Australia’s tax commissioner has said despite hearing for years that tax agents are “the guardians of the system”, it’s clear some operators are failing to uphold their duties and giving clients “sugar hits” by lodging incorrect deductions claims on their behalf.
Speaking at the Tax Institute’s National Convention in Cairns yesterday, ATO commissioner Chris Jordan said the level of incorrect claims, including work-related deductions, that the office had uncovered through recent auditing was “really disappointing”.
However, what was more alarming was the finding through audits that “the incorrect claiming in these random enquiries is actually worse in agent-repared returns,” Jordan said.
“It would seem complacency has crept in and the three golden rules of deductions are not being observed.”
“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.”
While acknowledging accountants and agents face business pressures, Jordan said the tendency for them to over-claim on behalf of clients would actually hurt those clients in the long-run.
“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,” he said.
Senior counsel at the Tax Institute, Bob Deutsch, said in a statement in response to the speech that it highlighted the importance of tax professionals in upholding the integrity of the system.
“The Tax Institute will do its part to ensure the tax professionals we represent positively contribute to the maintenance of that foundation,” he said.
Founder of Healthy Business Finances, Stacey Price, says it’s really up to agents to “have the balls to say [to clients], ‘you’re doing the wrong thing'” if they come forward with illegitimate deduction claims.
She says clients often approach tax agents without knowledge of the rules, or with incorrect beliefs about their entitlements because of things they have heard from family or friends.
“I think the difficulty is that clients generally expect a refund, and they will shop around to get one,” she says.
However, it’s critical that tax agents take the approach that even if they lose a potential customer by refusing to make wrong claims for them, this is the best choice for their business in the long run.
“We have to get confident that it’s ok for that client to walk away. It’s just not worth the risk – it [incorrect claims] could bring an entire business down”.
New portal back on the agenda
Reflecting on the status of the tax office’s systems, Jordan also said he was “very disappointed we lost the momentum we had built up in 2016” after having to pause development projects when a widespread systems outage caused chaos.
He said the ATO had launched a beta project in December of last year to test a new online service that will eventually replace the current tax agent portal, saying access to this will be more widely available later this year.
The new format would give agents better access to real-time client information, including historical tax data of a client, which would remove the need to contact the ATO or the client’s previous tax agent to get information.