Tax agents with outstanding personal tax obligations — such as debts or overdue lodgement — now have a brief window to act before a major compliance campaign from the Tax Practitioners Board (TPB).
The TPB has launched a debt and lodgement project, which is set for full rollout in February next year. A key focus will be on tax agents with personal tax debts and no payment plans, and outstanding lodgements — including of their income tax and SMSF annual returns.
Tax agents have from now until 31 January to remedy their affairs. This is not an amnesty period, however. The TPB will look more favourably on tax agents who have put genuine provisions in place for improvement.
If tax agents are found to be in breach of their professional obligations under the Tax Agent Services Act (TASA), that information will be passed on to other government agencies like the ATO and professional associations.
In effect, tax agents with breaches could attract penalties, and compromise or lose their tax agent registration and professional designation.
However, Professor Robert Deutsch of The Tax Institute told My Business that this is unlikely to impact their clients.
“To our knowledge, there is not necessarily any implication for clients of the tax practitioners who have outstanding obligations,” Professor Deutsch said.
The biggest offenders
Of the 78,000 tax practitioners registered with the TPB, about 5,000 have a personal tax debt of over $300, with no active pay arrangements.
About 2,500 practitioners have not lodged one or more of their personal income tax returns or for those of their associated entities. Approximately 1,000 agents have one or more outstanding business activity statements (BAS).
There are also 2,700 practitioners who are trustees of their SMSFs and have outstanding SMSF annual returns. Persistent lodgement failure could compromise trustee duties, which trustees agree to abide by on their initial fund declaration form.
Late SMSF annual return lodgement has also been a compliance bugbear for the ATO, which regulates the SMSF sector.
Often, fear of mounting debt shapes lodgement patterns — that is, tax agents may be less likely to lodge their returns if it’s likely to result in owing more money.
The personal tax affairs of practitioners have always been on the TPB’s radar, as tax agents are required to act with professionalism and integrity under TASA.
However, government agencies now have unprecedented access to personal and third-party data, and have got a handle on the scope of non-compliance within the tax agent community.
With a full-picture view of a tax agent’s affairs, the TPB assessed that it has now become “a matter of urgency” to address levels of non-compliance.
“The data integration has given us a bigger and whole-of-system focus,” chief executive and secretary of the TPB Michael O’Neill told My Business sister publication Accountants Daily.
Mr O’Neill, who was appointed to the TPB during its restructure earlier this year, said that the data often indicates a correlation between a tax agent’s personal non-compliance and that of their clients.
Further, the timing of the campaign ties in with the ATO’s compliance work in targeting “agents of concern”.
The federal budget stands to get a boost from this non-compliance being captured and remedied.
Tax agents with debts and no payment plans in place, which are about 7 per cent of the population, owe in the order of $115 million.
This is compounded by the $8.7 billion individual tax gap, which the ATO pinned in part on errors made by the tax agent population.
Although this is a major campaign by the TPB, agents with a clean record with no prior notice of potential non-compliance have no reason to fear.
“Most tax practitioners who are the focus would be well aware, and in some cases, have received a dozen or so reminders from the TPB or the ATO about getting their affairs in order. This would come as business as usual, and not a shock, to those agents,” Mr O’Neill said.
Further, the vast majority of the tax profession are low-risk operators, and not the principal focus of the regulators’ compliance campaigns.