Tax Practitioners Board no longer kidding around!

Recent reported AAT decisions show that the TPB is now actively pursuing those tax agents that have been referred to it by the ATO for excessive deduction claims. Following an investigation as mandated under TASA, the TPB is now terminating the registration of the tax agents in question.

The AAT matters are usually stay applications of the TPB’s termination decision, but the background to each is usually the same; an ATO audit of clients reveals either:

·        A lack of knowledge about substantive tax law (Gao and TPB [2019] AATA 3651);

·        systemic over-claiming of deductions (Taxation Guru Pty Ltd and Gambhir Watts and TPB [2019] AATA 3249); or

·        a lack of substantiation for deductions claimed (S & T Income Tax Aid Specialists Pty Ltd trading as Alpha Tax Aid and TPB [2019] AATA 4099)

The ATO then refers the findings to the TPB as a complaint which opens an investigation, and concludes in disciplinary action, including termination.

The threshold to the TPB’s decisions seems to be becoming quite low. For example, in Taxation Guru, the applicant contended that out of the 29 client files audited by the ATO, 24 of those decisions were fully or substantially reversed on lodging of the objection. It was only five of those client files that were audited in relation to substantiating their work-related expenses that were in dispute, and the applicant contended that those matters were not entirely relevant to their conduct. However that didn't deter the TPB from terminating the tax agent's registration.

Despite the low threshold, a termination decision is usually fatal to a tax agent’s practice and the goodwill that has been developed, often over many years of hard work and all the stress and toil that comes with it.

The point of this post is twofold:

1.    A tax agent needs to ensure that they have controls in place to ensure that all work done is to the highest standard, not the lowest cost. This would also necessarily require a concerted effort to ensure that minimum CPD requirements are met; and

2.    If and when the TPB notifies a tax agent that a complaint has been made and an investigation will commence, it has to be treated seriously and experienced professional advice sought immediately.