Engagement letters are not required under the Tax Agent Services Act 2009, but we highly recommend tax practitioners use them as a means of avoiding uncertainty and to prevent any misunderstandings with clients and to assist in compliance with the Code of Professional Conduct (Code).

We recommend the use of engagement letters for any services provided by tax practitioners to clients. Some of the benefits of using engagement letters is that it clarifies what is to be done, how it will be done and how much the work will cost.

When issuing an engagement letter it is important to include your name and registration number. You could also use your Registered tax practitioner symbol to promote your TPB registration.

Unfortunately we are not able to provide templates or example engagement letters, however many recognised professional associations can assist their members with templates.

Our practice note has more information on what to include in engagement letters.

At a minimum you should include:

• Your name and registration number to provide certainty that you are registered. 

• A description of the work to be completed.

• How much the work will cost.

• How you will manage your client’s information and maintain confidentiality. 

• Arrangements for storing your client’s documents or making copies of them. 

• Your responsibility to provide services in a competent manner and within agreed time frames.

• How you will deal with tax refunds received on behalf of your client. 

Check out our practice note to learn more. 

No, as long as your engagement letter: 

• clearly informs your client about the information you are disclosing

• advises your client to whom and where the disclosure will be made

• obtains your client’s written permission to disclose information relating to the client’s affairs to a third party.

Our practice note has more information on outsourcing and offshoring.

Depending on your business, you may choose to include in your engagement letter your duty under the Tax Agent Services Act 2009 (TASA) to act lawfully in the best interest of the client, and to act honestly and with integrity.

You may also choose to include in your engagement letter situations in which the law overrides the duty of the tax practitioner to the client, such as compliance with notices under the Taxation Administration Act 1953 concerning taxation laws, withholding tax obligations and any other duties of the tax practitioner under the TASA (including the Code).

Generally, if there is no change in circumstances you would not need to issue a new engagement letter. However, in relation to recurring or ongoing engagements, we recommend annual review because this ensures that the terms of your engagement are reconfirmed or reviewed with the client. 

The law requires that each time you lodge on behalf of your clients, you have first received a signed declaration in writing from your client, which states that the client has authorised you to lodge the document and the information is true and correct. This requirement includes all approved forms such as activity statements and tax returns. You cannot use an engagement letter to get a blanket and enduring approval for lodgements.

We strongly encourage the use of engagement letters as a means of avoiding uncertainty and misunderstandings, however each case will depend on its own circumstances.

We recommend checking with the client if their circumstances have changed given that time has passed and including any changes in an engagement letter for the client.

Yes, we would recommend using engagement letters for ‘one off’ income tax returns, but it does not need to be complex if you are dealing with simple tax affairs.

Even for simple dealings an engagement letter will ensure you and your client have clear expectations and that there is no misunderstanding of the services being provided.

We suggest that the client’s consent to fees being deducted from a refund is provided in writing, and ideally included in an engagement letter.

As disputes about fees often arise, the letter of engagement can limit the capacity for misunderstandings and provide the client with clear expectations about the basis on which fees are to be calculated and charged.

It is recommended that you have a separate engagement letter for each client that is designed to suit their specific engagement requirements. However, if you have written consent from the client that they accept the conditions of the engagement this would be sufficient. 

Yes, as long as the client has acknowledged receipt and acceptance of the terms in the engagement letter.

You should issue a separate engagement letter for each client in receipt of your services, unless it is agreed otherwise. Clients should sign their individual letter to show acceptance of the terms of an engagement. For example, separate letters should be issued if you provide tax 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. 

Yes, we suggest you have your client sign or provide written consent each time you change the engagement letter. 

We strongly recommend you review them annually and update to reflect any changes in the services you provide. 

It’s important that clients understand the terms of an engagement at all times. By doing this annually you can reconfirm the terms of your engagement. This accommodates any changes in the business relationship. It also reminds your clients of the scope of your engagement.