We investigated a tax agent company following an Australian Taxation Office (ATO) audit. The investigation uncovered poor internal controls within the practice. The practice failed to take reasonable care in the preparation and lodgement of income tax returns (ITRs) on behalf of their clients.   

ATO compliance activities identified that client ITRs lodged by the company contained deductions that could not be substantiated or did not have sufficient nexus to assessable income. This put clients at risk and resulted in tax shortfalls and penalties being imposed on these individual clients.

The Board Conduct Committee (BCC) determined that the practice had breached Code items 7, 9 and 10 of the Code of Professional Conduct because they failed to: 

• ensure tax agent services were provided competently to these clients

• take reasonable care in ascertaining these clients’ state of affairs

• take reasonable care to ensure that the taxation laws were applied correctly to the circumstances in which the company provided advice to these clients.

The BCC decided to issue a written caution and an order requiring the director and supervising agent to complete the National Tax & Accountants’ Association (NTAA) Tax Skills 1 course within 3 months.

In making its decision, the BCC took into consideration that the supervising agent responsible for the misconduct had been terminated and the company had since made changes to its processes and procedures.