Following a referral from the Australian Taxation Office (ATO), we investigated the conduct of a registered tax agent alleged to be facilitating the black economy by systemically undeclaring income and overclaiming work related expenses, to reduce his client’s and his own taxable and assessable incomes. The ATO identified the agent as high-risk due to high work-related expense claims in his clients’ tax returns. 

Work-related expense claims

The ATO reviewed and audited a large number of the agent’s clients as it detected significantly high work-related expense (WRE) claims in the 2018 tax returns lodged by the tax agent.  

The audit activities led to substantial amendments to the WRE claims, resulting in a total value of tax shortfall and penalties exceeding $1 million. 

The tax agent had falsely provided declarations to the ATO that the returns were prepared in accordance with the information supplied by the agent’s clients when the clients were not aware of the claims made in their returns. 

Conduct in personal tax affairs

The ATO determined that the tax agent had failed to declare all of his assessable income in his 2017 income tax return.  The tax agent had declared his income was less than $150,000, however the ATO had assessed his reportable income to be over $500,000. 

The tax agent also had failed to register for GST for a year when he would have been aware that he was required to do so. The agent had also failed to declare all reportable income in some business activity statements (BAS), resulting in significant tax shortfall.

Decision

The Board Conduct Committee (BCC) determined that the tax agent’s conduct breached the Code of Professional Conduct items 1, 2, 7 and 11. 

The BCC determined that the agent had engaged in repeated dishonest conduct lacking integrity. It therefore considered that the agent was not fit and proper and ceased to meet a registration requirement.

The BCC terminated the tax agent’s registration and banned the agent from applying for registration for a period of five years.