If your tax practitioner does not meet their obligations

• Their registration can be suspended or terminated, meaning they can’t practice.

• They could receive written cautions or orders from the TPB – for example, undertaking education or working under the supervision of another registered tax practitioner.

• Fines may be imposed by the Federal Court.

Situation

A client, a bookshop employee, asked their tax agent to claim significant travel and work-related expense deductions. The tax agent included these expenses in the client’s tax return, despite no supporting evidence being provided.

Consequences for the client

An ATO audit found the expenses were not deductible because they were private expenses and there was no evidence to support them. The ATO fined the client for making false statements in their tax return.

Consequences for the tax practitioner

The TPB found that the tax agent failed to:

• take adequate steps to ensure the income tax return was accurate

• take reasonable care to check the client’s circumstances and apply tax laws correctly

• sight the necessary evidence.

Because of these failures, the TPB:

• suspended the tax agent’s registration for 12 months, which meant they could not continue to operate their business

• ordered the tax agent to complete and pass courses of education in income tax preparation and lodgement.

Situation

A client, who operated a fruit shop, had the income tax returns their tax agent prepared audited by the ATO. The tax returns showed no assessable income reported, and significant claims for motor vehicle expenses and unreported interest income.

Consequences for the client

The ATO audits resulted in: 

• the client’s assessable income increasing in over $2 million

• penalties and interest charges totalling almost $800,000 being applied.

Consequences for the tax practitioner

The TPB found the tax agent failed to:

• take adequate steps to ensure the income tax returns were accurate

• take reasonable care to check the client’s circumstances and apply tax laws correctly

• ask relevant and sufficient questions about the client’s cash and interest income, and motor vehicle expense claims

• sight the necessary evidence.

Because of these failures, the TPB terminated the tax agent’s registration.

Situation

A sole trader client operating a plumbing business asks their BAS agent to claim the GST on a $55,000 new vehicle. The vehicle purchased is a campervan. The BAS agent claims the GST credit of $5000 for the campervan without:

• asking any questions about the type of vehicle that was purchased 

• checking evidence that the expense is for business purposes. 

In this situation, the BAS agent has a responsibility to determine if an expense is a private or business expense (and therefore whether the GST can be claimed) at the time of lodging the BAS. 

Consequences for the client

An ATO audit found the expense was not deductible and GST credits were not available because it was a private expense and there was no evidence to support the GST credits being claimed. The ATO imposed penalties on the client for making false statements in their BAS return.

Consequences for the BAS agent

The TPB found that the BAS agent failed to:

• take adequate steps to ensure the BAS was accurate

• take reasonable care to apply tax laws correctly to ensure GST credits are claimed for genuine business expenses

• sight the necessary evidence.

Because of these failures, the TPB:

• suspended the BAS agent’s registration for 3 months, which meant they could not continue to operate their business

• ordered the BAS agent to complete and pass a course of education in preparation and lodgement of business activity statements.