7.12 Bookkeepers undertake bookkeeping functions for businesses, either internally or externally to the firm. They generally provide a lower cost option for small businesses than tax agents.
78 These accountants are employees of tax practices and obtained their accounting degree five or less years ago.
7.13 Since the introduction of The New Tax System, the bookkeeping industry has grown significantly, largely due to the significant role played by bookkeepers in the preparation of BASs. ABS data indicate that there were 130,800 bookkeepers in Australia in February 2007, compared to 108,400 in February 2000.79
7.14 A 1996 Yellow Pages survey reported that 28 per cent of small businesses used the services of an internal bookkeeper. This proportion rose as the number of employees and the turnover of the business increased. Evans et al reported that 76 per cent of the financial records of small businesses were maintained in-house, with a further 9 per cent using the services of an external bookkeeper. 80
7.15 Under subsection 251L(6) of the ITAA 1936, bookkeepers can receive a fee for the provision of a BAS service if they are a member of a recognised professional association (RPA — as defined under the Act) or under the direction of a registered tax agent.81 The ATO estimates that around 10 to 15 per cent of bookkeepers prepare and lodge BASs on behalf of clients.
7.16 The quality of the service provided by bookkeepers can vary, but unlike tax agents, they are not directly regulated. According to the ATO, around 35 per cent of bookkeepers have no formal qualifications and more than 40 per cent have no formal training. The Australian Association of Professional Bookkeepers has noted that the 2002-03 Auditor-General’s report found that more than 27 per cent of the 9.7 million business activity statements contained errors.82
7.17 The ATO works closely with bookkeepers, their industry representatives and professional accounting associations to support the role bookkeepers play in the tax system.83 However, some tax agents have suggested that issues may still arise in ensuring that all parties are protected, including clients. Those tax agents commented that they feel vulnerable because of the possible errors, for which they are liable, caused by bookkeepers preparing BASs under their supervision.
7.18 High standards of bookkeeping will reduce the risk to taxpayers who use bookkeeping services and the registered tax agents who direct the providers of BAS services.
7.19 The exposure Bill and Regulations for the planned new tax practitioner regime (see Box 7.2) will widen the scope of the regulatory framework to incorporate BAS
79 ABS Labour force Survey, Australia –DEWR trend data, cited at http://jobsearch.gov.au. 80 Yellow Pages (1996) and Evans et al (2005) quoted in Atax p 15.
81 As well as those providing payroll services and customs broking.
82 Quoted in ‘Number crunchers count cost of errors ‘, The Age, 1 September 2006.
83 The ATO has established a Bookkeeper Advisory Group to provide input into the design of administrative interactions between bookkeepers and the ATO. See ATO Compliance Program 2007-08 p 62.
service providers.84 It proposes to regulate those persons who are in the business of providing BAS services, but not regulate bookkeepers in general. Under the exposure draft Bill, an entity (including a bookkeeper) will be required to register if they are providing, or propose to provide, any service for a fee that relates to advising, ascertaining or satisfying the liabilities, obligations or entitlements of an entity under a BAS provision, provided in circumstances where it can reasonably be expected to be relied upon. BAS service providers will have access to assistance from the Tax Practitioners Board, from the RPAs and from educational institutions to increase their knowledge of the tax laws and obtain ongoing professional education and support. They will also be subject to the requirements of the Code of Professional Conduct and associated sanctions for breaches.
Box 7.2 The New Tax Practitioner Regulatory Framework
On 9 May 2006 the then Minister for Revenue and Assistant Treasurer announced that the Government would provide funding for implementation of a new national legislative framework for tax practitioners.
The new regime will:
• establish a national Tax Practitioners Board, to replace the existing state Tax
Agents’ Boards;
• create a code of practice (the ‘Code of Professional Conduct’) to govern the
provision of tax practitioner services;
• allow a more flexible approach to regulating tax practitioners through a wider
range of disciplinary sanctions; and
• provide for a safe harbour from tax shortfall penalties for false and misleading
statements for taxpayers where they engage a registered tax agent to prepare their return and take reasonable care to provide that person with all of the information necessary to complete it.
The new regime will also provide for the registration of Business Activity Statement (BAS) service providers and enable the registration of certain types of tax specialists. ‘A national framework will ensure consistency in the registration and regulation of tax practitioners’, the Minister said. The new funding will enable the streamlining of registration and regulation processes, and provide better and more flexible regulation through access to a greater range of sanctions plus an enhanced ability to undertake proactive regulatory work. In addition, the new funding to the ATO will allow it to provide tailored services to a wider range of tax practitioners. Together, these initiatives should ensure that tax practitioner services are high quality and accessible and that taxpayers who use tax practitioners have greater certainty and appropriate protection.
Source: Minister for Revenue and Assistant Treasurer Press Release 016, 2006.
84 Minister for Revenue and Assistant Treasurer’s press release 2006/16 at http://assistant.treasurer.gov.au/pcd/content/pressreleases/2006/016.asp.