Before you start providing tax or BAS agent services (which include tax (financial) advice services) to a client, we recommend you have a written agreement with the client setting out the terms and conditions of the engagement. This agreement can include a variety of written communications, including a formal agreement, a standard form handout, a brochure, leaflet or electronic communication.

Issue a letter of engagement for each client

You should issue separate letters of engagement for each client (unless agreed otherwise) if you provide services to both:

• a husband and wife

• a partnership and the individual partners

• a company and its shareholders

• a company and its directors (if providing services to the directors separately from the company)

• the trustees of a trust and its beneficiaries.

Benefits of using a letter of engagement

A letter of engagement is one means of ensuring you are providing a professional service to your clients. Using a letter of engagement:

Recurring or ongoing engagements

You should reconfirm or review the arrangements with clients regularly (preferably annually) for recurring or ongoing engagements.  You may need to provide a new letter of engagement in certain situations, including when there are changes in:

• your client’s circumstances

• any relevant laws or regulations

• terms or scope of engagement or if there is reason to believe that your client has misunderstood the terms and scope of the engagement.

Templates

We do not provide template or sample letters of engagement. However, we’ve provided some suggestions in the section below as to what you might consider including in your letters of engagement.

If you are a member of a recognised professional association, you may be able to get a template from your professional association. However, even if you are using a template or sample letter, you should consider obtaining legal advice in relation to the letters of engagement you provide (or propose to provide) to your clients.

What to include in a letter of engagement?

We consider that letters of engagement or similar agreements will be particularly beneficial in assisting you to comply with the Code, when they cover the following matters (where relevant to the services being provided):

• name and registration number of the specific individual or entity who will provide the tax or BAS service

• client entities to which the services are to be provided

• a description of the work to be performed

• your responsibilities, such as providing the services in a competent and timely manner, including the lodging of documents with the Australian Taxation Office

• your client’s responsibilities, including advising of any changes relevant to the services provided

• how reports or other information will be communicated

• extent to which the services can be relied upon and the limitation on clients relying on the advice

• whether you intend to pass the clients information to third parties and how you will get informed consent to do that

• any arrangements for keeping client’s documents or of making copies of them

• your obligations (under the Tax Agent Services Act 2009) such as acting lawfully in the client’s best interests, acting honestly and with integrity, arrangements you have in place to manage any conflicts of interest

• the rights and obligations of the client under the taxation law such as advising about the self-assessment system and their rights of objection and appeals

• explaining how fees are calculated, the frequency of billing and the timeframe for payment (disputes about fees are very common)

• how you will deal with tax refunds received on behalf of your client and whether the client consents to your fees being deducted from any refund (refer to the Board’s recommendation about passing refunds to clients within 14 days)

• how you will deal with funds or other property held on trust for the client

• your professional indemnity insurance arrangements

• arrangements for terminating the engagement

• mechanisms for resolving any disputes that may arise.