There is no set formula for determining reasonable care. Ultimately, determining whether a tax practitioner has complied with their obligations under Code of Professional Conduct (Code) items 9 and 10 will be a question of fact. This means each situation will need to be considered on a case-by-case basis having regard to the specific facts and circumstances. A good question to ask yourself is 'what would my peers and colleagues do in this situation?'.

A ‘statement’ could be a statement you make to the Australian Taxation Office (ATO) or to your client when providing tax advice. For example, a BAS agent’s declaration made when electronically submitting a BAS return is a ‘statement’.

A ‘thing’ you do could include providing taxation advice to your client, or preparing and lodging returns, statements, objections or appeals on behalf of your client.

Some examples include when:

• there are new or substantial changes in the law
• you take on a new or inexperienced client
• you notice unusual transactions in the context of the regular business of your client
• it appears that the information or instructions your client has provided are incomplete or inaccurate.

To ensure you’re applying tax laws correctly some of the things you should consider include:

• legislation and related material
• relevant case law
• rulings and determinations issued by the ATO on the topic in question
• the ATO Commissioner’s instructions in documents such as income tax returns, BAS returns, fact sheets and practice statements
• any other guidance material published by the ATO, including on its website
• information published or provided by a recognised professional association or other relevant regulatory agency, including the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority
• publications, information, advice or commentaries published by other experts, registered practitioners or specialists
• another registered practitioner or a legal practitioner who has the ability and expertise to provide the advice on taxation laws
• relevant training material.

The first thing to keep in mind is what the ATO Commissioner refers to as the ‘golden rules’ of claiming work-related expenses. If you have a client who wants to claim work-related expense deductions, you need to ensure the:

• client has spent the money themselves and weren't reimbursed by their employer
• expense is directly related to your client earning their income
• client has a record to prove the expenses.

You should talk to your client and ask them:

• Did you spend the money yourself?
• Did your employer reimburse you already? Would they confirm this, if asked?
• How does this expense directly relate to you earning your income?
• Was there any private component to the expense that needs to be apportioned?
• Do you have a record to prove the expense? If not, why not?

Make it clear to your client that they are not automatically entitled to claim standard deductions. Exceptions to keeping written evidence are there to make things simpler (for example, claiming $150 for laundry expenses or using the cents per kilometre method for car expenses). Your clients still need to show how they worked out their claims.

If your client can show an expense is deductible, then substantiation rules must be met. Your client must have written evidence to prove claims if the total claim exceeds $300. Written evidence must include a document from the supplier of the goods or services.

See the ATO website for more information.

If you think a client may be acting illegally (from a tax perspective), you do not have an obligation to notify the ATO. However, you may wish to 'blow the whistle' to the ATO, if you qualify for protection under the whistleblower laws. These laws commenced on 1 July 2019 to legally protect people who ‘blow the whistle’ about an entity that is not complying with the tax laws.

At a more practical level, if you suspect your client is acting illegally, talk to your client about it. If this doesn’t resolve the issue, we suggest you decline the engagement of that client.

You cannot disclose any information to the new agent. It is up to them to ascertain whether the deductions claimed are lawful. You are, however, able to advise the ATO because you had a previous relationship with the client and may be eligible for whistleblower protections. This will not contravene the Code.

From 1 July 2024, if you have reasonable grounds to believe the other agent has breached the Code and the breach is a significant breach, you must notify us, and the recognised professional association of the other agent (if applicable). You can notify us by making a complaint. You may also qualify for whistleblower protection if you meet one of the categories of an eligible whistleblower. When making a complaint to us, it’s important to provide us with as much detail as possible and to make sure that you provide us with any relevant documentation to support your complaint.

No, engagement letters are not a specific requirement under the Code, but we highly recommend you use them. Using an engagement letter can assist you to establish a clear understanding of the elements of the engagement between you and your client. They set out the terms and scope of the professional service you will offer your client.

Engagement letters should inform your clients about their rights and obligations and are a useful reference point in case of future questions around expectations. Importantly, an engagement letter helps to avoid uncertainty and misunderstandings, especially in relation to disputes over fees and about the scope of work to be completed.