The ATO’s individuals not in business tax gap report released last month, revealed an $8.76-billion tax gap, with tax agents in the firing line as its random enquiry program showed tax agent-prepared returns requiring more adjustments compared with self-prepared returns.
The tax office has since clarified the veracity of its claims, noting that they have classified tax agents into three categories, with 25 per cent of practitioners listed as “examples of the profession”; two, a large proportion of agents who are making “avoidable mistakes”; and, lastly, a small number of 500 agents who fail to go by the law.
Speaking on the TPB’s webinar, ATO assistant commissioner Adam Kendrick said the tax office acknowledged the presence of these 500 agents of concern who were eating up market share by promoting ineligible deductions and placing pressure on good tax agents.
“They are the ones who are gaining an unfair advantage and by doing so are increasing their market share unfairly and in this group we are seeing intentional and sustained misreporting, usually through making false deductions claims and they are generally unresponsive to our initial interventions,” said Mr Kendrick.
“We encourage practitioners to refer fellow practitioners or their clients to us and we assess everything that comes through and to be honest, some of the best intel actually comes from agents.
“We go and assess the intelligence against the data that we hold and we prioritise that work appropriately now. In some instances, that results in audit work and where we find some of those [incorrect] behaviours we then refer that to the TPB, which is not something we do lightly.”
Likewise, TPB chair Ian Taylor said the board was committed to help level the playing field for tax practitioners.
“[The report] of course in itself is an area of concern, particularly in the context that registered agents are expected to have a very clear understanding of the tax laws and to be able to apply those tax laws correctly and where that's not happening then we the TPB need to ask the question why is that the case,” said Mr Taylor.
“The ATO and TPB are separate entities, and the TPB does have a requirement under our Tax Agent Services Act to investigate every compliant we receive. We get about 1,500 complaints a year and about 1,200 come from the public at large and they are the clients of practitioners complaining about the service of the practitioner.”
ATO deputy commissioner Alison Lendon was quick to point out the need for all participants in the profession to help reduce the tax gap.
“It is very clear how important the role is of intermediaries, particularly tax practitioners in terms of influencing behaviour, providing expert advice to clients to help them meet their obligations,” said Ms Alison.
“The message we're giving this time is we're asking tax practitioners to take that extra care when preparing returns for their clients and to ask those few extra questions to ensure the money was spent, the nexus is solid and a record exists.”