You need to ask reasonable and direct questions to get the information you need to work out your client's income position, and the deductions and tax offsets they can claim.
When working out your client's deductions, ask them whether they have already incurred the expenditure. You should also ask enough other questions to work out whether the expenditure is allowable as a tax deduction.
Where the substantiation rules apply, you should ask your client what evidence they have available that is necessary (for example, receipts) to support the deduction being made.
You do not have to sight the receipts and records; however, if they are available, you should examine them as part of the tax return preparation process. It is good professional practice to:
- ask your client to provide all the relevant documentation relating to their claims
- make note of the evidence you have seen and the evidence your client advises you they have, even if they haven't produced it for you.
You do not need to conduct tax audits on returns you prepare to ensure they are correct. However, when preparing tax returns, you are expected to adopt reasonable professional care.
You should ask questions to ensure you obtain the relevant information you need to prepare the tax return. However, we understand you have to rely on the accuracy of the information your clients' provide to you.
If you have good reason to believe your client is making a false claim or omitting income, you should carefully consider whether or not to continue preparing their tax return. However, if you have reasonably ascertained what records the client has to support their claims and you have no good reason to doubt the accuracy of that information, you can rely on it when preparing the tax return.
You should carefully advise your clients about:
- the relevant substantiation rules or other requirements to support their claims
- the significance of the declaration they have to sign on their tax return.
You must not knowingly include a claim in a tax return that is clearly not allowable.
The Tax Practitioners Board can apply a wide range of sanctions where breaches of the Code of Professional Conduct have occurred. The Board will tailor its response to the severity of any misconduct, which includes making false or misleading statements.
Further guidance has been given by Hill J in the Federal Court in Stasos v. Tax Agents' Board of New South Wales 90 ATC 4950; (1990) 21 ATR 974 where he said in 90 ATC 4950 at p. 4959 and in 21 ATR 974 at p. 984:
'In addition to the tax agent dealing with his clients, he will almost invariably have dealings with officers of the Australian Taxation Office and perhaps the boards and tribunals to which I have already referred. Those dealings must be able to be carried on in an atmosphere of mutual trust. The Commissioner and his officers must be able to accept that, to the best of the ability of the tax agent, returns that have been prepared are true and accurate. This is particularly so now that the Commissioner has proceeded to a system of self-assessment, with inaccuracies only coming to light in the case of random audit or, presumably, other information coming to the hands of the Commissioner.'
This means that as a registered tax agent, you must not include a claim on a tax return where you know:
- your client has not incurred the relevant expenditure
- the claim is not allowable.
For example, you must not include a claim for total work-related expenses (other than car, meal allowance, award transport payments allowance and travel allowance expenses) that exceeds $300 if you have not reasonably ascertained that your client has kept evidence to prove the total amount.
You should advise the client of their responsibility to lodge a correct tax return and the possible consequences of not doing so. You should also explain your responsibility as a professional registered tax agent.
You should try to persuade your client to exclude any false claims. If they insist on lodging a false tax return, neither you nor your staff should have anything further to do with the preparation of that tax return.
Last Modified: Wednesday, 28 September 2011