ATO reports tax agents over work-related expenses

The ATO identified incorrectly-claimed work-related expenses as the chief cause of the tax gap found in a July 2018 report.

The Australian Taxation Office’s campaign on work-related expenses has seen a jump in tax agents reported to the Tax Practitioners Board.

The Tax Practitioners Board (TPB) says it is “collaborating closely” with the Australian Taxation Office (ATO) to ensure better compliance by tax agents in work-related expenses claims, after imposing nearly 60 administrative sanctions over a three-month period in 2018.

The ATO stepped up its campaign on tax agent compliance after a July 2018 report found an A$8.7 billion tax gap in 2014-15 between the revenue it collected from individuals, and the amount it estimated would be collected if taxpayers were fully compliant.

The ATO identified incorrectly-claimed work-related expenses as the chief cause of the tax gap, and said it would put Australia’s 22,000 tax agents under greater scrutiny, with a particular focus on 150 “outliers”.

ATO assistant commissioner, Tim Roach, said it had referred 17 agents for “criminal prosecution” in 2018, while access to the ATO online systems had been revoked for eight agents in the last six months of the year.

Increase in tax agents reported

The ATO is working with the TPB to address the issue in what the board says is a “close partnership” which has seen a 48 per cent increase in referrals from the ATO in 2017-18.

The TPB’s annual report shows that the ATO referred 120 tax practitioners to the board in 2017-18, comprising 8 per cent of all referrals. Total referrals numbered 1528, of which 67 per cent came from the public.

“The increase in ATO referrals was a result of the focus on targeting work-related expense claims and this trend is expected to continue with the ATO’s increased compliance activity in this area,” a TPB spokesperson said.

“Between June and August 2018 the TPB’s board conduct committee imposed a total of 59 administrative sanctions.”

In the 2017-18 financial year, the TPB terminated the status of 24 agents.

Tax agents terminated

The TPB has the power under the tax agents’ code of professional conduct to impose a written caution, order action such as education or training, or order the suspension of registration or termination.

In one typical recent example, a tax practitioner’s registration was terminated for four months, while orders were imposed to complete appropriate education courses.

At the ATO, Tim Roach says that while there have been improvements in agents’ performance “there is still a lot of work we will do to ensure a level playing field”.

“We have a range of firmer approaches aimed at improving the compliance of the agent and their clients,” adds Roach.

“The approaches used this year included contacting agents’ clients directly about concerns we have with their returns, imposing requirements to lodge work-related expense schedules, and holding and reviewing all returns for intensive verification before issuing refunds.”

The ATO’s referrals were leading to sanctions, with 16 of the agents referred being either deregistered or suspended over the last six months of 2018.

“We have made referrals and will continue to do so as appropriate and necessary,” says Roach.

“We implement a range of approaches to treat these agents, from auditing their clients and their personal affairs, to mitigating the impact to revenue by stopping returns, monitoring the agents and their clients and even withdrawing the agents’ access to our online systems.”

Education programs for tax agents

The ATO says it is also stepping up its education programs for tax agents, with almost 5000 tax and BAS agents attending open forums held around Australia between March and December 2018.

In addition, the ATO has produced seven webcasts which have had more than 5700 views.

The July study by the ATO found that tax returns completed by agents had a higher error rate than those completed by individuals.

A random sample of 858 returns found an average error rate of 72 per cent, with a rate of 78 per cent for agent-prepared returns and only 57 per cent for those prepared by individuals.

“Over two-thirds of individual clients, or over five million people, claim work-related expenses and used a tax agent to help them with their returns,” says Roach.

“Tax agents therefore are vitally important to reduce the level of errors that we see.”

In 2016-17 agents lodged 71 per cent of individual returns and 90 per cent of returns for small business.

Read next: Tax office cracks down on work-related expense claims


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