Accountants' Terms of Engagement Template (Australia)

APES 305 makes documenting the terms mandatory — but not necessarily as a letter

APES 305 Terms of Engagement, in its December 2020 revision effective for engagements commencing on or after 1 July 2021, requires members in public practice in Australia to document and communicate the terms of engagement to the client. Two things about that requirement are commonly misread.

First, it is mandatory. Where ICAEW guidance in the UK treats an engagement letter as best practice and US practice treats it as risk management, APES 305 is a professional standard with which members must comply. A practice with no documented terms is not merely exposed, it is out of step with the standard.

Second, the standard does not prescribe a letter. It requires the terms to be documented and communicated, and the accepted means of doing that include an engagement letter, a handout, a brochure, a leaflet or electronic communication. That flexibility is genuinely useful for a practice with a high volume of small, similar engagements — a clear standing terms document, properly communicated and acknowledged, can do the work that a bespoke letter per client would otherwise do. The standard also addresses recurring engagements, so a practice needs a position on when terms are reissued rather than left to drift.

This template is written for that architecture: a standing terms document you communicate once and reference in each engagement, with the engagement-specific scope and fee living in the engagement document itself.

The clause the standard added that most templates still don't have: outsourcing and cloud

APES 305 was updated to require practitioners to include details of outsourced services and cloud computing in their engagement documentation. This is the clause that most terms in circulation — and effectively every free template written for another market — simply do not carry.

It matters because it maps onto what clients now actually ask. If part of the bookkeeping is performed offshore, if returns are prepared on software hosted overseas, if documents sit in a cloud platform whose servers are outside Australia, the client is entitled to know that from the terms rather than to discover it. This template's outsourcing section names the categories of service that may be outsourced, states that data may be held in cloud systems including outside Australia, confirms that confidentiality obligations are imposed on providers, and commits to telling the client which providers are involved if they ask.

It sits alongside the privacy obligations under the Privacy Act 1988 and the Australian Privacy Principles, which include their own rules about disclosing personal information to overseas recipients. The two are related but not the same requirement, and a practice needs both covered.

Tax agent registration and the 2024 Code obligations now shape the terms

Australia has required registration to provide tax agent services for a fee since the Tax Agent Services Act 2009 — which is worth noting because the United Kingdom only introduced mandatory HMRC registration for tax advisers in 2026. An Australian practice's terms have long needed to identify its registration; what changed recently is what else the Code of Professional Conduct requires it to do.

The Tax Agent Services (Code of Professional Conduct) Determination 2024 introduced eight new obligations. They commenced on 1 January 2025 for practitioners with more than 100 employees and on 1 July 2025 for everyone else — the grace period for firms with 100 or fewer employees as at 31 July 2024 has now passed, so these apply across the profession.

The obligation with the most direct effect on a terms document is the duty to keep clients informed: a practitioner must proactively tell clients about matters that may materially affect their tax affairs, decisions or timeframes. The scope was narrowed during consultation from an initial "any matter" formulation to particular listed significant matters, which is worth knowing because a lot of commentary still describes the original, broader version. This template includes a clause committing to that notification and explaining the channel it will come through, so the client knows where to expect it and the practice has a record of having said so.

Liability: professional standards schemes change the cap question here

Australian terms of engagement should not simply copy a British liability cap. Members of CPA Australia, Chartered Accountants Australia and New Zealand and the IPA can be covered by a professional standards scheme, which caps occupational liability at a level set by the scheme rather than by the contract, and which requires the member to disclose that the scheme limits their liability. Where a scheme applies, a contractual cap sitting alongside it needs to be consistent with it, and the required disclosure has to appear.

So this template treats the scheme as a switch rather than assuming one way or the other: switch it on and the terms carry a disclosure that the member's occupational liability is limited by a scheme approved under professional standards legislation, with a pointer to where the client can read the scheme. The contractual cap remains available for liability the scheme does not reach, and the interaction is stated rather than left implicit.

The clauses that cannot be excluded still cannot be excluded. Consumer guarantees under the Australian Consumer Law apply to services acquired by a consumer as that law defines one — which, on the monetary threshold, catches more small-business clients than practitioners expect — and a term purporting to exclude, restrict or modify those guarantees is void. This template says so in terms rather than drafting an exclusion that would not survive.

Records, liens and the practical reality of a handover

A lien over client papers for unpaid fees is recognised in Australian practice, but it is narrower than firms assume and it is regularly the wrong tool. It does not extend to everything in the file, it does not attach to documents that belong to the client and were provided by them in the ordinary way, and asserting it over material the client needs for a lodgment deadline creates a complaint risk that dwarfs the fee in dispute.

This template therefore states the position carefully: a lien only so far as the law and the practice's professional obligations permit, an undertaking to return the client's own documents, and a separate statement that working papers remain the practice's property. It also sets a records-retention period as a field, distinguished from the client's own obligation to retain records under tax law — generally five years for most business records, longer where a capital gains tax asset or a specific provision requires it.

The client-money section is optional, because many practices never hold client funds. Where a practice does, the professional bodies' client-monies requirements apply and a pooled trust account with unclear interest arrangements is a common audit finding.

The terms, explained

Scope, precedence and acceptance

States that these terms apply to every engagement, how they are accepted, and that the engagement document prevails on conflict — the APES 305 architecture of standing terms plus engagement-specific documentation.

Professional obligations and registration

Names the professional body, the practice's tax agent registration under the Tax Agent Services Act 2009 and its registration number, and the professional and ethical standards the practice works to.

Keeping you informed

The commitment introduced by the Tax Agent Services (Code of Professional Conduct) Determination 2024 to proactively notify the client of significant matters materially affecting their tax affairs, decisions or timeframes, and the channel that notification will come through.

Your responsibilities

Complete and timely information, responsibility for the practice's own records and the accuracy of what is provided, and the substantiation requirements that sit with the taxpayer rather than the agent.

Fees, disbursements and interest

Fee basis, disbursements, payment period, a window to query an invoice, and a stated interest rate for overdue amounts — a contractual rate, since there is no general statutory late-payment interest for professional services here.

Lien and handover costs

A lien only so far as the law and professional obligations permit, an undertaking to return the client's own documents, and the client's responsibility for the reasonable cost of providing information to a successor.

Outsourcing and cloud computing

The disclosure APES 305 requires: which categories of service may be outsourced, that data may be held in cloud systems including outside Australia, the confidentiality obligations imposed on providers, and how the client can find out who is involved.

Privacy

Handling of personal information under the Privacy Act 1988 and the Australian Privacy Principles, including disclosure to overseas recipients and how a client accesses or corrects their information.

Client monies (optional)

Switch on only if the practice holds client funds. Trust account, no commingling, treatment of interest, and prompt return.

Limitation of liability and professional standards scheme (optional)

A stated contractual cap, plus — where a scheme applies — the disclosure that the member's occupational liability is limited by a scheme approved under professional standards legislation, and confirmation that consumer guarantees under the Australian Consumer Law are not excluded.

Records retention

The practice's own retention and destruction period, on notice, stated separately from the client's tax-law obligation to keep records — generally five years for most business records, longer in specific cases.

Conflicts, confidentiality and quality review

Managing competing engagements with safeguards, confidentiality subject to legal and professional obligations, and the practice's files being subject to independent quality review by reviewers bound to the same confidentiality.

Termination and disengagement

A notice period each way, immediate-termination triggers, and the disengagement letter that should follow so that cut-off points are recorded rather than assumed.

Governing law

The state or territory whose law governs, chosen rather than defaulted, with the courts of that jurisdiction.

Requirements for an Australian practice

Confirm the current position with your professional body and the Tax Practitioners Board before relying on any of this.

• Document and communicate the terms of engagement — this is mandatory

  APES 305 Terms of Engagement requires members in public practice to document and communicate the terms of engagement to the client. The December 2020 revision applies to engagements commencing on or after 1 July 2021. The standard does not require a letter: an engagement letter, handout, brochure, leaflet or electronic communication are all accepted means, and the standard also addresses recurring engagements.

  APESB — APES 305 Terms of Engagement

• Disclose outsourced services and cloud computing in the engagement documentation

  APES 305 was updated to require practitioners to include details of all outsourced services and cloud computing in their engagement documentation. This is a disclosure obligation, not merely good practice, and it is absent from templates written for other markets.

  CPA Australia — APES 305 Terms of Engagement

• Be registered to provide tax agent services for a fee

  Registration with the Tax Practitioners Board under the Tax Agent Services Act 2009 is required to provide tax agent services for a fee or other reward, and the practice's registration should be identified to clients. Australia has required this since 2009 — considerably longer than the United Kingdom, which only introduced mandatory registration for tax advisers in 2026.

  Tax Practitioners Board

• Proactively keep clients informed of significant matters

  The Tax Agent Services (Code of Professional Conduct) Determination 2024 introduced eight new Code obligations, commencing 1 January 2025 for practitioners with more than 100 employees and 1 July 2025 for those with 100 or fewer as at 31 July 2024. They include a duty to keep clients informed of matters that may materially affect their tax affairs, decisions or timeframes. The scope was narrowed during consultation from an initial broad "any matter" formulation to particular listed significant matters, so older commentary overstates it.

  TPB — the Code Determination: background and context

• Disclose a professional standards scheme where one limits your liability

  Where a member's occupational liability is limited by a scheme approved under professional standards legislation, the scheme sets the cap and the member is required to disclose that their liability is limited by it. A contractual cap sitting alongside a scheme needs to be consistent with it rather than drafted as though the scheme did not exist.

• Do not attempt to exclude Australian Consumer Law guarantees

  Consumer guarantees under the Australian Consumer Law apply to services acquired by a consumer as that law defines one, which on the monetary threshold catches more small-business clients than practitioners often assume. A term purporting to exclude, restrict or modify those guarantees is void, so terms of engagement should acknowledge them rather than draft around them.

  ACCC — consumer rights and guarantees

• Handle personal information under the Privacy Act 1988

  The Australian Privacy Principles govern collection, use, disclosure and cross-border disclosure of personal information, and access and correction rights. Where outsourcing or cloud services place personal information with an overseas recipient, the cross-border disclosure principle applies in addition to the APES 305 disclosure.

  OAIC — Australian Privacy Principles

How to use this template

1. Identify the practice and its registrations. Practice name, entity type, professional body, tax agent registration number, and the effective date and version of these terms.
2. Complete the outsourcing and cloud disclosure. Name the categories of service that may be outsourced and whether data may be held outside Australia. This is the APES 305 disclosure, so do not leave it blank.
3. Set fees, interest and retention figures. Payment days, the window to query an invoice, your interest rate for overdue amounts, and how long you keep files before destroying them on notice.
4. Decide the liability position. State a contractual cap, and switch on the professional standards scheme disclosure if a scheme limits your occupational liability.
5. Switch on only what applies. Client monies, audit and assurance, the scheme disclosure and the optional guarantee are separate switches. Leave off anything your practice does not do.
6. Choose the governing jurisdiction and issue it. Pick the state or territory whose law governs, then issue these terms with your engagement documentation — APES 305 requires them to be communicated, not merely written.

Frequently asked questions

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