ATO, TPB unveil new client verification standard

As part of the new standards, practitioners will be expected to verify clients through visual verification, source verification using ATO systems, or through the Source Document Verification Service (DVS) which compares a client’s details on government-issued identity documents against details held by a DVS provider.

Two separate proofs of identity must be verified when using any of the three methods, with practitioners allowed to apply these methods in combination to achieve a total of two separate proofs of identity.

The exception is when a primary photographic proof of identity document can be verified using the visual method.

Practitioners will be expected to voluntarily adopt the new standards, with the regulators aiming to make it compulsory from next year.

ATO assistant commissioner Sylvia Gallagher confirmed that tax practitioners were not expected to revisit and verify the identity of their entire client base as part of the transitional approach.

“We’re asking that they perform identity checks from this point on, at the next opportunity in their normal dealings with clients,” she said.

In developing the new client verification standard, the ATO and the TPB believe a minimum standard needs to be applied across the profession to ensure due diligence is taking place when engaging new clients.

The regulators cite an increase in attempts by criminals to commit refund fraud by stealing the identities of taxpayers which has coincided with an increased reliance on technology and remote working practices.

“The Tax Agent Services Act 2009 does not expressly set out minimum requirements for tax practitioners to verify a client’s identity,” said TPB chair Ian Klug.

“However, there are implications under this act if tax practitioners fail to take reasonable steps to ensure the identity of their clients is established.

“Our draft guidance provides practical guidance and examples so tax practitioners do not fall foul of their obligations and put their registration and business at risk.”

CPA Australia’s senior manager of tax policy, Elinor Kasapidis, believes the new guidelines are achievable, considering how many practices already have good identity verification controls in place.

“The proposed guidelines appear to strike a good balance between improving identity verification practices and allowing practitioners to exercise professional judgement in relation to existing clients,” Ms Kasapidis said.

“From a practical perspective, the expectations on practitioners appear workable.

“We recognise that many practitioners already undertake thorough identity verification checks and these guidelines shouldn’t be a burden. If a practitioner has doubts about the identity of an existing client or suspects fraud, these guidelines will support their efforts to undertake appropriate due diligence.”

View the ATO’s new client verification guidelines here.