Dear client,
1 PURPOSE & SCOPE OF ENGAGEMENT
You are engaging the accounting business run by Savvy Accountants Pty Ltd, Tax Agent 25634 134, (the Firm) to attend to the following matters for the Group, as applicable:
1. Prepare and lodge Business or Instalment Activity Statements
2. Prepare the annual financial statements.
3. Prepare and lodge annual taxation returns.
4. Prepare and lodge annual Fringe Benefits Tax (FBT) returns.
5. Prepare and lodge annual returns for your superannuation fund (SMSF)
The engagement is ongoing until cancelled, in writing, by either party, or the legal personal representative of either party. The Firm may do some work on the subsequent year’s tax returns before any appointment is made, and the cost of that will be recoverable by the Firm. Each member of the group will need to cancel the engagement. Each member who has not cancelled the engagement remains liable for costs incurred in respect of work done for him/her/it.
Each member of the group engages the Firm on the terms set out in this letter and is bound by those terms. Each member of the group is jointly and severally liable to pay all accounts issued by the Firm, regardless of to which Group member those accounts are addressed, and regardless of which Group member received the benefit of the work performed.
If you ask the Firm to act for a new or additional member of your family group, the Firm will forward an updated Schedule of Clients which each existing member of the Group agrees will apply in place of any previous Schedule of Clients. Each new member of the Group will be required to sign an acknowledgement of these terms of engagement.
The Firm provides services on a fee for service basis. A schedule setting out indicative fees is included with this package.
This letter relates only to the services listed above and details the basis and terms of this engagement. Unless otherwise agreed in writing, the engagement is limited to the matters described in this letter. Work which is performed, or disbursements made outside the scope of this letter, are subject to an additional charge.
2 BASIS OF ENGAGEMENT
The engagement is to assist with the preparation of the financial accounts and the preparation and lodgement of the taxation returns for the Group. This includes non-trading individual members of your family (individuals), as well as your trading entities (including individuals), corporate entities, partnerships, trusts and superannuation entities (entities).
2.1 ACCOUNTING AND RECORDKEEPING
In undertaking this engagement, you must generally ensure the following:
Ø The bookkeeping for all entities is maintained on a regular basis. The Firm recommends that bookkeeping and other record keeping be done every week.
Ø Reconciliations for bank accounts, debtors and creditors are performed each month.
Ø A stocktake, if applicable, is performed during the last weekend each June for each entity.
Ø A Trial Balance of each entity is completed by the end of July each year.
For personal returns all information should be supplied as soon as possible. The Firm recognises that clients with investments in trusts and managed funds are dependent on receiving information prepared by third parties beyond their control.
2.2 TAXATION SERVICES
v You are responsible for the accuracy and completeness of the particulars and information you supply to the Firm.
v Any advice given by the Firm is only an opinion based on our knowledge of your affairs.
v The self-assessment rules require you to keep full and proper records of all matters required to complete a tax return.
v The Firm will not complete a tax return for you if it finds that the material supplied by you contains false or misleading information or omits information. Once the information has been corrected or supplied, the Firm may complete the tax return(s)
2.3 COMPILATION OF FINANCIAL STATEMENTS
You agree that:
The reliability, accuracy and completeness of the accounting records are your responsibility.
You have disclosed to the Firm all material and relevant information.
2.4 STATUTORY FINANCIAL AUDITS
The Firm does not undertake to disclose to you any irregularities, including fraud, or other illegal acts and errors. See item 4 below, Confidentiality.
The keeping and maintaining of all required books of account is the responsibility of the Group.
The Firm is not engaged to conduct a statutory audit of the financial records of any entity in the Group and will not express an opinion as to the truth and fairness of the financial statements.
2.5 DOCUMENTATION
The Firm will send a copy of all returns and other documents to be lodged for your approval. Once those are returned to us, the various returns can be lodged. The Australian Taxation Office (ATO) sets the date for the lodgement of each type of tax return. The Firm’s capacity to lodge your returns by the due dates is totally dependent on you supplying the documentation it needs in accordance with the demands made under 2.1 and 2.2 above. The Firm is not responsible for late lodgement penalties or interest charges you may incur where you have not provided the details the Firm requires.
2.6 OWNERSHIP OF DOCUMENTS
The financial statements, tax returns and any other documents which the Firm is specifically engaged to prepare, together with any original documents given to the Firm by you, shall be your property. Any other documents brought into existence by the Firm, including general working papers, a general ledger and draft documents are the property of the Firm at all times.
If our services are terminated (by either party) each member of the Group separately agrees the Firm shall be entitled to retain all documents owned by that client until payment in full of all outstanding fees from all members of the Group on any account. Where copies of any documents released to you are required for our records, you will be charged for the cost of photocopying, postage and/or courier at our usual rates.
2.7 ADDITIONAL SERVICES
The scope of our services is the preparation of financial accounts and the preparation and lodgement of taxation returns. Any agreed fee relates solely to services and advice provided within the scope of this engagement. The fee includes checking and forwarding any original Notices of Assessment or Payment Notices received from the ATO or the Australian Securities and Investments Commission (ASIC).
You may request additional services which are outside the scope of this engagement letter. The Firm will require a separate engagement letter for those services and will advise the likely fee for those services.
NOTE any correspondence from the ATO, such as audits, or ASIC which does not relate to initial assessments or original payment notices will be charged as additional services.
2.8 FEES & CHARGES
The Firm’s services are provided on a fee for service basis. A schedule of likely fees is available. An estimate of likely fees can be provided; an estimate is not a firm quote nor is it a cap, nor is an estimate binding. Where it becomes apparent that the estimate was based on an inadequate description of the task required, the Firm will advise you and provide a revised estimate.
The Firm may require payment in advance. Until that payment is made the Firm will not start work and may suspend work when the amount paid has been exhausted.
Each client in the Group is jointly and severally liable to pay our fees for all work performed for any and all members of the Group. Once the client sign this letter, we may charge the fees based on the work performed.
2.8.1 GOODS & SERVICES TAX (GST)
The Firm is registered for GST and fees are subject to GST.
2.8.2 DISBURSEMENTS
In addition to our professional fees, you will be responsible for payment of any expenses we incur on your behalf, including GST embedded in those expenses.
The Firm will act as your agent in paying for services, annual fees etc and will forward the Tax Invoice to you. On occasion it will be more efficient for you to provide separate cheques payable to the service provider.
2.9 INFORMATION RELATING TO YOUR AFFAIRS
The Firm may use third party contractors to provide services in connexion with your work A list of third party contractors is available.
Each client in the group hereby authorises the Firm to disclose information to such third-party contractors.
The Firm does not use third party contractors outside of Australia, nor does it use the “cloud’ for storage of data. On occasions the Firm needs to make its database available to its software provider, Reckon Elite, for the repair or managing of the tax return software. Reckon Elite has similar privacy provisions to this Firm.
2.10 LIMITATION OF LIABILITY
The Firm’s liability may be limited by a scheme approved under the Professional Standards Legislation. At present the Firm is not a member of such a scheme. The Firm holds Professional Indemnity Insurance.
3 SCHEDULE OF SERVICES
3.1 ACTIVITY STATEMENTS
Activity statements are prepared and lodged monthly or quarterly, and it is not generally possible to review the correctness of the underlying financial information as part of the preparation of an activity statement, as the Firm is engaged to prepare annual accounts, which are always completed after the end of a financial year.
The Firm therefore relies on and processes the financial information provided to it, and the Firm may not be able to review any primary source documents. The Firm makes the following assumptions:
o The financial information the Group provides is accurate.
o The financial information accurately states the GST position. That is, all input tax credits, and GST amounts payable have been correctly recorded. If you are unsure of the correct treatment and require advice, this is available as an additional service and charged separately.
o You have all the supporting documentation, including invoices, credit notes and other receipts, known collectively as vouchers. If you are unsure of the ATO requirements and require advice, this is available as an additional service and charged separately.
o You hold valid tax invoices and adjustment notes, known collectively as vouchers, for all expenditure incurred by the Group in respect of which an input tax credit is being claimed. Substantial penalties can be imposed where an activity statement is prepared incorrectly.
It is possible, however, that when the annual accounts are prepared that some discrepancies will be found. The Firm will discuss the need to correct either the Activity Statements already lodged or the financial accounts. Such services are additional services and charged separately.
3.2 FINANCIAL ACCOUNTS
The Firm has been engaged to prepare the annual financial accounts of the Entities within the Group. This service includes the preparation of:
A profit and loss account (P & L)
A balance sheet.
Notes to the accounts
This service includes the maintenance of a Chart of Accounts for the general ledgers of your Entities and telephone support should you require any assistance as to how to record specific transactions in the general ledger. This service also includes the preparation and lodgement of any standard reports required by ASIC.
For sole traders, the P & L is included in the tax return as lodged. The ATO does not require a balance sheet for a sole trader. Preparing a P & L and Balance Sheet is an additional service.
This service does not include the preparation of one-off accounts for presentation to your bank, finance provider or any other purpose such as selling the business. Such services are additional services and charged separately.
3.3 INCOME TAX RETURNS
The Firm is engaged to prepare and lodge income tax returns for each member of the Group.
The Firm is not responsible for reviewing or verifying any financial records or statements provided to it, whether as a manual cashbook or prepared on accounting software such as MYOB or QuickBooks. Each entity is responsible for the correct coding and classification of each transaction. If assistance is required on how to correctly code, please discuss this with the Firm. Such services are additional services and charged separately. In 3.2 above the Firm offers limited telephone support for a specific transaction; any fee is a question of the amount of support and/or training required.
Each member of the Group must have all source documents available, for 5 years, to enable the Firm to analyse the income tax implications of any transaction. Generally, the Firm will not examine every transaction, but it may request to see the source documents. This is particularly important for events which may include Capital Gains Tax where the vouchers relating to the original purchase are critical.
Work Related Expenditure in personal tax returns has its own set of rules, and each member of the group must have the evidence to satisfy the substantiation provisions of the Income Tax Assessment Act.
The Firm will not check that you have complied with the substantiation provisions of the Income Tax Assessment Act.
This means that the Firm will not review:
§ A motor vehicle logbook
§ Details in a rental property schedule
§ Home office usage worksheet
§ Motor vehicle expenses worksheet
§ Any other document supplied by a member of the Group
Standard forms and templates are available from the Firm and are supplied free of charge. Where a member of the group does not complete a template or worksheet, additional fees will be charged.
If you require additional assistance in completing any worksheet or template, discuss this with the Firm. Such services are additional services and charged separately.
The fee for this service does not cover any inquiries made to us, nor any investigations involving the Firm, which are initiated by the ATO. Such services are additional services and charged separately.
3.4 FRINGE BENEFITS TAX (FBT) RETURNS
An FBT return cannot be prepared from the general ledger, without also examining the original vouchers, due to the treatment of GST incurred in transactions subject to GST.
The fee for this service includes:
ü Advice on how to collate the information needed
ü An annual review of the methods available, particularly for cars
ü Basic telephone advice about FBT matters
ü The calculation of Reportable Fringe Benefits Amounts
3.5 SUPERANNUATION
The Firm is engaged to attend to the income tax compliance work for each Self-Managed Superannuation Fund (SMSF) in the Group. This assignment involves:
· Preparation of the accounts for the SMSF
· Preparation and lodgement of the SMSF annual tax return
Note that every SMSF must have its accounts audited by a person registered with ASIC. This Firm does not have such registration. The trustees of each SMSF in the Group must arrange for the audit. The Firm has a list of registered auditors.
The process for an SMSF is convoluted.
· The accounts must be prepared.
· A draft tax return prepared from the accounts.
· Both documents delivered to the Auditor.
· The audit report returned to the Firm.
· The tax return finalised and lodged.
It is critical that at least three months be allowed for this process. That means that all documents for an SMSF must be delivered to the Firm no later than 2 January immediately following the end of the financial year.
The Firm will usually sub-contract most of this work to other specialist accountants.
3.6 SUPERANNUATION ADVICE
Superannuation advice can only be provided by a person who holds an Australian Financial Services Licence (AFSL) issued by ASIC. The Firm does NOT hold an AFSL, nor does it have any arrangements with an AFSL holder.
The Firm is thus prohibited from providing any member of the Group with any advice, recommendation or opinion which is intended to influence you in making a decision in relation to superannuation, including whether to establish, contribute to or draw benefits from a superannuation fund, whether an SMSF or a retail fund, or any investment decision by a superannuation trustee.
The Firm is allowed to give factual advice, that is, statements of the laws and rules applying to superannuation.
The Firm is permitted to act on your written instructions, and will do so, regardless of whether the Firm or any employee believes that those instructions might not be in your best interest.
4 CONFIDENTIALITIES
The general rule is that the Firm is bound by the Privacy Act and thus your personal details are not disclosed, unless I am required by law to do so. The International Federation of Accountants has issued a Code of Ethics for Professional Accountants. This is effective from Monday 17 July 2017. One of its requirements is that where a Professional Accountant finds Non-Compliance with Laws and Regulations (NOCLAR) s/he is required to report the breach to the relevant authority, tax office, ASIC, Police. Be aware that the Firm will report all instances of NOCLAR that it detects. Note that in 2.4 above the Firm does not undertake to look for errors, fraud etc.
5 CONFIRMATIONS OF ENGAGEMENT
There is a lot to consider. Please take the time to address every issue raised in the 6 pages of this document. Do not hesitate to contact the Firm if you want clarification of any matter.
Once you are satisfied with the terms of the engagement, please sign and date both copies of this engagement letter where indicated. Keep one copy for your records and return the other to the Firm as soon as possible.
The Firm cannot and will not perform any work for any member of the Group until it receives the signed engagement letter, the schedule of clients in the Group and the Deeds of Guarantee.
Thank you for the opportunity to provide accounting and taxation services to the members of your Group. I look forward to a long and mutually beneficial relationship.
6 Communication with ATO
Once the lodgement process is completed, you are agreed to communicate with ATO directly for any other matter if the service agreement says otherwise. If you want us to do on behalf of you must let us know in advance and that is subject to fees depending up on the services.
Yours sincerely
ABC ACCOUNTING AND TAXATION PTY LTD
Registered Tax Agent # 26107347
Hobart, Tasmania 7000