On 27.4.21, the ATO released a consultation paper seeking feedback from the tax profession on its proposed guidelines that set a minimum standard on due diligence for tax practitioners when engaging new clients, or where there is suspicion that a client may have had their identity compromised. These guidelines are set to address the growing risk of identity theft and fraud. Certainly tax agents should look at this, but tax lawyers and others dealing with tax agents have an interest, if the obligations on tax agents, to verify that you do act for a client, become too cumbersome.
See below for details.
The Tax Practitioners Board (TPB) and the ATO put out a joint statement about the importance of this initiative. The TPB’s draft practice note is available on the TPB websiteExternal Link. Submissions to the TPB can be emailed to firstname.lastname@example.org
The ATO said that it is encouraging tax practitioners to voluntarily adopt these standards into business practices now, with the view for the standards to become compulsory in the future following an initial transition period which will be followed by further consultations with the tax profession.
The consultation paper sets out details on:
- who needs to be verified;
- the verification methods – including the identity documents required;
- relationship verification;
- reviewing client verification and relationship authorisation for ongoing clients and individual representatives; and
- recording the client verification process.
The consultation paper also includes questions from the ATO to understand the impacts the proposed guidelines will have on the tax profession.
Who you need to verify
We do not expect you to go back and verify your entire client base. Instead, we are asking that you perform identity checks from this point on for:
- all new clients including representatives of new clients
- new representatives of existing clients
- existing clients where you have concerns the client may not be who they say they are.
As an agent, you can verify clients in any of three ways:
For each client, the information they provide must match the details of the documents used for client verification; for example, name, TFN or ABN, address and/or date of birth (DOB).
For each method a total of two separate proofs of identity must be verified. The exception is when a primary photographic proof of identity document can be verified using the Visual method.
Agents may also apply these methods in combination to achieve a total of two separate proofs of identity.
If you are unable to verify a client and suspect potential fraud:
- do not give the client any private information, importantly do not share or confirm pre-fill information.
- contact us so that we can stop any other attempts to use that identity.
If you use the Source ATO method and suspect potential fraud, delink the client immediately and contact us.
Take care to verify the authorised relationship for clients who act on behalf of other people or entities. In these situations, the individual acting on behalf of the person or entity must have their identity proven using the methods described above. They must also prove they are authorised through relationship verification.
TAX LAWYERS and others, take note –
- you may not have a duty to do this checking (as the Consultation Paper seems to assume that the phrase ‘tax practitioner’ really only extends to tax agents);
- but you could get caught up in this, as tax agents seek to verify the identity of parties who represent individuals and other entities.
- What impact will this new client verification method have on your existing processes?
- How would you prepare new clients for this process?
- What could the ATO do to assist in this?
- In regards to Relationship verification, what challenges do you see in regards to your clients?
- Are the guidelines clear and easily understood?
COMMENTS are due by 9 June 2021 and may be made by email to: ‘TaxPractitionerConsultations@ato.gov.au’.
[29.4.21; LTN 79, 28/4/21]