Love your tax agent
10 Jul 2014
83 month(s) ago
At tax time, it is important to know how important your tax agent is. There are pitfalls.
Self managed super fund trustees have many administrative duties to attend to and professionals to hire to ensure compliance. But one that is especially important is the tax agent, as the AFR points out. Many regard it as more important than accountants, auditors or other people on the administrative side. Especially at this time of year:
"Why the tax agent’s role may have a lower profile, says (Michael Hallinan, a special counsel with Townsends Business & Corporate Lawyers), is because quite often it is blended with that of the fund’s accountant or administrator. A tax agent can be the fund accountant or an employee of a professional fund administrator or someone the administrator has engaged to perform this role.
The role of the tax agent is to oversee the preparation of the fund’s annual return, including the financial statements, and then ensure this is lodged on time with the Australian Taxation Office. The agent then acts as the intermediary for any communications between the fund trustees and the ATO.
While people who use tax agents for their personal tax returns know this can simplify the annual reporting responsibility, not everyone with a DIY fund has the same understanding of their fund’s tax agent."
Accrding to the AFR, the ATO must go through the agent where it has any queries about the fund. But the ATO will generally not communicate with the auditor if it has any queries about a contravention the auditor may have reported.
"DIY fund trustees not appreciating the role of the tax agent is highlighted by a client complaint a super adviser recently put to SMSF Professionals’ Association technical director Graeme Colley about an administration service they belonged to. The client said he wanted his accountant to take over looking his fund but was concerned after hearing that if he did then the administrator would cancel the fund’s account with the ATO.
"While this might seem a dramatic gesture by the administrator, says Hallinan, what it indicates is that the administrator is also the fund’s tax agent and if you terminate a relationship with your tax agent they have a responsibility to advise the Tax Office the fund is now without a tax agent. As the tax agent is responsible for ensuring the fund’s annual return is lodged on time rather than the trustees, where the agent no longer has any control over this matter, it’s important for the agent to advise the ATO of this.
"If they don’t advise the ATO they are no longer the agent, they will be chased by the taxman for the required returns rather than the trustees if they happen to be late. That’s because it is always much easier for the ATO to put pressure on tax agents than it is to pressure trustees who happen to be delinquent about lodging their returns.
"DIY super lawyer Daniel Butler of DBA Lawyers says when many people start a DIY super fund via an accountant or administrator, they are not aware of the critical role of the tax agent and what is involved should they decide they want to change their accountant or administrator."
The lesson is to be wary about the implications of changing an accountant or an administrator, and to make sure any initiatives are executed before the required date. The AFR says this is usually October 31:
"Anyone who doesn’t have a registered tax agent or is planning on changing their tax agent with a different one must organise this before October 31. Specialist DIY super administrator Martin Heffron of Heffron Super Solutions recommends anyone interested in charging administrators discuss this with a prospective new administrator before they act to determine what information they will need to obtain. It is always much better to get this information before you leave a service provider and while you are on good terms with them."