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ATO investigation uncovers ‘serious’ cases of SAN misuse

As part of its ongoing investigation, the ATO referred 18 tax agents to the Tax Practitioners Board in 2019–20 for the misuse of SMSF auditor numbers, and has also identified some more serious cases involving forged audit reports.

SMSF Miranda Brownlee 03 August 2020
— 2 minute read

In March and April last year, the ATO sent a list to approximately 5,000 auditors with funds that had reported them as the auditor on the 2017 SMSF annual return.

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As previously announced, the ATO said it received 2,739 responses from auditors in 2017, which is a 50 per cent response rate. Of those responses, 420 auditors confirmed 1,445 instances of SAN misuse connected to 1,685 funds and 626 tax agents.

In September, it then contacted tax agents who had prepared the 2017 annual returns to determine whether the misuse was deliberate or inadvertent.

Around 1,000 funds had misreported the SAN inadvertently, mainly due to the SAR software rolling over a previous auditor’s details and the tax agent lodging the return not checking to ensure the correct current-year auditor was reported.

With respect to the remaining 500 instances of SAN misuse, ATO SMSF auditor portfolio director Kellie Grant said the Tax Office identified deliberate misreporting among those and referred 18 tax agents to the Tax Practitioners Board during the last financial year. 

“That compares to only eight tax agents referred the year before that,” she noted.

In relation to the 18 tax agents referred to the Tax Practitioners Board last year, four actually resulted in written cautions being issued to them for breaches of the Tax Agents Services Act, Ms Grant said at the SMSF Association Technical Day.

“Other sanctions imposed were orders to complete certain TPB-approved training courses and conditions on registration which prevent the tax agent from providing tax agent services or supervising tax agent services in relation to just SMSFs,” she said.

Ms Grant said it was encouraging to see stronger results coming out of the TPB in respect of the tax agents who deliberately misused a SAN.

“One agent and his company had their registration terminated and was prohibited from lodging for four years for lodging over 170 returns which contained incorrect SANs for two auditors. Another agent was suspended for six months for providing tax agent services and 12 months for providing SMSF services for his role in lodging over 30 returns for using a SAN of an auditor who had not completed any audits,” she said.

“Another agent appealed a decision of the TPB where they had deregistered him for two years and had to deregister the partnership as a result of the firm lodging 125 annual returns prior to audit, and eight of which had not received an audit for 10 years.”

That particular agent, she said, applied for a stay of that decision, which was actually refused in May.

Ms Grant said the ATO hopes the TPB outcomes serve as a deterrent for other tax agents who look to deliberately misreport a SAN.

“In addition to those agents we referred to the TPB, since 1 July last year, we’ve also referred a few to our prosecutions area and that’s where the SAN misuse was considered quite serious because the agent either obtained audit fees from clients and didn’t end up arranging those audits, or it actually went as far as forging the audit report,” she stated.

While the ATO has only had a 40 per cent response rate to its 2018 mailout, Ms Grant said it was encouraging to see that time around, only 137 auditors confirmed 832 instances of SAN misuse connected to 832 funds and 230 tax agents.

“We are now in the process of investigating those 832 funds,” she said.

ATO investigation uncovers ‘serious’ cases of SAN misuse
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