Speaking at the Tax Institute’s National Convention in Cairns, Mr Jordan said that while the majority of tax practitioners were doing the right thing, some were “deliberately scamming or cheating the system”.
As part of the ATO’s focus on work-related expenses, Mr Jordan said its random enquiry program has found that incorrect claiming was worst in agent-prepared returns.
“Some display a lack of competence, or outdated knowledge and practices, or do not take proper care when undertaking their work; others are deliberately scamming or cheating the system,” said Mr Jordan.
“These results are really disappointing. For years I’ve heard how tax agents were guardians of the system – these random enquiry results tell me this is not the case for some agents.
“They are not fulfilling their duty as a registered tax practitioner in line with the Tax Practitioners Code of Conduct,” he added.
“In reality, they are selling their clients short – they are not bringing their expertise, nor taking care beyond reliance or blind acceptance of information given by clients, or even, leading clients to deductions that are not allowable.”
Work-related expenses are a revenue drain for the government though and Mr Jordan has said that the work-related expenses gap is estimated to be greater than the large corporate tax gap of $2.5 billion.
Mr Jordan said his disappointment with the industry was exacerbated following comments from the tax community on the ATO’s last practitioner webcast.
“One of the comments made during the webcast was ‘I would say if you don’t claim the $300 deduction for your client you are pathetic and are a waste of time as a tax agent. You should retire.’,” explained Mr Jordan.
“I understand that agents want the best for their clients, and that they are also competing for business.
“But not doing the right thing might be a “sugar hit” for your clients in the short term but in the long run is not good for your clients, not good for the profession and not good for the system. High integrity agents encourage, enable and ensure their clients do the right thing.”
Further, as part of its approach to improving the integrity of the system, the ATO will be increasing its attention on several areas this tax time.
These include undeclared income, unexplained wealth, incorrectly claimed private expenses, unpaid superannuation guarantee, and cash-only businesses.
The Tax Institute’s senior tax counsel Professor Bob Deutsch believes the commissioner’s message should come as no surprise as the ATO seeks to repair trust in the tax system.
“There are three key players in the tax system – taxpayers, the ATO and tax professionals. They all have a significant role to play in ensuring the foundation of the tax system remains strong,” said Professor Deutsch.
“None of these focus areas should come as a surprise. One way or another, they all can contribute to an erosion of the revenue base, weakening the integrity in the system and thus chipping away at the foundations.
“It is not surprising the ATO would want to take action to repair the chinks in the foundations.”