Strange tax claims creating ethical accounting dilemmas

The Institute of Public Accountants has noted the rising number of instances of accountants experiencing questionable behaviour from clients as the Tax Office clamps down on dubious tax claims.

Speaking to Public Accountant, the Institute of Public Accountants general manager of technical policy, Tony Greco, said this could either mean one of two things – either accountants are more exposed to those types of issues, or they’re more conscious of their responsibilities.

However, he also acknowledged that sometimes accountants don’t “want to go there” in confronting their client around adhering to their tax obligations.

“There’s a bit of pressure on the practitioner to bend their practices and somewhat succumb to the client’s request,” Mr Greco said.

“They don’t want to ask the pertinent questions, and sometimes they see that as a way out. For example, they might know the client has got other income, cash not reported, but they don’t want to go there and ask the pertinent questions.”

The comments come as the ATO last month released several case studies of adventurous and misguided expenses claims from taxpayers.

In particular, it has specifically targeted work-related clothing and laundry claims on notice after a 20 per cent rise in claims over the last five years.

Moroney & Associates principal Mitchell Moroney told Public Accountant of an instance where a small hairdressing salon client of his claimed a tax deduction on lingerie from adult shops.

He said that the client then explained that while the main business is hairdressing, they also attend hairdressing shows where they have models sport their hairstyles and that the purchases were made for the models as costumes.

“I remained sceptical. However, she assured me that it is for the business and the shows were a good way to market the salon,” Mr Moroney said.

“After our conversation, although sceptical I was confident enough that it was business-related to allow the deduction.”

Direct Management founder and director Diane Lucas cited a client of hers claiming on a particular $900 expense that had no descriptors, that she eventually found out was a bribe payment.

“[The client] did come clean and did confirm that it was a bribe payment, to which I replied, ‘Well, this needs to go to your director’s loan account, as it’s not something that is a claimable expense, and certainly there wouldn’t be any GST on that’,” Ms Lucas said.

“We really don’t want to see anything associated with those sorts of activities coming from your business account.”

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