Chapter 18
IN THIS CHAPTER
Registering as a BAS Agent — what’s involved and why it’s such a big deal
Being honest as a mirror, straight as an arrow
Ensuring that any information you submit is up to scratch
Putting systems in place to look after yourself, and your clients too
If you have your own bookkeeping business, or you’re thinking about starting your own bookkeeping business, you must first ensure you have all the necessary qualifications, experience, registrations and insurance in place.
Only bookkeepers who register with the Tax Practitioners Board (TPB) — and have the experience and 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, as well as more complex tasks, such as generating employee payment summaries.
In this chapter, I provide a rundown of the legal framework for bookkeepers, including training requirements and professional standards of behaviour. I also touch on issues that all contract bookkeepers need to consider, such as codes of conduct, professional indemnity insurance and client confidentiality.
So, do you need to worry about this whole BAS Agent hullabaloo, or not? If you plan to work as a contract bookkeeper (as opposed to working as a bookkeeper on an employee basis), you almost certainly need to register as a BAS Agent, so the answer is yes. I explain the details in the following pages.
If you’re planning to work on your own as a contract bookkeeper, take a few moments to familiarise yourself with the delights of the Tax Agent Services Act. 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 calculating complex payroll transactions such as redundancy payments.
In my opinion, the upshot of these regulations is that if you’re serious about being a contract bookkeeper (as opposed to being an employee), you need to have BAS Agent registration.
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
).
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 haven’t been an undischarged bankrupt, served time in jail, or been convicted of fraud, tax or otherwise, within the last five years — the main hurdle is the qualification and experience requirements.
You must have a qualification equivalent to or better than Certificate IV in Accounting and Bookkeeping. If you received this qualification before GST was introduced into Australia, then you will also need to complete an approved course in basic GST and BAS principles.
In terms of experience, you must also have undertaken at least 1,400 hours of relevant experience in the preceding four years. Alternatively, you can apply to become a BAS Agent if you’re a member of a recognised BAS Agent or tax agent association and you meet the qualification requirements and you’ve undertaken at least 1,000 hours of relevant experience in the last four years.
For more of the fine print on these requirements, visit the Tax Practitioners Board website at www.tpb.gov.au
.
Professional indemnity insurance protects you against claims for professional negligence if you make a mistake or fail to exercise a sufficient level of skill. All BAS Agents must have this insurance.
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?
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, you’re almost certainly bound by a particular code of conduct.
The Tax Practitioners Board oversees the code of conduct for BAS Agents that is prescribed by the Tax Agents Act. In the next few pages of this chapter, I attempt to distil the essence of this code, explaining key points in as straightforward a manner as possible. However, the fine print in this code is so detailed that I can’t cover every point, and I suggest you take some time to read through the full Code of Professional Conduct yourself (go to www.tpb.gov.au
and head for the Code of Professional Conduct page, under the BAS Agents tab).
The first part of the Code of Professional Conduct includes the following requirements:
Item 5 of the TPB’s Code of Professional Conduct states that agents must have adequate arrangements in place for managing conflicts of interest.
Following are some examples of possible conflicts of interest. Have a think about each one — what do you think you’d do if you found yourself in one of these situations?
Examples of possible conflicts of interest include
According to the Code of Professional Conduct, you have three possible courses of action when faced with a conflict of interest: You can control the conflict, avoid the conflict or disclose the conflict. (Note: Conflicts of interest can be actual conflicts or potential conflicts.)
For example, if I return to the scenario of a hardware store asking you to do their books when you already do the books for one of their competitors, you would have three courses of action:
Can you see that there’s no simple right or wrong course of action in many situations of a conflict of interest? Personally, I usually choose to avoid or disclose (rather than control) conflicts of interest, because I believe that these two strategies present the least likelihood of causing problems in the future. (I have enough stress in my life without voluntarily signing up for more!)
Item 6 of the TPB’s Code of Professional Conduct states that ‘unless you have a legal duty to do so, you must not disclose any information relating to a client’s affairs to a third party’. This limit applies indefinitely, so that even if you worked for a client over ten years ago and their business is long since gone, you can never say anything about that client or their business to anybody else. (The only exception to this rule is if you receive a notice to provide information about this client from a court, tribunal or the Tax Practitioners Board.)
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.
Note: You may wonder if I’m being inconsistent here, because my books include many anecdotes about clients. However, I always either adapt the anecdotes so that my clients can’t be recognised, or I specifically ask the client for permission to refer to their story.
One more tip. 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. After all, what can possibly be worse than someone picking your brains for tax advice when you’ve already had two glasses of champagne?)
Lastly, remember that ‘not disclosing any information’ also covers the potential inadvertent disclosure of client information. See ‘Protecting client data’, later in this chapter, for more details.
So far in this chapter, I’ve talked about the kind of ethical behaviour the TPB’s Code of Professional Conduct expects bookkeepers to display. However, the code of conduct also covers technical matters such as ensuring any information you supply on behalf of your client is accurate, and that the services you provide are up to scratch.
Item number 7 of the Code of Professional Conduct states that ‘you must ensure that BAS services that you provide, or that are provided on your behalf, are provided competently’.
The code defines ‘competence’ as ‘a state of being capable, fitting, suitable or sufficient to provide a tax agent service’. The code notes that the definition of competence varies from bookkeeper to bookkeeper. You may have a particular expertise in the building and construction industry while another bookkeeper may have a high level of skills in payroll and employee awards.
The code also elaborates to say that you are required ‘to act diligently in accordance with applicable technical and professional standards when providing a tax agent service’ and proceeds to define the word diligent as being ‘constant and persistent in an effort to accomplish something’ and ‘pursued with persevering attention’.
Note also that Item 8 of the Code of Professional Conduct states that you must ‘maintain knowledge and skills relevant to the BAS Agent services you provide’. Specifically, Item 8 suggests a minimum of 45 hours of continuing professional education (CPE) over each three-year registration period. These activities will vary from person to person, but may include attending courses, webinars, conferences or distance learning.
You need to keep a diary of your CPE and the TPB can ask for proof of your professional development hours at any time, including when your BAS renewal time falls due.
Providing ‘competent services’ (see the preceding section for details) doesn’t just include the services that you provide, but also the services of your employees and subcontractors.
You must ensure that any employees or subcontractors have appropriate skills and experience and that you provide adequate supervision. The level of supervision depends on a range of factors, including
In short, you need to be confident that the work performed by people under your supervision is ‘competent’. You need to provide a much higher degree of supervision for an employee with little experience and who works offsite with no checklists in place than you would for an experienced employee who works in the same office as yourself, and who follows a series of strict procedures.
Item 9 of the Code of Professional Conduct states that ‘you must take reasonable care in ascertaining a client’s state of affairs’.
‘Reasonable care’ is a tricky term to define, but depends on a range of factors including
In order to be sure that you meet the standards of reasonable care, I suggest you follow these four steps with each and every client:
Establish the level of engagement the client requires. Part of taking reasonable care involves having a measure of what the client expects you to do. Some clients expect their bookkeeper to do only simple tasks, such as reconciling bank accounts and paying employees. Other clients may expect a much higher level of knowledge, maybe monitoring retentions, creating cashflow reports or implementing new software systems. The more complex the level of engagement, the higher the standard required in terms of reasonable care.
Item 10 of the Code of Professional Conduct states that ‘you must take reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client’. (What a mouthful!)
If a client seeks advice, ask yourself first whether you’re qualified to respond. Remember that as a BAS Agent (as opposed to being a tax agent), you’re not qualified to advise on income tax matters, fringe benefits or the tax deductibility of certain expenses.
Even if you’re 100 per cent confident that you know the correct information on something, don’t go beyond the limit of your scope as a BAS Agent. If you think a client is doing something wrong, or could structure their tax affairs in a more beneficial way, suggest that your client seeks some additional advice from their accountant.
In the last section of this chapter I provide some tips about creating a letter of engagement, and also give some advice about looking after your client’s data.
As part of a strategy to avoid compromising or difficult situations, the Tax Practitioners Board suggests that you provide clients with a formal letter of engagement. While I’m sure you recognise that this is a good idea in theory, you may feel quite reserved about the idea of such a letter. Maybe you’re worried about putting the client off by being overly formal, or maybe you’re worried about how to phrase such a letter.
Probably your best starting point is to hunt down a template. (The Institute of Certified Bookkeepers, for example, provides a template for members to use. This template is a bit too wordy for my liking, but provides a good reference for something you can adapt and personalise.)
For the record, here’s what I believe an engagement letter should include:
If you’re not a tax agent, clarification that you can offer advice regarding everyday transactions and GST coding, but that you can’t offer advice regarding income tax matters, including FBT and the deductibility of expenses.
Other information you may want to include (but then again you may feel isn’t relevant):
Finally, don’t forget to close your letter with something warm and friendly, such as, ‘Please don’t hesitate to call me on my mobile on 0400 000 000 if you have any questions at all.’
If a client trusts you with their precious data, you have a big responsibility to look after this data in an even more conscientious manner than if it were your own. By protecting data, I mean both protecting client data from loss or corruption, and protecting client data from the prying eyes of unwelcome stickybeaks.
Some words of advice:
If you store your client data in the cloud, I suggest you generate PDFs of key financial reports each quarter (a minimum of a transaction report plus a Profit & Loss report) and store these in a safe location.
13.59.32.1