Accountants urged to hike fees as new rules squeeze industry

Code of conduct changes will increase workloads and practitioners must charge clients accordingly, expert John Jeffreys says.

AUSTRALIA – Accountants should raise their fees to cope with new obligations from the government that will increase costs and workloads, an industry expert has said.

In a recent webinar, John Jeffreys said recent changes to the tax agent code of conduct would slug practitioners with increased quality management, client record keeping and supervision requirements, more TPB investigations and higher registration fees.

Jeffreys said accountants raising fees in response would be “inevitable” and clients who resisted paying extra should be dropped.

“Will fees increase? I think that has to be an inevitable outcome,” he told webinar participants on Tuesday.

“[The obligations] are going to take you more time. Are you going to charge your client or not? I suggest that you should.”

“There may be some clients who simply will not pay for the extra work that you have to do, then you’ll have to think about whether you want them as a client. Maybe that’s a good thing.”

The new rules were introduced through a legislative instrument by Assistant Treasurer Stephen Jones in early July and were set to start on 1 August.

After intense industry backlash over the obligations and short implementation time frame, Jones announced last week that small firms with fewer than 100 employees would be given until 1 July next year to comply.

The start date for larger firms with more than 101 employees would be 1 January.

In the meantime, Jones said practitioners would still be expected to take genuine steps towards compliance during the transitional period.

Despite the deferred start date, Jeffreys said the obligations would take a “lot of work” to implement and require many practitioners to overhaul their internal processes.

“I can hardly remember a matter that has had so much media attention from the tax and accounting community in my 40 years of being in this practice, at least from the point of view of the workload of what tax practitioners have got to do,” he said.

Quality management to be the ‘most work’

Under the changes, he said tax agents would be forced to establish and maintain documented quality management systems – a requirement only around one-quarter of webinar attendees said they had in place.

“This item is the one that is going to take the most work,” Jeffreys said, particularly for sole practitioners and small firms who might need to develop their systems from scratch. “Nobody is exempt.”

Jeffreys said merely having a quality management system on paper would fail to comply with the new code rules and free templates made by professional bodies were also inadequate.

“Quality control systems of the professional bodies are helpful however they will not take you all of the way … what’s going to be important in the long run is whether you have contemporaneous documents.”

“Quality management has got to be a daily thought process in everything you’re doing when you’re talking to clients, when you’re giving advice, and when you’re producing a tax return.”

The rules also mandate more extensive record keeping, including documentation of client interactions and the reasoning behind tax advice.

“This is probably going to increase fees,” Jeffreys said. “If you’re used to not documenting fully the interactions with your client, and now you need to, that’s going to take you more time.”

New supervision obligations mandating tax agent services done on a practitioner’s behalf are provided competently could require increased staff training sessions and affect those who outsourced work.

“I don’t think there’s any exemption for people where you’re outsourcing your accounting work, often it’s offshore,” he said.

“Those who are doing work on your behalf must be competent and supervised properly, and it’s you that has to put in the effort to make sure that that’s happening.”

TPB probes, fees tipped to rise

Increased TPB investigations and registration fees were also another “inevitable” outcome, Jeffreys said.

“The TPB is funded out of your registration fees. So, if the TPB gets more people, your registration fees are going up. And I think that that is just inevitable,” he said.

He added that practitioners should start making changes now and not rely on TPB guidance to significantly narrow their new obligations.

“The minister referred to these changes as ‘modest obligations’ … but for some of them, they’re quite challenging and ‘modest obligations’ gives you an indication of just how little change will be made to this legislative instrument between now and when it’s enacted.”

Christine Chen
AUTHOR
7 August 2024

Christine Chen is a graduate journalist at Accountants Daily and Accounting Times, the leading sources of news, insight, and educational content for professionals in the accounting sector.