Australia’s commissioner of taxation has accused tax agents of asking clients questions that “lead taxpayers to a deduction”, questioning whether all of the $21 billion worth of deduction claims that are expected to come from individuals this year are legitimate.
It’s been a challenging 12 months for the tax office and tax agents, with systems outages causing chaos to workflow and preventing the ATO from undertaking promised works to upgrade the online systems accountants use each day.
The tax office has also been focused on business owners and individuals dodging their obligations this year, with promises that eyes are on the “unexplained wealth” of business owners, as well as any claims for travel, self-education and work expenses.
However, ATO Commissioner Chris Jordan has taken aim at tax agents for their role in incorrect deductions this week, telling The Australian he’s seen evidence of agents trying to “lead taxpayers to a deduction”, and establishing niches for themselves as providers who give certain professions better deductions, for example: “people (who) specialise in nurses, in police, in teachers”.
The tax office has drawn attention to ballooning individual tax deductions over the past few years, with up to 20% increases for expenses like laundry not matching up with what the ATO knows about the working population at large.
General manager of technical policy at the Institute of Public Accountants, Tony Greco, tells SmartCompany his members are keen for the ATO to weed out accountants who are doing the wrong thing.
“Our members are saying, let’s deal with those rogue agents,” he says.
“Every profession has a rogue element, but it shouldn’t be a reflection of the profession at large.”
But while he says a vast majority of tax agents are compliant when it comes to workplace claims, Greco says it has to be acknowledged that more and more Australians are tempted to over-claim on individual tax deductions as news stories of big multinational tax avoidance, like the Paradise Papers, continue to hit headlines.
“You’ve got to understand there is a lot of pressure being put on the tax system,” he says.
“Taxpayers are looking at what multinationals have gotten away with. They’re saying, ‘I’m the punter on the street, but there are others out there who are legally able to avoid their taxes’.”
This is upping the number of taxpayers approaching agents wanting big deductions to be made, Greco says, and this poses a longer-term question about the psychology of the taxpayer and making people feel okay about paying their obligations.
“It does pose a big issue for the tax system,” he says.
Tax community cautiously optimistic ahead of more ATO system maintenance
Jordan’s comments about non-compliant agents come just days before the tax office schedules a weekend of maintenance that will take services offline.
It also coincides with the one year anniversary of the first ATO systems knockout in December, 2016.
Greco says while the year’s events have been incredibly disruptive to tax agents, ultimately the outages themselves could be seen as a “blessing in disguise”.
“It [December 2016’s outage] showed up some major flaws in the way their systems operate in cases of hardware failure,” he says.
The situation prompted widespread reviews of tax office systems, which Greco says has led to more contingency plans being put in place for accountants in the lead-up to the end of the year.
“If something of that nature will happen again, we’ve been assured there won’t be significant impacts. We know they’ve spent a fair bit of time bulletproofing the contingencies,” he says.
SmartCompany contacted the ATO for more information on the nature of the weekend’s planned maintenance but did not receive a response prior to publication.