Over the coming months, the ATO will be conducting new risk profiling of practices to account for the billions of dollars’ worth of work-related expenses (WRE) claimed each year.
ATO set to roll out new tax agent risk profiling
The ATO’s increased data gathering and matching capabilities mean it is now able to create a risk profile for each practice based on a comparison of their clients’ WRE claims with those made by similar taxpayers.
These risk profiles will be shared with some tax professionals where their clients’ claims appear higher than expected.
“We recognise that larger than usual claims may be legitimate due to the individualised nature of deductions,” the ATO said.
“By trialling the sharing of risk profiles, we will increase our understanding of practices and gain feedback on the usefulness and accuracy of the risk profile so we can continue to improve it.”
Where high-risk practices are identified, the ATO told AccountantsDaily it will apply its usual range of approaches to deal with any potential problem areas.
These include reviewing return preparation practices, undertaking client audits, examining tax agents’ personal affairs and, for high-risk agents, referring them to the Tax Practitioners Board.
The development of this tool is ongoing, and the ATO will announce down the track whether it plans to share the data more broadly.
“We are committed to being more transparent about the information we hold to assist agents and their clients claim the work-related expenses they are entitled to,” the ATO said.
“The feedback we gather from agents about this trial will be evaluated to determine how we improve and utilise this tool in the future. We will keep the profession informed of developments and will be involving them and their professional associations in how we improve and utilise the tool.”
The number of WREs continues to grow each year: last year 8.4 million taxpayers claimed a total of $21.3 billion.
“We know this is an area where taxpayers make mistakes, given that complex rules and individual circumstances make WRE entitlements difficult to understand. While the amounts at an individual level are relatively small, collectively the overall impact is significant,” the ATO said.