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You can now record your Australian client verifications in Xero

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Anthony Migliardi

Mar 9, 2022

The Tax Practitioners Board (TPB) recently announced that all Tax and BAS agents in Australia need to undertake proof of identity verifications for new clients, to reduce the risk of tax and identity fraud. A strong verification process — also referred to as a 100-point check — gives you confidence that your clients have the authority to act on the business’ behalf.

Right now, it’s a recommendation. But in the later half of 2022, undertaking and recording client verifications will become mandatory. This is the next step towards stronger due diligence across the industry — driven by new Anti-Money Laundering legislation, as well as tighter industry standards by other professional bodies, like CPA Australia and Chartered Accountants Australia & New Zealand.

It may also form the foundation for other changes in the future. For example, you may not be able to lodge a tax return or call the ATO if you haven’t verified the identity of your client. That’s why we’ve made some changes in Xero, to make recording your verifications as easy as possible.

What identity documents do you need to sight?

You’ll need to undertake a proof of identity check before providing Tax or BAS agent services to new clients. The types of clients you should verify and the documents you can use to verify their identity depends on a number of factors — the TPB has a list of verification requirements and a fact sheet for clients that may be helpful.

It’s important to note that you simply need to witness the documents. There is no need to store a copy, and in fact we recommend against it. You can sight them in person, or do it remotely — such as joining a Zoom call to match the face of your client to their identity documents. The good news is that anyone in your practice can undertake the verification process.

The records must be kept for at least five years after the engagement with your client and/or their representative ceases.

How to record your client verifications in Xero

We’ve added new fields into the ‘Tax and Company’ section of the client record in Xero Practice Manager (XPM) and Xero Tax, so you can record the identity verification process. By creating a report in the report builder and selecting the client verification fields, you can quickly see which clients are yet to be verified, or which existing clients you might like to formally verify.

The new fields include:

  • A ‘verified individual’ checkbox to confirm whether the individual (or an individual acting on behalf of an entity) has been verified
  • The date that the individual was verified by your practice
  • How the individual was verified (multiple options can be selected)
  • The name of the staff member that verified the individual
  • A notes section where you can add any other information you need to record as part of the verification process, such as whether the verification was completed in person or remotely

Recording the Director ID of your client

From November 2021, new company directors in Australia need to apply for a director identification number with Australian Business Registry Services. Existing company directors have until November 2022 to apply for their Director ID. It’s part of the wider anti-phoenix initiative implemented by the Australian Federal Government, designed to prevent the use of false director identities and make it easier for regulators to trace directors’ relationships with companies over time.

You can record the Director ID of your client using the field in the ‘Tax and Company’ section of the client record in XPM and Xero Tax. You can also import this information when you import your client list.

Don’t forget, if you fail to undertake a proof of identity check for your clients after it becomes mandatory, you may be in breach of the TPB code and have sanctions imposed on you. So it’s worth taking the time to review your client list, completing the verification checks, and recording them in XPM or Xero Tax for your peace of mind.

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