Registered tax practitioners are increasingly reliant on technology and remote work practices, and methods of engaging with new and existing clients are changing. This raises important security considerations in the client identity verification process.
The Tax Practitioners Board (TPB) has released new Proof of identity (POI) guidance to help tax practitioners verify their clients’ identities and thereby reduce the risk of identity theft and tax fraud. The ATO has also released the Strengthening client verification guidelines which complements the TPB’s guidance and is intended for registered tax practitioners using Online services for agents or practitioner lodgment service software.
This article explores the TPB’s POI guidelines.
The TPB’s proof of identity (POI) guidelines
The Tax Practitioners Board (TPB) has released a Practice Note to provide practical guidance and assistance to registered tax practitioners in relation to verifying client identities.
The Practice Note refers to relevant provisions of the Tax Agent Services Act 2009 (TASA) including the Code of Professional Conduct (Code). While there are no specific POI requirements in the TASA, there are a number of provisions that a registered tax practitioner may breach if they fail to take appropriate POI steps. These include that:
- You must act honestly and with integrity.
- You must ensure that tax agent services are provided competently.
- You must take reasonable care in ascertaining a client’s state of affairs.
- Registered tax practitioners and company directors and partners must be fit and proper.
The TPB’s minimum requirements
The TPB requires that all registered tax practitioners take appropriate POI steps prior to providing tax agent services and BAS services. The required information and required evidence will depend on the particular scenario and nature of the tax practitioner/client relationship. The TPB requires that, at a minimum, registered tax practitioners comply with the requirements contained in the table below.
| Scenario | Required information | Required evidence to be sighted |
| Individual seeking to engage the registered tax practitioner in their own right |
o residential address; or o date of birth. |
o an original or certified copy of a primary non-photographic identification document; and o an original or certified copy of a secondary identification document. |
| Individual representative seeking to engage the registered tax practitioner on behalf of an individual client |
o residential addresses; or o dates of birth; and
|
o an original or certified copy of a primary non-photographic identification document; and o an original or certified copy of a secondary identification document; and
|
| Individual representative seeking to engage the registered tax practitioner on behalf of a non-individual client |
o residential address; or o date of birth; and
o Australian Business Number (ABN); o Australian Company Number (ACN); or o any other additional detail in order to make a reasonable assessment of the legitimacy of the non-individual’s identity; and
|
o an original or certified copy of a primary non-photographic identification document; and o an original or certified copy of a secondary identification document.
o a legal document demonstrating the authority of the individual representative to engage the registered tax practitioner on behalf of the non-individual client.
|
The Practice Note also provides examples of required evidence to be sighted across various categories and encourages registered tax practitioners to consider:
- Whether the photo in any identification document appears to match the details that have been provided by the individual (for example, age and gender).
- Whether the name, address and date of birth match when comparing documentation.
Additional considerations
The Practice Note covers additional considerations impacting the client identity verification process including:
- Whether there is a letter of authority authorising a third party to act on an individual’s behalf. In such cases it may be appropriate to take additional steps to confirm the individual’s authorisation, such as by following up with a phone call.
- Some clients may not have conventional identity documents, for example, refugees or some Aboriginal or Torres Strait Islander clients. In these situations, the TPB would expect registered tax practitioners to take a flexible approach to undertaking POI steps, and to record their clients’ circumstances.
- It may not be practical or necessary for a registered tax practitioner to undertake the POI steps for well-established clients. Registered tax practitioners should use their professional judgment and retain a record of their assessment about the appropriateness of undertaking the steps. If the assessment is in relation to an individual representative of a client, the TPB still requires that the registered tax practitioner sights evidence that demonstrates the authority of the individual representative to engage the registered tax practitioner on behalf of the client.
- It is up to the registered tax practitioner to determine the frequency of undertaking these checks based on the circumstances.
- The TPB requires a contemporaneous record (for example, a checklist) to demonstrate that proof-of-identity steps were undertaken by registered tax practitioners. This record would include information such as the date and time that proof-of-identity checks were undertaken, and the name and title of the person undertaking the checks.
- Receiving identity documents electronically. The TPB does not recommend sending and receiving identity documents by email due to security concerns. More secure electronic solutions should be used such as via a secure online mailbox.
- Remote verification requirements are the same as for face-to-face. If sighting identification documents through videoconferencing, the tax practitioner should make a note of this.
- In cases of transferring a tax practice or client list from one registered tax practitioner to another, copies of the contemporaneous POI records relating to affected clients should be transferred as well.
- Being engaged by another registered tax practitioner on behalf of a client. Refer to the Practice Note for further details.
- Referral of a client from another registered tax practitioner. The newly engaged registered tax practitioner must undertake the proof-of-identity checks.
- If a registered tax practitioner identifies discrepancies with the information provided, they should:
- ask additional probing questions of the client or individual representative, and/or seek additional documentation or evidence.
- take steps to independently verify the information provided (if possible).
- decline the engagement if they are not satisfied that the information about the client’s or individual representative’s identity is correct.
- consider notifying the TPB, the ATO, ASIC or other relevant authorities, if they are lawfully permitted to do so.
Consequences for non-compliance
If a registered tax practitioner fails to take appropriate POI steps to verify a client’s or individual representative’s identity, the TPB may find that they have breached the Tax Agent Services Act and the Code of Professional Conduct.
If a registered tax practitioner breaches the Code, the TPB may impose one or more administrative sanctions:
- Issuing a written caution.
- Imposing an order requiring the registered tax practitioner to take one or more actions (for example, undertaking a course of education or providing tax agent services (including BAS services) under the supervision of another registered tax practitioner.
- Suspension of registration.
- Termination of registration.
If the TPB finds that a registered tax practitioner has failed to meet an ongoing tax practitioner registration requirement (for example, by no longer being a fit and proper person), the TPB may terminate the tax practitioner’s registration.
If an individual or entity is found by the TPB to have contravened a civil penalty provision of the TASA, the TPB may apply to the Federal Court of Australia for a civil penalty to be imposed on that individual or entity.
Key takeaways
The Tax Practitioners Board (TPB) has released new proof of identity guidance. Tax practitioners need to ensure that they meet the requirements set out by the TPB to verify their clients’ identities, to help reduce the risk of identity theft and tax fraud. Consequences for non-compliance may include the termination of the practitioner’s registration.
