Accountant, Tax Agent & Bookkeeper

What is the distinction between the role of an Accountant, Tax Agent & Bookkeeper?

Introduction to Accounting versus Book Keeping

The role of accounting information is at the core of running a successful organisation. The introduction of accounting allowed the personal assets of a merchant to be measured and recognised distinctly from their business operation. 

Accounting has been defined as the process of identifying, measuring and communicating economic information to permit informed judgement and decisions by users of the information.

Accounting provides particular details of economic activity and business transactions. Accounting is concerned with providing information, which is useful to business decision-making. The accounting process consists of:

  • recording
  • classifying
  • interpreting
  • reporting

Accounting practice incorporates the design of accounting systems, the assessment of transaction recognition and measurement, the preparation of reports and the input of financial reports into the decision making process.

Measurement is a process of determining the magnitude or quantity of something by the application of some object of known size or capacity, or by comparison with a fixed unit or known standard (Oxford English Dictionary 1989, vol. IX, p. 528). Whereas, bookkeeping relates to the recording phase of transactions and economic events.

Accounting information that is generated from the accounting process is useful in a wide range of decision making contexts including:

  1. assessment of financial performance
  2. assessment of short-term liquidity
  3. assessment of financial stability (longer term solvency)
  4. compliance with regulatory or professional standards (eg ATO) and
  5. identifying and achieving your financial goals.

Financial accounting is part of the accounting system that attempts to meet the needs of various external users. The major difference between financial accounting and management accounting is that management accounting is primarily directed towards providing information of specific use to managers whereas financial accounting has many users apart from managers.

The 3 major accounting bodies in Australia are:

  1. ICAA (Institute of Chartered Accountants in Australia)
  2. CPAA (CPA of Australia) and
  3. NIA (National Institute of Accountants) renamed to Institute of Public Accountants

Role of an Accountant versus a Bookkeeper

The scope and responsibilities of a bookkeeper tend to vary depending on several factors, such as the:

  • employment situation (e.g. employed, contract, or self-employed)
  • business needs and size of the business that engages the bookkeeper
  • skill level of the bookkeeper/s employed or contracted

In small companies, the bookkeeper tends to be responsible for the general ledger, which encompasses all of the financial transactions for the given company. In addition, the bookkeeper often provides summaries of the general ledger’s details, such as what the company owes, what is owed to the company, as well as any information regarding the company’s profit margin. Furthermore, a bookkeeper with a job at a small company may also be responsible for payroll, customer invoices, and tax reports.

In larger companies and corporations, people with bookkeeping careers are often assigned to a specific task or specialised area. The responsibilities of a bookkeeper within a large business vary depending upon experience and position description. For example, an entry-level bookkeeper may

  1. enter transactions,
  2. total accounts,
  3. monitor accounts, and
  4. calculate interest charges,

whereas more advanced bookkeepers may reconcile vouchers, verify the accuracy of data, and review accounting journals.

Typical Bookkeeper Responsibilities

While bookkeeper roles will differ, it is typical that they will be defined by a combination of the following responsibilities:

A bookkeepers’ Accounts payable and receivable responsibilities include:

  • Data entry
  • Management of accounts
  • Invoicing customers
  • Paying suppliers
  • Liaising with customers and suppliers
  • Debt recovery
  • Reconciliations
  • Weekly, fortnightly, monthly or quarterly services

A bookkeepers’ reporting responsibilities:

  • Profit & loss
  • Balance sheet
  • Aged receivables
  • Any type of reporting required in relation to accounts, banking, sales, purchases and payroll
  • Performed monthly, quarterly or as required

A bookkeepers’ Payroll responsibilities::

  • Weekly, fortnightly or monthly pay runs
  • Monthly/quarterly payment of PAYG
  • Superannuation
  • Employee record keeping

A bookkeepers’ BAS responsibilities:

  • Performed under the supervision of a registered tax agent

A bookkeepers Statutory compliance responsibilities::

  • GST
  • BAS,
  • Payroll Tax,
  • Instalment,
  • Workcover

Tax Agent – BAS Agent – Financial Planner

There are different qualifications to be a tax agent, BAS Agent and a financial planner.

You will need a combination of academic qualifications and relevant employment experience. The period of relevant employment required will depend upon the qualifications held. Regulation 156 of the Income Tax Regulations 1936 sets out the prescribed qualifications as:

  • an accounting degree at a university or another educational institution of an equivalent standard;
  • a law degree with eligibility for admission as a legal practitioner;
  • a diploma/certificate in accounting at a TAFE college.

If you do not have any formal qualifications, you may still be eligible for registration as a tax agent. You may be eligible for registration if you: have been engaged in relevant employment or equivalent on a full-time basis for at least eight years in the preceding 10 years, and either, are a member of, and entitled to vote at meetings of, a recognised professional association, or have successfully completed a Course in basic accounting and a Course in Australian income tax law

The educational requirements to become a qualified BAS Agent have recently been introduced. Please visit www.icb.org.au.

Prior to the introduction of GST into Australia a bookkeeper’s job was mainly one of keeping the books up to what was known as “trial balance stage.” It did not matter whether the bookkeeper was employed or contacted to the business.

This all changed in 2000 when not only was GST introduced but the ATO introduced the Business Activity Statement (BAS) which required businesses to report monthly or quarterly on their GST, PAYG, FBT and provisional tax obligations.

Overnight a bookkeepers role changed to one of keeping the books and preparing the BAS. For the employed, bookkeeper life continued to be reasonably straight forward – they continued to keep the books and in addition either lodged the BAS for the business owner or sent it to the Accountant for completion or checking and lodgement.

After the introduction of GST contact bookkeepers completed BAS returns. A BAS return is now regarded as a Tax return and that under section 251L of the Income Tax Assessment Act of 1936 (ITAA36) a bookkeeper may not take a fee for giving “tax advice” (GST, PAYG, FBT etc) or lodging a BAS return unless they are either:

  • working under the direction of a Registered Tax Agent; or
  • are a member of one of the following seven recognised professional accounting associations: CPA Australia (CPA, Institute of Chartered Accountants in Australia (ICAA), National Institute of Accountants (NIA); Association of Taxation & Management Accountants (ATMA); Taxation Institute of Australia (TIA); Chartered Institute of Management Accountants (CIMA); Association of Chartered Certified Accountants (ACCA). Breach of the Act is a criminal offence subject to a $22,000 fine.

Legislative Changes impacting the Book Keepers

The introduction of the Tax Agent Services Act 2009:

  1. highlighted the importance of contact bookkeepers to the BAS system;
  2. defines a person registered to give BAS advice and lodge BAS returns as a “BAS Agent” and
  3. defines the meaning of a BAS Service as a service:
    1. that relates to:
      • ascertaining the liabilities, obligations or entitlements of an entity that arise, or could arise, under a *BAS provision; or
      • advising an entity about the 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 Tax Commissioner in relation to a BAS provision [e.g. lodging a BAS return]; and
    2. that is provided in circumstances where the entity can reasonably be expected to rely on service.
      • qualifications required by a BAS Agent; (Cert IV Financial Services (Bookkeeping)
      • relevant experience required by a BAS Agent;
      • professional indemnity insurance a BAS Agent must hold;
      • Code of Professional Conduct for BAS Agents; and
      • Civil Penalties (up to $27,500 to be inflicted on non-registered bookkeepers posing as BAS Agents by the issue of a notice rather than the current criminal fine which requires a court appearance.)

The “commencement date” of the new law occurred on 10 March 2010. It is expected that the law will not only be enforced by the ATO but also by registered BAS Agents “dobbing in” non-registered bookkeepers offering BAS services.