INTHEBLACK September 2021 - Magazine - Page 37
SPECIAL ADVERTISING FEATURE
KNOW YOUR
LANE TO STAY
OUT OF TROUBLE
A M ID RIS IN G TAX LAW
CO MP L EXITY, IT IS IMPERATIV E
THAT TAX AGENTS UNDER STAND
THEIR BO U N DAR IES WHEN
G IVIN G A DVIC E TO C LIENTS.
W
HEN ADVISING CLIENTS,
accountants need to be aware of,
and stay within, the scope of their
engagement and their expertise. They not only
risk breaking the law by providing advice
they’re not appropriately licensed to give, but
should they fail to deliver services competently,
they’ll find themselves in breach of the Tax
Agent Services Act 2009 Code of Professional
Conduct or other provisions of the Tax Agent
Services Act 2009.
Overstepping the mark can lead to legal
claims, which are escalating as regulations
tighten, according to QBE Insurance panel
expert lawyers Matthew Curll and Frank
Hinoporos of Hall & Wilcox. They point to
financial penalties, disciplinary action, client
loss and increased insurance premiums as
common outcomes – “a real double penalty for
an accountant whose insurer is forced to pay
out a claim”, Curll says.
Critically, if a practitioner is found to
have contravened the limitations of their
professional indemnity (PI) policy – by
committing fraudulent or dishonest acts, for
example, or tipping clients towards specific
investments – they could be left uninsured
and severely out of pocket.
TOEING THE LINE
Activities that tend not to be automatically
included in accountants’ PI cover range from
investment advice and financial planning to
mortgage and finance broking, insolvency,
corporate advisory around mergers and
acquisitions and buying or selling a business.
If accountants wish to be properly insured for
these activities, they should raise this with their
insurer. For certain other scenarios involving
complex law – those events or transactions
that go beyond “business-as-usual”
compliance – Hinoporos believes practitioners
need to self-assess their competency to
provide advice, particularly if they don’t
handle similar cases on a regular basis.
Specialist expertise, he says, is often
required for common “landmines” such as
stamp duty and areas where the Australian
Taxation Office (ATO) has an "aggressive
compliance focus", including the small
business capital gains tax concessions,
shareholder loans (Division 7A), aggressive
tax planning involving trusts and complex
offshore arrangements. It also extends to
situations that carry significant tax risk, like
ATO audits, or have the potential to snowball
over time if mistakes are made that may have
implications at a later point or over time, such
as when structuring a business.
“The common thread for all of these things
is that they’re complex,” Hinoporos says.
“They create binary outcomes and the ATO,
with the benefit of hindsight, is always going
Fenton Green is QBE’s broker partner
to provide CPA members with
professional indemnity insurance.
They are licensed, authorised and
experienced to discuss your
practice’s insurance
requirements. Please get in touch
with them if you have a specific
question about your QBE professional
indemnity insurance coverage.
to have the upper hand, with the client trying
to defend what they did at the time.”
MITIGATING RISK
When considering whether they’re the right
person for a job, accountants should assess
the level of risk involved, factoring in the dollar
value of the transaction, the complexity of the
issue and their technical limitations.
If they are confident to take on the brief,
but wish to mitigate their risk exposure, Curll
recommends having their advice sensechecked. Likewise, when providing
conceptual or "high-level" information, they
should make it clear to the client that it is not
a definitive answer.
“It’s really important that a rider, or
limitation of liability, gets sent to clients in
writing, as the lack of contemporaneous
records can be a disaster for accountants
if they need to defend their position or are
alleged to have provided specific advice.”
If the request is out of scope, practitioners
can outsource advice to a specialist tax
lawyer or accountant, Curll says they should
first determine that the person or firm they’re
referring work to has the relevant expertise
and is a good “fit” for their client.
It also pays to consider whether the
specialist will enhance or challenge their client
relationship, Hinoporos adds, suggesting that
small practices, in particular, can use external
support to their advantage.
“With a good network of advisers that you
can bring in to help you out when things get
more complex or risky, you can keep that
long-term client relationship and not run the
risk of having another firm take it away.”
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