If your tax practitioner does not meet their obligations

• Their registration can be suspended or terminated, meaning they can’t practice.
• They could receive written cautions or orders from the TPB – for example, undertaking education or working under the supervision of another registered tax practitioner.
• Fines may be imposed by the Federal Court.

Situation

A client, who operated a fruit shop, had the income tax returns their tax agent prepared audited by the ATO. The tax returns showed no assessable income reported, and significant claims for motor vehicle expenses and unreported interest income.

Consequences for the client

The ATO audits resulted in: 

• the client’s assessable income increasing in over $2 million
• penalties and interest charges totalling almost $800,000 being applied.

Consequences for the tax practitioner

The TPB found the tax agent failed to:

• take adequate steps to ensure the income tax returns were accurate
• take reasonable care to check the client’s circumstances and apply tax laws correctly
• ask relevant and sufficient questions about the client’s cash and interest income, and motor vehicle expense claims
• sight the necessary evidence.

Because of these failures, the TPB terminated the tax agent’s registration.

Situation

A sole trader client operating a plumbing business asks their BAS agent to claim the GST on a $55,000 new vehicle. The vehicle purchased is a campervan. The BAS agent claims the GST credit of $5000 for the campervan without:

• asking any questions about the type of vehicle that was purchased 
• checking evidence that the expense is for business purposes. 

In this situation, the BAS agent has a responsibility to determine if an expense is a private or business expense (and therefore whether the GST can be claimed) at the time of lodging the BAS. 

Consequences for the client

An ATO audit found the expense was not deductible and GST credits were not available because it was a private expense and there was no evidence to support the GST credits being claimed. The ATO imposed penalties on the client for making false statements in their BAS return.

Consequences for the BAS agent

The TPB found that the BAS agent failed to:

• take adequate steps to ensure the BAS was accurate
• take reasonable care to apply tax laws correctly to ensure GST credits are claimed for genuine business expenses
• sight the necessary evidence.

Because of these failures, the TPB:

• suspended the BAS agent’s registration for 3 months, which meant they could not continue to operate their business
• ordered the BAS agent to complete and pass a course of education in preparation and lodgement of business activity statements.

Situation

A BAS agent is engaged by a new client to prepare and lodge their quarterly BAS. The client advises they have appropriate record keeping systems in place and that all their suppliers are registered for, and are charging, GST. The BAS agent takes this on face value and goes ahead and prepares the client’s BAS.

In this situation, because the client is new, the BAS agent should also undertake appropriate follow-up action to assure themselves that:

• the client has appropriate record keeping systems in place; and
• they can rely on the information provided by the client to prepare and lodge their quarterly business activity statement.

Consequences for the client

An ATO audit resulted in:

• the client’s GST credits being reduced
• penalties and interest charges being applied.

Consequences for the BAS agent

The TPB found that the BAS agent failed to:

• take reasonable care to apply tax laws correctly and ascertain the client’s state of affairs
• exercise professional knowledge, skills and judgment and make further enquiries
• sight the necessary evidence.

Because of these failures, the TPB:

• issued a written caution
• ordered the BAS agent to complete and pass a course of education in preparation and lodgement of BAS returns.