What stays onshore when an Australian firm offshores its accounting

Why the line sits where it does

Anyone who provides tax agent or BAS services for a fee must be registered with the TPB, unless an exemption applies. One exemption covers employees and contractors of a registered agent who don't provide the service in their own right (TPB, who needs to register). That is the footing offshore accounting stands on. The offshore person prepares. Your registered agent provides the service.

The Code of Professional Conduct does the rest. Under Code item 7 you must make sure a tax agent service you provide, or that is provided on your behalf, is provided competently. The TPB's factsheet says this covers an unregistered contractor in Australia or abroad (TPB factsheet). Its guidance statement goes further. Work outsourced to an unregistered third party must be under the supervision and control of a registered practitioner, who is "ultimately responsible for the quality of work of the unregistered third party" (TPB(GS) 31/2018).

The TPB is specific about what supervision means. Signing off a document because its contents "seem reasonable" is not enough. You needn't check every piece of work, but a "substantial degree of oversight" is required. The TPB suggests training offshore staff in Australian tax, spot checks of source documents and a written supervisory plan (TPB, supervision and quality management).

There is a civil penalty behind this. If you sign a client declaration prepared by someone outside your supervision and control, the penalty is up to $82,500 for an individual and $412,500 for a partnership or company (TPB figures, at the penalty unit value it quotes as at 7 November 2024).

Who lodges, and the declaration that comes first

The ATO describes Online services for agents as a system "for registered tax and BAS agents and their authorised staff". Every user needs their own Digital ID, and the practice's principal authority sets what each person can do (ATO, Online services for agents). The terms of use say you must not share a credential, and once you give someone access "you are responsible for the actions of the user" (ATO terms and conditions).

Before any lodgement, your client has to give you a written declaration that they authorised you to lodge and that the information is true and correct. One per form, no bulk declarations, and an email will do. When you lodge, you state that you have received it. The ATO points to sections 388-65 and 388-70 of schedule 1 to the Taxation Administration Act 1953 (ATO, client declarations).

So the offshore accountant can prepare the return and the workpapers, but the declaration comes to your firm and your agent lodges. Lodgement and sign-off stay with your firm.

Client consent and the engagement letter

Code item 6 stops you disclosing a client's affairs to a third party without their permission, unless a legal duty requires it. The TPB lists an overseas or offshore entity as an example of a third party, and notes that an employee of your own business who is located overseas is not one (TPB(GS) 31/2018). A provider's employee working on your files is. Permission can be a signed engagement letter, a signed consent or another written communication. It should say what is disclosed, to whom and where. The TPB also suggests you don't "imply or state that all their work is completed in Australia, if that is not the case".

The TPB's webinar answers put it plainly: a generic line in the engagement letter isn't enough, and an email from the client accepting the offshoring arrangement is (TPB webinar Q&A). CA ANZ tells its members that client consent is paramount and should be in writing, for example in a signed engagement letter that sets out the outsourced service (CA ANZ).

What privacy law adds

The Privacy Act runs alongside the Code. Under Australian Privacy Principle 8, before you disclose personal information to an overseas recipient you must take reasonable steps to make sure they don't breach the principles. Usually that means an enforceable contract. Under section 16C you are then accountable for what the recipient does with it, as if the breach were your own. Giving personal information to an overseas contractor is usually a disclosure. There is an exception where the individual gives informed consent, but only if you expressly tell them that APP 8 will no longer apply (OAIC, APP 8 guidelines).

Professional indemnity

Code item 13 requires you to hold the PI insurance the Board sets. The TPB's factsheet asks practitioners who outsource to review the policy and check that it covers outsourced services (TPB factsheet). Make that call to your broker before the first file moves.

The 2024 Code changes

The Tax Agent Services (Code of Professional Conduct) Determination 2024 added eight obligations under Code item 17. They apply from 1 January 2025, or from 1 July 2025 for practitioners with 100 or fewer employees as at 31 July 2024 (TPB, Code of Professional Conduct). Three bear on offshoring:

• Section 35: each entity providing tax agent services on your behalf must maintain relevant knowledge and skills and be "appropriately supervised", having regard to the services it provides and your system of quality management (Code Determination).
• Section 40: you must have a documented system of quality management and enforce it, covering client engagement, confidentiality, record keeping and staff training among other things.
• Section 45: you must tell current and prospective clients about the TPB register, how to complain, your rights and obligations, and certain past events. It says nothing about offshoring, but the engagement letter that carries your offshoring consent is a natural place to meet it (TPB, keeping your clients informed).

Nothing in the Determination bans offshoring. The TPB's supervision guidance names offshoring as a remote supervisory arrangement and says physical proximity is not what decides whether supervision is adequate. Contact, document review and whether you can audit the work remotely are what count.

What stays, what moves, what depends

This is a summary, not legal advice. Check your own position with your professional body or adviser.

Stays with the firm

• Lodging with the ATO, and the agent declaration that goes with it.
• Receiving and keeping the client declaration for each lodgement.
• Review and sign-off of anything that goes to the ATO or a client.
• Advice, the client relationship and the engagement letter.
• Registration, the 'sufficient number' of registered individuals and the quality management system.

Commonly moves

• Bank reconciliations and coding.
• Payroll processing, plus payables and receivables.
• BAS preparation, ready for your review.
• Workpapers and draft returns in your practice software.
• Audit file preparation and sample testing.

Depends on the client and the work

• Client contact. You can route queries through the offshore team or keep them onshore. The time difference usually decides.
• ATO logins for offshore staff. The terms allow it if each person has their own credential, but you answer for everything they do.
• Whether client data may leave Australia at all. Some client agreements say no.
• Whether the offshore person is a 'third party'. Your own overseas employee usually isn't. A provider's employee is.
• How much supervision. It scales with the complexity of the work and the experience of the person.

What a return looks like in practice

Take a company return. Your team drops the source documents and the prior-year file into XPM on a Tuesday afternoon. South Africa is eight hours behind Sydney, nine in daylight saving, so the draft return and workpapers are waiting when your reviewer logs in on Wednesday morning. The reviewer checks them against the source documents, fixes or queries what needs it, and sends the client the return with a request for their emailed declaration. When it comes back, your registered agent lodges. The offshore accountant never touches the ATO, and each correction goes on the checklist. That loop, with a co-founder joining your weekly review, is how we work.

Questions

Can an offshore bookkeeper lodge a BAS?

Not in their own right. BAS services for a fee require registration, and the client's declaration is addressed to your firm. An offshore bookkeeper can reconcile the file and prepare the BAS for your registered agent to review and lodge.

Do I have to tell clients the work is done overseas?

If the work goes to a third party, yes. Code item 6 requires the client's permission, and the TPB says the communication should say to whom and where the disclosure is made, including whether it is overseas. APP 8 adds its own consent and contract requirements where personal information is involved.

Does the 2024 Determination make offshoring harder?

It makes the supervision you already owed under Code item 7 explicit, and asks you to write it down. A supervisory plan, a review step for every file and a documented checklist get you most of the way there. If the offshore work was running unsupervised, it does make that harder, which is the point.

Next step

If you're deciding where to draw the line in your own firm, book a call with me. Bring your engagement letter and the work you'd move first. We'll tell you what we'd keep onshore and what a team could take. For the cost side, read what offshore accounting costs, and for the move itself, how to move your firm to offshore bookkeeping. Or read how our outsourced bookkeeping service, the Offshore finance desk, works.