Business Terms | FVRA Tool | RTO Accounts

Terms of Business

1. Terms of Business and Matters that we need to disclose to you.

We have explained below the terms of Business and Matters that we need to disclose to you.

2. Basis and terms of engagement
Our engagement is to assist with the preparation of the financial accounts and the preparation and lodgment of the taxation returns for your Group. This includes the non-trading individual clients in your family (Individuals), as well as your trading entities (including individuals, corporate entities, partnerships, trustees and self-managed superannuation entities) (Entities).

2.1 Accounting and record-keeping
In undertaking this engagement, you must generally ensure the following:
The bookkeeping for all Entities is maintained on a regular basis. In fact, we recommend the bookkeeping and record-keeping tasks be attended to each week.
Reconciliations for the bank accounts, debtors and creditors are performed at the end of each month for each of the Entities.
A stocktake is performed during the last weekend in June for each entity that deals in trading stock.
It is expected that the trial balance of each of the Entities will be completed no later than 14 July each year.
All cash transactions are accounted for.
In respect of the personal tax returns for Individuals, we require that all relevant information be collated and forwarded to our office within 7 days of request each year. We shall detail more specific requirements in respect of the Individual tax returns later in this letter.

2.2 Taxation services
In engaging us to provide taxation services, it is important for you to understand the following:
You are responsible for the accuracy and completeness of the particulars and information provided to us by you.
Any advice we provide is only an opinion based on our knowledge of your particular circumstances.
You have obligations under the self-assessment regime to keep full and proper records in order to facilitate the preparation of accurate returns.
We cannot provide taxation services if we find that information on which those services are to be based includes false or misleading information, or material information is omitted, and you are not prepared to appropriately amend that information.
Before we lodge any returns, statements or other documents on your behalf, we will forward them to you or the relevant taxpayer in the Group for approval. We will endeavour to ensure that the returns are lodged by the due dates and will advise you at the beginning of the financial year when documentation should be provided to us. If you are late in providing information, we will do our best to meet the time limits, but we will not be responsible for any late lodgment penalties or interest charges you may incur

2.3 Compilation of financial statements
By engaging us to compile financial statements, you acknowledge that:
the reliability, accuracy and completeness of the accounting records are your responsibility; and
you have disclosed to us all material and relevant information.

You and your employees are responsible for the maintenance of the accounting systems and internal controls for all the Entities. That includes the keeping and maintenance of all required books of account. Our firm cannot be relied upon to disclose irregularities, such as fraud, and other illegal acts and errors that may occur with regard to such matters.
Our firm is not being engaged to conduct a statutory audit of the financial records of any of your Entities and we will not express an auditor's opinion as to the truth and fairness of the financial statements.

2.4 Obligation to correct false or misleading statements
By law, registered tax practitioners must not (in any capacity) make a statement to (or prepare a statement that they know or ought reasonably to know is likely to be made to) the ATO, the TPB or another Australian government agency, or permit or direct someone else to make or prepare such a statement, that they know or ought reasonably to know is false, incorrect, or misleading in a material particular, or omits any matter or thing without which the statement is misleading in a material respect.

If we become aware that a statement we made or prepared (or permitted or directed another to do so) to the ATO, the TPB or another Australian government agency on your behalf or on behalf of a client in your Group was false, incorrect or misleading in a material particular (including by omission) at the time it was made, we may advise you to take action to correct the false or misleading statement.

If after a reasonable period of time after providing this advice, we are not reasonably satisfied that you or the relevant Group client has corrected the statement (or provided consent for us to correct the statement) or adequately explained the basis for the statement, we may take further action. In some cases, this may include withdrawing from the engagement and notifying the ATO or the TPB about the matter.

2.5 Ownership of Documents
The financial statements, tax returns and any other documents which we are specifically engaged to prepare, together with any original documents given to us by you, shall be your property.

Any other documents brought into existence by us, including general working papers, the general ledger and draft documents will remain our property at all times.

In accordance with our statutory obligations under the TASA, we will also retain all records of the tax agent services provided to each client in the Group. We will retain these records for at least five years after the relevant services have been provided, even if our engagement is terminated.

Furthermore, if our services are terminated (by either party), each client separately agrees that we shall be entitled to retain all documents owned by that client (including all tax refunds of the client that come into our possession) until payment in full of all outstanding fees from all clients in the Group on any account. Where copies of any documents released to you are required for our records, you will be charged for the cost of photocopying at our normal rates.

2.6 Additional services
The scope of our engagement is the preparation and lodgment of the accounting and taxation matters detailed above. Any agreed fee applies only to services and advice provided within the scope of our engagement. This fee includes checking and forwarding original assessments and payment notices that are received from the ATO and the Australian Securities & Investments Commission (ASIC).

Any additional services or advice that you request are outside the scope of this letter and are not included in this agreed fee. We will separately advise you of the scope and fee for those services, including any direct out of pocket expenses.

Please note in particular that any correspondence from the ATO or ASIC that does not relate to initial assessments or original payment notices, will be charged as additional services.

2.7 Fees and charges
Our services will be provided to you on a fee for service basis.

Unless otherwise stated in writing, any estimates which we provide to you of our anticipated fees, disbursements and charges for any work are only indicative of the amounts you can expect to be charged. Estimates are not quotes or caps and are not binding on us.

Where an estimate is given and the scope of the work changes, or if it becomes apparent that the work involves matters which were not taken into account in the estimate, we will endeavour to advise you and provide an amended estimate as soon as it is practicable to do so.

We may require you to deposit money into our trust account in anticipation of our fees and charges. If you fail to make a required trust deposit, we may suspend work or terminate this engagement. Each client in the Group authorises us to apply trust moneys held on their behalf towards payment of fees and disbursements, and to meet our bill of costs which have been rendered and which have not been paid or disputed within 14 days after issue of the bill of costs.

Each client in the Group is jointly and severally liable to pay our fees in respect of all work performed for all clients in the Group. We may require that payment of our fees be guaranteed by one or more persons who are associated with the Group but are not themselves our clients (for example, company directors). If you fail to provide a required guarantee, we may suspend work or terminate this engagement.

If we suspend work or terminate this engagement by reason of your failure to make a trust deposit or provide a guarantee as required, we will not be liable for any loss or damage suffered by any client in the Group as a result of the suspension or termination.

If you are on a monthly payment arrangement and decide to terminate our services at any time, we reserve the right to calculate any refund for the payments already made to us.

2.8 Goods and Services Tax (GST) – Professional fees and disbursements
Our professional fees are inclusive of GST. If our services are provided to Individuals or Entities that are registered for GST, then those Individuals or Entities may be able to claim a GST input tax credit for the GST they pay on our services. However, this will not be the case if the services we provide are used by the recipient in making an input taxed supply or otherwise for a non-creditable purpose. In this situation, the GST associated with our professional fees cannot be claimed as an input tax credit.

If your matter involves a mixture of taxable, GST-free and input taxed supplies, we will not apportion our professional fees between these categories of supply unless you have expressly requested us to do so.
Please note that if you make such a request after the commencement of any particular matter, it may not be possible for us to subsequently apportion professional fees that were incurred prior to receiving your request. If you need separate advice on whether you will receive the benefit of a GST input tax credit for the GST paid to us, then please contact us.

2.8.1 GST – Disbursements
In addition to our professional fees, you will be responsible for payment of expenses which we incur on your behalf (together with the GST that we pay in relation to such expenses), as set out below.

Certain government charges and fees included in some matters undertaken in the scope of our engagement are effectively GST-free to the applicant but will attract the 10% GST if paid by this firm and then passed on to you as part of our services.

Accordingly, for certain disbursements in this category (e.g., ASIC fees, new company and trust deed orders and other specific disbursements notified from time to time), we will act as your agents in incurring those disbursements. You will therefore technically be primarily liable to pay the account to the supplier. Under this agency relationship, you will receive the benefit of any concessional GST treatment of any part of the disbursement.

Where GST is payable on some or all of a supply acquired by us as your agent, we will forward you the Tax Invoice and you will be able to claim the input tax credits directly if you are GST-registered (or are required to be GST-registered) and are entitled to claim the input tax credits.

For disbursements incurred in this manner, we may in some cases require that you provide us with separate cheques for the relevant amounts to be paid directly to the relevant government body or supplier.

For all other disbursements (e.g., couriers, searches, photocopying, etc.), the treatment will be the same as for professional fees – i.e., we will incur the costs at first instance and invoice them to you after making allowance for any GST input tax credits received by us on the acquisition. These invoices will include GST for which you may be entitled to claim an input tax credit.

2.9 Confidentiality
We will take all reasonable steps to keep information acquired as a result of this engagement confidential and will not disclose confidential information relating to clients in the Group without their permission, unless there is a legal duty for us to do so. We will also not use any information acquired as a result of this engagement for our own personal advantage or for the advantage of a third party.
We may also need to disclose information relating to a client’s affairs to:
• other clients in the Group to assist in performing our work;
• persons responsible for the governance of an entity to comply with professional standards;
• the relevant parties in order to protect our professional interests in legal proceedings;
• a professional or regulatory body in response to an inquiry or investigation;
• the relevant parties (e.g., the TPB) to comply with technical and professional standards (including ethical requirements); or
• a professional body of which we are a member, in relation to a quality review program undertaken by that body.

Each client in the Group hereby authorises us to do so when we consider it appropriate to further our performance of work for the Group, or when requested by the relevant party.

2.10 Utilising outsourced services
From time to time, our firm may use “outsourced services” (which may include “Cloud Computing”) to perform some of the services we are engaged to perform for you.

The list of third party service providers currently used by our firm, to whom client information will or may be disclosed, are as follows:
From time to time, the Xero file, tax details and other software with client information may be accessed by our overseas staff members in Clark, Philippines. At RTO Accounts, we pride ourselves on providing a high-quality service to all our clients. Our staff are hired and vetted through an Australian HR Solutions company, TOA Global, with our staff working at their premises in Clark, Philippines. Our staff only work at their facilities, using their computers and state-of-the-art security protocols and data security provided through Practice Protect.

We will notify you of any change to this list from time to time.
Each client in the Group hereby authorises us to disclose information relating to that client’s affairs to such third party service providers as we may choose to engage to perform such work.
Where we outsource services to third party providers, we are nevertheless responsible for the conduct and activities of those providers and for the delivery of the services we are engaged to perform for you.

2.11 Use of “Cloud Computing” (that is not an outsourced service)
From time to time, our firm may utilise “Cloud Computing” in the performance of services under this engagement which is not an “outsourced service”.

The list of “cloud computing” service provider(s) currently used by our firm in the provision of services which is not an outsourced service, to whom client information will or may be disclosed, is as follows:
We use Xero (a cloud accounting system), Xero Practice Manager (a cloud practice management system), Xero Tax (a cloud tax return preparation system), BGL SF 360 (a cloud-based super fund accounting and administration system), Office 365 (a cloud email and calendar system), SuiteFiles and OneDrive (cloud document management systems), Payrix (a cloud payment solution), Annature, & DocuSign (cloud electronic signature system) and NowInfinity (a cloud corporate record management system). These cloud computing systems store files on remote servers operated by third parties, including the use of hosting providers in the United States of America and in Singapore.

There is the ability for you to act as the Subscriber for Xero Business Edition subscriptions and to "invite" us into that subscription as an "invited user", rather than having us act as the Subscriber to that subscription. Xero has different user roles, and in particular, the Subscriber to a Xero subscription has the ability to control access rights to a Xero subscription. If we are the Subscriber for your Xero Business Edition, we will always give you full access to your Xero subscription, including if the business relationship between us terminates or if there is a dispute between us. If you transfer your business to a new accountant, you will need to provide us with the name and email address of your chosen new Xero Subscriber for us to transfer your Xero subscription. We are bound by the Xero Partner Code of Conduct. This Code contains dispute resolution procedures and how your access to the Xero subscription will be maintained in the event of a dispute (including relating to non-payment of our fees) between you and us. We will notify you of any change to this list from time to time.

Each client in the Group hereby authorises us to disclose information relating to those clients' affairs to such “Cloud Computing” service providers as we may choose to engage.

2.12 Non-compliance with Laws and Regulations (NOCLAR)
During the performance of our work under this engagement, we may detect conduct or a transaction that is considered to constitute NOCLAR, which has a material effect on any documents or information that might be required to be provided to a regulatory authority (RA), such as the ATO.

If we detect any NOCLAR, we may have a professional requirement to make a disclosure to a RA. We will follow a formal process which will include advising you of our concerns and, if necessary, seeking legal advice. If we do seek legal advice, we reserve the right to ask you to pay or reimburse us for our reasonable costs.

If we are required to make a disclosure to a RA, you agree to forever release us from any claim for costs or losses you incur in responding to or dealing with anything that arises from our disclosure.

2.13 Losses from unauthorised cyber-activity
We will take all reasonable precautions to ensure that any electronic data that contains your private information is securely stored and that any email transmissions are protected and are not able to be intercepted by third parties. However, we cannot be held liable for any loss that you might incur as a consequence of any third party intervention that accesses, procures or copies any data that contains your private information from any medium or device we use to store or transmit such information.

In the event that, despite our firm having taken reasonable precautions to securely store your private information, you suffer any losses arising from unauthorised cyber-activity, you agree to forever release us from any claim for your losses.

2.14 Conflicts of Interest
We will inform you if we become aware of any conflict of interest in our relationship with you (including between any of the individuals and entities in your Group that are covered by this engagement letter) or in our relationship with you (including members of your Group) and another client of this firm.

Where conflicts are identified which cannot be managed in a way that protects the interests of you or any members of your Group, then we may be unable to provide further services to some or all of the persons to whom this engagement applies. If this arises, we will inform you promptly.

2.15 Complaints
If you have a complaint about us, we ask that you contact Shiv Jaidka of our office. We will work with you to help resolve your complaint as quickly as possible.

If we cannot resolve the issue or you are not satisfied with how your complaint is being handled by us or with the outcome, you may be able to escalate the matter to the TPB. Complaints to the TPB must be made in writing using its online form, which is available at myprofile.tpb.gov.au/complaints/

Note, not all complaints can be acted on by the TPB. For example, if your complaint is about fees, you will be asked to contact Consumer Affairs or the Office of Fair Trading in your State or Territory. However, the TPB may be able to assist if the fee complaint is associated with inappropriate conduct by our firm. Details about making complaints to the TPB are available at www.tpb.gov.au/complaints

2.16 Professional indemnity insurance
Our firm maintains adequate professional indemnity insurance cover and that our policy complies with the minimum requirements of the Tax Practitioners Board (TPB) and Chartered Accountants Australia & New Zealand (CAANZ).

2.17 Limitation of liability
Our firm’s liability may be limited by a scheme approved under Professional Standards legislation and applicable regulations of the Professional Body.

3. Details of services to be provided
We now outline the basis of our engagement in the context of the specific services to be provided.

It should be noted at the outset that, as a general proposition, we rely upon our clients to provide us with accurate and timely information to enable us to properly perform our engagement obligations. Consequently, any rectifying work performed by us on the basis of incorrect or late information will be work which is outside the scope of this engagement and will be charged as additional services.

3.1 BAS returns
As the BAS returns are prepared monthly/quarterly (as the case may be) and lodged during the financial year, it is not possible for this firm to review the correctness of the underlying financial information as part of the preparation of the BAS return. This is because we are engaged to prepare the annual accounts, and these are prepared after the conclusion of the financial year.

Therefore, for the BAS returns, we will rely on and process the financial information provided to us without any review of the primary source documents. In doing that, we will make the following assumptions:
The financial information provided to us is accurate.
The financial information correctly states the GST position. For example, all input tax credits and GST payable amounts have been correctly recorded in the general ledger. If you are unsure of the correct position or require advice regarding this, we are able to provide this as work which is outside the scope of this letter and charged as additional services.
You have the necessary supporting documentation to satisfy the ATO for GST purposes. Again, if you are unsure of the ATO requirements or require advice regarding these documents, we are able to provide this as work which is outside the scope of this letter and charged as additional services.
You hold valid tax invoices and adjustment notes for all expenditure incurred by you in respect of which an input tax credit is being claimed. Substantial penalties apply for an incorrectly prepared BAS. If you have any queries in respect to this, please contact our office for assistance.
You account for and inform us all the business cash transactions
However, it is possible that when the financial accounts are prepared, some discrepancies will exist between the information disclosed in the BAS returns and in the annual financial statements. Should any discrepancies arise, we will discuss the need to correct the BAS returns and/or financial accounts. This will involve work which is outside the scope of this engagement and will be charged as additional services.

3.2 Financial accounts
Our firm has been engaged to prepare the annual financial accounts of the Entities in your Group. This service includes the preparation of:
a profit and loss statement;
a balance sheet; and
notes for the above accounts.

This service includes maintenance of the chart of accounts for the general ledgers of your Entities, and telephone support should you require any assistance as to how to record specific transactions in the general ledger. This service also includes the preparation and lodgment of any standard reports that are required to be furnished to ASIC.

However, this service does not include the preparation of one-off accounts for presentation to your financiers for additional finance and the like.

3.3 Income tax returns
Our firm has been engaged to prepare and lodge income tax returns for your Group.
However, we will not be responsible for reviewing or verifying any financial records or statements provided to us, either via manual cashbooks or prepared on accounting software such as MYOB or Quickbooks. Correct coding or classification of accounts is outside the scope of this engagement. If assistance is required on how to correctly code, or to review how you currently do so, please discuss this with us. This will entail work which is outside the scope of this engagement and will be charged as additional services.

Also please ensure that you have all source documentation available to allow our firm to analyse the income tax implications of any transaction, if we request to see it. Whilst we will not as a matter of course be looking at these documents, the ATO will expect you (and you are required) to have them available before any claim is made in your income tax return. We may in some circumstances also request to see source documents if a tax issue is particularly contentious.
It is also expected that, in respect of individual income tax returns, each person will have the necessary documents so as to comply with the substantiation provisions of the Income Tax Assessment Act 1997. We will specifically advise as to the requirements of the substantiation provisions relating to your income tax return and of the necessity to obtain acceptable receipts as required by the legislation.

We will not, however, be checking that the requirements of the substantiation provisions have been satisfied. This means that we will not be reviewing your log book or any calculations or information you provide us with, such as a rental property schedule either prepared by you on a spreadsheet or by a property manager. If you require assistance in completing a log book or preparing any calculations, or you would like us to review such work, please discuss this with us. This will entail work which is outside the scope of this engagement and will be charged as additional services.
From time to time, this firm prepares templates and schedules to assist with the collation of information to complete income tax returns. These will be provided free of charge.
The fee for this service does not cover any inquiries made to us, or investigations involving us, conducted by the ATO. Substantial penalties apply for an incorrectly prepared income tax return. If you have any queries in respect to this, please contact our office for assistance.

3.4 Fringe Benefits Tax (FBT) returns
Our firm has been engaged to prepare and lodge the FBT returns for your Entities.
Please note that, because of the impact of GST, it is not possible to prepare an FBT return from the information contained in the general ledger. It is necessary to revert to the source documentation to allow our firm to analyse the FBT implications of any transaction.
Our fee for this service includes the following:
Advice on how to collate the information necessary to prepare the annual FBT return.
An annual review of the methods available to reduce the FBT expense on the annual FBT return.
Telephone advice on basic FBT issues.
The calculation of Reportable Fringe Benefits Amounts that may be required to be included on the annual income statements or payment summaries for your employees (including family members employed in the business of any Entity).

3.5 Single Touch Payroll (STP) reports
We will prepare and lodge weekly/fortnightly/monthly/quarterly (as the case may be) STP reports with the ATO for the Group, based on the information provided to us by you, your employees or any third party authorised by you, without reviewing or verifying the payroll calculations, any relevant wage rates or the source documents relied upon to process each STP pay event.
We will only provide a lodgment service. We make no representations about the accuracy of the information submitted, the due date or whether it is received by the ATO. Our firm is not being engaged to perform, or check the accuracy of, payroll calculations associated with the STP reports. You and your employees are responsible for correctly preparing and processing each pay event, and for maintaining the necessary supporting documentation.

You and your employees are also responsible for calculating and remitting your PAYG withholding and Superannuation Guarantee liabilities with respect to each employee, for each relevant pay event.

3.6 SMSF annual return
Our firm has been engaged to attend to the income tax compliance work for your self-managed superannuation fund (SMSF).
This assignment will involve the following:
Preparation of the SMSF's accounts for the purposes of the Superannuation Industry (Supervision) Act 1993 (the SIS Act).
Preparation and lodgement of the SMSF annual return. It is important to note that, as part of the regulatory framework for SMSFs, an annual audit of the fund must be undertaken and provided to the trustees of the fund before the SMSF annual return is lodged. Therefore, trustees of the fund must ensure that they provide the fund accounting records no later than 2 months before the due date to lodge tax return to allow these tasks to be completed.
With respect to the annual audit of the SMSF referred to above:
This office will make arrangements for the audit to be undertaken by an external party whereby you will be billed directly and liable for all costs associated with the completion of the audit.

In addition to the basic financial information required to complete these requirements, it is expected that the source documentation will be available to allow us to analyse the implications of any superannuation-related transaction.
You should also note that the SMSF’s deeds should be annually reviewed by a superannuation specialist to ensure they continue to comply with the requirements of the SIS Act. Our engagement does not extend to the provision of such legal advice and our fee does not include this service. We are happy to recommend the services of a superannuation specialist for this task.
This service does not cover any inquiries or investigations by the ATO.

3.7 Superannuation-related financial advice
We do not hold an Australian Financial Services Licence and are not an authorised representative of such a licence holder.
As a result, we are generally prohibited from providing you with any advice, recommendation or opinion that is intended to influence you in making any decision in relation to superannuation (including whether to establish, contribute to or draw benefits from a superannuation fund, or any investment decision by an superannuation trustee), or that could reasonably be regarded as being intended to have such an influence (Financial Advice).

However, we are able to provide you with superannuation advice that is of a factual nature only (e.g., to explain how superannuation rules would apply to you and what options are available to you).
Where you request us to undertake superannuation-related work (e.g., to arrange for the establishment of a self-managed superannuation fund), we will be obliged to perform that work in accordance with your instructions, even if we believe those instructions may not be in your best interest.

Where you request Financial Advice concerning superannuation, we will endeavour to assist you in obtaining that advice from an appropriately licensed advisor. Depending on the circumstances, this may involve us outsourcing the provision of the Financial Advice (in which case we would seek your prior authorisation) or referring you to a licenced provider directly.

4. Agent nomination process – Client-to-agent linking
The ATO has introduced a new process that requires all taxpayers with an Australian Business Number (excluding sole traders) to undertake certain steps to nominate a registered tax or BAS agent.
This process is referred to as ‘Client-to-agent linking’ (‘CAL’) and, importantly, it must be completed by the taxpayer seeking to nominate an agent. It cannot be done by agents on behalf of their clients.
We have determined that each entity (other than individuals) in your Group will need to undertake this process to nominate our firm as their registered tax agent/BAS agent.

Please notify us as soon as the nomination process is completed by each client in your Group. We will then have 28 days to connect to the client on the ATO’s systems. Please note that we cannot perform any work for a client who has not successfully completed the client-to-agent linking nomination process.
You will find further information and details of the steps that each of the above clients will need to take to nominate our firm in the document, Client-to-agent linking steps: Client-to-agent linking steps | Australian Taxation Office (ato.gov.au)

5. Authorisation of ATO digital communication preferences
Each client in the Group may agrees to have the ATO communication sent digitally to our registered tax agent, where applicable:
You hereby authorise RTO Accounts to change or withdraw our preferred address for service of ATO communications.

6. Other matters to be aware of
The Tax Practitioners Board (TPB) is responsible for the registration and regulation of tax practitioners and for ensuring their compliance with the TASA. As part of this role, the TPB maintains a register that enables the public to ensure they are engaging the services of a registered tax practitioner. The register also provides details of suspended and deregistered tax practitioners.

6.1 Search the TPB Register
To check the details of the tax practitioner responsible for your tax affairs, search the TPB Register at www.tpb.gov.au/public-register using either of the following details:
• Practitioner name – K2 Advisors Pty Ltd
• Registration number – 25825445

Taxpayers who engage registered tax agents also have rights and obligations under the taxation laws, including a safe harbour from certain penalties imposed by the Australian Taxation Office (ATO). To qualify for safe harbour protection, taxpayers must provide their registered tax agent with “all relevant taxation information” to enable accurate statements to be provided to the ATO. This requirement may be important to both parties in identifying and understanding the purpose and scope of the engagement and may also affect other matters discussed below. You will find a further discussion on the safe harbour protections in the attached appendix, Rights and Obligations of the Parties under the Taxation Laws.

6.2 Matters that could significantly influence your decision to engage us
We are required to advise if certain prescribed events have occurred within the last five years (but not before 1 July 2022). This will enable each client in the Group to make a fully informed decision on whether to engage or re-engage Shiv Jaidka of RTO Accounts to provide tax agent services.

Court Enforceable Undertaking with ASIC: Shivdeep Jaidka has entered into a Court Enforceable Undertaking with the Australian Securities and Investment Commission (ASIC) on 20 Feb 2024 regarding the superannuation-related financial advice previously provided as an authorized representative of an Australian Financial Services License (AFSL). As per the undertaking Shivdeep Jaidka will not carry a financial services business (including on behalf of another person) until 20 Feb 2029. The undertaking does not prevent Shivdeep Jaidka from providing Tax Agent, Accountancy and Business Advisory Services. The full details of the undertaking are available via ASIC media release at:
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2024-releases/24-027mr-asic-accepts-court-enforceable-undertaking-from-former-melbourne-financial-adviser/

YOUR RIGHTS AND OBLIGATIONS UNDER THE TAXATION LAWS

As a client or prospective client of this practice, we are required to advise you of your rights and obligations under the taxation laws in relation to the tax or BAS agent services we provide to you. It is also important that you understand our obligations as a tax or BAS agent, including to you, under the taxation laws (including the Tax Agent Services Act 2009 and the Code of Professional Conduct contained within that Act) and your obligations to us.

Set out below is a brief explanation of the main areas of the taxation system you need to understand. If you have any concerns or issues with any of the matters discussed below, please feel free to contact us.

Operation of the self-assessment system

Australia’s tax system operates on a self-assessment basis. This means that when your income tax return, Fringe Benefits Tax (‘FBT’) return or Business Activity Statement (‘BAS’) is lodged, the Australian Taxation Office (‘ATO’) accepts the information provided in the return at face value and issues you with an assessment notice based on that information.

However, this does not mean the assessment is final as the ATO can conduct a review or audit of the information provided in the return at a later time, subject to the time limits discussed below.

Importantly, as a taxpayer, you have an obligation to comply with the taxation laws. If you do not meet your obligations under the taxation laws, the ATO may impose administrative penalties (fines), apply interest charges, seek criminal prosecutions (in some cases) or initiate debt recovery.

Commissioner’s ability to amend an assessment

While the ATO accepts the information lodged in your return at face value, it can amend the assessment if the ATO finds it to be incorrect. The following time limits generally apply for amending an assessment:

Individuals

For most individuals, the ATO can amend an assessment within two years after the individual receives their notice of assessment. However, if an individual carries on a business and is neither a Small Business Entity (‘SBE’) (broadly, a business with an aggregated turnover of less than $10 million) nor a Medium Business Entity (‘MBE’) (broadly, a business with an aggregated turnover between $10 million and less than $50 million), then that period extends to four years.
If an individual is a partner in a partnership or a beneficiary of a trust, the amendment period is generally two years. However, if a partnership or trust carries on a business and is neither an SBE nor an MBE, then the amendment period extends to four years

Companies

The ATO can amend a company assessment within two years after a notice of assessment is deemed to have been made where the company is either an SBE or an MBE.
If the company is a partner in a partnership or a beneficiary of a trust, the period is two years. However, if the partnership carries on business and is neither an SBE nor an MBE, the period extends to four years. If the trust is neither an SBE nor an MBE, the period extends to four years.
In most other cases, the period is four years.

Trustees

The ATO can amend an assessment within two years after the trustee receives the notice of assessment if the trust is either an SBE or an MBE.
If the trustee is a partner in a partnership or a beneficiary of a trust, the period is two years. However, if the partnership carries on business and is neither an SBE nor an MBE, the period extends to four years. If the trust is neither an SBE nor an MBE, the period extends to four years.
In most other cases, the period is four years.

If the ATO amends an assessment, this will potentially involve, apart from increased taxes, penalties and interest. If you discover an error in the information declared in the return, lower penalties generally apply for making a voluntary disclosure.

Note that there are no time limits on the ATO amending an assessment where it believes there has been fraud or evasion.

Obligation to keep records

The tax laws specifically require taxpayers to keep records that properly explain the transactions they have entered into.

Individuals

Individuals claiming deductions for work-related expenses are subject to the substantiation rules in the tax laws. This requires taxpayers to keep receipts, invoices etc., of the expenses they incur. Where the expenses relate to a taxpayer travelling interstate or overseas, a travel diary may also need to be kept. Where the expense relates to a motor vehicle, a record of the journeys taken such as a log book may need to be kept. A failure to keep the appropriate records can lead to the ATO denying a particular deduction which may involve the imposition of penalties and interest. Substantiation records must be retained for five years.

Businesses

The tax laws specifically require a taxpayer that carries on business to keep records that record and explain all the transactions they have entered into. This includes all the documents that explain how the income and expenditure of the taxpayer was determined. Where the tax laws allow or require a taxpayer to make a choice, election, estimate or calculation, documents containing particulars of these matters must be kept. All these records must be retained for a period of five years. There are penalties for taxpayers who fail to do so.

Obligation to provide complete and accurate records

For our practice to be able to lodge returns on your behalf, it is your responsibility to provide us with truthful, complete and accurate records. Furthermore, in order to lodge your return on time, we will require you to provide us with the relevant information as and when requested.

Where you are unable to provide us with complete and accurate records, we may be unable to prepare and lodge your return. Tax agents are subject to a Code of Professional Conduct contained in the Tax Agent Services Act 2009, which prevents us from acting for a client where insufficient records or information exist that allow us to determine the amount of a client’s income or deductions.

We also reserve the right to question any claims for deductions or credits that in our reasonable judgment might be considered as being excessive, and we may ask for more substantiation or records to prove that such a claim is allowable under the law.

If we believe that a claim is excessive and it cannot be substantiated, we reserve the right not to include such a claim in your income tax returns or BAS, but you will have the right to lodge an objection after receiving your notice of assessment. There may be further costs in doing so, and we will advise you accordingly.

Records for clients operating in the cash economy

Due to the ATO’s on-going concerns with dealings in the cash economy, the ATO has a program of ‘benchmarking’ standardised revenue returns for a wide range of small businesses.

In circumstances where the ATO is dissatisfied with a taxpayer’s records or recording systems, it may assess income tax and/or GST on what it considers to be an appropriate ‘benchmark’ amount (plus penalties and interest). Once this occurs, it is the responsibility of a taxpayer to demonstrate that the assessment is excessive and identify the correct tax position. One of the major problems with this outcome is that the onus of proving that the ATO’s assessment is excessive (i.e., the taxpayer did not earn that much income) is the responsibility of the taxpayer.

Taxpayers who operate in the cash economy are therefore urged to have a robust and reliable system for recording and reporting all cash transactions and ensuring that the recorded figures are accurate. If you need assistance in setting up or reviewing your recording and reporting systems, we will be happy to do so and will advise you of our rates for doing so on request.

Right to seek a Private Binding Ruling

When preparing your return, we may identify one or more issues that are not clear under the tax laws. Where we have pointed out such issues to you, you have a right to request a Private Binding Ruling from the ATO. The ATO will provide you with a ruling setting out its view on the proper tax treatment of the issue requested in the Private Binding Ruling.

Objecting against an assessment

If the ATO issues you with an assessment that you do not agree with, you have the right to lodge an objection against that assessment. The objection must be lodged with the ATO within either two or four years. The period which applies is determined as discussed above.

Where the ATO issues an amended assessment, the period for objecting is the greater of:

60 days from the time the amended assessment is received; or
two or four years (whichever is applicable) from the time the original assessment was received.

If you remain dissatisfied with the outcome of the objection, you have the right to have the matter reviewed by the Administrative Review Tribunal or appeal the matter to the Federal Court.

Onus of proof falls on the taxpayer

It is important to be aware that in any disputed assessment before the court or the Administrative Review Tribunal (whether initiated by the taxpayer or by the ATO), the onus of proof is placed on the taxpayer. In other words, if the Commissioner asserts that your income should include a certain amount or that a deduction claimed in a return is not allowed, it will be up to you to establish that the Commissioner’s view is incorrect and the correct treatment.

Safe Harbour protection

As the client of a registered tax agent, under the taxation laws, you have a statutory ‘safe harbour’ exemption from penalties imposed by the ATO in certain circumstances.

To ensure you are eligible to benefit from the safe harbour, it is a requirement that you provide us with all relevant tax information. This includes any records, or documents we request from you plus any other information relevant to the preparation of your tax return. The information provided must be truthful, complete and accurate.

It is equally important that you provide us with this information by the time it is requested to allow the return to be lodged by its due date. The safe harbour from late lodgment penalties can also apply where a Business Activity Statement, Instalment Activity Statement, or FBT return is lodged late.

A taxpayer who is eligible for the safe harbour protection will not be subject to any penalties for errors identified in their tax return, although the underlying tax and interest charges will still apply.

Your tax practitioner’s obligations

The Tax Agent Services Act 2009 (‘TASA’), including the Code of Professional Conduct contained within the TASA, provide statutory protections for taxpayers who engage registered tax practitioners.

The Code of Professional Conduct is a set of statutory ethical and professional standards that registered tax practitioners must comply with. The TASA, including the Code of Professional Conduct, and associated regulations and determinations are administered by the Tax Practitioners Board (‘TPB’). We are required under the Code of Professional Conduct to provide you with general information about the obligations that tax practitioners have to their clients under the taxation laws, including the TASA and the Code of Professional Conduct. The following information has been adapted from the TPB’s factsheet, Information for Clients for these purposes.

Your Tax practitioner’s obligations require them to:

• act lawfully in your best interests and with honesty and integrity in the performance of our duties;

• uphold and promote the ethical standards of the profession;

• manage any conflicts of interest;

• take reasonable care to ascertain your state of affairs and apply tax laws correctly;

• keep your information confidential unless there is a legal duty to disclose;

• provide services competently;

• not knowingly obstruct the administration of the tax laws;

• advise you of your rights and obligations under the taxation laws (refer above);

• account to you for money or other property on trust;

• not make false or misleading statements to the TPB or the ATO, and in some cases, withdraw our engagement with you and notify the TPB or ATO of certain matters;

• address any false or misleading statements we are responsible for;

• engage with clients to address other false or misleading statements, exploring options to correct;

• keep proper records (including records of tax agent services provided);

• keep you informed of certain matters so you can make informed decisions.

If your registered tax practitioner fails to meet their obligations:

• their registration can be suspended or terminated, meaning they cannot practice;

• they could receive a caution or orders from the TPB – for example, undertaking education or working under the supervision of another registered tax practitioner;

• have fines imposed on them by the Federal Court;

• your tax and superannuation matters may not be accurate;

• you may be subject to enquiries or audits;

• any tax shortfalls may attract penalties and interest;

• you may have litigation options to review decisions and recover debts;

• in the case of fraud or criminality, penalties may lead to prosecutions.