Terms of Agreement
Engagement of Services
SDP Factor1 as your tax agent is required to adhere to the Code of Professional Conduct under the Tax Agent Services Act 2009. In addition to the requirements of the Act, our Accounting Professional & Ethical Standards require us to communicate and document the terms of our agreement.
This letter is to confirm our understanding of the scope of our agreement and the nature and limitations of the services that we will provide. Please read it carefully and if you have any queries or wish to discuss any aspect, do not hesitate to contact us.
This engagement starts on the date that you sign and return this document to us.
1. Purpose and Scope of Agreement
Our agreement is to assist with the preparation of the financial accounts and the preparation and lodgement of the taxation returns for your Group. This includes the non-trading individual members of your family (Individuals), as well as your trading entities (including individuals), corporate entities, partnerships, trustees and superannuation entities (Entities).
- The scope of our agreement will include the services outlined within the attached quote.
- Our general advice will cover Income Tax and Goods & Services Tax. It will not cover any detailed tax advice or any indirect taxes such as stamp duty, land tax or payroll tax. These services are available if required via a separate quote.
- Any advice given to you is an opinion only and is based on our knowledge of the particular circumstances.
- The scope of our agreement will be limited to performance of the services listed within the quote.
- Any services you request up to the amount of $250 that are outside of the scope will be added to your invoice without the need to re-issue this agreement and quote.
- If the scope does not meet your requirements or you would like to discuss the scope with us further, please let us know.
- This work will be conducted in accordance with the relevant professional and ethical standards issued by the Accounting Professional & Ethical Standards Board Limited (APESB). The extent of our procedures and services will be limited exclusively to the mentioned purpose of the agreement.
- Our agreement cannot be relied upon to disclose irregularities including fraud, other illegal acts and errors that may exist. However, we will inform you of any such matters that come to our attention.
- We consider that we have the necessary expertise to perform the services covered by our agreement. However, any changes to the scope of our agreement may require us to reconsider the terms of our agreement and/or make new arrangements with you.
- If you wish to change the scope of our instructions, please contact the agreement Director.
- The completeness and accuracy of the information you supply will affect the relevance and reliability of the Financial Statements and other reports we prepare. You will be required to keep all documentation needed to prepare your tax returns. You must retain all necessary supporting documentation to substantiate any claim. We will not take any responsibility for any failure by you to maintain adequate records or for failure to provide all necessary details.
- Unless this agreement covers bookkeeping, you will be responsible for maintaining and regularly balancing all books of accounts, and if relevant, the maintenance of an adequate accounting and internal control system. You also acknowledge that it’s your responsibility for the reliability, accuracy and completeness of the accounting records and that you have disclosed to us all material and relevant information.
3. Your disclosure and record keeping obligations
- You are required by law to keep full and accurate records relating to your tax affairs.
- It is your obligation to provide us with all information that you reasonably expect will be necessary to allow us to perform work contemplated under this agreement within a timely manner or as requested. This includes providing accurate and complete responses to questions asked of you by us within a reasonable timeframe. Inaccurate, incomplete or late information could have a material effect on our services and/or our conclusions and may result in additional fees. We will not verify the underlying accuracy or completeness of information you provide to us.
- You are also required to advise us on a timely basis if there are any changes to your circumstances that may be relevant to the performance of our services. Specifically, if any subsequent event results in the information you provided to us being inaccurate, incomplete or misleading, then you are obliged to advise us as soon as possible. We take no responsibility to the extent that our advice is inaccurate, incomplete or misleading because it is based on inaccurate, incomplete or misleading information being provided to us.
- By accepting the terms of this letter, you will be taken to have agreed that the performance of our services is dependent on the performance of your obligations relating to disclosure and record keeping.
- The Taxation Administration Act 1953 contains specific provisions that may provide you with “safe harbours” from administrative penalties for incorrect or late lodgement of returns if, amongst other things, you give us “all relevant taxation information” in a timely manner (the safe harbour provisions apply from 1 March 2010). Accordingly, it is to your advantage that all relevant information is disclosed to us as any failure by you to provide this information may affect your ability to rely on the “safe harbour” provisions and will be taken into account in determining the extent to which we have discharged our obligations to you.
- You are also required to advise us if you become aware of any conflict of interest or potential conflict of interest. Generally, a conflict of interest is any event which may result in us becoming unable to remain objective in the performance of our services to you. Some examples of events which could give rise to a conflict of interest or potential conflict of interest during this agreement are changes to your business circumstances, events affecting your family (e.g. death and/or marriage breakdown) or a legal action commencing against you.
- You are responsible for ensuring that your entity/s business activities are conducted in accordance with laws and regulations. You are also responsible for identifying and addressing any non-compliance by your entity/s, by an individual charged with governance of the entity/s, by a member of management, or by other individuals working for or under the direction of your entity/s.
4. Details of services that may be provided
If the following services appear within your quote refer to the below details.
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 agreement 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 letter and will be charged as additional services.
Business Activity Statements
As the BAS returns are prepared quarterly 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 quarterly 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 quarterly 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 specific 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.
However, it is possible that, when the financial accounts are prepared, some discrepancies will exist between the information disclosed in the quarterly BAS returns and in the annual financial statements.
Should any discrepancies arise, we will discuss the need to correct either the BAS returns and/or financial accounts. Those services will involve work which is outside the scope of this letter and will be charged as additional services.
If this 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 lodgement 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.
Income tax returns
If this firm has been engaged to prepare and lodge income tax returns for your Group:
This firm will not be responsible for reviewing or verifying any financial records or statements provided to it either via manual cashbooks or prepared on accounting software such as MYOB, Xero or QuickBooks. Correct coding or classification of accounts is outside the scope of this agreement. 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 agreement and will be charged as additional services.
Also please ensure that you have all source documentation available to allow this 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.
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 specifically required by the legislation. We will not, however, be checking that the requirements of the substantiation provisions have been satisfied.
This specifically means that we will not be reviewing your log book or any calculations or information you provide us, 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 letter 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.
If SDP Factor1 is engaged to establish the payroll systems and process the payroll on information provided to us by your business. To be clear, our engagement does not extend to the following services:
- Determining pay rates
- Interpreting Awards or determining which Awards to apply
- Verifying the accuracy of employee timesheets
- Pastoral and religious bodies requirements
- Completion of Employment Separation Certificates (although we may provide the calculations, clients complete the form)
We will not be responsible for the accuracy or compliance with any payroll related matters for which we are engaged but which occurred prior to the commencement of our engagement. Sometimes, our ability to perform our services will be hindered by prior mistakes or inaccuracy of information prior to the commencement of our engagement, with some common examples being:
- Payroll software that has been set up incorrectly by a party other than SDP Factor1
- Incorrectly completed TFN Declarations or Superannuation Guarantee Choice forms
- Employees who have been set up incorrectly in the payroll software
- Deficient payroll software
- Underpayment of PAYG withholding in prior periods
- Underpayment of Superannuation Guarantee in prior periods
- Deficient record keeping
We will not conduct an audit of prior period payroll records unless instructed. If we identify any such issues, we will discuss these with you and if you choose to have SDP Factor1 investigate and resolve the issue for you we will be only too pleased to assist; however, our time in resolving the issues will be fully and separately charged as independent assignments in their own right.
5. Your rights and obligations under the taxation laws
The self-assessment System
The Australian tax system operates as a self-assessment system. This means that when your tax return, Fringe Benefits Tax (FBT) return or Business Activity Statement (BAS) is lodged, the Australian Taxation Office (ATO) accepts the information in the return at face-value and issues you with an assessment notice based on that information. It is important to understand that 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 in the topic below.
The Commissioner’s ability to amend an assessment
As explained above, the ATO accepts the information lodged in your return at face value. However, the ATO also has the power to amend the assessment if they find it to be incorrect. The following rules generally apply:
- For most individuals, the ATO can amend an assessment within two years after you receive your notice of assessment. If the individual carries on a business and is not a Small Business Entity, that period extends to four years.
- If the individual is a partner in a partnership or a beneficiary of a trust, the period is two years. If the partnership or trust carries on business and is not a Small Business Entity, the period extends to four years.
- The ATO can amend a company assessment within two years after the company receives a notice of assessment where the company is a Small business Entity. The same period applies where the company is a partner in a partnership or beneficiary of a trust that is a Small Business Entity.
- In any other case, the period is four years.
- The ATO can amend an assessment within two years after the trustee receives the notice of assessment if the trust is a Small Business Entity.
- If the trustee is a partner in a partnership or a beneficiary of a trust that is not a Small Business Entity, that period extends to four years.
- In any other case, 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 they believe there has been fraud or evasion.
Obligation to keep records
The tax laws specifically require taxpayers to keep records that properly explain the transaction they have entered into.
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.
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
In order for our practice to be able to lodge returns on your behalf, it is your responsibility to provide us with complete and accurate records. Further, in order to lodge your return on time, we will require you to provide us 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 Professional Code of Conduct contained in the Tax Agent Services Act 2009, which prevents them from acting for a client where insufficient records or information exists so as to be able determine the amount of the client’s income or deductions.
Records for clients operating in the cash economy
Because of the ATO’s concerns with dealings in the cash economy, there are particular recording imperatives for clients who operate in that sector. In particular, the ATO has a program of “benchmarking” standardised revenue returns for a wide range of cash businesses.
In circumstances where it is dissatisfied with a taxpayer’s records or recording systems, the ATO will often assess income tax and/or GST on what it considers to be an appropriate “benchmark” amount (plus penalties and interest) and then put the taxpayer to the task of disproving that assessment.
Where that occurs, the taxpayer is at a serious disadvantage and can be put to a great deal of cost and effort in disputing the assessment.
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 to ensure 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. Upon providing the ATO with all the relevant facts, they will provide you with a ruling setting out their view on the proper tax treatment of the issue requested to be ruled upon.
Objecting to an assessment
If the ATO issues you with an assessment that you do not agree with, you have the right to lodge an objection to that assessment. The objection must be lodged with the ATO within either two or four years. As to which period applies, this is determined in the same way as the discussion above under the heading ‘Commissioner’s ability to amend an assessment’.
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 Appeals Tribunal or to 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 Appeals Tribunal, 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.
Your protections under TASA
The Tax Agent Services Act 2009 (TASA) and complimentary amendments to the applicable taxation administration legislation provide statutory protections for taxpayers who engage registered tax agents.
In particular, as your tax agent, we are bound by a statutory Code of Conduct which is administered by a new national Tax Practitioners Board. That Code requires us, amongst other things, to act lawfully in your best interests and with honesty and integrity in the performance of our duties.
In addition, as the client of a registered tax agent, you have statutory “safe harbour” exemptions from penalties in certain circumstances.
When did the safe harbour provisions commence?
The safe harbour can only apply for returns lodged on or after 1 March 2010.
How does the safe harbour work?
In order to benefit from the safe harbour should the need arise, it is a requirement for you to ensure that you provide us with all of the 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 complete and accurate.
It is equally important that you provide us with this information by the time it is requested so as to allow the return to be lodged by its due date. The safe harbour from late lodgement penalties can also apply where a Business Activity Statement, Instalment Activity Statement, or Fringe Benefits Tax return is lodged late.
What does the safe harbour apply to?
Whilst the safe harbour can apply to exempt the penalty for an error made in a tax return, it is important to note that the tax and interest will be still be payable.
What if the safe harbour does not apply?
Even if you are not eligible for the safe harbour, it is still possible to request the ATO remit or reduce the penalty.
6. Our obligation to comply with the law
- We have a duty to act in your best interests. However, the duty to act in your best interests is subject to an overriding obligation to comply with the law even if that may require us to act in a manner that may be contrary to your interests. For example, we could not lodge an income tax return for you that we knew to be false in a material respect.
- We also have an obligation to ensure that we manage conflicts of interest as they arise. In this regard, we have arrangements in place to ensure that we manage potential or actual conflicts of interest. The effective operation of these arrangements depends, in part, on you complying with your obligation to disclose any potential conflicts of interest to us.
- Our advice and/or services will be based on Australian taxation law in force at the date of the provision of the advice and/or services. It is your responsibility to seek updated advice if you intend to rely on our advice at a later stage. We note that Australian taxation laws are often subject to frequent change and our advice will not be updated unless specifically requested by you at the time of the change in law or announced change in law.
- We will not disclose any information relating to your affairs to any third party without your consent, unless required by law. You may provide us with permission to disclose your confidential information in certain circumstances, or place conditions on the disclosure of certain confidential information. If you do so, we will have permission to disclose the relevant information accordingly, in the performance of our services, unless you instruct us otherwise in writing.
- We wish to draw your attention to our firm’s system of quality control which has been established and maintained in accordance with the relevant APESB standard. As a result, our files may be subject to review as part of the quality control review program of Institute of Chartered Accountants of Australia which monitors compliance with professional standards by its members. We advise you that by accepting our agreement you acknowledge that, if requested, our files relating to this agreement will be made available under this program. Should this occur, we will advise you.
- Data is stored on servers and back up devices located in Victoria, Australia. We also use Cloud based software and the vendors of these applications store data securely in Australia and Internationally.
- We charge a fixed fee for most of our services. However, some items may fall outside of our fixed fee structure. Before any additional work is completed that will result in extra fees, you will be notified in advance. Please refer to clause 8(b) in the schedule for our charge out rates.
- Our rates vary depending on the level of experience of the team member involved. Our current hourly rates vary from:
- Directors $275
- Manager $220
- Senior Accountant $165
- Accountant $140
- Administration Support $120
Per hour plus GST. These rates may change from time to time. The new rates will apply from the date of the change.
- Fees are estimates based on our experience with clients of similar size in your industry and our understanding of the job, should circumstances be different, we reserve the right to revise the estimates, however if a revise is needed, we will seek your written consent as soon as possible.
- SDP Factor1 will issue an invoice to you for services performed. Payment will be due in full no later than 14 days from the issue of the invoice.
- If the amount payable on invoice is not paid within the due date, at our discretion, the amount owing may be referred to an external collection agency. You agree to be responsible for any collection costs, including commission fee, relating to the collection of any overdue amounts owed to SDP Factor1.
- For all year-end work that comes into our office, we will lodge the relevant tax returns with the ATO once one of the following has been completed:
- Payment has been received in full
- If you are on a monthly agreement, payments must be up to date, or
- A direct debit payment plan has been agreed.
- If we have been engaged to act as your ASIC agent, 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, namely:
- ASIC fees
- New company and trust deed orders
- Other specific disbursements notified from time to time
For all other disbursements (couriers, searches, photocopying etc) the treatment will be the same as for professional fees – this firm will incur the costs at first instance and invoice them on 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.
9. Limitation of Liability
Our liability is limited by a scheme approved under Professional Standards Legislation. Further information on the scheme is available from the Professional Standards Council – www.psc.gov.au.
10. Ownership of documents
The final Financial Statements, Income Tax Returns and any other documents which we are specifically engaged to prepare, together with any original documents given to us by you, shall remain your property. However, we reserve the right to make a reasonable number of copies of the original documents for our records. All other documents produced by us in respect of this agreement will remain our property. You will allow us to place a lien over any documents we hold on your behalf, until any outstanding invoices from us are paid in full.
- Our services will be performed in accordance with a timetable agreed with you.
- Whilst we will make effort to lodge returns by the due dates, any penalty or general interest charged is your responsibility. You agree SDP Factor1 will not be responsible for the payment of any penalties for late lodgement or interest on late payments.
The terms of this agreement will have continuous effect unless superseded by a new agreement or terminated. We will not continue to act for you if you:
- Do not pay our invoice, or
- Fail to give us adequate documentation or instructions.
13. Your acceptance of the terms of agreement
There are many matters to consider in this agreement and we ask that you consider all aspects of this letter to ensure that you are satisfied with the scope of our agreement. Please contact us if you have any queries about this letter.
We now provide SMS delivery alongside the standard email delivery for the digital signing of documents. This will give you the choice to sign by using your mobile phone or computer. Please notify us if this is NOT something you would like to receive via SMS.
A copy of this agreement, either in digital or physical format, should have been provided to you for your signature and dating. All parties who accept the terms of the agreement should also sign it, and then submit it to us as evidence of their acceptance.
We thank you for the opportunity to provide accounting and taxation services to you and your Group.
If you wish to discuss any of the terms within this agreement, please contact your Account Manager.