
prosecuted and fined up to $22,000 for a breach of this
law.
Section 251L of the Income Tax Assessment Act 1936 (ITAA
1936) prevents any person from charging or receiving a
fee for preparing or assisting a client with any income
or fringe benefit tax matters unless they are a
registered tax agent.
However, subsection 251L(6) of the ITAA 1936
allows an exemption to this rule for the provision of
BAS related services for people who meet the required
criteria. For bookkeepers who satisfy the exemption
criteria, BAS services include:
-
preparing or lodging an approved form
for a client that relates to a goods and services (GST),
pay as you go (PAYG) withholding, PAYG instalment,
or fringe benefits tax (FBT) instalment obligation
-
giving advice about these
obligations, or
-
dealing with the Tax Office on behalf
of a client in relation to these obligations.
The exemption
Under the exemption, bookkeepers may
charge for the provision of BAS services if they are:
There are also some exemptions extended
to customs brokers under this subsection.
a)
Recognised professional associations
There are currently seven associations
who have indicated that they meet the requirements for a
recognised professional association as outlined under
section 251LA of the ITAA 1936. They are:
-
Association of Chartered Certified
Accountants
-
Association of Taxation & Management
Accountants (ATMA)
-
CPA Australia
-
Institute of Chartered Accountants in
Australia (ICAA)
-
National Institute of Accountants
(NIA)
-
Taxation Institute of Australia (TIA)
-
Chartered Institute of Management
Accountants (CIMA).
Note: This exemption does not extend to
student or retired members of these professional
associations. Members must be in possession of all the
necessary academic qualifications required for
membership.
b) Working under the
direction of a registered tax agent
This provision does not necessarily
require the bookkeeper to be employed by the registered
tax agent. If the bookkeeper is not an employee, the
agent must have appropriate quality assurance procedures
in place to ensure they are satisfied with the accuracy
and completeness of the bookkeeper’s work. This does not
mean that the tax agent must review all of the
bookkeeper’s work.
Examples
Note: The examples below serve to
illustrate common hypothetical circumstances and the
extent to which they may or may not amount to a ‘BAS
service’ under subsection 251L(6) of the ITAA 1936. The
examples should be read in conjunction with each other
in considering their application to any specific factual
situation.
(There is also other related Tax Office
published material and examples dealing with different
aspects of section 251L of the ITAA 1936, such as
Taxation Determination TD 2005/16 which deals with the
provision of tax advice under paragraph 251L(1)(b) of
the ITAA 1936. While these other examples might serve to
illustrate quite different issues, they are consistent
with and complementary to the examples below.)
Is an employed bookkeeper allowed to prepare
a BAS for their employer?
Carole works as an office
manager/bookkeeper for a small automotive parts
manufacturer.
In the course of her regular duties
she prepares her employer’s BAS. She is not a
registered tax agent or a member of a recognised
professional association, and recently she has
become aware of restrictions under the legislation
on who can and cannot prepare a BAS. Carole is now
wondering if she should be doing this work on behalf
of her employer.
As Carole is a salaried employee who
performs the work as part of her normal duties without
charging a separate fee, she is not in breach of section
251L of the ITAA 1936. A BAS prepared by an employee on
their employer’s behalf as part of his or her regular
work is taken to have been self-prepared.
I'm a member of a recognised professional
association and I have a practising certificate. Am I
allowed to charge for the preparation of a BAS?
Dave has an accounting degree and
runs his own inner city bookkeeping business. He is
a fully qualified member of the ICAA and holds a
current practising certificate. Many of Dave's
business clients have BAS requirements as part of
their tax affairs.
Although Dave is not a registered tax
agent, as he is a fully qualified member of a
recognised professional association, he qualifies
for the exemption under subsection 251L(6) of the ITAA 1936
and is allowed to charge for the provision of any BAS
services.
Can a student member of a recognised
professional association charge a fee for BAS services?
Anna works as a bookkeeper and is in
her final year of studying a commerce degree,
majoring in accounting and taxation. She is
currently a student member of the Tax Institute of
Australia. Some of Anna's clients have requested
help with their BAS preparation as part of the
bookkeeping service.
As Anna is only a student member of the
TIA, she has not yet obtained the necessary
qualifications to become fully qualified as a member.
This means she is not eligible to charge a fee for
assisting clients with their BAS requirements. It also
means Anna cannot charge a fee for services that include
BAS preparation, even if they are bundled with other
bookkeeping charges.
I provide bookkeeping services to registered
tax agents. Can I charge a fee for preparing a BAS?
Liz
is a bookkeeper who receives work from two separate
registered tax agents on a contract basis. Both
agents refer to Liz for their bookkeeping, which she
completes and returns to the agents for checking
before it is released. Liz would like to expand her
range of services to include BAS work, and wonders
if this is possible.
Under the law, even though Liz is not an
employee of either agent, she can provide and charge for
BAS services if they are prepared under the direction of
registered agents. In practice, this means that an agent
must have in place quality assurance procedures for
reviewing Liz’s work. This does not mean that the tax
agent must check every item of Liz’s work.
Does becoming a member of a franchised group
legally allow a bookkeeper to prepare a BAS?
Jane has her own business providing a
range of services, including bookkeeping, for a
number of small business clients in a large country
town. To increase the services she has to offer,
Jane recently became a member of a bookkeeping
franchise group, in the hope that this move will
help further build and develop her business.
Jane wants to know if by becoming a
member of this group she is now legally permitted to
prepare a BAS and charge a fee.
Simply becoming a member of a franchised
group doesn't allow Jane to prepare a BAS on behalf of
her clients and charge for the service. Jane must still
satisfy one of the requirements in order to qualify for
the exemption. She must be either:
-
a member of a
recognised professional association, or
-
a bookkeeper
working under the direction of a registered tax
agent who has procedures and processes in place
to ensure that the work done by the bookkeeper is
reviewed for accuracy and completeness of work
(note: a bookkeeper can work under the direction of
more than one registered tax agent), or
-
a payroll services provider preparing
a BAS only for PAYG withholding obligations (this
includes preparation and lodgment of a notification
of a PAYG withholding amount and PAYG payment
summaries in respect of these amounts).
Beyond ordinary bookkeeping, what BAS-related
services can a bookkeeper provide?
George provides bookkeeping services
to a number of small business clients. He works by
himself and he is not a member of a recognised
professional association. Some of his clients have
asked him to help them lodge their BAS’s using the
business portal. George is wondering what services
he can offer if he does not meet the requirements of
section 251L(6) of the ITAA 1936.
Where the work undertaken by a bookkeeper
goes beyond ordinary bookkeeping services, such as
advising a client about BAS matters or entering data for
the client through the business portal, the bookkeeper
will be generally regarded as assisting the taxpayer in
substantially the same way as a registered tax agent.
The Tax Office considers that a
bookkeeper undertaking such activities would be
generally providing a BAS service and acting in a
representational capacity. A bookkeeper can only provide
these additional services if he or she is a member of a
recognised professional association or is working under
the direction of a registered tax agent.
A bookkeeper who does not satisfy these
requirements should ensure that clients are aware of the
limitation to provide only ordinary bookkeeping
services.
If bookkeepers don’t charge a separate fee
for BAS preparation, are they allowed to prepare a BAS
as part of a total bookkeeping service?
Mary works part time as a bookkeeper
from home. Her clients are largely small businesses,
including a number of shop owners and self-employed
tradespeople.
Mary has been working with these
clients to assist them with their record keeping,
including helping them to automate their record
keeping processes and to use accounting software.
Over time, Mary has become more confident in her own
ability and is finding her clients and their
accountants are coming to her more frequently,
seeking a greater variety of services. Mary would
now like to move to providing a total bookkeeping
service, including BAS assistance.
Mary is now wondering if she does not
charge a separate fee for the preparation of a BAS
is she able to prepare a BAS as part of a total
bookkeeping service.
The answer is no, unless Mary
meets the requirements of subsection 251L(6) of the ITAA 1936.
The Tax Office takes the view that the fee for a total
bookkeeping service includes a fee for the preparation
of a BAS.
If bookkeepers don’t charge a fee for BAS
preparation, are they allowed to show a client how to
prepare a BAS as part of a total bookkeeping service?
Mary is also wondering if she doesn’t
charge a fee for BAS preparation, is she able to
show a client how to prepare a BAS as part of a
total bookkeeping service.
The answer again is no, unless Mary
meets the requirements of subsection 251L(6) of the ITAA 1936.
Subsection
251L(7) of the ITAA 1936 defines a BAS service as
including giving advice about a BAS provision. The Tax
Office takes the view that the fee for this total
bookkeeping service includes a fee for providing a BAS
service.
If a bookkeeper uses commercial accounting
software which happens to automatically generate a BAS
like report for his client, does this amount to the
provision of a BAS service?
Norm owns a bookkeeping business and
has a number of small business clients for whom he
provides bookkeeping services.
Norm regularly makes site visits to
his clients, where he uses their commercial
accounting software to enter and code their list of
transactions. At the end of each BAS period, the
software usually generates a report that is very
similar to the real BAS, which Norm gives to his
clients. Norm is always very careful not to complete
the BAS documents himself and does not represent to
his client that the BAS like report should be used
as a basis for completing the Tax Office supplied
BAS form.
Although Norm’s business does not
work under the direction of a registered tax agent
and he is not a member of any recognised
professional association he has always believed that
he was legally able to perform this work. With the
recent discussion around BAS preparers Norm is now
concerned about how far he can legally carry on his
business.
The Tax Office considers that bookkeepers
who use commercial accounting software to generate a
report for their clients to prepare a BAS are not in
breach of section 251L of the ITAA 1936. The generation
of this BAS information is an automated feature of the
software and purely incidental to the bookkeeping
services. As long as Norm does not prepare the actual
BAS form, attempt to show his clients how to do so, and
does not represent to his client that the BAS like
report should be used as a basis for completing the Tax
Office supplied BAS form he may legally charge a fee for
his bookkeeping services.
If a bookkeeper installs accounting software
for a client that is able to produce a BAS like report,
does this amount to the provision of a BAS service?
Barry works as a registered
consultant for a major accounting software company.
Businesses that purchase the software get his
details from the software company as someone to
assist them with installing and using their new
software packages. Barry does not work under the
direction of a registered tax agent, and is not a
member of any of the recognised professional
associations.
Barry is wondering if he is allowed
to install and customise the software as required by
the client, including customising tax codes and
their reporting on a BAS like report. This report is
very similar to the actual Tax Office form and is
used by the client to fill in their own Tax Office
supplied BAS form.
The Tax Office takes the view that
installing and customising commercial accounting
software for a client does not amount to the provision
of a BAS service under subsection 251L(7) of the ITAA 1936.
As with the previous example, the Tax Office considers
the BAS information produced to be an automated feature
of the software and purely incidental to regular
bookkeeping services.
Note however that as Barry does not
qualify for any of the exemptions for BAS providers, he
must not prepare a BAS form on behalf of any client, or
provide any advice about how to do this, or advise them
about a BAS provision.
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Last Modified: Tuesday, 7 November 2006
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