Last Friday, the Tax Office revealed that a one-year prison sentence had been given to a tax agent found to have deliberately underreported the earnings of eight clients in order to deliver higher tax refunds, pocketing the difference, in a scheme worth more than $90,000.
Asked to comment on the prevalence of community tip-offs about suspect behaviour on the part of tax agents, a spokesperson for the ATO told My Business that it received 209 “dob-ins” in the 2018–19 financial year. The vast majority (189) related to agents that were properly registered to work in the field.
That was up slightly on the 183 tip-offs it received the previous financial year (165 of which related to registered agents).
Last financial year’s compliance action resulted in the Tax Practitioners Board (TPB) terminating the registration of 74 agents, with prosecution launched against 12 agents.
“The ATO has a key role in creating a level playing field. We aim to make sure everyone is operating by the rules and no one is gaining an unfair advantage by playing the system or breaking the law. We do this to protect the integrity of tax and super systems,” an ATO spokesperson said.
“Unfortunately, a small number of agents misuse their positions of trust, engage in criminal activity and perpetuate fraud and evasion. We act swiftly to identify and deal with these agents. This includes referral to the Tax Practitioners Board (TPB) and criminal prosecution in the most serious cases.”
The spokesperson also noted that “dob-ins are only one way that the ATO identifies fraud”.
“We rely on data from third parties and employ sophisticated risk identification techniques to alert us to suspicious behaviour.”
Drop in the ocean
While zero complaints — and zero fraudulent activity — is obviously the ideal scenario, 209 tip-offs and 74 registration terminations are very small figures when compared with the overall number of registered tax agents in Australia.
According to the TPB’s 2017–18 annual report, the most recent year available at the time of publishing, there were 77,749 registered tax practitioners as of 30 June 2018.
The majority (42,561) are tax agents, while a further 15,638 specifically work as BAS agents. The remaining 19,550 under the TPB’s oversight are tax (financial) advisers.
What should clients look out for?
While the ATO spokesperson said that “most tax agents strive to encourage and enable their clients to do the right thing”, there are signs of fraudulent activity by tax agents that can become apparent to their clients.
“Tax agent fraud can manifest in a number of ways. This can include lodging false returns on a client’s behalf without their knowledge, providing misleading advice or misusing their client’s personal details,” the spokesperson said.
“One or more of the following signs may indicate inappropriate tax agent behaviour:
- a lack of responsiveness from your agent
- withholding information about your taxation affairs
- other client complaints
- using myGov as a lodgement channel or requesting your myGov credentials (this may indicate an unregistered preparer)
- using an unauthorised bank account to receive refunds.”
According to the spokesperson, anyone with suspicions about their accountant, bookkeeper or tax agent should report the circumstances to the police, lodge a formal complaint with the TPB and contact the ATO’s Client Identity Support Centre on 1800 467 033.
“You may be requested to provide information such as the tax agent’s contact details and evidence including details of payments made and documentation provided to your tax agent.”
Are clients liable for tax agent wrongdoing?
While the actions of a third party are beyond the control of the business or individual client, the ATO spokesperson said that taxpayers assume ultimate responsibility for their own tax affairs.
“Generally, clients are responsible for the accuracy of their own returns, even if they use a registered tax agent. This is why it is important to know what is being lodged on your behalf,” they said.
However, they continued by stating that “the ATO treats fraud seriously and is committed to supporting taxpayers who fall victim to fraudulent activity”.
“The ATO can assist victims of fraud where:
- a fraudulent action has been taken on your account
- by a third party
- without your knowledge or authority.
“Taxpayers can contact the ATO on 1800 467 033 if they feel they have been the victim of fraud to discuss correcting their taxation affairs.”