Speaking to Accountants Daily, CA ANZ tax leader, Michael Croker said Commissioner Chris Jordan’s public speeches on the individual’s tax gap and how tax agents might be fuelling the rort means tax practitioners need to be actively thinking of how to protect their practice and clients this tax time.
Further, the Tax Office’s focus on work-related deductions will receive a $130.8 million boost from the government to increase compliance activities targeting individual taxpayers and tax agents, as announced in the budget earlier this month.
“[Staff training] is a constructive approach if you were contacted by the ATO, you can say, ‘look at the staff training we conducted during the month of June, we helped our staff understand new developments, our staff are across the Form I instructions’, I think that's a good defence if you run a well-run tax practice and staff training should be part of the regular calendar,” said Mr Croker.
Further, Mr Croker believes practitioners in public practice can borrow from their auditing counterparts in applying professional scepticism to tax claims by their clients and having an honest conversation with them over the risks involved.
“Make sure clients are aware there are risks in getting it wrong and lets just tease it out — for example that overseas trip you're telling me about, can we talk a little bit more about what you did and how it relates to your income-producing activity and getting your staff member to have the presence of mind to jot down the comments that the client makes,” said Mr Croker.
“Just to push back gently and say maybe we can't claim everything because I can see there are some private things here and have a straight conversation with your clients and make sure they know why you're asking these questions, that you're not trying to be obstructive, you're just trying to do your job and it's important to convey that.
“We're in a risky business in the tax profession and managing your risk means you do some of those basics and you get that work done and it helps you in the long run to invest [in training], particularly in the month of June when people are getting ready and there's a lot of hype from the ATO in getting your deductions rights.”
While some tax agents might take a dim view of the ATO’s education campaign, Mr Croker believes it might ultimately benefit practitioners who face pushy clients looking for more deductions.
He flagged the tax office’s work in hardware stores reminding tradies to keep receipts for tax time as an example of its work in educating taxpayers on the need to substantiate claims.
“Sometimes clients can be a bit pushy and say, "I want big deductions this year, what can you do?', and it is probably helpful for the ATO to sound a cautionary note because if we don't bring these deductions under control then sooner or later the government will probably say we can't tolerate this anymore and we have to change the law,” said Mr Croker.
“That will take a lot of courage, don't take me wrong — we all love a refund at the end of the year but the deductions claimed is a pretty big number.”