The boundary between accounting and legal advice is a somewhat grey area recently considered by Havilah Legal at a seminar event held for Chartered Accountants Australia New Zealand members.
 
This article considers when an accountant* can do legal work (in specific circumstances and in a specific capacity) and what are the implications for the accountant, their organisation and most importantly the client, should legal work be undertaken when prohibited.
 
On the other side of the equation then, when can a lawyer do the work of an accountant? The resounding answer to that question is never! Both lawyers and accountants have undertaken significant training and possess entirely different skill sets.  For example, while a lawyer may advise a client as to the likely outcome of a litigated dispute in terms of a potential settlement amount, in respect to what the client should do with the money – that falls into the realms of the type of advice that must be provided by their accountant and not the lawyer.
 
As an accountant there are two regimes that must be complied with in respect to the provision of legal advice, namely the statutory framework in addition to the relevant obligations, standards, rules and regulations dictated by the professional association an accountant is a member of.

The Statutory Framework
 

Section 11, Legal Profession Act 2008 (W.A.)

The purposes of this Part are as follows —
(a) to protect the public interest in the proper administration of justice by ensuring that legal work is carried out only by those who are properly qualified to do so;
(b) to protect consumers by ensuring that persons carrying out legal work are entitled to do so.

Section 12 (1), Legal Profession Act 2008 (W.A.)

Prohibition on engaging in legal practice when not entitled
(1) In this section
legal work means:
(a) any work in connection with the administration of law; or

(b) drawing or preparing any deed, instrument or writing relating to or in any manner dealing with or affecting —
(i) real or personal estate or any interest in real or personal estate; or
(ii) any proceedings at law, civil or criminal, or in equity;

Section 12(2) of the Legal Profession Act 2008 (W.A.)

(2) A person must not engage in legal practice in this jurisdiction unless the person is an Australian legal practitioner.
Penalty: a fine of $20,000.
(3) Subsection (2) does not apply to engaging in legal practice of the following kinds —
• appearing or defending in person in a court;
• drawing or preparing a transfer under the Transfer of Land Act 1893;
• a public officer doing legal work in the course of his or her duties;
(4) It is a defence to a prosecution for an offence against subsection (2) in relation to the doing of legal work to show that the person who did the legal work has not directly or indirectly been paid or remunerated or promised or expected pay or remuneration for the work so done (the unpaid work).

(5) Subsection (4) does not apply if the person directly or indirectly receives, expects or is promised, pay or remuneration for or in respect of other work or services relating to, connected with or arising out of the same transaction or subject matter as that to which the unpaid work relates.

(6) A person is not entitled to recover any amount in respect of anything the person did in contravention of subsection (2).

(7) A person may recover from another person in a court of competent jurisdiction, as a debt due to the person, any amount the person paid to the other person in respect of anything the other person did in contravention of subsection (2).

Professional Association Requirements

Depending on the particular association an accountant belongs to, there will be a variety of rules, regulations, standards and/or codes of conduct that must be adhered to.
 
In general, it will be that member’s responsibility to not only take into account the requirements of their client, an individual, or employer but also to have regard to the public interest and the accountancy profession as a whole.
 
The power of the association to take disciplinary action against its own members for not adhering to their membership obligations is likely to be well documented, setting out the procedures to be followed and the sanctions which may be imposed.

Professional Indemnity

Whilst not a regime as such, it is important to consider the extent to which your professional indemnity insurance will cover you (or not, as the case may be!) for any legal work undertaken when prohibited to do so.
 
The most commonly made claims by accountants on professional indemnity insurance involve taxation but their severity tends to be lower because the claims are normally only for any charges for penalties and interest. Although there have been major losses for clients from some tax effective schemes, Part IV restricts the schemes from some insurance coverage.
 
Audit has very low numbers of reportable incidents but the claims can be severe. Financial planning/incorrect financial advice and the sales of businesses are other common areas where high claims are reported.

Types of work accountants regularly do:

  • Providing advice as to income tax laws, GST laws, FBT laws;
  • Providing an advice about directors’ obligations under the Corporations Law;
  •  Drafting trustee resolutions, interpreting loan agreements, administering deceased estates, interpreting contracts for sale;
  • Acquiring a trust deed for a client from a website;
  • Interpreting a sale contract to determine GST outcomes;
  • Interpreting a trust deed;
  • Giving legal advice that is incidental to advising as to taxation laws;
  • Giving legal advice that is incidental to advising as to Commissioner of Taxation;
  • Determining whether a document is a lease for the purposes of the in-house asset rules or the separate business test within the personal services income rules or active asset test in the small business concessions;
  • Drafting an instrument whereby a guardian approves of an amendment to a trust deed or a distribution;
  • Appearing on a tax prosecution at State Magistrates’ court or District Court; and
  • Giving advice as to State tax legislation.

There are numerous cases where court proceedings have been bought against accountants in circumstances where legal advice has been provided on issues such as those noted above.

Exceptions

Expert Witness

Accountants acting as an expert witness in litigation such as a Forensic Accountant are not bound by the statutory framework described above.

Registered Tax Agents

Pursuant to Section 50-5(1) of the Tax Agent Services Act 2009, such a person can lawfully charge a fee to provide a “tax agent service”.

 

A “tax agent service” is defined in s 90-5(1) to mean, inter alia, a service that relates to ascertaining liabilities, obligations or entitlements of an entity under a taxation law in circumstances where the entity can reasonably be expected to rely on that service to satisfy its liabilities or claim entitlements. Such services encompass the preparation of income tax returns.

Section 90.15 defines the meaning of tax (financial) advice service and section 90.10 defines a BAS service.

Section 50.5 of this Act outlines the penalties applicable should you be found to be providing tax agents services if unregistered.
 
 
*When referring to accountants in this article, the reference is general (including Chartered Accountants, Certified Practising Accountants etc.)

This website and blog is made available by Havilah Legal only to give you general information and a general understanding of the law. It is not legal advice, and should not be treated as such.

The legal information on this website is provided ‘as is’, and Havilah Legal makes no representations or warranties, express or implied, in relation to the legal information on this website.

Your use of this website does not establish a lawyer/client relationship between you and Havilah Legal. You must not rely on the information on this website as an alternative to legal advice. If you need legal advice, or if you have any specific questions about any legal matter you should consult Havilah Legal or your professional legal services provider.

Liability limited by a scheme approved under Professional Standards Legislation.