WHAT’S IN A NAME? UNDERSTANDING WHO’S WHO IN ACCOUNTING AND FINANCIAL SERVICES

A BRIEF EXPLANATION OF THE SOMEWHAT CONFUSING PROFESSIONAL DESCRIPTORS IN THE WORLD OF ACCOUNTING AND TAX

Many ADF members seek the services of an “accountant” (often referred to as “my accountant”), principally for the preparation of tax returns and obtaining related tax advice. These service providers use all manner of descriptors, including “Chartered Accountant”, “Certified Practising Accountant”, “Public Accountant”, “Tax Accountant”, “Registered Tax Agent” or just plain vanilla “accountant”.

The obvious question arises as to what these descriptors mean and whether the services on offer differ in important ways that might benefit or detrimentally impact their clients. This article seeks to explain and demystify them.
  
At the outset, you should note that there are no clear boundaries or widely adopted conventions in the accounting and tax advisory professions about the use of designations and descriptors. Nevertheless, armed with the information that follows, you should be in a better position to make informed choices when it comes to identifying a suitable accountant who is willing and able to be your tax return preparer/adviser.

So let’s go through the short list of descriptors outlined earlier in this piece: 

Qualified Accountants

An individual using the descriptor “Chartered Accountant”, “CPA” or “Public Accountant” should be a member of a professional association that allows the person to use those words. The relevant associations are Chartered Accountants Australia New Zealand (CAANZ), CPA  Australia (CPAA) and The Institute of Public Accountants (IPA) respectively. Entry to the “accounting profession” via these associations requires considerable tertiary study (typically via an undergraduate university degree and postgraduate study), ongoing professional development and adherence to a code of ethics.

These individuals, provided they or their firms are also a “registered tax agent/s” (more on this below), will offer tax return preparation services and related tax advice. Usually, they will also offer a wider range of financial services, including complex tax advice, corporate/business strategic advice, management consulting and estate planning services, which are typically not offered by businesses that are simply promoting themselves as “registered tax agents”.

The potential downside here for ADF members and their families is that if their financial and tax affairs are simple, they may not be a “good fit” for many of these highly qualified accounting firms whose business models and fee levels are often designed to service high net worth individuals, wealthy families or businesses with complex problems. As a result, it may be that you’ll be a rather unimportant client paying an unnecessarily hefty fee for the preparation of a simple tax return.  

We hasten to add that this is not always the case, but it’s a common enough problem of which you should be aware (and enquire about) when seeking out the services of a qualified accountant.

Tax Accountants

The next descriptor on our list is “tax accountant”. This is a general or shorthand term of convenience that is often used to describe a person or firm that prepares tax returns. It is not a professional descriptor given by a professional body, and there is no professional designation attached to it.

This doesn’t necessarily suggest that a person who uses the term “tax accountant” (or is so described by their clients) is unqualified or unsuitable to look after your tax affairs. However, it’s wise to ask such a service provider about their qualifications, business model and the types of tax advisory services they offer.

Registered Tax Agents

This brings us to the term “Registered Tax Agent” (RTA). Service providers who use this term are licensed by a federal government agency. They must have undertaken rigorous training in taxation law, must undertake ongoing professional education and are bound by a Code of Professional Conduct. You can find more about these requirements at the Tax Practitioners Board, including a complete list of RTAs.

It’s important to note that registration as a tax agent is required at all levels of the accounting profession where tax returns are prepared/lodged and tax advice is offered. However, it’s likely that where a provider describes their service offering as a “Registered Tax Agent”, they will be offering more of a volume or process driven tax return preparation service (with some advice) for clients with simpler financial affairs who are conscious of not paying high levels of fees.

Accountant

Last but not least on our list is the term “accountant”. We often hear people referring to “my accountant”. On rare occasions, because the word “accountant” is not a legislatively recognised (or “reserved”) term, it is used by service providers who have no accounting qualifications at all. Therefore, it’s wise to check the qualifications of anyone who claims to be a mere “accountant”. However, as a general rule, like the term “tax accountant” described above, “accountant” or “my accountant” is widely used by members of the public when referring to the person or firm who looks after their tax affairs.   

The key point (as always) is to take your time, ask questions, get in writing the scope of the service you require and the fees that you will be charged. Even ask a friend or colleague for a referral to a service provider they have come to trust. But never stop being a sceptical consumer of professional services because no one will take your taxation obligations more seriously than you.

Financial Advice/Planning

Just to complete a rather complex picture……

Many ADF members ask us about how to identify a licensed financial adviser (aka planner). Adding to the complexity, some qualified accountants and RTAs offer “personal financial advice” under their own Australian Financial Services Licence or under the licence of a third party, in addition to tax return preparation and related tax advisory services. And some licensed financial advisers/planners offer a wider accounting service within an integrated service offering, or at least have a commercial or referral relationship with a qualified accountant/s.

The main point here is to understand in whose interests the various services are being offered. Sometimes (more often than occasionally), the tax/accounting service is used to promote financial products, real estate and mortgages being marketed by an integrated service provider of which they are a part. This is not illegal, but it will be important for you to understand how the various parties work together, whose interests are being served, how the various parties are remunerated and by whom. There’s more about this in the Centre’s website section on Getting Financial Advice.

Follow the Money

Sound complicated? Sadly, it is, but remember the old adage “follow the money”. Doing that will explain (for better or for worse) much of what happens in the worlds of accounting, tax and financial services, and you’ll be well prepared to interact positively with its variously described and designated providers of products and services.