The ATO is focused on higher risk agents
While most practitioners take their professional obligations very seriously, there are a small group who do not and their actions impact on the rest of you. We are increasing our efforts to address the behaviour of higher risk/reckless agents who predominantly prepare returns for individuals.
Over 22,000 tax practitioners prepare returns on behalf of clients that are individuals. In the individuals segment, we are paying particular attention to around 500 of these agents who present a higher risk to the integrity of the system.
This group of agents represents over one million clients. These are not the agents making inadvertent errors. This group demonstrates deliberate and persistent non-compliance that includes:
- knowingly taking positions contrary to established law
- acting recklessly in relation to the correctness of their client's returns
- deliberately over-claiming deductions
- engaging in other fraudulent activities, in some instances.
The ATO sophisticated data analytics have been fine tuned to identify concerning patterns of behaviour in real time as tax returns are lodged. Where agents exhibit these behaviours, the ATO commonly see similar concerning practices extended to the way they manage their business and their personal affairs. For example, they are more likely to be avoiding their own tax obligations and we often see a mismatch between the income they report and the lifestyle they lead.
These practices do not meet the professional standards of your association or the vast majority of your colleagues. Backed by additional government funding, we are increasing the scale and scope of our activities in this space. The ATO will be taking firmer action to correct this behaviour and bring these agents to account.
If you are one of those 500, you can expect the ATO to be in touch. This year alone the ATO will be closely scrutinising the affairs of 150 agents. These reviews will not only involve client audits but will extend to your personal tax affairs and that of your business.
And, it will not stop at a review. Where practitioners are obstructive or slow to change their practices, the ATO will continue to monitor their behaviour until such time as it improves. If there is no material improvement, steps will be taken to legally restrict their operations and if necessary, remove them from the system. This includes:
- imposing a requirement to lodge work-related expense schedules
- stopping all returns at pre-issue for review or audit
- holding and reviewing all returns for intensive verification before issuing refunds
- removing accesses to the ATO systems such as the Tax Agent Portal and lodgment services
- applying director penalty notices
- referring them to the Tax Practitioners Board
- criminal investigation and prosecution where practitioners or their clients display blatant disregard of the law including fraud on the Commonwealth.
The recent funding provided in the 2018–19 Federal Budget demonstrates the seriousness with which the Australian Government views egregious behaviour by tax practitioners and the risk they pose to willing participation in our tax system. The ATO will continue to work with you to address these issues and ensure a level playing field for practitioners who are trying to do the right thing.
The following two case studies are examples of how the ATO are detecting and dealing with higher risk/reckless agents. The ATO will provide regular updates on how their higher risk/reckless agent program and the outcomes of their work.