We acknowledge and appreciate your important role in helping your clients navigate the tax and super systems. We want a strong relationship with you and a shared commitment to support and protect the community.
A collaborative approach
Many Australians turn to tax professionals to help guide them through the tax and super systems. They trust their agents' knowledge, expertise and care to help them navigate and comply with their tax obligations.
Our relationship with you allows us to:
- understand the changing nature of risks in the tax and super systems
- identify new and emerging threats or areas of concern
- consult, collaborate and co-design on issues of importance.
As highlighted by the Commissioner in his speech at the 2021 Tax Institute Summit, we acknowledge and appreciates the importance of tax practitioners in helping clients navigate the tax and super system. We aim to maintain a:
- strong relationship with the tax profession
- shared commitment to support the community.
Through our dealings with you, we seek to maintain a mutually beneficial, open and collaborative approach.
We will always have a purpose when we seek to engage with you:
- In the majority of cases, it is to give you or your clients advice or support to help you understand and comply with an aspect of the tax and super systems.
- In other cases, we will be seeking your views to help us pilot new approaches or co-design processes.
There will be occasions where we will need to engage with you, your clients, or both of you to understand and manage potential compliance issues. To resolve these issues, we will:
- be open and direct
- seek the necessary information or action from you or your clients.
When our concerns are addressed through additional information you give, we will close our enquiries promptly. This minimises the compliance costs to you and your clients.
This relationship is two way. You can expect that we will follow agreed protocols when contacting you or your clients, including:
- having a cooperative approach to information gathering
- being open and honest about the intent of our engagement with you
- providing relevant materials to support our interaction with you
- maintaining respectful and professional behaviour at all times
- aiming to conclude our enquiries in a timely manner.
As a representative of your client, we expect you will:
- work with us to arrive at mutually agreeable outcomes
- engage with us to aid our understanding of a matter, or to design new processes that improve our administration of aspects of the tax and super system
- deal openly and frankly with us about your clients' affairs, within scope of any applicable legal professional privilege or concession governing sharing of information.
Our approach to compliance
Over 90% of small businesses and 60% of individuals use a tax agent. We recognise the significant influence agents have in helping clients correctly comply with tax and super laws and in helping to reduce tax gaps.
We use a 'teardrop' model of engagement as a framework to define and categorise practitioner behaviour. We use this information to apply strategies with corresponding tailored activities and interventions that promote compliance with tax and super obligations.
The teardrop model is based on extensive research conducted into tax practitioner attitudes to compliance, including A will and a way: An analysis of tax practitioner preparation complianceExternal Link. The research found that rather than a continuum of taxpayer attitudes to compliance, tax practitioner behaviours to compliance was more in the shape of a teardrop.
Categories of behaviour researchers observed include:
- better practice behaviours – adherence to high personal and professional standards
- behaviours of interest such as not taking reasonable care, lack of education or opportunistic behaviours
- behaviours of concern including scheme promotion, providing false or misleading advice and facilitating reckless behaviour
- behaviours that threaten the tax and super systems, such as fraud, theft and other tax crimes.
By understanding the behaviours that attract our attention, you will support your clients to comply with their obligations. You will also support a level playing field for all practitioners.
Better practice behaviours
The Code of Professional ConductExternal Link for tax and BAS agents outlines the personal and professional conduct expected of registered agents under the Tax Agent Services Act 2009, with the Tax Practitioners Board regulating the profession. We have an interest in the role tax and BAS agents play in upholding the integrity of the tax and super systems.
We recognise the majority of tax professionals try to do the right thing – adhering to high personal and professional standards. In our interactions with agents, we have observed a number of behaviours that go hand in hand with high levels of client compliance. These include:
- good internal controls and practices, such as physical and IT security measures and strong customer verification methods
- a strong technology foundation and review processes indicative of robust internal controls
- clear client acceptance and ongoing engagement policies and practices, such as refusing to act for clients that wish to engage in illegal or opportunistic behaviour or are not transparent about their affairs
- focusing on keeping skills and knowledge up to date, particularly around legislative changes
- taking reasonable care to
- correctly establish a client's position
- help their clients understand their tax obligations
- not allow tax reporting that the agent knows to be incorrect, unjustified or unsubstantiated
- working with us collaboratively to support their clients' tax and super affairs
- taking on board our advice and guidance for you and your client.
Professional associations can support and help agents to achieve better practice behaviours.
Tax professionals who display behaviours of better practice can expect a low-touch approach from us. Our focus is on continuing to work with you, your professional associations and the Tax Practitioners Board. We will look at opportunities to collaborate and enable you to continue to maintain the integrity of the tax and super system.
Behaviours of interest
Our tax gap research has found that some tax and BAS agents make avoidable errors and appear more opportunistic in exploiting areas they believe are not being monitored.
This behaviour generally occurs due to:
- agents not taking reasonable care to correctly ascertain their clients’ position, particularly where taxpayers are not being full and frank about their circumstances
- client pressure to achieve large refunds or reduced tax liabilities
- time and cost pressures
- lax practices such as limited or no internal controls
- outdated knowledge or agents operating outside their area of expertise.
Examples of indicators that may attract our attention include:
- for individual clients, clusters of clients claiming significantly higher deductions than comparable clients
- for small business clients, clusters of clients with income and expenses out of pattern with comparable clients
- audit outcomes indicating knowledge issues
- 'standard' deductions being claimed across a client base.
When we observe potential behaviours of interest in your practice, we try to engage with you early to avoid the risks escalating. We will contact you to begin a conversation to understand how your practice operates and what controls you have in place, such as through our early intervention program. We will:
- give you an overview of the risks we observe, in line with our risk-assessment processes
- discuss specific clients or instances of concern
- provide you with information to help you avoid common mistakes.
Our goal is to help tax and BAS agents to:
- stay on track in supporting their client compliance
- avoid costly audits in the future.
After our interaction, we continue to monitor for positive change, including changes to the agent's client base, lodgment patterns and tax and BAS return labels. We will advise you of this; however, if there is no improvement or your risk increases, we'll consider a more intensive response that might involve a review or audit.
Example: early intervention helps agent back on track
Agent C prepares BAS and tax returns for their clients. ATO risk assessment identifies the business income being reported for the agent’s small business client base is out of pattern when compared against the small business client base of similar agents.
To better understand the factors contributing to the risk assessment the ATO engages with Agent C through their early intervention program. They discuss the risks observed and highlighted an example of where there was a significant difference between the income reported on one client’s BAS compared to what was reported in the tax return for the same period.
The agent identifies that there is a reporting issue between the client’s and the agent’s software. They are able to correct this to ensure their clients are compliant in the future and avoid costly audits going forward. Agent C lodges an amendment to correct the issue.
End of exampleBehaviours of concern
A smaller number of tax and BAS agents influence non-compliance by clients in ways such as:
- developing, promoting or using schemes
- consistently failing to correctly ascertain their client's situation
- giving false or misleading advice
- taking advantage of vulnerable clients.
Tax and BAS agents engaging in these kinds of behaviours not only expose their client base, their business and themselves to risk, they also gain an unfair advantage over those agents who try to do the right thing.
Examples of indicators that may attract our attention include:
- clusters of clients with significantly different reporting than comparable clients coupled with similar risk observed in the practice or agents own affairs
- promotion of schemes
- clusters of client phoenix behaviour
- detection of unexpected patterns in reporting across a client base
- clusters of audit outcomes indicating recklessness.
If we identify behaviours of concern for your practice, we will apply increased attention to understand your practice and your clients’ affairs. We will actively engage with you to:
- advise you of the risks we observe
- undertake verification activities (reviews and audits) to examine these risks.
While the process is tailored on risks we observe, in many cases we will undertake verification activities for risks in your client base, your practice and your own personal tax affairs. If we suspect that there may have been a breach of the professional code of conduct, we will share information with the Tax Practitioners Board for their independent investigation.
Example: High risk behaviour leads to agent deregistration
Agent A is identified through ATO risk assessment as having behaviours of concern. There is an identified pattern where Agent A's new individual clients report business income and expenses for the first time in the initial tax return the agent lodges. The result is that clients receive larger refunds than they had received in the past. ATO risk assessment also identifies that Agent A is not reporting all of their clients' income.
Several audits are conducted on Agent A's clients, resulting in the clients receiving liabilities and penalties. Agent A's clients are not in business and are unaware that Agent A is reporting business income and expenses in their tax returns.
Agent A’s own affairs are also the subject of an audit finding that they are not reporting all of their income, which results in liabilities and penalties. The ATO refers the case to the Tax Practitioners Board, who then terminate Agent A's registration.
End of exampleBehaviours of threat
While representing less than 1% of the profession, a minority of agents display behaviours that pose a threat to their clients, to the tax and super system and all Australians. These behaviours include agents misusing their position of trust to deliberately commit fraud, theft or evasion or engage in other illegal activity.
We have no tolerance for these behaviours. If we detect risk, we will take action to intervene as quickly as possible, such as removing access to online services. Our main objective is to contain the effect, and protect clients and the community.
We work across the ATO and with other government agencies to bring these people to account and remove their influence on the system. Consequences can include civil penalties and criminal prosecution.
Example: Agent fraud leads to deregistration and prosecution
Agent B is the principal of a tax and accountancy firm. One of their clients constructs residential units. Agent B prepares their business activity statements and adds extra amounts to the construction costs, which inflates the GST refund. The resulting refunds are deposited into the firm’s accounts.
Agent B is found guilty of two counts of dishonestly obtaining a gain from the Commonwealth. Agent B’s registration is also terminated by the Tax Practitioner Board as they had breached the Code of Professional Conducts and failed to comply with tax laws for their own affairs.
End of example