BAS Agent Fined for Giving Tax Advice
One would think it was pretty easy to know if you had crossed that line from being a BAS Agent to doing the work of a Tax Agent. It is.
In the case now being reported by the TPB, it was pretty clear – a BAS agent company was advertising the preparation of tax returns and then also doing them. The federal court imposed a penalty of $81,500 for unlawfully providing and advertising tax agent services over a period of several years.
For those of us who don't deliberately overstep the line, where is that line?
The Grey Area of the BAS: PAYG I
BAS Agents can be involved in the PAYG Instalment "payment" that is included on an activity statement.
The ICB View
- You cannot advise a business about what their PAYG Instalment amount should be varied to, or what their PAYG Instalment rate should be varied to. Variations of these must be in conjunction with the Tax Agent of the business or as directed by the business owner. It would be wrong for a business to be relying on a BAS agent for the purposes of determining a variation to PAYGI.
- You can determine the value of T1, (taxable income), to be entered on the BAS for the calculation of T1 by the rate in order to work out the amount for the quarter. IF you calculate T1 based on information from the Tax Agent or the system prescribed by the Tax Agent, typically you would work from the revenue disclosed on the reconciled and verified profit and loss statement and make any adjustments to that revenue only as directed.
- Be careful of the owner directed reduction in T1 simply to reduce this quarter’s instalment amount. It is not a BAS agent’s decision, nor is it up to a BAS agent to advise on changes to the calculation of T1; obtain in writing any directions to vary amounts from the business owner.
The Grey Area of Claiming GST on Expenses
BAS agents are typically relied on for the system and the compliance around each business’ claiming of GST. One of the conditions is that you cannot claim back GST on non-deductible expenses. This is the strongest link between income tax matters and GST or BAS matters.
You should base your claiming of GST on expenses by reviewing:
- Previous profit and loss expenses
- Any adjustments the Tax Agent has made in the tax return, (if you have access to this)
Anything you are considering "disallowing" because you doubt whether it is tax deductible, you should question and/or advise the tax agent.
We note that in relation to private expenses, it is permitted by law to claim back the GST during the year and make a one-off adjustment based on the tax return being completed. Work closely in conjunction with the tax agent.
The Black and White Line
It is not up to BAS agents to advise on income tax matters. It is totally appropriate for BAS agents to ask questions about private or unknown expenses and seek direction.
The FBT law complicates the issue of many private expenses, because through the use of salary packages and applying the FBT provisions, otherwise private and non-deductible expenses may become deductible. Therefore GST amounts that were not able to be claimed back, may now be claimed back. FBT matters must be advised by a tax agent.
BAS agents cannot prepare income tax returns. BAS agents should not advertise that they can prepare tax returns.
Updated: 16th March, 2016