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AAT reduces penalties for reckless claims based on incorrect tax agent advice

A support worker has succeeded in reducing shortfall penalties for reckless deductions after the tribunal found that he would not have claimed over $13,000 in education and loan expenses if not for his tax agent’s advice.

Tax&Compliance Jotham Lian 18 August 2021
— 2 minute read

The Administrative Appeals Tribunal has agreed to remit taxpayer Ahamed Munkayilar’s $6,065 administrative penalty by 85 per cent after finding that he made a genuine attempt to meet his tax obligations despite recklessly including false and misleading statements in his tax return.

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The tribunal heard that Mr Munkayilar had engaged tax agent Dr Chuks Iheakor in 2018 to prepare his tax return, and went on to claim $15,492 in work-related deductions.

The bulk of the deductions were from self-education expenses including $9,435 for a Certificate IV in Child, Youth and Family Intervention, and $4,000 in Higher Education Loan Program (HELP) debt.

Mr Munkayilar said he had advised Dr Iheakor that the Certificate IV course was paid for by the government but was told by Dr Iheakor that the fees had been added to his previous student HECS debt.

Dr Iheakor then mistakenly showed Mr Munkayilar his Student Financial Supplement Scheme (SFSS) loan account debt of $9,435 and proceeded to claim a deduction for it. The government closed the SFSS in 2003, while Mr Munkayilar’s Certificate IV was completed in 2018.

The AAT heard that Dr Iheakor claimed $4,000 in HELP repayments on the basis that they were incurred and paid by students despite HELP debt not being a deductible expense by law.

AAT senior member Linda Kirk agreed with the ATO that the claims were reckless and noted that Mr Munkayilar did not question the claims when signing off on the tax return.

Ms Kirk also determined that the safe harbour provision did not apply because Mr Munkayilar had not provided his tax agent with all of the relevant information required.

However, Ms Kirk ultimately chose to remit the $6,065 administrative penalty by 85 per cent after finding that Mr Munkayilar’s trust in his tax agent led him to accept incorrect advice.

“[Mr Munkayilar] was certain that he was not required to pay for the Certificate IV course fees until Dr Iheakor told him otherwise at their meeting to prepare [Mr Munkayilar’s] tax return,” said Ms Kirk.

“The tribunal accepts that, had [Mr Munkayilar] completed his tax return without the advice of Dr Iheakor, he would not have included this false and misleading statement in his tax return.

“The tribunal also accepts that [Mr Munkayilar] would not have included a claim for $4,000 for a HELP debt repayment if he had not engaged Dr Iheakor to complete his tax return.

“The tribunal accepts [Mr Munkayilar’s] claim that he ‘had a lot of trust in [his] accountant and believed he knew what he was doing ...’. This trust [Mr Munkayilar] placed in his tax agent also resulted in him accepting Dr Iheakor’s incorrect advice in relation to the deductibility of HELP loan repayments and his calculations of the claims for study-related travel expenses.”

AAT reduces penalties for reckless claims based on incorrect tax agent advice
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Jotham Lian

Jotham Lian

Jotham Lian is the 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.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

Tax&Compliance