ATO commissioner singles out tax agents for incorrect claims

ATO boss Chris Jordan has slammed tax practitioners for “deliberately scamming or cheating the system” following findings that showed incorrect claiming of work-related expenses was worse in agent-prepared returns than self-prepared returns.

Mr Jordan said data from the ATO’s random enquiry program found that the over-claiming of work-related expenses was worse in agent-prepared returns as compared to self-prepared returns.

“Some display a lack of competence, or outdated knowledge and practices, or do not take proper care when undertaking their work; others are deliberately scamming or cheating the system,” said Mr Jordan.

“These results are really disappointing. For years I’ve heard how tax agents were guardians of the system – these random enquiry results tell me this is not the case for some agents.

“They are not fulfilling their duty as a registered tax practitioner in line with the Tax Practitioners Code of Conduct,” he added.

“In reality, they are selling their clients short – they are not bringing their expertise, nor taking care beyond reliance or blind acceptance of information given by clients, or even, leading clients to deductions that are not allowable.”

According to the tax office, the work-related expenses gap is estimated to be greater than the large corporate tax gap of $2.5 billion.

Mr Jordan also recalled a comment made on the ATO’s last practitioner webcast as an example of the rampant system abuse.

“One of the comments made during the webcast was ‘I would say if you don’t claim the $300 deduction for your client you are pathetic and are a waste of time as a tax agent. You should retire.’,” explained Mr Jordan.

“I understand that agents want the best for their clients, and that they are also competing for business.

“But not doing the right thing might be a “sugar hit” for your clients in the short term but in the long run is not good for your clients, not good for the profession and not good for the system. High integrity agents encourage, enable and ensure their clients do the right thing.”

20 thoughts on “ATO commissioner singles out tax agents for incorrect claims

  • March 16, 2018 at 2:02 pm
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    These tax agents should be identified and referred to TPB for breach of Code of Conduct and sanctions applied against them. They are bringing all agents into disrepute. TPB should also look into tightening the eligibility for admission to be a Tax Agent.

  • March 16, 2018 at 2:14 pm
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    Were the returns chosen completely at random, or from an at risk list in the ATO, or from a collection of large claiming returns. It would make a big difference.
    In general I’m not surprised, I’ve lost many clients over the years to cowboys more than willing to lodge a wish list of deductions rather than a list of actual expenditure, it makes it hard to not join them when year after year they get away with it because up till now the ATO have sat on their hands.
    The ATO only has itself to blame, it has done nothing for years, promised the government it would cut staff and done it by killing off the areas that might have stopped this problem growing.
    I was trained in the ATO as and assessor and auditor, how many years ago I will keep to myself, to some extent I still have the “protecting the revenue” mindset drummed in during that time, I’ve had many conversations with ATO audit officers and the Tax Practitioners Board over the last 10 years about the problem of cowboy agents and the damage they do to honest agents, I’ve provided them with names, but in every case I was told its not something they have the resources to deal with, it was not on their list of priorities. And now the commissioner comes out and tars us all with the same brush, makes me consider bringing my retirement forward.

  • March 16, 2018 at 2:21 pm
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    as a reputable tax agents we are tired of the rogue tax agents who appear to not go under audit and slam our practice by telling the public that we do not know what we are doing. We need you the ATO to shut these rogue practices down. We do report on these agents but it appears that they are still practicing the same . Due to this as it have greatly affected my practice in numbers and $, I have been so disheartened that I have sold my practice and will not be practicing after the 31/03/2018. TAN: 74632008

  • March 16, 2018 at 3:00 pm
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    Before Mr Jordan singles outs Tax Agents, I suggest he get his own backyard in order.
    I was chosen to have 5 clients audited as the ATO claimed that my claims were way outside the industry averages.
    How they can use that as a basis is beyond when the occupation categorises are far too inadequate, however , that is another story.
    So I am dealing with a woman who has very poor understanding of English to the extent that ia sked that her manager attend as an interpreter and even she struggled.
    This week, I received the phone call from the woman to discuss the cases ,
    Well after 2.5 hours I was ready to scream.
    This woman had little or no knowledge of the income tax act!
    Just as an example – and there are many – she is going to disallow the direct running costs of a vehicle that is used for work related purposes because it is not registered in our clients name!!
    “If you use someone else’s car for work purposes, you may be able to claim the direct costs (such as fuel) as a travel expense.
    If the travel was partly private, you can claim only the work-related portion.”
    I suggested that she read the above from the ATO website.
    She refused to.
    So Mr. Jordan, I believe that you have unskilled people judging tax agents.

  • March 16, 2018 at 3:27 pm
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    Agreed, we faced a situation of 30 simultaneous audits. The officer dealing with our case was un-cooperative and had very limited knowledge of allowable claims. I had to object to his audit decisions and in all cases the original claims were reinstated. So in summary it was a complete waste of my time!

  • March 16, 2018 at 4:19 pm
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    I view tax agent’s job is to serve ATO but pay by client but both side can finish you.
    Loose of client can kill your business gradually but ATO can kill you instantly.
    What we want is just a fair play field between tax agents.

  • March 16, 2018 at 4:47 pm
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    We deserve an apology. That’s no different than the head of our accounting bodies labelling all ATO workers as untrained, unskilled, inept and lazy – except that we are telling the truth.

  • March 16, 2018 at 5:43 pm
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    Since when does the ATO randomly select anything? They would have targeted agents that consistently fall outside the norms. I am livid at this article tarnishing all with the same brush. This man is a disgrace. Get on with the job of weeding out dodgy agents by all means but to slander us all . . .

  • March 16, 2018 at 7:02 pm
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    I think we need to go back to the basics – we have a contract with our clients – not with the ATO – we send out a letter of engagement to our clients not the ATO. We work to the Taxation Law. Yet the ATO tell us what we can and cannot claim. Try to stero type use. Excuse me. We do not fit into boxes. If a claim is legitimate then it is claimed legitimately. But the ATO comes back and says these are the only claims you can make – What a load of cods

  • March 17, 2018 at 7:21 pm
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    I’m not doubting the veracity of the Commissioner’s statement BUT is this the same sample comment/question and answer in July 2017 at the National Press Club when I the Commissioner stated that 300 audits were carried out and that was going to be doubled in the “next year” ?
    There are many agents hence the question
    1. Is that 300 agents or 30 agents x 10 returns ? or what stats exactly is this statement based on ?
    2. This information would be more relevant regarding rogue agents doing the wrong thing ? or are taxpayers giving wrong information to start with
    My main concern in the long run is for legitimate claims for taxpayers – not a single source of assessment by the Australian Taxation Office which totally ignores the Taxpayers Charter of Rights – frankly in my experience 95% of self preparers miss out on vital deductions/offsets and as shared by me colleagues above getting “correct” independent advice

  • March 19, 2018 at 9:33 am
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    I would dispute the ATO claims that self preparers make less incorrect claims than tax agents. In my experience self preparers are wont to make far more incorrect claims than tax agents. I have to wonder where the ATO got their sample from. I have had several clients, unhappy with me telling them they cannot claim this or that deduction, telling me not to do anymore and they will do it (their tax return) themselves. They clearly were going to make the claims I had told them were inadmissible.
    I also agree with Kelly and Paul above, I have on numerous occasions found myself dealing with an ATO employee that has a very poor knowledge of the Act, Rulings, Determinations or published ATO advice on a subject, often they also have a poor command of English!

  • March 19, 2018 at 10:10 am
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    The taxation office themselves are the main contributor to rogue tax agents. There are too many disreputable preparers that are NOT tax agents that have weasled into the system via nominee companies etc and are rorting excessively. I know of one rogue preparer that have been rorting the system for years in many ways and costing the taxpayer tens of thousands per annum and they have been reported 5 times to the ATO and TPB but they have NOT acted apprpriately on every occasion and the alleged dishonesty continues unchecked. Virtually given them a licence to be a career recidivist. The ATO need to look at themselves first as they are the main lethargic contributors so it appears to allowing rogues to prosper. An earlier posting by Veronica hit the nail right on the head. The ATO themselves are the weakness in the system.

  • March 19, 2018 at 12:27 pm
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    Professional advisers who provided advice or suggest actions that are patently in breach should bear serious personal penalties and censure. The legal fiction that seems to protect such advice and action need to sweep aside with personal assets on the line together with any trusts etc so popular in the legal profession etc also struck out to effect full recovery.

  • March 19, 2018 at 8:54 pm
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    I agree with many of the comments listed above, and have also been subject to ‘random’ audits of 10 clients twice, as we fell outside of the normal ratio in one specific field. The 1st time we were able to substantiate all claims, and all were allowed. The 2nd time we were told to amend 8 of them to relocate a particular income and deduction to another item number. After much discussion about how the changes would trigger ATO omitted income issues, and assurances from the ATO staff member how this would not be so, it took 18 months to restore the tax payer’s original assessments, and wipe the demand for payments that kept arriving after the reversal of the amended assessments that arose, following the “omitted income” letters that we stated would occur. A senior officer finally sorted the situation after these affected clients received repeated Probe Group Collection letters, and they then stated we had prepared the returns correctly initially!
    We were also unlucky enough to have a primary producer have a FTC audit, in which we had to provided RMS registration papers for all farming equipment, or they were going to disallow the claim (as you may all know, only vehicles driving on public roads require registration, not farm and paddock based machinery), and other fuel was used in machinery, etc., as well. We also had to provide substantiation, after entering a debate with the ATO officer who had limited English, as he refused to accept that a beef cattle farmer would be required to grow hay or fodder. (This was after we spent ages trying to explain what both things were!). We were given ONE WEEK, at the end of the processed quarter to comply!

  • March 20, 2018 at 10:26 am
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    This claim about work related deductions being claimed by tax agents exceeding the 2.5 billion large corporate tax gap appears to be wildly exaggerated? I did some sums on ATO statistics on individual tax returns from their website, without going into any great detail on the calculations, but around 70% of all ind. tax returns that are prepared by tax agents at around the middle range tax rate of 32.5%, correct me if I am wrong, but I am coming up with excessive tax refunds of $1,292.82 for EACH and EVERY taxpayer prepared by a tax agent? That includes all the little taxpayers that work in fast food with minimal deductions, council workers and others with all clothing, phones etc provided by employers would possibly equate to EVERY other taxpayer claiming around $3,000 to $4,000 per year, per return excessively. This quoted figure by the ATO appears to be nothing short of absurd? As a once prominent federal politician once said, if you can make a call on one wildly inaccurate statement, then it makes all other statements in that document highly questionable also. Some corporates in Australia such as large airlines have allegedly paid no company tax for ten years? I think the ATO need to go back and examine that statement.

  • March 20, 2018 at 10:46 am
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    Furthermore, the comment made by one individual with little or no knowledge or respect for the tax system in relation to just jacking $300 in work related deductions should have earned them a tax practice audit. It would not be rocket science to track a URL to identify such a poor representative of tax agents views. You do spot the odd lazy tax preparer or sausage factory that do just input $300 but it also appears to be more largely the domain of the self preparers from my experience. With modern technology advancements with mobile phones etc I implore my clients to photograph any perceived work related purchases in our days of fading dockets etc. If they maintain them in a separate gallery file it makes life much easier to complete an individual tax return accurately in conjunction with the same or any paper receipts held. I would imagine I would send 5 to 10 taxpayers per annum packing if they are in pursuit of excessive work related deductions. At the end of the day you do not want those clients. They can go elsewhere and be a pest. So this then gets back to the ATO not pursuing the small number of individuals in the system that do the wrong thing, instead discrediting the “guardians of the system”.

  • March 20, 2018 at 9:14 pm
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    Bloody hell, next thing you know they’re going to remove WREs completely!

  • March 20, 2018 at 9:15 pm
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    So much love for CJ right now…………..

  • March 21, 2018 at 9:45 am
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    Maybe it is the senior taxation officers themselves who may be more brought to account in the future rather than legitimate tax agents. I submitted 6 pages of evidence to an inquiry by the Inspector General of Taxation, Mr Ali Noroozi in relation to a lack of action by the ATO where 4 other reputable tax agents became aware of alleged (but easily proven) fraud and dishonesty over many years by another tax preparer and after numerous written complaints to the ATO and Tax Practitioners Board no apparent action was taken. The Inspector General is to hand down a report to Parliament in June, 2018 I am advised after an inquiry was opened after an issue with a former Deputy Commissioner of Taxation – of which we have seen very little of in the press recently strangely enough. It will be interesting to see the findings. A prominent Federal Senator has been briefed during a personal meeting some months ago on the issue so we will be expecting a positive result this time. When the next complaint to the ATO is submitted by this persons former employer soon containing further recent distinct and factual evidence of alleged tax fraud by a rogue tax preparer and if it is swept under the carpet again, afterwards maybe there could be a few senior tax officers looking over their shoulders. It is one thing to come out and bag tax agents but before they do they should ensure their own backyard is clean first. The collective tax experience of myself and the other reputable tax agents exceeds 100 years and each of us are flabbergasted at the past lack of action by the Taxation Office that has allowed literally hundreds of thousands of dollars of taxpayers funds to be allegedly misappropriated from the government – why is this so? It is important to note that this alleged rogue tax preparer is not a qualified accountant, not a registered tax agent in their own right, is not a member of the IPA, but runs a shopfront tax agent practice. Go figure? Therein possibly lies your problem Mr Jordan.

  • March 21, 2018 at 12:01 pm
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    The whole issue of WRE’s needs an overhaul. I would suggest requiring substantiation for ALL WRE’s. It is the expenses that do not require written substantiation that are the most heavily rorted such as cents per kilometre motor vehicle, overnight travel and the first $300. Make it plain, no receipt – no deduction. A bit of TV educational advertising would go a long way.

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