04 – The need for tax warnings in SOAs
ASIC’s guidelines on preparing SOAs make it clear that advisers can advise on strategies which have tax consequences outside their competence. RG 175, which deals generally with issues connected to SOAs, in effect says the SOAs should refer such tax issues to an appropriate third party such as a registered tax agent or a solicitor.
This direction is contained in paragraphs 356 and 357, and reads as follows:
Tax implications outside the advice provider’s competence
A client’s tax position may be relevant to the assessment of the client’s relevant circumstances. Advice involving complex tax strategies is likely to involve more inquiries about the client’s tax position than relatively simple advice.
When there are material tax implications that the client should consider that go beyond an advice provider’s competence, two ways that the advice provider can act in the best interests of their client and give appropriate advice are:
- the advice can be based on advice given to the client by someone with appropriate expertise, such as a registered tax agent. In this case, the advice provider must ensure that they make clear in the SOA and in discussions with the client that they are assuming the tax advice is appropriate, rather than endorsing it; or
- the advice can be limited to matters on which the advice provider is competent to advise—in which case, the advice provider must take steps so that it is reasonable to believe the client understands that they should seek tax advice from a person with appropriate expertise (or forms their own view if they have appropriate expertise) before following the advice provider’s advice.
Mandatory disclosure of tax limitation
Dover requires this direction to be in every SOA unless arrangements are made with Dover’s compliance team when the SOA is submitted for pre-client review. For example, if the SOA does contain detailed tax advice then this warning is not appropriate and should not be included in the SOA.
This warning is built into every Dover SOA. It’s part of our mandatory Client Information Policy. This is one of the ways Dover ensures all SOAs are compliant, and one of the ways Dover protects advisers from unrealistic client expectations.
Once again, it is a mark of a professional to refer a client to a specialist where this is in the client’s best interests. Smart clients see this a strength, and will trust you even more. They know you have their best interests in mind at all times.