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A tax agent firm was also issued an education order for lodging client tax returns with groundless deductions.
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TPB terminates agent for wrongfully claiming over $100k in deductions
25 May 2023
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10 minute read
The TPB has terminated a tax agent’s registration for failing to meet their personal tax obligations.
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The board found the agent had failed to meet their tax responsibilities through the non-lodgment of business activity statements, failing to pay a tax debt on time and lodging a fraudulent income tax return.
The fraudulent return lodged to the ATO claimed over $100,000 in deductions that could not be substantiated and an ATO compliance audit resulted in a tax shortfall of $60,000 and imposed a penalty for recklessness.
The Board Conduct Committee (BCC) found the tax agent had breached code items one and two of the Code of Professional Conduct when they failed to:
- Act honestly and with integrity by claiming deductions in a personal income tax return that the agent should have known were not allowable.
- Have evidence to substantiate the expenses.
- Comply with the taxation laws by failing to lodge 13 BAS and pay an income tax debt by their due dates.
The BCC also found the agent breached code items seven and 10 by lodging income tax returns on behalf of clients in which the deduction was overclaimed or incorrect.
It said the agent had failed to:
- Ensure tax services supplied to their clients were provided competently.
- Take reasonable care to ensure the tax laws had been applied correctly in the preparation and lodgment of 32 client tax returns which resulted in tax shortfalls and penalties for the individual customers.
It said the agent also breached code item 14 by failing to respond to requests from the BCC during its enquiries.
As a result of the agent’s actions the BCC found they had ceased to be a fit and proper person and terminated their registration.
Separately, the TPB imposed an education order upon a tax agent company following an ATO audit that uncovered poor internal controls within the practice.
The ATO activity found the practice failed to take reasonable care in the preparation and lodgment of income tax returns on behalf of their clients.
The returns lodged by the company contained deductions that could not be substantiated or did not have sufficient nexus to assessable income, which put its clients at risk and resulted in tax shortfalls and penalties handed down on the firm’s clients.
The BCC determined the practice had breached the Code of Professional Conduct as it failed to ensure tax agent services were provided competently to their clients, take reasonable care in ascertaining their clients’ state of affairs and take reasonable care to ensure the taxation laws were applied correctly where the company provided advice.
The board issued a written caution along with an order which required the company’s director and supervising agent to complete the National Tax and Accountants’ Association Tax Skills 1 course within three months.
When deciding the punishment the BCC said it took into consideration that the supervising agent responsible for the misconduct had already been terminated.
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