Existing BAS Laws Section 251L
The Law As It Stands – Section 251L
Section 251L of the Income Tax Assessment Act (1936) was amended in 2000. The intention of the amendment was to alleviate Tax Agents of some of their workload by paving the way for BAS Services to be provided by non-tax agents.
S.251L allows the following persons to provide BAS Services:
- A person who is a member of a recognised professional association (RPA) as defined under S.251LA. There are seven such RPAs, all of whom are accounting bodies. They are Association of Chartered Certified Accountants (ACCA), Association of Taxation & Management Accountants (ATMA), CPA Australia (CPA), Institute of Chartered Accountants in Australia (ICAA), National Institute of Accountants (NIA), Taxation Institute of Australia (TIA) and Chartered Institute of Management Accountants (CIMA).
- A person who is working under the direction of a registered tax agent.
- A payroll services provider preparing a BAS only for PAYG withholding obligations.
- A licensed customs broker providing BAS services relating to imports or exports to which certain indirect tax laws applied.
Persons providing BAS services, other than registered tax agents or those qualifying for one of the above four exemptions, are liable to prosecution and fines of $22,000 per offence.
S.251L(7) defines a BAS service as any of the following:
- Preparing or lodging an approved form about a taxpayer's liabilities, obligations or entitlements under a BAS provision;
- Giving advice about a BAS provision (GST, WET, LCT, Fuel Tax, FBT and PAYG); or
- Dealing with the Commissioner or a person who is exercising powers or performing functions under a taxation law in relation to a BAS provision.
The following two documents provide the best reference on the ATO’s current interpretation of what constitutes a BAS Service:
- A document entitled Important information for bookkeepers providing BAS services. This can be downloaded from the ATO website at http://www.ato.gov.au/print.asp?doc=/content/40604.htm
- Taxation DeterminationTD 2005/16 which deals with services provided by a range of persons including non-tax agent accountants, real estate agents, financial planners and bookkeepers. The ruling is significant and should be read in conjunction with the aforementioned Fact Sheet. This can also be downloaded by searching for TD 2005/16 from the ATO legal database at http://law.ato.gov.au/atolaw/browse.htm?ImA=MainMenu
The definition of a BAS service is a wide one. Some bookkeepers believe their services do not constitute BAS service when in fact they do. Some of the more common myths and misconceptions are detailed here.
“I don’t actually lodge the BAS – the client signs off on it”
The ATO have made it very clear that they will look to the substance of the arrangement, not its strict form. If a bookkeeper represents to their client that their work can be used as a basis for preparing or lodging a BAS, then they have provided a BAS service. The fact that the client signs off on the BAS and may be the one that physically lodges the BAS is irrelevant.
“I produce BAS like reports from accounting software but then the client takes it from there. They complete the actual BAS themselves.”
The ATO have a specific example on this on their website (the “Norm” example). If a bookkeeper represents to their client that the BAS like report should be used as a basis for completing the Tax Office supplied BAS, then they have supplied a BAS service.
“I provide a total bookkeeping service, but I don’t charge a separate fee for doing the BAS”
If you provide BAS services, but do not explicitly or separately charge for it in your fee, you are still caught. The Tax Office takes the view that the fee for a total bookkeeping service includes a fee for providing a BAS service.
“The client in question is a mutual client of mine and the Tax Agent's – therefore, I’m covered”
The following wording is straight off the Tax Office’s website at http://www.ato.gov.au/businesses/content.asp?doc=/content/68591.htm&page=44&H44.
“Sharing a client is not an agreement: Where a tax agent and a bookkeeper merely share a client (that is, the bookkeeper provides BAS services and the tax agent provides other tax agent services, but there is no agreement that the bookkeeper is working under the tax agent’s direction), paragraph 251L(6)(b) of the ITAA 1936 has not been satisfied. In these circumstances, the tax agent does not have any assurance obligations and the bookkeeper cannot claim to be working under the direction of that tax agent.”
“I am on good terms with my client’s accountant and I can run any questions I have past them. Therefore, I can provide BAS services using the “working under the direction” exemption”.
In order for a bookkeeper to be ‘working under the direction of a registered tax agent’, the registered tax agent must have a risk-based quality assurance process in place to review the BAS services provided by the bookkeeper for accuracy and completeness, and be satisfied with the standard of BAS services provided. The ATO have a comprehensive document Guidelines for 'working under the direction of a registered tax agent’ which sets out the requirements of such a process. The process is a comprehensive one which requires a great deal of interaction between tax agent and bookkeeper. There is also a significant investment of time for the bookkeeper and tax agent alike to formulate an arrangement which complies with the ATO requirements. Being able to refer any questions to a client’s tax agent falls well short of the onerous requirements of the ATO risk-based quality assurance process.
“I am a member of a large franchise group. Therefore, I can provide BAS services using the “working under the direction” exemption”.
Simply becoming a member of a franchised group doesn't allow a bookkeeper to prepare a BAS on behalf of their clients and charge for the service. Even if the head of the franchise group were themselves a registered tax agent, this would still not be enough unless an ATO-compliant risk-based quality assurance process were in place between each specific bookkeeper and the registered tax agent.
Again, the ATO will look to the substance of the arrangement, rather than the form. Notwithstanding that there may be a written agreement in place between bookkeeper and client, if the client is - for all intents and purposes – using the bookkeeper’s work as a basis for preparing their BAS, then the existence of a waiver will make no difference. The agreement would need to stipulate who the client is relying on if not the bookkeeper. If the answer to this question was the client’s tax agent, then the Tax Office would be expecting that the client’s tax agent reviewed the bookkeeper’s work as part of a risk-based Quality Assurance framework.