Tax agents, intermediaries and nominated persons who act for their clients or another person in relation to their tax affairs (including social policy entitlements and obligations) must obtain an Authority to Act.  This authority provides access to the client’s tax accounts and other information held in Inland Revenue’s system.  It also allows the tax agent to interact with Inland Revenue on their client’s behalf.  

What’s covered

Inland Revenue’s proposed operational position on what they require for a valid authority to act considers the following:

• who may give an authority to act
• what the authority to act should cover
• the requirements for obtaining an authority to act electronically
• record keeping requirements in relation to the authority (including verification of identity), and
• Inland Revenue’s process for auditing authorities to act and related documentation 

Highlights

CA ANZ supports the publication of the statement however, there are several issues we consider require clarification. 

Information sources

All information/guidance on what is required for a valid authority to act should be consolidated into the draft statement. 

Currently, information about obtaining a valid authority to act can be found on Inland Revenue’s website, in the IR1059 information sheet and an item in the November 2011 Tax Information Bulletin (pp 3 – 7) titled, “Process for tax agents to obtain electronic authorities to act.” 

If the final statement supplements these sources there will be four different resources tax agents will need to refer to. This would not only increase compliance costs but also increase the risk of confusion and inadvertent non-compliance. 

When a new authority to act is required

The draft statement provides examples of situations when Inland Revenue will or may require a new authority to act to be signed. For example, on a change in ownership of an entity, or if a client is accidentally de-linked, including through the actions of another party. 

Regarding a change in ownership, CA ANZ questions whether this criterion would be useful or relevant (particularly if the change is at the ultimate parent level). In the situation where a client has been accidentally de-linked, CA ANZ considers it to be unnecessary to require a new authority to act to re-link them.

Information needed on the authority to act

Included in the detailed discussion, the draft statement sets out items to be ‘clearly addressed’ in the Authority to Act. 

As well as the client’s full name and IRD number, the draft statement also considers what is required if the tax agent outsources part of their work to a third party.  In this case, it is suggested the authority should authorise the tax agent: “to allow access to the client’s information from Inland Revenue to that third party to the extent necessary for the completion of the agreed services (Note: Inland Revenue will not accept responsibility for any improper use of a client’s information as a consequence of the client agreeing to the agent outsourcing work to a third party.)”

Verifying the identity of the person giving authority

In today’s digital world it would be remiss for the authority to act process to exclude consideration of identity verification procedures. Notwithstanding, it would be appropriate for Inland Revenue’s requirements to be practical and consider the tax agent’s own existing business processes and policies.  

In some cases, it would be reasonable to relax the need for an identification document to be obtained. For example, when a child of a client turns 16 years of age, Inland Revenue requires the child to complete their own authority to act. If the tax agent has known the child since birth, it would seem unnecessary to require a copy of the child’s birth certificate when obtaining the new authority.  

CA ANZ’s views on these and other matters are included in our submission on the draft statement.  

Final word

We wait with interest for the final statement to be published. While the subject matter may appear mundane it is critical to a tax agent’s business to ensure all clients have a valid authority to act.