Chapter 21
Ten Words of Advice for Contract Bookkeepers
In This Chapter
Find out whether you need to register as a BAS agent
Upgrade your skills (and why not charge more while you’re at it?)
Cover your back with indemnity insurance
Get acquainted with the bookkeeper’s code of conduct
Go to the grave with your client’s secrets intact
Do you work in Australia? If you have your own bookkeeping business, or you’re thinking about starting your own bookkeeping business, you must first make sure you have all the necessary bits of paper. (In contrast, the Kiwis are all very casual, and you can do most stuff quite happily without interference from any government body.)
The new BAS agent laws came into effect on 1 March 2010, along with the introduction of a national Tax Practitioners Board ( TPB). Only bookkeepers who register with the board — and have the qualifications to do so — are able to provide ‘BAS services’ for their clients. The definition of BAS services is very broad, and includes relatively mundane activities such as selecting default tax codes for accounts and generating employee payment summaries.
In this chapter, I provide a rundown of the legal framework for bookkeepers in Australia and New Zealand, so you can be confident that you’re operating within the law. I also touch on issues that all contract bookkeepers need to consider, such as codes of conduct, professional indemnity insurance and client confidentiality.
Figure Out Whether You Have to Register
So, do you need to worry about this whole BAS agent hullabaloo, or not? First things first: You don’t have to read any of this if you’re doing bookkeeping in New Zealand (although I’ve heard a few rumours that changes may be afoot in New Zealand as well). However, if you’re in Australia, here’s the deal:
You have to register as a BAS agent if clients rely on your expertise and you assist clients with ‘BAS services’. Note: A BAS service doesn’t just mean completing activity statements, but includes anything to do with GST or PAYG, including configuring tax codes in accounting software, coding tax invoices and generating employee payment summaries.
You don’t have to register as a BAS agent if you’re an employee receiving wages or you only do basic bookkeeping data entry based on explicit instructions provided by the client or by their tax agent.
In other words, relatively few contract bookkeepers in Australia aren’t caught by this legislation. For more details about whether you need to register, check out the BAS agent page at the Tax Practitioners Board website (www.tpb.gov.au) or the BAS agent page at the Institute of Certified Bookkeepers (ICB) website (www.icb.org.au).
If you’re not registered as a BAS agent, don’t even think about providing any kind of tax advice to a client. The penalty for providing BAS services without registering ranges from a not insignificant $5,500 to a whopping $137,500 per offence.
Don’t Kid Yourself
The Australian Taxation Office is adamant that a bookkeeper can’t argue that they aren’t providing BAS services because the client signs off on everything. For example, unless you’re a registered BAS agent, don’t even think about printing out a copy of what should go on a client’s Business activity statement and then getting the client to complete the statement and sign it.
The crux of the matter is that if you indicate to a client that they can use your work in order to prepare or lodge their Business activity statement, then you’re providing a BAS service.
Find Out Whether You Meet the Grade
Sadly, registering as a BAS agent isn’t quite as simple as signing up for karaoke night at the bar or getting a new Facebook account. Before you can register, you have to make the grade as far as the Tax Practitioners Board is concerned.
Aside from the rather pompously expressed requirement that you’re a ‘fit and proper person’ — that you’re not an undischarged bankrupt, you’ve never served time in jail, been convicted of fraud, tax or otherwise — the main hurdle is the education requirements.
If you have a qualification equivalent to or better than Certificate IV Financial Services (Accounting) or Certificate IV Financial Services (Bookkeeping) and you’ve successfully completed a course in basic GST and BAS principles approved by the board and you’ve undertaken at least 1,400 hours of relevant experience in the preceding three years, then you’re home and hosed. You can apply to become a BAS agent before the night is out.
Alternatively, you can apply to become a BAS agent if you’re a member of a ‘Recognised Professional Association’ (which currently includes the ACCA, ATMA, CIMA, CPA, ICAA, NIA and TIA) and you’ve successfully completed a course in basic GST and BAS principles approved by the board and you’ve undertaken at least 1,000 hours of relevant experience in the last three years.
At the time of writing, some of the fine detail of the legislation is yet to be nutted out, such as exactly what constitutes a ‘course in basic GST and BAS principles’. However, even if you don’t meet the exact requirements of the board, you may well qualify under the ‘transitional provisions’ which allow you to register as a BAS agent for two years until these requirements are met.
Is your heart sinking because your qualifications don’t cut the mustard? Don’t despair, but read on . . .
Get New Skills if You Have To
Don’t freak out if you’re working as a contract bookkeeper and you don’t meet the education requirements to register as a BAS agent. You have a few options still open to you:
Get your prior learning recognised: Several education bodies, including the Bookkeeping Institute of Australia (www.biau.com.au), the Institute of Certified Bookkeepers (www.icb.org.au) and the National Institute of Accountants (www.nia.com.au), offer prior learning recognition programs. If you have enough knowledge and experience, you may be able to meet most of the Certificate IV course requirements without having to do any further study. ICB also has a series of practical assessments that — when completed — may provide significant credits for any of these programs.
Register under the transitional rules: At the time of writing, the Tax Practitioners Board (TPB) allows you to register under transitional rules, even if you don’t meet the education requirements. You must register by 1 March 2013, and you must be able to prove that you have been providing BAS services to a ‘competent standard’ for a ‘reasonable period’ (these terms have yet to be defined). The board may then grant your first registration, with the proviso that when you renew this registration in three years’ time, you must meet the education requirements.
Notify the TPB that you are providing BAS services: The transitional rules offered by the TPB also allow you to simply notify the board of the fact you are providing BAS services. You must notify the board by September 2010, after which you can continue to provide BAS services up until 1 March 2012. After this time, you will have to have gained the necessary requirements in order to register.
The rules regarding transitional registration are fairly complex, so I suggest you make your way to the ICB website at www.icb.org.au or the TPB website at www.tpb.gov.au to find out more.
Piggy-Back on Someone Else
An alternative way to avoid having to register as a BAS agent is to work under the supervision and control of another BAS agent or tax agent. Whether or not this works for you very much depends on how many clients you have, and what kind of relationship you maintain with your clients’ accountants or tax agents.
If you decide to work under the supervision of a tax or BAS agent, then your client must be aware of this arrangement, and of who the supervisor is. This method may be okay in the short term, but in the long term, many clients aren’t going to want to pay both a bookkeeper and a BAS agent for the same service.
A different approach — and one that’s a great option for businesses that are looking for affordable accountancy services where the bookkeeper and accountant work as a cohesive team — is to join the Australian Bookkeepers Network (ABN) and pay a fee for ABN to lodge and review your client’s tax and BAS. You retain the personal relationship with your client, and you can choose to pass the ABN fees on to your client. For more info, visit the ABN website at www.austbook.net
Cover Yourself with Insurance
Professional indemnity insurance protects you against claims for professional negligence if you make a mistake or fail to exercise a sufficient level of skill. This insurance is required for membership of many bookkeeping and accounting associations and, at the time of writing, seems almost certain to be a requirement for BAS agent registration.
When weighing up different policies and premiums, make sure that the policy covers all aspects of the kind of bookkeeping work that you perform. For example, find out whether the policy covers you for setting up and installing accounting software, managing payroll, generating financial reports or preparing Business activity statements. If you have employees or contractors working for you, make sure that the policy covers them also, and that the policy covers you for wherever you work, not just from your home office.
Lastly, don’t forget to be specific about what costs the policy covers you for. Will the insurance company pay for legal costs and defending any claim against you? Will the payout include any penalties, interest or damages claims?
By the way, you may be able to save a few dollars by subscribing to a policy organised in conjunction with a bookkeeping association. Both the Institute of Certified Bookkeepers (www.icb.org.au) and the Australian Bookkeepers Network (www.austbook.net.au) offer special deals on professional indemnity insurance.
Join a Professional Association
With all the changes in the legal framework for bookkeepers, not to mention the ever-transforming tax landscape, joining a professional association is something any contract bookkeeper should consider. There’s not enough space here to cover every single association, but the main ones are as follows:
The Australian Bookkeepers Network (ABN) is Australia’s largest private bookkeeping network. ABN is explicit in its aim to help bookkeepers succeed in their business, and focuses on providing bookkeepers with commercial solutions, resources and support. Visit www.austbook.net for more details.
The Institute of Certified Bookkeepers (ICB) is the largest bookkeeping institute in the world, and aims to promote and maintain the standards of bookkeeping as a profession. In Australia, the institute emphasises recognition and education for all bookkeepers. Visit www.icb.org.au to find out more.
The New Zealand Association of Professional Bookkeepers (NZAPB) is the only association for the bookkeeping industry in New Zealand. This association aims to create a national body to recognise and separate quality qualified bookkeepers, and to build the New Zealand bookkeeping industry into a viable and credited profession. Hop onto www.nzapb.org.nz to find out more.
Know Your Code of Conduct
A code of conduct is a set of expectations and responsibilities that bind any person who is a member of a particular group. If you belong to a professional accounting or bookkeeping association, then you’re almost certainly bound by a particular code of conduct.
The Tax Practitioners Board also dishes out a code of conduct that it requires all tax agents and BAS agents to abide by. Of course, any bookkeeper can benefit by getting acquainted with this code. Even if you don’t have to register as a BAS agent, having a set of rules that helps you get clear about what’s professional behaviour, and what’s not, is pretty helpful.
I give a quick and dirty outline of the essence of this code here, but for the whole shebang, visit the TPB website at www.tpb.gov.au.
Be honest and careful: Act honestly not only in regards to your client’s affairs, but also in regards to your own affairs (I’m talking tax affairs here, not extra-marital relations). If a client asks you to look after any money or property on their behalf, do so with care and integrity, and account for every last cent.
Keep confidences: Prize a client’s confidentiality as if it were a precious jewel. (For more on this topic, skip ahead to ‘Keep Your Lips Sealed’.)
Maintain independence: Always act in the best interests of your client and avoid situations where you could encounter a conflict of interest.
Maintain your knowledge and skills: Probably the most realistic way of staying up to speed is to join a professional accounting or bookkeeping association, and commit to spending at least a couple of days every year on seminars and training events.
Make sure your work is of a professional standard: I’m talking not just the bookkeeping work that you do, but the work that any employees or subcontractors provide on your behalf.
Reflect carefully on a client’s situation before dishing out any advice: Don’t spout off any kind of advice without considering all the factors that may affect this client’s position. And, if you’re not qualified to give tax advice, don’t provide any (even if you believe that you do know what’s right). Instead, refer your client to their accountant.
Stay clear of clients who want you to assist in fiddling the books: Sounds clear cut, doesn’t it? However, for a more detailed exploration of real-life dilemmas, skip ahead to ‘Anticipate Ethical Dilemmas’.
Take out professional indemnity insurance if required to do so: At the time of writing, the Tax Practitioners Board hasn’t stipulated the exact type of insurance or level of coverage required. Visit www.tpb.gov.au for the latest update.
Anticipate Ethical Dilemmas
The Tax Practitioners Board code of conduct requires that you don’t assist your client in evading tax. At first, this requirement seems clear cut, but in real life, you’re going to come across difficult situations that make this requirement quite a challenge.
For example, imagine that a client marks a whole swag of transactions on their credit card statement as fuel, but when you come across the receipts, you see that there’s often $50 or so for fuel, plus another couple of dollars for snacks. You mention this to the client, and they tell you simply to code everything to fuel and not to waste time double-checking receipts.
Or, on a bigger scale, what would you do if a client marks all expenses relating to a recent trip overseas as a business expense, with the memo ‘Visit to Frankfurt trade show’. However, you’re friends with the client’s wife, and you know that the client’s real reason for going overseas was to visit his daughter for three weeks.
Or what about if you’re doing the books for a client who is running a café that’s struggling to break even? The client can’t afford double time and a half on public holidays, so she pays employees only time and a half instead, but does it cash in hand. The client is happy because she can afford to open the café and the employees are happy because they get cash in hand. You, however, are left wondering how to show the adjustment in the till for the shortage at the end of the day.
What if the client asks you to adjust superannuation in the payroll because they don’t intend to pay super for foreign workers or casuals who stay for less than three months? You advise the client that they must pay super in these situations, but the client replies that they don’t want to.
As you can see from these examples, behaving ethically sometimes isn’t as simple as refusing to do as you are instructed. Sometimes the amount in question can be very minor; sometimes, you may feel awkward because the client has become a friend; or sometimes, you may feel sympathy because you know the client is struggling to make ends meet.
Possibly the best advice I can give you is to think in advance about how you’ll behave if confronted by a difficult situation. One good strategy is to tell the client that because you’re a professional bookkeeper, you’re bound by a code of conduct. If the client chooses to evade tax in any way, then they must make sure that you remain completely unaware of the fact.
Keep Your Lips Sealed
I live in a regional area (the Blue Mountains, west of Sydney) which has a population of only 80,000 people in the whole region. The longer I live here, the more I find that my path repeatedly crosses with the same people in different contexts. For example, I find that my hairdresser goes to the same yoga class, and our kids also go to school together. Or that a client and I have a mutual friend, and we bump into each other at her Christmas party.
As a bookkeeper, respecting confidentiality is more complex than simply not blabbing to friends about how much profit a client is making. Respecting confidentiality means that as soon as you leave that client’s premises, it’s as if you were never there. Like a science fiction movie, all memories are instantly erased.
For example, imagine you do the books for a local builder. One day, a friend mentions that they’re thinking of hiring this builder to build an extension. You mustn’t say ‘Ah, Steve, he’s a great guy. I’ve been doing his books for years’. Respecting confidentiality means that you simply don’t make any comment about your clients to other people, or about what work you do for them.
Similarly, if you come across a client socially, by all means nod and say ‘hello’. However, unless the client specifically initiates the topic, never ask the client how business is going, or whether a deal came through or not. Instead, keep things strictly social. You’ll find some benefits in taking this approach, too. After all, what can possibly be worse than someone picking your brains for tax advice when you’ve already had two glasses of champagne . . . especially if you’re a one-pot squealer at the best of times.