Professional Duties

Accountants and registered tax agents are expected to exercise specialist skill, judgment and care. Their duties to clients may contract and the common law of negligence.

Where practitioners hold themselves out as having specialist knowledge, clients may reasonably rely on their work, provided that the reliance falls within the scope of the engagement.

If that work falls below the standard expected of a reasonably competent professional, the practitioner may be exposed to a claim in negligence.

Registered tax agents have additional statutory obligations under the Tax Agent Services Act 2009 (Cth), including the Code of Professional Conduct.

Those obligations include requirements to:

• act honestly and with integrity;
• act lawfully in the client’s best interests;
• have adequate arrangements in place to manage conflicts of interest;
• ensure tax agent services are provided competently;
• maintain knowledge and skills relevant to the services provided;
• take reasonable care in ascertaining the client’s state of affairs;
• take reasonable care to ensure taxation laws are applied correctly to the client’s circumstances; and
• advise the client of rights and obligations under the taxation laws that are materially related to the services provided.

Registered tax agents are also subject to additional obligations under the Tax Agent Services (Code of Professional Conduct) Determination 2024, including requirements concerning client records, competence and supervision, quality management systems and keeping clients informed.

A breach of the Code does not, by itself, establish negligence. It may, however, be relevant to whether the tax agent met the applicable standard of care.

Conduct That Can Turn an Error into a Claim

Not every error amounts to negligence. Risk increases where conduct appears careless, cannot be justified by the information available at the time, or is poorly documented.

Examples include:

• lodging returns or statements without adequately checking material facts;
• providing advice outside the accountant’s competence or the agreed scope of the engagement;
• failing to warn a client of material tax consequences, penalties or deadlines;
• failing to correct or address a false or misleading statement after becoming aware of it;
• acting despite an unmanaged conflict of interest;
• signing off on work that has not been appropriately supervised or reviewed;
• providing tax advice without making reasonable enquiries;
• failing to record advice, assumptions, limitations and client instructions; and
• disclosing client information without the client’s permission or other legal authority.

Practical Steps to Reduce Risk

Accountants and tax agents can reduce their exposure to professional negligence claims by adopting clear, consistent risk management practices.

Key steps include:

• using engagement letters that clearly define the scope of work, exclusions, fees and client responsibilities, and updating them whenever the scope or circumstances change;
• maintaining contemporaneous file notes that record key facts, source documents, client     instructions, advice, assumptions and review steps;
• maintaining and documenting a proportionate quality management system, including conflict checks, review of unusual positions and appropriate supervision of junior and outsourced work; and
• responding promptly when errors arise by reviewing the issue, considering notification obligations under the professional indemnity policy, advising the client and, where appropriate, correcting any affected return, statement or advice.

Ultimately, professional negligence risk is best managed through sound systems, clear communication, competent work and contemporaneous records. Consistent processes and prompt action help protect clients and strengthen the defensibility of the practice.

Concerned about your practice’s exposure to a professional negligence claim?

Whether you are reviewing your engagement terms, addressing an error or responding to a client complaint, contact Velocity Legal’s Disputes team for advice on your obligations, risks and next steps.