In Short
- New accounting businesses need clear contracts, including client service agreements, employment agreements, and software agreements, to ensure legal compliance and protect against risks.
- Key clauses should address scope of services, liability limitations, privacy obligations, and regulatory requirements like the Privacy Act 1988 and AML/CTF laws.
- Failure to have proper contracts can lead to legal disputes, financial claims, and regulatory breaches.
Tips for Businesses
Ensure all contracts are comprehensive and tailored to your accounting services. Include clauses that define service scope, liability limitations, and compliance with privacy and financial regulations. Regularly review contracts to stay updated with legal requirements, and seek professional legal advice to protect your business from unnecessary risks.
Starting a new accounting business in Australia requires navigating complex legal requirements that extend beyond basic bookkeeping knowledge. Many new accounting practitioners underestimate the importance of properly drafted contracts and compliance frameworks, often operating on the basis of informal agreements or inadequate documentation that leaves their businesses exposed to risks. This article will examine key contractual considerations, including essential contract types, protective clauses, and statutory obligations that new accounting businesses should implement to safeguard their practices and maintain legal compliance.
Key Contract Types for Accounting Businesses
Client Service Agreements
Your client service agreement defines the scope of accounting services you will provide. You should include specific details like bookkeeping frequency, financial reporting deadlines, and tax preparation timelines. For example, specify “monthly management accounts delivered by the 15th of each following month” rather than vague terms like “regular reporting”. This contract should clearly outline your professional fees, payment terms, and what happens if clients provide incomplete information.
Employment and Contractor Agreements
If you are hiring employees or contractors for your accounting business, you need a good contract that sets out the terms of employment and/or the services to be provided by the contractor. Employee contracts must comply with the Fair Work Act, including minimum wages, superannuation, and leave entitlements.
Contractor agreements should specify project deliverables, payment schedules, and intellectual property ownership. If you are engaging a sole trader as a contractor (for example, a freelance bookkeeper), there may be superannuation and PAYG withholding obligations. Make sure you discuss your tax obligations with a tax lawyer or a specialist to ensure you are aware of all the risks associated with your arrangements with individual contractors.
Software Agreements
Accounting businesses often use cloud-based software for bookkeeping, payroll, and tax preparation (for example, providers like Xero, MYOB, or QuickBooks that offer specific protections for accounting practices). You should review software licence agreements carefully, particularly clauses about data ownership and security breaches. Ensure your agreements with software providers comply with relevant privacy laws, especially when handling your client’s personal information, including their financial data. These agreements should also include appropriate remedies in the event that these service providers suffer a data breach.
Risk Management and Protection
Limitation of Liability Clauses
Note that if you are a public practitioner providing public accounting services in Australia, hold a CPA or FCPA and have a current public practice certificate, you may take part in the Professional Standards Scheme. This Scheme incorporates a mandated financial cap on your business’ liability. The cap may depend on the size and nature of your business. Make sure to speak with a regulatory consultant to see whether this scheme applies to your business.
Clear Scope Definitions and Change Management
You should define exactly what services you will provide and establish procedures for scope changes. You can include statements such as “additional work requests require written approval and separate quotation”. This prevents clients from expecting free additional services later. For instance, if your bookkeeping service excludes payroll processing, state this explicitly and outline the additional costs if clients later request payroll services.
Reviewing contracts across your business? Download this free checklist to ensure clear terms, fair risk allocation and stronger commercial outcomes
Regulatory Compliance Integration
Privacy Act 1988 (Cth) Requirements
Depending on the size of your business, you will have privacy obligations set out by law. You should have a privacy policy that explains how you collect, use, disclose and store personal information. Make sure to speak with a lawyer to better understand your privacy obligations as an accounting business.
Australian Financial Services Licence (AFSL) Considerations
Depending on the services you provide, you may need to hold an AFSL, unless an exemption applies. If you are providing financial product advice (for example, advice relating to a self-managed super fund), ensure your contracts comply with AFSL obligations, including disclosure requirements and client duties. You should include disclaimers in contracts when providing general financial information versus personal financial advice.
Tax Agent Services Act 2009 (Cth)
This legislation sets out the registration requirements and regulations for tax and BAS agents, particularly regarding competence, character, trust accounting, and confidentiality obligations. When drafting your client agreements, you should also set out clauses that explain what will happen if there is a conflict of interest and how such conflicts will be managed.
Anti-Money Laundering and Counter Terrorism Financing (AML/CTF)
Certain services such as:
- management of client assets;
- management of bank savings or securities accounts;
- involvement in real estate transactions; and
- assisting with the creation or management of legal entities or trusts,
subject your business to AML/CTF obligations. If this applies to your business, you will have the following obligations by law:
- enrolment with AUSTRAC;
- development and maintenance of a tailored AML/CTF program;
- conducting initial customer due diligence;
- performing ongoing customer due diligence;
- reporting of certain transactions and suspicious activities; and
- maintaining comprehensive records.
Key Takeaways
Starting an accounting business requires comprehensive contracts to protect your practice and ensure legal compliance. Client service agreements must clearly define scope, fees, and deadlines, while employment agreements must comply with the Fair Work Act requirements and tax obligations. Important clauses such as liability limitation clauses, protect your business from excessive claims, but must remain fair under Australian Consumer Law. You should also include clauses that address your privacy obligations, AFSL requirements, and AML/CTF compliance obligations, as applicable to your services and business size.
If you need help with your contracts for your accounting business, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Operating without proper contracts leaves your business exposed to risks. You could face unlimited liability claims, disputes over the scope of work, payment issues, and regulatory breaches. Without clear client service agreements, clients may expect additional services at no cost or dispute your fees. Poor documentation also makes it difficult to enforce your rights or defend against claims. Speak to a commercial lawyer to help you draft the right agreement.
AML/CTF obligations apply if you provide specific services, including managing client assets, handling bank accounts or securities, involvement in property transactions, or helping create legal entities and trusts. If these laws apply to your business, you must register with AUSTRAC, develop an AML/CTF program, conduct customer due diligence, report suspicious activities, and maintain detailed records. Your client agreements need specific clauses addressing these requirements, so seek expert advice to understand your obligations.
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