A tax agent company was investigated by the Board for suspected breaches of the Code of Professional Conduct (Code). The Australian Taxation Office (ATO) referred the case to the Board after completing audits on income tax returns (ITRs) that the company prepared and lodged for 21 of its clients for the 2013 and 2014 financial years.

As a result of the audits, the ATO disallowed work-related expenses because the relevant expenses were not adequately substantiated and/or the clients did not demonstrate sufficient connection between the claims and the work-related activities. 
 
Subsequently, some of the taxpayers involved appealed the amended assessments to the Administrative Appeals Tribunal (AAT) for a review of the ATO’s decisions. In rejecting the appeals, the AAT also made findings that the company’s conduct in claiming the deductions was reckless and/or demonstrated a lack of reasonable care in the preparation and lodgement of the relevant ITRs. 

In considering the investigation, the Board Conduct Committe (BCC) found the company had breached the Code, in that it failed to take reasonable care by failing to:

• ask sufficient or relevant questions regarding work-related expense deductions

• sight the necessary supporting documentation to ascertain work-related expenses were actually incurred

• ensure the taxation laws were applied correctly to clients’ circumstances

• substantiate clients’ work-related expense claims.

The BCC also found the company had failed to ensure that the tax agent services it provided, or that were provided on its behalf, were provided competently. The company’s registration was terminated.