In 2021 Tax Tips

Moral Compass and Taxation in Australia

It’s no secret that Australia has one of the world’s most complex tax systems. But while many people might find the intricacies of our tax system daunting, it’s important to remember that paying taxes is an essential part of being a responsible and contributing member of society.

What does your moral compass tell you about taxation in Australia? Do you think everyone should pay the same percentage of their income, no matter how much they earn? Or do you think that those who can afford to pay more should be asked to contribute more? 

These are questions that many people ask themselves when thinking about tax policy, and there is no right or wrong answer. However, it is important to consider all of the implications of different tax systems before deciding.

As citizens of Australia, it is our civic duty to pay taxes. But what happens when the tax system feels unfair? Where do we go to voice our concerns? And more importantly, how do we find our moral compass when it comes to taxation? 

In this blog post, I’ll be discussing some of the complexities around taxation in Australia and giving you a few tips on where to find information about how your money is being spent.

In Australia, we have a system of taxation that is based on our moral compass. The government collects taxes from citizens to provide public goods and services. 

This includes everything from defence and infrastructure to health care and education. So how do you think our tax system compares to other countries? And how does our morality come into play?

As individuals, we all have our moral compass to guide us through life. This compass helps steer our decisions and actions in the right direction, based on what we believe is right and wrong. 

But what happens when this moral compass clashes with the law? Particularly in the case of taxation in Australia? How do our personal beliefs shape how we pay our taxes – or whether we even choose to pay them at all? Let’s take a closer look at this complex issue.

When it comes to taxation in Australia, there are a few things you need to know. The first is that the Australian government relies heavily on taxes to fund public services. 

This means that you can expect to pay tax on almost everything you earn or purchase. However, there is also a range of tax deductions and exemptions available, which can help reduce your taxable income.

Are you unsure about how to feel about the Australian taxation system? You’re not alone! Australia’s taxation system can be confusing, and it can be hard to figure out what our taxes are used for. 

In this blog post, we’ll explore Australia’s tax system and talk about how your taxes help fund important programs and services in our country. We’ll also discuss how to find your moral compass when it comes to tax time and offers some tips on getting the most out of your tax return.

Most people would agree that paying taxes is a necessary evil. After all, we need taxes to fund important public services, like healthcare and education. But how do you decide how much tax you should pay? 

And what happens when your moral compass tells you that you should pay more tax than what the government is asking for? Unfortunately, there is no one right answer to this question in Australia – it depends on your circumstances. 

In this blog post, we’ll explore some of the factors that go into deciding how much tax you should pay in Australia. We’ll also discuss some of the arguments for and against paying more tax than what the government has asked for.

Let’s get started!

The APESB Standards And Your Practice

CPA Australia members have a responsibility to act in the public interest. Therefore, you must comply with the fundamental principles of integrity, objectivity, professional competence, due care, confidentiality and professional behaviour in all your dealings.

Established in 2006, APESB is an independent, national body. It sets the code of ethics and professional standards with which members from CPA Australia, Chartered Accountants Australia and New Zealand (CA ANZ), and the Institute of Public Accountants (IPA) must comply.

Do Professionals Have an Ethical Compass, and Does It Matter?

The formation of the Tax Bar Association at the Victorian Bar is indicative of the forerunning role that the bar plays as an important constituent of the legal community. The Australian Taxation Office (ATO) looks forward to working closely with the Association and its members.

Such a relationship is important because we are both strong supporters of the rule of law. It is the rule of law that ultimately safeguards people’s rights, giving our society an ethical and competitive advantage over those countries where it does not hold sway.

It has been said that if we accept that society appropriately orders itself in a way to ensure harmony and survival, we can accept that rules (laws) designed to promote harmony have a moral compass. 

There are, of course, personal perspectives as to what this may mean to a particular individual. Still, in terms of their responsibilities, professionals simply mean compliance with the legal and ethical standards set down by profession to which they belong and as observed by members of the profession of good repute and competency.

APESB Professional And Ethical Requirements

1. APES 110 Code of Ethics for Professional Accountants

APES 110 Code of Ethics for Professional Accountants is issued by the Accounting Professional and Ethical Standards Board (APESB). 

APESB is an independent body established in 2006 as an initiative of CPA Australia and Chartered Accountants in Australia and New Zealand (then the Institute of Chartered Accountants in Australia). 

CPA Australia, Chartered Accountants ANZ and the Institute of Public Accountants are all members of the APESB. The role of APESB is to develop and issue professional and ethical standards in the public interest that apply to members of CPA Australia and the other two Australian accounting bodies.

The Code is based on the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants (IESBA) of the International Federation of Accountants (IFAC). Additional Australian definitions or paragraphs in the Code contain the prefix AUST.

Members practising in Australia or abroad must comply with the Code unless applicable laws or regulations prevent them. In applying the requirements outlined in the Code, members shall be guided not only by the words but also by the spirit of the Code.

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2. APES 205 Conformity with Accounting Standards

1. Objective

APES 205 Conformity with Accounting Standards sets out mandatory requirements and guidance for members. 

Members must comply with the relevant financial reporting framework applicable to their relevant jurisdiction when they prepare, present, audit, review or compile general purpose financial statements or special purpose financial statements.

2. Scope and application

APES 205 took effect on 1 July 2008 and was revised in October 2015. The revised standard, effective from 1 January 2016, requires members in Australia to adhere to its mandatory requirements, whilst members outside of Australia are required to comply with the financial reporting framework applicable to the relevant jurisdiction unless they are preparing financial statements under the Australian financial reporting framework.

3. Fundamental responsibilities of members

APES 205 requires members to observe and comply with their public interest obligations when they prepare, present, audit, review or compile financial statements. Members must ensure they meet their professional obligations established in Section 130:Professional Competence and Due Care of APES 110 Code of Ethics for Professional Accountants. 

The Standard stipulates that members must have the requisite professional knowledge and skill, or if they do not have the necessary expertise, they must engage a suitably qualified external person.

4. Responsibilities of members in respect of the Reporting Entity concept

APES 205 refers members to Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity and the Framework for the Preparation and Presentation of Financial Statements. 

These guides circumstances in which an entity will be considered a reporting entity. Members responsible for preparing financial statements of reporting entities are required to prepare general purpose financial statements.

5. Responsibilities of members in respect of general purpose financial statements

APES 205 requires that members take all reasonable steps to comply with Australian accounting standards when they prepare, present, audit, review or compile general purpose financial statements which purport to comply with the Australian Financial Reporting Framework.

Where members cannot ensure that general purpose financial statements are prepared following Australian accounting standards, they must take reasonable steps to ensure that appropriate disclosures are made in the financial statements. 

Where legislation, ministerial directive or other government authority requires a departure from the Australian accounting standards, members must disclose that fact as the reason for departure in the general purpose financial statements.

6. Responsibilities of members in respect of special purpose financial statements

Where special purpose financial statements are prepared, members have a professional obligation to ensure the following matters are disclosed:

  • that the financial statements are special purpose financial statements
  • the purpose for which the special purpose financial statements are prepared
  • the significant accounting policies adopted.

Where members are unable to ensure proper disclosure of departures from Australian accounting standards, APES 205 states that members should discuss the matter with an appropriate level of management and document the results of these discussions.

7. Members in public practice

APES 205 requires members to take reasonable steps to ensure clients have complied with Australian accounting standards when performing an audit or review engagement or a compilation engagement of general purpose or special purpose financial statements.

Where members in public practice have been engaged to provide audit, review or compilation services and are unable to ensure that clients have complied with the applicable financial reporting framework, the members have a professional obligation to consider relevant Australian auditing standards applicable to audit or review engagements or professional standards applicable to compilation engagements.

3. APES 210 Conformity with Auditing and Assurance Standards

1. Objective

APES 210 Conformity with Auditing and Assurance Standards set out mandatory requirements and guidance for members. Members must comply with auditing and assurance standards when they conduct assurance assignments or assurance engagements.

2. Scope and application

APES 210 took effect on 30 September 2008 and was revised in November 2011 and again in October 2015. The revised standard, which is effective from 1 January 2016, requires members in Australia to adhere to its mandatory requirements. 

For members outside of Australia, the scope of the standard must be followed as long as it does not contravene local laws and regulations in the country they are working.

A member in business undertaking work, including honorary work that is within the scope of an assurance engagement, is deemed to be a member in public practice for the purpose of APES 210. 

Consequently, members in these circumstances must also comply with auditing and assurance standards when they perform assurance engagements (for example, audits of a local charity or social club).

3. Fundamental responsibilities of members

APES 210 requires members to observe and comply with their public interest obligations when performing an assurance assignment or assurance engagement. Members must adhere to the professional obligations established in APES 110 Code of Ethics for Professional Accountants in respect of:

  • Section 130 – Professional Competence and Due Care
  • Section 290 – Independence Audit and Review Engagements
  • Section 291 – Independence – Other Assurance Engagements

4. Auditing and assurance standards

APES 210 requires members to comply with auditing and assurance standards. The only exception to this requirement is where legislation or other government authority requires a departure from such standards. In circumstances where a departure is required, the member must disclose that fact in the member’s report.

5. Auditing and assurance guidance

Members should follow auditing and assurance guidance issued by the AUASB.

4. APES 220 Taxation Services

1. Objective

APES 220 Taxation Services sets out mandatory requirements and guidance for members who provide taxation services.

2. Scope and application

APES 220 took effect on 1 July 2008 and was revised in March 2011, October 2015 and July 2018.

The revised standard, which is effective from 1 October 2018, requires members in Australia to adhere to its mandatory requirements when they provide a taxation service. For members outside of Australia, the scope of the Standard must be followed as long as local laws and regulations are not contravened.

3. Fundamental responsibilities of members

APES 220 requires members to observe and comply with their public interest obligations when providing taxation services. 

The Standard also reminds members of their professional obligations established following APES 110 Code of Ethics for Professional Accountants (the Code) in respect of:

  • Section 120: Objectivity
  • Section 130: Professional Competence and Due Care
  • Section 140: Confidentiality

Consistent with the fundamental principles of integrity and professional behaviour, APES 220 mandates that members providing taxation services must ensure that their personal tax obligations and those of the member’s associated entities are properly discharged.

4. Preparation and lodgment of returns to revenue authorities

APES 220 stipulates that a member must prepare and lodge returns and other relevant documentation with a revenue authority following the information provided by a client or employer, their instructions and applicable taxation law.

5. Tax schemes and arrangements

APES 220 requires a member, where appropriate and having regard to the member’s scope of work, to provide a client or employer with sufficient information to be fully informed of the details of any proposed tax scheme or arrangement and its current future ramifications. 

Members must not knowingly or recklessly be associated with documents or accounting entries that misrepresent transactions. Members must also not promote tax schemes and arrangements in circumstances where it is not reasonably arguable that the applicable tax benefit is available under Taxation Law.

6. Estimates

Estimates are prohibited by APES 220 unless their use is reasonable and generally accepted or where exact data cannot be obtained. Where estimates are not reasonable, the member must advise the client or employer of the risks and consequences of using estimates.

7. False or misleading information

In accordance with APES 220, members must not provide a taxation service to a client or employer if it is based on false or materially misleading information. Further, a member must not knowingly or recklessly make a statement or cause others to make a statement that is false or misleading by its content or omission in a material manner.

8. Professional engagement matters

Terms of engagement must be documented and communicated by members in public practice according to APES 305 Terms of Engagement. Members in public practice must also comply with Section 210 Professional Appointments of the Code.

Refer to the standard for information concerning:

  • definitions
  • objectivity
  • confidentiality
  • professional competence and due care
  • preparation and lodgment of returns to revenue authorities
  • tax schemes and arrangements
  • estimates
  • false and misleading information
  • professional engagement matters
  • client monies
  • professional fees
  • documentation.

5. APES 305 Terms of Engagement

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1. Objective

APES 305 Terms of Engagement mandates that members in public practice document and communicate the terms of engagement with their clients. Guidance is provided in respect of the general contents of an engagement document.

2. Scope and application

APES 305 took effect in December 2007 and was revised in June 2009, July 2013 and October 2015. 

The revised standard, which is effective for engagements commencing on or after 1 January 2016, requires members in public practice in Australia to comply with its mandatory requirements. 

For members outside of Australia, the scope of APES 305 must be followed to the extent local laws and regulations are not contravened.

3. Terms of engagement for professional services

Members in public practice must document and communicate to the client the terms of engagement. However, it is not a requirement that the engagement document takes the form of a letter. Other acceptable methods of documenting and communicating the terms of engagement are a handout, brochure, leaflet or electronic communication.

4. General contents of an engagement document

APES 305 discusses the general contents of an engagement document and guides on matters that members in public practice may consider for inclusion in an engagement document. These matters are noted below and can be varied to meet the individual requirements and circumstances of an engagement:

  • purpose of the engagement
  • objectives of the engagement
  • scope of the engagement
  • engagement output
  • relative responsibilities of the member, the client and any third parties
  • involvement of other members in public practice
  • fees and billing arrangements
  • ownership of documents
  • confirmation by the client that the terms of the engagement document are understood.

5. Recurring engagements

A member in public practice may decide not to send an engagement document for recurring engagements each year unless there is a change in circumstances such as:

  • the client misunderstands the objectives and scope of the engagement
  • any significant changes in the engagement
  • any significant changes in the professional services to be provided or the terms of engagement
  • a recent change of client management or ownership
  • a significant change in the nature or size of the client’s business
  • any significant changes to professional standards or applicable accounting or auditing or assurance standards
  • any changes to legal or regulatory requirements.

6. Limitation of liability scheme

A member in public practice participating in a limitation of liability scheme must be familiar with the relevant professional standards legislation and related obligations. In addition, APES 305 mandates that where the member in public practice is a participant under such a scheme, the member must advise the client that the member’s liability may be limited.

Refer to the standard for information concerning:

  • definitions
  • conformity with international pronouncements
  • features of a recurring engagement
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