Supervision, competency and quality management

One of the registration requirements for a company or partnership entity to become a tax or BAS agent is to satisfy the ‘sufficient number’ requirement. This means your entity must have an adequate number of registered individual tax or BAS agents to:

• provide tax agent or BAS services to a competent standard, and 
• carry out supervisory arrangements on behalf of the entity. 

This is also an ongoing registration requirement.

Sufficient number requirement

There is no set formula to determine the sufficient number of registered individuals for a practice, but the minimum number must be at least one. You must assess the number of registered individuals your practice needs to ensure tax agent or BAS services are provided competently and there are adequate supervisory arrangements in place.

The registered individuals may include partners, directors, employees, contractors and staff provided under a service trust arrangement.

For company or partnership tax agents with a tax (financial) advice services condition, the registered individuals can include Australian financial services (AFS) licensee’s representatives such as:

• authorised representatives
• responsible managers
• compliance officers
• regional/line managers.

Factors to determine sufficient number

We will consider a range of factors to determine if your practice has an adequate number of registered individuals, including the following:

• Do you have adequate financial, technological and human resources to provide the tax agent services and provide supervision?
• Is the registered individual competent and adequately trained to provide effective supervision and control?
• Does the registered individual only supervise the tax agent or BAS services they are registered to provide?
• What is the size and scale of services provided within your business? This may include considerations such as your business turnover, number of clients, nature and sophistication of your client base and the number of relevant staff.
• How complex are the services being provided and supervised?
• How many qualified and experienced staff do you have and how often do they undertake training and development activities?
• Do you have sufficient technology support, including network security protocols and digital monitoring and review processes?
• What supervisory arrangements do you have in place, including quality assurance and control practices and escalation procedures?
• What are your risk management processes, including delegated supervision processes?
• Does your entity have a condition imposed on its registration by us?

Additional guidance for AFS licensees

• Where an AFS licensee registers as a tax agent, it must have at least one registered individual tax agent as its sufficient number. We may consider the number of qualified tax relevant providers providing tax (financial) advice services within the company to determine if the company meets the sufficient number requirement.
• Where an AFS licensee does not register as a tax agent, it must ensure every entity providing tax agent services on its behalf is either registered as a tax agent or is a qualified tax relevant provider.

Obtain written consent

When appointing registered individuals to provide supervision for your practice, you must obtain their prior informed consent by way of a written signed statement. You must ensure they have considered all the relevant information before accepting to take on the supervisory role, including the nature of supervisory arrangements in place and the supervision and control to be undertaken. This will ensure the nominated individual is aware of their appointment as a supervising tax agent and understands the responsibilities of the role.

The only exception where the prior informed written consent will not be required is in situations where:

• you have existing documentation that sets out the nature of supervisory arrangements and supervision and control to be undertaken, and 
• the nominated individual is aware of and understands the obligations set out in the documentation. 

Supervisory arrangements

You must ensure tax agent or BAS services provided by you or on your behalf are provided competently. This is an obligation under the Code of Professional Conduct (Code item 7).

To provide competent services and comply with the Code, you need to direct, oversee and check the services provided on your behalf. There doesn’t need to be an employer/employee relationship with the person performing the services to provide adequate supervision. 

Supervisory arrangements are also important in the following contexts: 

1. Tax Agent Services (Code of Professional Conduct) Determination 2024 (the Determination)
2. the civil penalty provisions in the Tax Agent Services Act 2009 (TASA) 
3. relevant experience requirements for an individual to be registered.

1. Obligations under the Determination

The Determination complements and extends the Code by requiring you to:

• ensure that each entity providing tax agent or BAS services on your behalf maintains sufficient knowledge and skills relevant to the tax agent services it provides
• ensure adequate training (both formal and informal) is given to unregistered staff providing tax agent or BAS services on your behalf to ensure these services are provided competently
• supervise appropriately, considering the knowledge and skills of the entity, types of tax agent or BAS services provided, and the system of quality management you have in your practice
• establish and maintain a system of quality management, relating to the tax agent or BAS services you provide, that can give you reasonable confidence that you are complying with the Code
• document and enforce the policies and procedures of your quality management system.

Quality management system

A quality management system includes policies and procedures relating to: 

• governance and leadership
• monitoring performance
• compliance with the Code
• client engagement
• proper recordkeeping
• protecting confidentiality of information
• managing conflicts of interest, and 
• recruitment, training and management of employees.

These obligations are informed by the standards issued by the Accounting Professional and Ethical Standards Board (APESB). Further details about appropriate quality management processes can be found in:

• APES 320 Quality Management for Firms that provide Non-Assurance Services as published on the APESB website.
• TPB(I) 48/2024 Supervision, competency and quality management under the Tax Agent Services Act 2009.

The extent of internal controls will depend on the size of your practice, complexity of services provided and the complexity of your clients’ tax affairs. You must exercise your professional judgement in determining the extent of controls in your practice depending on your circumstances.

You must also ensure your quality management system provides you with reasonable confidence that you are complying with the TASA, including the Code and the Determination. For further information, refer to the information using the links below, having regard to:

• breaching reporting
• false or misleading statements
• conflicts of interest and confidentiality in dealings with government
• keeping proper client records
• keeping clients informed, and
• employing or using a disqualified entity to provide tax agent services on your behalf without approval.

2. Civil penalty provisions - signing of declarations

You will breach the civil penalty provisions in the TASA if you sign a declaration or statement required or permitted under a taxation law about your clients that was not prepared by someone working under your supervision and control.

For partnerships and companies, the declaration or statement must not be prepared by an individual who is not working under the supervision and control of a registered individual tax or BAS agent.

The penalty imposed for contravening these provisions is:

• up to 250 penalty units ($78,250) for an individual tax or BAS agent
• up to 1,250 penalty units ($391,250) for a partnership or company tax or BAS agent.

Note: The value of one penalty unit is $330 (current as at 7 November 2024  and subject to indexation).

3.Relevant experience requirements

An individual seeking to register as a tax or BAS agent needs to demonstrate they meet our relevant experience requirements. Relevant experience requirements can include work performed under the supervision and control of a registered individual tax or BAS agent.

Measures to ensure adequate supervision

You can consider adopting a range of measures to ensure there is adequate supervision and control in your practice. Below are some suggested measures:

• Inspect, advise and direct how the staff undertake their tasks. While you do not have to monitor all work or interviews conducted, you must provide a substantial degree of oversight. ‘Substantial’ means there must be ample or considerable amount of involvement and not simply checking from time to time. This will vary according to the skills and experience of the staff and the complexity of tax matters involved.
• Ensure the staff have adequate level of education and understanding of the relevant tax laws to execute the tasks they are responsible for. 
• Provide initial and ongoing training to your staff.
• Have documented procedures and processes in place and train staff, so they can raise any issues with their supervisor that are beyond their knowledge or if there have been any specific concerns raised by your clients.
• Implement quality control mechanisms and quality management systems.
• Undertake spot checks of the source documents and questions asked by staff to justify any income and deductions declared.

Develop a supervisory plan

We strongly recommend that you develop a plan setting out the supervisory arrangements in your practice. The supervisory plan should set out processes and procedures in your practice to provide competent services and adequate supervision, covering the measures outlined above. 

The plan should help the nominated supervising tax practitioner to clearly understand what their responsibilities are and that of the staff under the plan. 

Having such a plan should help you establish the supervisory processes for your practice and also help you to comply with your obligations under the Code and the Determination.

Remote supervisory arrangements

Remote supervisory arrangements can apply in situations where the supervisor and the staff they supervise are in different locations or employed by different entities (including in relation to outsourcing and offshoring arrangements).

The following considerations can be helpful to ensure there is adequate supervision and control in remote working arrangements in addition to the measures outlined above:

• frequency of contact and the methods of communication
• whether the supervisor is available to be contacted at all times by staff
• access to training and research resources while working remotely
• management of workflow, particularly where the supervision and control is being exercised by an unrelated entity
• how documents are to be reviewed and feedback provided to staff
• how file and document sharing logistics will be managed
• whether systems allow for audits or reviews to be carried out remotely
• whether the registered individual supervises one or more entities
• other administrative obstacles inherent with a remote supervisory arrangement.

Holding multiple supervisory roles

There may be situations where a nominated supervisor is supervising multiple related or unrelated entities, or both. In these situations, the factors outlined above are still relevant to determine if adequate supervisory arrangements exist. Additionally, you should also consider:

• size of each entity – for example, turnover of business, number of clients, and number of relevant staff
• market segment of the client base of each entity
• type and complexity of the tax agent or BAS services being provided
• other professional duties or responsibilities of the nominated supervisor.

Failure to comply

If your entity does not have a sufficient number of registered individuals or supervisory arrangements in its practice, it may breach the TASA.

If we find that you have failed to comply with the TASA, including the Code, we may impose one or more administrative sanctions or seek a Court imposed civil penalty. 

Further information

For further information, including examples refer to our information sheet TPB(I) 48/2024 Supervision, competency and quality management under the Tax Agent Services Act 2009.

https://www.tpb.gov.au/supervision-competency-and-quality-management - © Tax Practitioners Board

Accreditation Points Allocation:

0.10 Regulatory Compliance and Consumer Protection

0.10 Tax (Financial) Advice

Total CPD Points: 0.20