Tax Practitioners Board, BAS Lodgment - Case Study Example

Surname Institution Course Code Year Tax practitioners in Australia may include: Tax agents, BAS agents or tax advisers also referred to as financial advisers. These practitioners are charged with the responsibility of lodging tax returns, notices or statements and provision of tax advice. It is mandatory for them to be registered with the Tax Practitioners Board (TPB). This paper delves into Australian tax agent services, BAS lodgement program, code of professional conduct for tax practitioners, payroll tax and other relevant legislation applicable to the tax practitioners. BAS Lodgment BAS should be lodged by the due date to avoid penalties. This is usually done using the following methods: electronically, via mail or the phone (for nil lodgments). The options available for online lodgement are: through the business portal, through the Standard Business Reporting (SBR) software, using the Electronic Commerce Interface (ECI) or using individual online services. The Australian Tax Office usually sends a notification to individuals whose BAS is available.The lodgment by phone is applicable for individuals with nil lodgments only. This service is available every day. The original BAS statement can be posted via email accompanied by cheque on a pre-addressed envelope that comes with the BAS package. Goods Services Tax (GST) and BAS statement Goods Services Tax (GST) is a tax of 10% applicable to goods, services or other items purchased in Australia. When a consumer pays GST amounts or claims GST credits, she/he does so by lodging a BAS (Business Activity Statement) or GST annual return. The BAS statement is issued two weeks before the reporting period. For GST, this happens after every three months. The date of lodgment and payment is usually shown on the BAS. The BAS is a tax report required by the Australian Tax Office. It should be issued on a monthly or quarterly basis from businesses. BAS is used when reporting and paying Goods and Services Tax (GST), pay as you go (PAYG) installments, PAYG withholding taxes and other tax obligations (Australian Tax Guide, 76). On registration of the Australian Business Number (ABN) and GST, one automatically gets the BAS when they want to lodge. For businesses registered for GST, the BAS should be lodged by the due date. The modes used to pay the BAS are BPAY, direct credit, direct debit, mail or in person via the Australian post. The payment should be made before it is due. The due dates for lodging and paying the BAS are usually displayed on the BAS statement. If the due date falls on a weekend or a public holiday, the BAS form can be lodged and paid on the next business day. The quarterly reporting should be as follow: for the months of January, February and March, due date is 28th April. For the months of April, May and June, the due date is 28th July. For the months of July, August and September, due date is 28th October. For the months of October, November and December, due date is 28th February. For the monthly BAS reporting, the due date is usually on the 21st day of the following month (Australian Tax Guide, 56). Tax Agent Services A Tax Agent Service is one that relates to advising clients about entitlements, liabilities or obligations of entities under the taxation law. A Tax Service Agent can also be a representative of an entity dealing with the Commissioner of Taxes on matters about the taxation law. If one is not a registered tax service agent, they should not charge fees for services deemed to be tax agent services. Lawyers who lodge tax returns are also required to register as tax agent services providers. The tax agent service in Australia is governed by the Tax Agent Service Legislation. This legislation comprises of the Tax Agent Services Act 2009, Tax Agent Services Regulation 2009, Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 and Tax Laws Amendment (2013 Measures No. 3 Act 2013). BAS Tax Agents Qualifications The Tax Agent Services Registration (TASR) 2009 sets us the qualifications and experiences needed for one to become a BAS tax agent. They include undertaking a GST/BAS course and or having an academic qualification of Accounting Certificate Level IV. The qualification should be from a viable training institution. The BAS/GST course is used to test the basic taxation principles. The TPB may place a conditional registration on a tax agent. Such registration limits the scope of activities the tax agents may provide. Registered tax practitioners are also required to undertake Continuing Professional Education (CPE) to renew their registration. The CPE activities will be confirmed by the Tax Practitioners Board before renewal of registration (Australian Tax Guide, 16).The Tax Practitioners Board CPE policy states any course that adds relevant skills to the BAS agent is considered a CPE. BAS agents are also required to undertake a minimum of 45 hours of CPE within the three-year duration. The minimum hours each year should be five. The BAS agent should maintain a clear record of CPE activities undertaken. Such records should be maintained for six years. Exemptions are given to members of relevant associations. In such a case, records should be maintained with the specific association. The following contents of ABN qualify as appropriate CPE: Bookkeepers Knowledgebase, ABN Conference, ABN Coffee clubs, Pillars f public practice and ABN Webinars. The BAS agent should also be a fit person with a sound mind. She/he should also have and 1400 hours of relevant tax experience within the past four years. If the applicant belongs to a tax agent association, the 1400 hours of relevant experience are reduced to 1000. The Australian Bookkeepers Association is a tax agent association. Members of Australian Bookkeepers Network (ABN) also become members of Australian Book Keepers Association. (ABA) However, being a member of a BAS agent association alone does not qualify one to be a BAS Tax Agent. If one is not a BAS agent, ABN BAS can opt to provide services for his/her clients through the Quality Assurance Reviews and BAS lodgement program. Payroll Tax The payroll tax is a tax required by the state on wages paid or payable by employers. It applies to all Australian states and territories. In the payment of payroll tax, wages comprise of salaries, allowances, director’s fees and the gross value of fringe benefits. Employers need to check their payroll liabilities on a monthly basis. AT the end of the financial period, employers need to perform an annual adjustment reconciliation of the payroll taxes. For employers with an annual payroll of above$550,000, it is expected that they check the registration requirements and the rates of payroll taxes applicable to their states. There are various revenue offices situated in different territories that aid in identifying and assessing tax liabilities (Australian Tax Guide, 35). The payroll process in Australia has five key steps that form the complete payroll cycle. They include: processing a pre-payroll, printing payments, adding journal entries, running payroll reports and running the final update. The specific process of processing payments entails utilizing country-specific programs to create information concerning payment. Concerning tax information, the system enables one to set up the tax information and to review tax setups. Superannuation contributions data can be reported through the system. Termination can be tax through the system after submission of complete tax calculations. Finally, the system enables report of government tax by generating necessary reports and files. Termination codes are used to identify the reasons for an employee’s termination. Such reasons include redundancy, disability, death or normal resignation. ATO, also the preservation age in the calculation of payroll tax. Preservation age is determined using the preservation age code. If the preservation age is higher than the employee age, a higher tax rate is applied to calculate the Employee Termination Payment (ETP). If the preservation age is lower than the employee age, the tax rate applicable also becomes lower. Code of Professional Conduct The code of professional conduct acts as a regulatory mechanism for BAS agents, registered tax agents, and tax advisers. The code outlines the principles required in five distinct areas. The code of professional conduct also compels one to hold the Professional Indemnity(P.I) Insurance to a specific level. Honesty and Integrity Persons dealing with tax information should do so with honesty and integrity. They should also uphold tax laws at all times be it in personal or in professional conduct. Independence A tax agent should always put first the client’s interests. The tax agent should have provisions in place, in any case, there arises a conflict of interest between him and the client. Confidentiality This is a key virtue. A tax agent should not disclose any information about the client’s tax obligations to third parties without the client’s permission. Competence A tax agent must ensure that the tax agent services provided by him/her are competent. They must also ensure that taxation laws are applied competently to the tax cases being handled. One should also seek to continually improve the knowledge and skills needed to provide competent services to the client. Other Responsibilities Other responsibilities are: to maintain the professional indemnity insurance required by the board, to respond to Board recommendations on a timely basis, not knowingly obstructing administration of tax laws and advising of the client on his/her obligations and rights under the taxation law.The code of conduct for tax and BAS agents is well outlined in the TPB (EP) 01/2010 Code of Professional Conduct. The obligations for tax advisers outlined in the code are very similar to those of the holders of Australian Financial Services(AFS) Licenses (Australian Tax Guide, 98). To effectively comply with the code of professional conduct, the Australian Tax Office (ATO) has provided additional information such as reasonable care, letters of engagement, passing on refunds, conflict of interest management, and client information confidentiality and holding money on trust. Processing accounting data that complies with tax reporting requirements The report detailing tax information for an entity is reported annually. This information entails that in the tax returns and amendments for entities which need to pay Petroleum Resource Rent Tax (PRRT) and Mineral Resource Rent Tax (MRRT) (Australian Tax Guide 69). Production of the report Reports are produced for corporate tax entities. These tax entities include corporate limited partnerships, corporate unit trusts, and public trading trusts.The report contains information derived from returns and amendments by the specific entity. This report is for corporate tax entities which have lodged tax returns. Report Data Sources The source data contained in the report is found in the following tax return labels: total income, taxable income, tax payable, MRRT payable and PRRT payable. Total income comprises of the gross revenue, foreign source income, and exempt income. Expenses are not included in the total income; therefore the figure does not allow for income earnings. Taxable Income includes non-deductible items that cause an increase in taxable income. Tax payable is usually derived by multiplying taxable profits by 30% corporate tax. There are allowable and disallowable expenses that are also factored into this figure. Reporting of entity tax Entity taxes are reported at the corporate entity tax level. Entities may, however, be a representation of economic groups. Economic groups belong to one or more tax groupings with non-consolidated entities within them. Such entities belong to sectors of the Australian economy that are characterized by economies of scale and cross-border trade (Australian Tax Guide, 47). Legislation Entities are allowed to use different forms of legal structures that they deem fit. The tax burden may, therefore, differ for entities in similar sectors depending on the legal structure adopted. Economic groups may be made up of different entities. This requires them to lodge tax returns for individual entities in the group. Economic groups may also report tax information by one entity paying tax for the whole group. This means that other entities that are part of the economic group will, therefore, report nil tax payable. Private companies associated with private groups may be taxed at the individual level rather than the corporate level. If associated companies fail to meet the tax requirements under the law, ATO does not publish its taxes. Renewal of tax agent registration A BAS agent or tax adviser should renew their registration at least 30 days before the expiry date. ATO sends the notice of expiry of registration to tax agents at least 60 days before the expiry date. Tax agents remain registered until they are notified of the outcome of their registration renewal application. Civil Penalty Provisions They are enlisted in the Tax Agent Services Act (2009). Tax practitioners are mandated to comply with the regulations contained in these provisions. A tax practitioner who uses the tax services of another tax practitioner who has been deregistered within 12 months breaches the civic penalty provisions. Other scenarios where these tax practitioners can breach these provisions are: when they give false statements to the tax commissioner when they append their signatures on tax statements or other declarations prepared by other persons other than themselves, other registered tax agents or other persons working with them. In the case of other persons working with them, the tax practitioners should take an additional step of verifying the tax statement (Australian Tax Guide, 42). There are safe harbor provisions that apply to clients of BAS agents who encounter errors during their lodgment programs. BAS agent registration is valid for a three years duration before renewal. Procedures to be undertaken in Case of Change of Circumstances When circumstances of registered tax practitioners change, they should inform the Tax Practitioners Board concerning the changes in writing. Such changes may include: Failure to meet tax requirements partly or in whole or occurrences of events that tamper with the tax practitioner’s registration. In the case of partnerships and companies, additional regulations are applicable when there is a change in key personnel such as partners and directors. The Tax Practitioners Board maintains a register of all BAS agents. A registered agent symbol is done through supporting the system. This symbol enables the tax practitioners to be identified with the Tax Practitioners Board. Professional Indemnity Insurance The Tax Agent services Act 2009 requires tax agents to maintain Professional Indemnity Insurance (PI). The PI should meet the requirements of the ATO. If the tax practitioners fail to meet the requirement, they will be in violation of the code of professional conduct and may risk deregistration (Australian Tax Guide, 40). The PI insurance acts as a cover for tax practitioners for claims by clients who may suffer a loss during the administration of tax agent services. The PI insurance should be maintained by tax agents within 14 days of notification of their registration. ATO’s PI requirements are in tandem with those of Australian Securities and Investment Commission (ASIC) save for two key exceptions. The first one is that the PI insurance coverage should include the tax advice. ASIC, on the other hand, does not require an extension of the tax advice. The PI requirements apply to all members registered with ATO and not just licensees of AFS. Registration as a BAS tax agent Registration as a BAS agent has different requirements. These requirements vary with the type of registration. There are three different types of registration: registration as an individual BAS agent, registration as a company BAS agent and registration as a partnership BAS agent. Registration exemptions apply to employees or contractors of registered BAS or tax agents. Safe Harbor Provisions They are set out in the Tax Administration Act and are administered by the Australian Tax Office. ATO or a court tribunal may decide to administer safe harbor provision to a tax practitioner in cases where the tax practitioner fails to exercise reasonable care. Such a finding leads the TPB to assess whether the tax practitioner has breached the code of professional conduct. The code items that might have been breached in such a situation are code items 9 and 10. Code Item 9 states that the tax agent should exercise reasonable care when evaluating the client’s tax information. Code 10, on the other hand, states that the registered tax practitioner should exercise reasonable care with applicable of tax laws. The tax laws should be relevant to the client’s tax situation. An investigation into the agent’s activities will then be launched to determine whether they are guilty of breaching the code of professional conduct. The TPB determines whether such investigation is applicable on a case to case basis. The tax legislation provides tax practitioners with guidelines on every area of their practice and also enables Australian citizens to receive competent tax services. The code of professional conduct primarily should be abided by at all times for tax practitioners to avoid litigation issues with their clients. Work Cite Rodgers, Robert, and Peter Lucas. Bookkeeping and Accounting Essentials. South Melbourne, Vic: Cengage Learning Australia, 2011. Print. Australia Tax Guide: Volume 1. Washington: International Business Publications, USA, 2010. Print. Read More