The Australian Government’s tax bonus payment -Implications for members’ trust accounts
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Q. Am I required to receive tax bonus payments on behalf of my clients?
A. No. The ATO announced on 26 February 2009 that tax agents can choose whether or not to receive tax bonus payments on behalf of their clients.
Q. Is a tax bonus payment received by EFT into the practice’s trust account “trust money”?
A. Yes. Miscellaneous Professional Statement APS 10 Trust Accounts defines “trust money” as any money held or received on behalf of any person by a member or the member’s personnel, in the course of or in connection with offering or performing public accounting services, where the member has no present entitlement to such money. A tax bonus payment clearly falls within this definition.
Q. If I receive a cheque from the ATO made payable to a client, is this “trust money”?
A. No. Paragraph 10 of APS 10 indicates that a cheque payable to a client does not constitute trust money until it is negotiated. If the physical cheque is promptly forwarded on to the client, it is not trust money and the requirements of APS 10 do not apply to it.
Q. Is there a time limit on how long I can take to deal with the tax bonus payment that is in my trust account?
A. Paragraph 20 of APS 10 indicates that trust money must be withdrawn “within two Working Days”. The period from which the two working days is determined is not specified.
The accepted interpretation of when the two working day period commences is that it commences when all of the pre-requisites for withdrawal of the trust money have been satisfied. In the case of the tax bonus payments, those pre-requisites would be: receipt of tax bonus payment amounts from the ATO; identification of the taxpayer/client to whom the particular tax bonus payment belongs; and holding the authority to deal with the payment on behalf of that client, or alternatively applying the rule in paragraph 8 of APS 10 (see FAQ below).
The two working day period cannot simplistically be said to commence from the date on which the tax bonus payment amount is deposited to the trust account.
It is accepted that, where a tax agent has a number of tax bonus payments to work through on behalf of a range of clients, there will inevitably be some delay in processing through the payments.
As an alternative to the two working day rule, paragraph 20 refers to being “otherwise directed”. Where you have been directed by the client to deal with the tax bonus payment in some timeframe other than the two working day period, that direction overrides the two working day rule.
Q. I do not hold an authority from the client to process the tax bonus payment through my trust account. How should I proceed after the EFT deposit is made to my trust account?
A. Where the member has no authority from the client on file, paragraph 8 of APS 10 indicates that the client’s money must be dispatched or refunded immediately to the client. Therefore, if no authority from the client is held, prompt dispatch of the tax bonus payment to the client will be in compliance with APS 10. Paragraph 20 states that trust money can only be withdrawn from the trust account on authority from the client, or "to make payment to the client". The payment of a tax bonus payment to the client in accordance with paragraph 8 is therefore also in accordance with paragraph 20.
Q. I hold an authority from the client to deal with their tax refund from the ATO. Will I be able to rely on this as an authority in relation to the tax bonus payment?
A. For many clients, the tax agent will have on file a written authority to deal with the client’s tax refund from the ATO. Members should examine the wording of that authority and, in consultation with their trust account auditor, determine whether it can be applied to the circumstance of the tax bonus payment. If the conclusion is that the existing authority from the client can be so applied, no additional authority would be required.
For example, wording which is restricted to a particular tax refund or a particular income year would be unlikely to be able to be applied more generally, whereas wording which referred to all taxation matters on behalf of a client should be able to be applied to the tax bonus payment.
Q. Can I apply the tax bonus payment to outstanding fees owed to me?
A. Not without a specific written authority from the client to do so. Such an authority would need to be obtained prior to the receipt of the tax bonus payment. It would not be acceptable to delay dispatch of the tax bonus payment while you sought an authority from the client in relation to your outstanding fees.
Q. Can I charge a handling fee in relation to processing the tax bonus payment through my trust account?
A. There is no rule or regulation that would prevent you from charging such a fee. However, Guidance Note G1 Fees from the Members’ Handbook indicates that the basis on which fees will be charged must be advised to the client before an assignment is undertaken, and that prompt advice must also be given of any changes to the fee structure or billing arrangements. Therefore, if you were contemplating introducing such a fee where one had not previously existed, you would need to advise the client of the introduction of this fee before the receipt of the tax bonus payment, and with enough notice to allow the client to make alternate arrangements, if they determined that they did not wish to incur this new fee.
Q. Can I charge the client for my work in checking the calculation of the tax bonus payment?
A. There would be no Institute rule or regulation that would prevent you from levying such a fee. However, members are reminded that for many taxpayers, the calculation of the tax bonus payment amount would be a relatively straightforward calculation, and it might be expected that there would be clients resistant to the idea of paying you to perform that calculation on their behalf. Members should be mindful of this issue in seeking to raise a fee in this context.
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