Reasonable care for tax (financial) advisers
When providing tax (financial) advice services, the Code of Professional Conduct (Code) requires you to take reasonable care in:
- ascertaining your client’s state of affairs (Code item 9)
- applying tax laws correctly to your client’s circumstances (Code item 10).
What reasonable care means will vary depending on the circumstances, so you must exercise your professional skills and judgement considering factors such as:
- the terms of engagement you have with your client
- the nature and scope of tax (financial) advice services being provided
- your client’s level of knowledge and experience
- the complexity of the transaction.
Ascertaining a client’s state of affairs
To ascertain your client’s state of affairs, you do not have to necessarily audit, examine or review your client’s records. However, you should not simply accept what your client provides or tells you at face value.
If your client’s statement seems credible (and for existing clients, it is consistent with their previous statements), you may accept their statement without further checking.
On the other hand, if the information does not seem credible (or is inconsistent with previous statements), you should ask questions of your client or examine their records to verify their circumstances, depending on the terms of engagement.
Other circumstances when further enquiries may be required include:
- a change in your client’s circumstances
- whether the client is new or inexperienced
- new or substantial changes in the law.
Comparison with the Corporations Act
Below are some obligations under the Corporations Act 2001 that are comparable to those under Code item 9, requiring the person providing the advice to:
- make reasonable enquiries to obtain complete and accurate information relating to client’s relevant circumstances
- warn the client, where the client’s information is incomplete or inaccurate, that the advice provided may be incomplete or inaccurate, and to consider if the advice is appropriate before acting on it
- decline to provide advice if they do not have the expertise required to provide advice on the matter.
For further information about Code item 9 and the comparative obligations, refer to TPB(I) 28/2016 Code of Professional Conduct - Reasonable care to ascertain a client's state of affairs for tax (financial) advisers
Ensuring tax laws are applied correctly
This Code item requires you to interpret and apply tax laws correctly to your client’s circumstances.
If you make a mistake in correctly applying tax laws, it does not necessarily mean that you have failed to take reasonable care. However, if you made a mistake because you did not take reasonable care, it could be considered a breach of the Code.
To ensure you take reasonable care in applying tax laws correctly, you may refer to a number of materials including legislation and other relevant materials issued by the Australian Taxation Office, recognised professional associations, specialists or other registered tax or legal practitioners.
Comparison with the Corporations Act
There are some obligations under the Corporations Act 2001 that are comparable to those under the Code item 10. They require the person providing the advice to a retail client to:
- act in the best interests of the client in relation to the advice
- only provide advice if the resulting advice would be appropriate to the client.
For further information about Code item 10 and the comparative obligations, refer to TPB(I) 29/2016 Code of Professional Conduct – Reasonable care to ensure taxation laws are applied correctly for tax (financial) advisers
Failure to take reasonable care
If you fail to take reasonable care in ascertaining a client’s state of affairs or applying taxation laws correctly to your client's circumstances, we may find that you have breached the Code and impose sanctions for that breach.
- TPB(I) 28/2016 Code of Professional Conduct - Reasonable care to ascertain a client's state of affairs for tax (financial) advisers
- TPB(I) 29/2016 Code of Professional Conduct – Reasonable care to ensure taxation laws are applied correctly for tax (financial) advisers
- Code comparison with the Corporations Act and FASEA Standards
- Taking reasonable care – Questions and answers
- Webinar – Taking reasonable care
Last modified: 4 June 2020