The Australian Government's National Tax Clinic program is meeting an urgent need in the community by providing assistance to those who are unable to engage the help of a tax agent or public practitioner.
At a glance
- According to a national survey of financial counsellors, there are between 60,000 and 80,000 financially vulnerable people whose tax issues are unaddressed each year.
- In 2018, Curtin University ran a pilot program for free tax clinics following which, in 2019, the Australian Government announced its free National Tax Clinic program.
- The clinics run on different delivery models, but are required to provide four key services to the “unrepresented taxpayer”: advice, representation, education and advocacy.
When the Australian Government announced its free National Tax Clinic program in 2019, the response from the finance and accountancy profession was mixed. Some public practitioners saw the program as a new competitor in the market, with the potential to affect their business.
Others felt it foolish to offer free tax advice, because this would deter people from wanting to pay for services in the future.
However, what many underestimated was the scale of community disengagement with the Australian Taxation Office (ATO) and taxation specialists.
These were not people trying to avoid paying tax. They had the desire for compliance; what was missing was their capacity to achieve it.
Annette Morgan FCPA is a tax agent and lecturer at Western Australia’s Curtin University. Together with her colleague Donovan Castelyn, after extensive political lobbying, she established the National Tax Clinic’s pilot program through the university in 2018.
“What we found out through our pilot was that we were dealing with lots of clients who had let their taxes get so out of control they weren’t in a financial position to engage a professional to help them,” says Morgan.
In the early days of the Curtin Tax Clinic, its work – and the need for it in the community – was not fully understood.
It soon became apparent, however, that the project was meeting a huge need in the community and helping people who were not in the position to engage the help of a tax agent or public practitioner.
Some of the tax clinic clients were experiencing marriage breakdowns, domestic violence and homelessness. Others had a disability, or were isolated by geographical, cultural or language barriers.
There was also a striking number of clients who had not lodged a tax return for many years – sometimes decades – or had an outstanding BAS and urgently needed help to get their tax affairs up to date.
“For one, these people are in such a hole they can’t afford to pay, which adds to their burden and makes them think, ‘I can’t do this, I’m going to leave it’,” Morgan says.
“But there are other issues that – in my 30-odd years working in my own small family tax clinic and in firms – I’d never seen before.
“I’d never had clients who were getting prosecuted or couldn’t pay their tax due to hardship – it wasn’t the type of work we did, because our clients weren’t in that space.”
Support for unmet needs
Following a review of the well-established Low Income Taxpayer Clinics in the US, and with the Curtin Tax Clinic pilot program deemed a success, in late 2018 the Australian Government committed to a year-long trial of the National Tax Clinic program.
Ten major universities across Australia were given a budget of A$100,000 each to establish and operate the clinics, with accounting and law students studying taxation offering pro bono advice and assistance under the close supervision of qualified tax professionals.
The universities were offered the freedom to develop their own delivery models, on the condition they provided the “unrepresented taxpayer” four key services – advice, representation, education and advocacy.
One of the first national clinic launches was at the University of New South Wales (UNSW), under the leadership of Dr Ann Kayis-Kumar, associate professor with the School of Accounting, Auditing and Taxation, and co-founders Michael Walpole, taxation law professor, and Gordon Mackenzie, adjunct senior lecturer at the Australian School of Business.
For its client base, the UNSW Tax Clinic relies almost exclusively on “warm referrals” – those coming from financial counsellors, community legal centres, charities and other social services.
Kayis-Kumar says that, while tax may be what brings clients through the door, the clinic model feeds back into the social services sector to support other unmet needs. For example, some are struggling to afford food or transport.
A national survey of financial counsellors conducted by the UNSW Tax Clinic has found that, regardless of a client’s geographical location, 30 per cent to 40 per cent of those seeking help from a financial counsellor also have an unmet tax need.
This means there are between 60,000 and 80,000 financially vulnerable people whose tax issues are unaddressed each year.
Psychological burden, eased
Screening and secondary research conducted by the UNSW Tax Clinic has identified that their clients are three times more affected by mental health problems than the general population.
They also have a high proportion of women experiencing domestic violence and have an over-representation of Indigenous clients and culturally and linguistically diverse clients.
One of the most powerful benefits of the National Tax Clinic program, Kayis-Kumar says, is that it frees people of the psychological burden.
“What we’re seeing with the clients we help is that it is often problems beyond an individual’s control that have led to their circumstances – whether it’s health problems, mental or physical, relationship breakdowns, external shocks like we’re seeing with the pandemic, and things that are no fault of the individual.”
She says the professional expertise offered by the clinic is invaluable, particularly in light of the tax system’s complexity.
“It’s one thing to tell a person to just look it up online, but if that person has low levels of literacy, let alone tax literacy or financial literacy, or access issues because they don’t have a digital device, it is really challenging.”
Giving back to the community
Charles Darwin University (CDU) in the Northern Territory became involved in the National Tax Clinic program because it acknowledged the complexity of the tax system and recognised the need to support all taxpayers in achieving a fair outcome with their tax matters, says Professor David Low CPA, provost of the Asia-Pacific College of Business and Law.
CDU’s bid to establish its clinic was based on the fact that it would service a population that is strongly multicultural, predominantly in low socio-economic circumstances, and living in remote and regional communities with limited access to professional representation.
“We saw this as something we could do to give back to the community,” says Low.
The CDU Tax Clinic was set up and run by Professor Indra Abeysekera CPA, who had to overcome a unique set of challenges, including designing an operational model and engagement methods to suit the clinic’s target clients.
For example, instead of “National Tax Clinic”, it was named “Free Tax Clinic” to arouse curiosity in the local community.
Before the pandemic, the clinic operated seven days a week, from June to October, providing advice out of the university’s most centrally located Waterfront Campus in Darwin during the week, and on weekends setting up at shopping centres as far as Alice Springs and Katherine.
When COVID-19 hit, the clinic pivoted its operations, particularly when servicing clients from remote communities who were among those at highest risk of contracting the virus. CDU also engaged a local tax firm to provide two paid clinic supervisors to help run the clinic.
“The firm got a lot of job satisfaction out of serving the clients and mentoring our students,” says Low. “They even had a couple of new clients come to them because they saw, through the little bit of publicity, that they were doing their corporate social responsibility.”
CPA Australia resource:
Policy submission on National Tax Clinics
The UNSW Tax Clinic was the first to establish a teaching hub for future tax practitioners, by incorporating a tax clinic specialist elective course into their subject offerings.
The clinic employs two professional accountants, Paul Viola CPA and Helen Lam CPA, to supervise and mentor the accounting and law students who provide the clinic’s services. Ultimately though, it is Viola or Lam who prepare the tax returns for clients under their tax agent licences.
Lam believes the tax clinic is helping to create more empathetic and skilled graduates, and hopes they take away with them a willingness to do more pro bono work in the future.
It also provides students with an opportunity to get valuable client interview skills and file management experience with real-world cases prior to graduation.
“In your typical accounting practice, you will deal with some clients who are a bit more difficult than others, but this experience helps you to consider if maybe they have other things going on in their lives that they are not telling you about – perhaps they have mental health issues or financial difficulties,” says Lam.
At the University of Melbourne, Professor Sunita Jogarajan, at the Melbourne Law School, is also seeing the clinic’s benefits flow to tax law students in the form of authentic experience with case file management, interviewing and leadership skills.
“Even though when we teach we use real-world scenarios, there is nothing like dealing with a client in front of you, because it is not just facts on a piece of paper,” says Jogarajan.
“For some of our students, the work was quite confronting due to the people they met and the circumstances they were in, but at the end of it they say they grew so much, and it was a wonderful learning experience.”
The Melbourne Law School Tax Clinic accepts clients below the A$60,000 annual income threshold - the same threshold adopted by the ATO’s Tax Help program.
Unlike Tax Help, however, the clinic goes far beyond a tax lodgement service. It is able to provide advice and has an educational element in empowering people with the confidence and skills to complete their own tax returns in the future.
While the clinic also receives referrals from financial counsellors and community legal services, a large proportion of its clients are students and new migrants who are trying to navigate the ATO’s self-lodgement myTax Portal for the first time.
“It’s not necessarily about revenue collection, but you’re reducing the intervention the ATO has to do,” says Jogarajan. “It’s about helping people to do the right thing by educating them what the right thing is.”
Potential for reform
Since the completion of the 2019 National Tax Clinic pilot, the program has continued on a year-by-year sponsorship basis.
However, moves are under way to switch to an open competitive grant system, which will enable individual universities to pitch for a greater share of the budget pie and potentially enable nonacademic organisations to incorporate a clinic into their service offering.
Morgan would love to see more structure brought to the national program, to ensure consistency of service across the country.
While she is encouraged by the support the program receives from the nation’s leaders, there is much more that can be done in Australia with the right knowledge, resources and commitment.
Morgan has also been involved in the international expansion of the tax clinic concept into the UK and Ireland, and is hopeful the Organisation for Economic Co-operation and Development (OECD) will jump on board.
In the meantime, she is excited by the growth of the movement internationally, much of it driven by Nina E. Olson, the American taxpayer advocate widely considered the pioneer of the low-income tax clinic concept.
Kayis-Kumar also points out that, by supporting society’s most vulnerable and relieving them of some of their psychological burdens, the tax clinics have a role to play in bringing down the economic cost of mental illness, estimated by the Productivity Commission to be about A$220 billion every year.
Kayis-Kumar also hopes to use the clinic’s research agenda to identify systemic injustices in the tax laws in order to put forward options for reform.
“Identifying the issues and shining a spotlight on them would affect so many people if addressed,” she says. “Without knowing what’s happening on the ground with these clients, we can’t make those recommendations for reform, but I’d love for us to be in a position where we could help even more people.
“We have a model that works, we know the clients’ need for help is genuine, and we know there are many more people out there.”