This week, the TPB released the practice note TPB(PN) 2/2018 Outsourcing and offshoring - Code of Professional Conduct considerations aimed at helping registered tax and BAS agents understand their obligations under the Code of Professional Conduct in the Tax Agent Services Act 2009 in relation to the use of outsourcing and offshoring.
Speaking to The Bookkeeper, All That Counts director Lielette Calleja said she believes there are some who choose not to disclose offshoring arrangements due to stigma.
“I have seen more open discussions about it on the different forums which indicate more people are resorting to offshoring or at least giving it serious thought,” said Ms Calleja.
“I’m sure there are many who offshore and prefer to say nothing as there is still a stigma on keeping the work local.”
Emphasising on appropriate disclosure, the TPB has reminded tax practitioners that it must not disclose any information relating to a client’s affairs to a third party unless they have the client’s permission or has a legal duty to do so.
“While there is no set formula or methodology used to obtain client permission, the TPB suggests that registered tax practitioners be clear in explaining to their client where information may be disclosed (including, among other things, where a component of work or add-on activity is completed elsewhere),” said the TPB in its release.
“For example, to avoid any likelihood of clients being misled, the TPB suggests that registered tax practitioners do not imply or state that all their work is completed in Australia, if that is not the case.”
Further, the TPB has singled out competence as an area of focus, warning that registered tax practitioners are ultimately responsible for the quality of work by the unregistered third party, including ensuring there are appropriate supervisory arrangements.
“When contemplating or using an outsourcing or offshoring arrangement, there is a need to carefully consider the extent to which this may impact on the ability to supervise work, noting that supervision and control should be commensurate with the nature and extent of the work undertaken,” said the TPB.
“It is also important to recognise that while supervisory arrangements may be an important factor in ensuring services are provided to a competent standard, it will not of itself ensure competency. It is not sufficient to simply say that ‘supervisory work’ is being undertaken and that work is being reviewed.”
However, the TPB has noted that there is no standard process to determine if registered tax practitioners have adequate supervisory arrangements in place, with several factors being used to determine, including quality assurance mechanisms, whether there is substantial supervision and the physical or geographic proximity of the tax practitioner to the third party.
Ms Calleja believes that while the quality of work has improved, being actively involved in the management of work will ensure a better outcome.
“The success of offshoring relies heavily on being a great communicator and being actively involved in the direction and management of the work that is assigned to them,” said Ms Calleja.
“It goes without saying that your back-office tools need to be up to scratch to manage the workflow, tasks, checklist and anything else that you would normally utilise in your local surroundings.”
What are the consequences?
Failure to ensure adequate procedures and policies have been applied to outsourcing and offshoring arrangements may attract administrative sanctions from the TPB, including a written caution, an order, a suspension of registration or a termination of registration.
“Where modification is required, the TPB will take a pragmatic approach in assessing whether a registered tax practitioner has implemented adequate procedures and policies in relation to their outsourcing or offshoring arrangements,” the TPB said.
“Ultimately, determining whether a registered tax practitioner has complied with their obligations under the Code will be a question of fact. This means that each situation will need to be considered on a case-by-case basis having regard to the particular facts and circumstances.”
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.