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Software developers exposure draft 2010

Exposure Draft

Software developers

This draft information sheet is also available as a PDF, download link at the end of this page.

The Board has released this draft information sheet as an exposure draft and invites comments and submissions in relation to the information contained in it within 30 days. The closing date for submissions is 10 September 2010 after which time the Board will consider any submissions made before seeking to finalise this information sheet.

Any written submissions in relation to this exposure draft should be made by the closing date to the Secretary of the Board via email at tpbwebsite [at] ato.gov.au or by mail to:

Tax Practitioners Board
PO Box 9825
PENRITH NSW 2740

Disclaimer

Please note that this document is in draft form, and when finalised, will be intended as information only. While it seeks to provide practical assistance and explanation, it does not exhaust, prescribe or limit the scope of the Board’s powers provided in the Tax Agent Services Act 2009. Additionally, the principles, explanations and examples in this paper do not constitute legal advice. They are also at a preliminary stage only. The Board’s conclusions and views may change as a result of the comments the Board receives or as other circumstances change.

Document history

This draft information sheet issued on 11 August 2010 and is based on the Tax Agent Services Act 2009, the Tax Agent Services Regulations 2009 and the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 as at 1 March 2010.

Introduction

  1. This draft information sheet has been provided by the Tax Practitioners Board to assist software developers to understand the operation of the new tax agent services regime. It specifically addresses two questions:
    a. Does a software developer who only provides tax related software systems need to register as tax agent? – No
    b. Does a software developer need to register if they provide tax related services such as:
    • call centre advice
    • consulting services
    • implementation, configuration and customisation of systems, or
    • classroom training and other training materials such as user manuals and information sheets?

    Yes. However, this will depend whether there is reliance on that service. This draft information sheet explains this further.

Background

  1. The Board administers a system for the registration of tax agents and BAS agents and being part of the new regime means that entities and individuals providing certain services will be required to register as tax or BAS agents with the Board.
  2. To determine if a service comes under the new regime the question that must be asked is whether the service falls within the definition of a ‘tax agent service’ or ‘BAS service’ in the Tax Agent Services Act 2009 (TASA). Providing a tax agent service or a BAS service is the activity that requires registration, when this is done for a fee or other reward and certain other tests are met. In other words, does the service relate to:
    • ascertaining an entity’s liabilities, obligations or entitlements that arise, or could arise, under a taxation law or BAS provision’?, or
    • advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a taxation law or BAS provision? or
    • representing an entity in their dealings with the Commissioner in relation to a taxation law or BAS provision? and
    • is the service provided in circumstances where the entity can reasonably be expected to rely on the service for the purposes of satisfying liabilities or obligations or to claim entitlements that arise, or could arise, under a taxation law or BAS provision?
  1. From 1 March 2010, an individual, partnership or company must be registered as a tax agent or BAS agent to provide a defined ‘tax agent service’ or ‘BAS service’ for a fee or reward.
  2. There are no separate or specific legislative provisions relating to whether software developers need to be registered under the Tax Agent Services Act 2009 (TASA).

Tax agent service

  1. A ‘tax agent service’ is any service that relates to:
    • ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise, under a taxation law, or
    • advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a taxation law, or
    • representing an entity in their dealings with the Commissioner, and

    that is provided in circumstances where it is reasonable to expect that the entity will rely on it to satisfy liabilities or obligations under a taxation law, or to claim entitlements under a taxation law.

  1. A tax agent service includes, but is not limited to:
    • preparing or lodging a return, notice, statement, application or other document about a taxpayer's liabilities, obligations or entitlements under a taxation law
    • giving a taxpayer advice about a taxation law that the taxpayer can reasonably be expected to rely upon to satisfy their taxation obligations, and
    • dealing with the Commissioner on behalf of a taxpayer.
  1. A taxation law includes BAS provisions and as such the definition of tax agent services includes BAS services.
  2. Any decision about whether advice constitutes a tax agent service or BAS service requires consideration of all the facts and circumstances to determine whether the client can reasonably be expected to rely on that advice.
  3. While the Board will consider a disclaimer in determining whether a person could reasonably be expected to rely on a service, the mere existence of a disclaimer alone will not be determinative of whether any reliance was placed on the services and was reasonable. Evidence of other in-house practices and procedures which limit the service may also be relevant.

BAS service

  1. A ‘BAS service’ is a ‘tax agent service’ that relates to:
    • ascertaining an entity about liabilities, obligations or entitlements that arise, or could arise, under a ‘BAS provision’, or
    • advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a BAS provision, or
    • representing an entity in their dealings with the Commissioner in relation to a BAS provision, and

    that is provided in circumstances where it is reasonable to expect that the entity will rely on it to satisfy liabilities or obligations under a BAS provision, or to claim entitlements under a BAS provision.

  1. A BAS service therefore includes, but is not limited to:
    • preparing or lodging an approved form about a taxpayer's liabilities, obligations or entitlements under a BAS provision, and
    • giving a taxpayer advice about a BAS provision that the taxpayer can reasonably be expected to rely upon to satisfy their obligations, and
    • dealing with the Commissioner on behalf of a taxpayer in relation to a BAS provision.
  1. Under section 995-1 of the Income Tax Assessment Act 1997, BAS provisions include:
    • GST law
    • wine equalisation tax law (WET)
    • luxury car tax law (LCT), including fuel tax law
    • pay as you go (PAYG) instalments
    • PAYG withholding (PAYG(W))
    • fuel tax law.

Circumstances where a software developer does not need to register as a tax agent or BAS agent

    1. A software developer may need to register if they provide a service for a fee or reward to a client as follows:
      • ascertaining client’s liabilities, obligations or entitlements that arise, or could arise, under a taxation law or BAS provision’? or
      • advising client about liabilities, obligations or entitlements of the client that arise, or could arise, under a taxation law or BAS provision? or
      • representing a client in their dealings with the Commissioner in relation to a taxation law or BAS provision? and
      • the service is provided in circumstances where the client can reasonably be expected to rely on the service for the purposes of satisfying liabilities or obligations or to claim entitlements that arise, or could arise, under a taxation law or BAS provision?

    Note:

    • In determining whether a service is covered by the regime it is important to understand the extent to which the client depends on the service and how specific the service is to an individual client.
    • It is important to note the fee does not necessarily have to be separately charged to the client. It can form part of a package of services offered by the software developer when a client purchases their software.
    1. The following are examples of services that may be provided by a software developer which the Board considers are covered by the regime and may require the developer to be registered.

      The client out sources all of its payroll and accounts work to a software developer.
      A software developer not only sells the software, but provides an outsourced payroll/accounts service using that software. In the provision of this service they interpret and apply taxation law, which includes BAS provision, and/or represent the client in their dealings with the Commissioner.

      The software developer configures and customises a software system to deliver a specific tax outcome for the client.
      The service is provided in circumstances where the client can reasonably be expected to rely on the service for the purposes of satisfying liabilities or obligations or to claim entitlements of the client that arise, or could arise, under a taxation law or BAS provision.

      The software developer’s help desk provides specific advice to assist the client to meet a specific tax outcome.
      For the advice to constitute a tax agent service, the advice would need to relate to the clients particular circumstances and require the interpretation of taxation laws or BAS provisions. It must also be reasonable for the client to rely on the advice.

      The software developer provides written advice to a client that is specific to the client’s circumstances.
      For the written advice to constitute to a tax agent service, the advice would need to relate to the client’s particular circumstances and require the interpretation of taxation laws or BAS provisions. It must also be reasonable to expect the client to rely on the advice

    Options available to software developers

    1. If a software developer ensure that they do not provide tax agent services for a fee or reward, they can still write and sell software system packages, and provide a support mechanism on the use of the software without being registered.
    2. If a software developer has an intention to provide a tax agent service, that is relied upon, for a fee or reward, the following options are available.

      Subject to meeting the eligibility requirements, the developer can register as a tax agent or BAS agent.
      For partnership or company registration, this does not necessarily require the person providing the advice, for example an employee, to be registered in their own right. The company or partnership can be registered if they have a sufficient number of registered individuals, being registered agents, to provide services to a competent standard and to carry out necessary supervisory arrangements.
      For information about how to register, see www.tpb.gov.au

      Engage a registered tax agent or BAS agent to provide the tax agent services.
      This can be achieved through the use of contractors who are registered agents to undertake either the work personally or to supervise non-registered individuals who are providing the tax agent service advice. This arrangement may not require the engagement of a registered agent on a full time basis.