The first case involves a tax agent company that had its registration terminated after the TPB’s Board Conduct Committee (BCC) found that it had failed to take reasonable care in relation to work-related expense deductions.
The ATO had referred the company to the TPB after completing audits on income tax returns that the company prepared and lodged for 21 of its clients for the 2013 and 2014 financial years.
As a result of the audits, the ATO disallowed work-related expenses because the relevant expenses were not adequately substantiated and the clients did not demonstrate sufficient connection between the claims and the work-related activities.
Some of the clients appealed the amended assessments to the Administrative Appeals Tribunal (AAT) for a review of the ATO’s decisions, with the AAT ultimately rejecting the appeals and noting that the company’s conduct in claiming the deductions was reckless and/or demonstrated a lack of reasonable care in the preparation and lodgement of the relevant ITRs.
In its investigation, the BCC found that the tax agent company had failed to ask sufficient questions around work-related expense claims, cite the necessary supporting documentation, substantiate clients’ work-related expense claims and ensure that taxation laws were applied correctly to clients’ circumstances.
Multiple code breaches
The second case saw a tax agent registration torn up by the TPB, along with being barred from re-applying for two years, after the board found that the agent did not act with honesty and integrity.
The termination was instigated by a complaint from a former client of a tax agent claiming the tax agent had carried out fraudulent activity by making changes to their 2017 income tax returns without authority and lodging amended 2015 and 2016 ITRs without the client’s authority or knowledge.
During the investigation, the tax agent’s bank statements were reviewed. The statements showed the client’s tax refunds were deposited into this account. The statements also showed that activities of a personal nature — for example, supermarket payments, energy bill payments and school fees — were withdrawn from the same account.
The BCC also found that the agent had failed to have a payment arrangement in place with the ATO for outstanding tax debts in excess of $20,000.
In reaching its decision, the BCC determined that the agent had breached Code items 1, 2, 3, 9 and 12, including failing to deal with clients and the board openly and transparently, and dealing with client monies on trust consistently and with the expectations and standards required of a registered tax practitioner.
Personal tax debts
The TPB also moved to terminate a tax agent company and individual registration after it was found they had a tax and superannuation debt of over $1.4 million.
The investigation identified that the entities had failed to comply with their personal taxation obligations due to the significant and overdue debt amounts.
Further, the individual practitioner had recently been found guilty of 20 counts of theft and one count of false accounting. They also acted dishonestly by failing to disclose these convictions in their annual declaration and application for renewal.
In terminating the company and individual registration, the BCC determined that they may not apply for registration under the Tax Agent Services Act 2009 for five years.
The TPB could not disclose the names of individuals and companies involved in the cases.
Jotham Lian is the news editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.