Board Conduct Committee decisions - June to August 2018
Between June and August 2018, the TPB’s Board Conduct Committee (BCC) imposed the following administrative sanctions:
Number of tax practitioners
Termination of registration
The BCC also rejected four registration renewal applications because the practitioners did not meet one or more eligibility requirements for registration.
Written cautions and orders
Annual declaration matters
The BCC issued written cautions to 14 tax practitioners for failing to complete their annual declaration by its due date. Orders were also imposed on these practitioners, requiring them to lodge their annual declaration within 21 days from the date of the order.
The BCC issued written cautions to 10 tax practitioners for various Code of Professional Conduct (Code) breaches. The BCC found that seven of these tax practitioners had failed to provide tax agent services competently (Code item 7) for various reasons, including the failure to:
- ensure their practice had adequate processes and procedures in place to prevent unauthorised access and use of the Australian Taxation Office (ATO) portals
- have adequate trust account management arrangements to ensure tax refunds received on behalf of clients were passed on to them in a reasonable and timely manner
- contact client in a timely manner to obtain authority and ensure lodgment of their tax returns by the due date
- carry out adequate supervision and control, leading to incorrect work-related expense claims included in several of their clients’ returns
- correctly apply the tax laws relating to work-related expense deductions and the substantiation rules
- lodge or take adequate steps to ensure timely lodgment of clients’ tax returns
- pass on ATO correspondence to clients.
Other Code breaches by tax practitioners included their failure to:
- act ethically when using a bank account held for the purposes of holding and disbursing client tax refunds (Code item 1)
- declare their non-compliance with personal tax obligations in their annual declarations (Code item 1)
- comply with their personal tax obligations (Code item 2)
- account to client of their tax refund in a timely manner (Code item 3)
- ensure staff-maintained confidentiality by disclosing client information to third parties without consent (Code item 6)
- ask sufficient and pertinent questions to clients regarding work-related expense claims and ensure their tax returns contained accurate information (Code item 9)
- take reasonable care to ensure taxation laws were applied correctly in their clients’ returns (Code item 10)
- maintain professional indemnity (PI) insurance that met the TPB’s requirements (Code item 13)
- respond to Board’s requests for information in a timely, responsible and reasonable manner (Code item 14).
In addition to a written caution, the BCC issued various orders on eight of the 10 tax practitioners. The orders addressed the specific conduct of each practitioner, and included the following orders, requiring them to:
- return a tax refund to the ATO and provide evidence to the Board after doing so
- complete and pass courses of education in various subjects including practice management, trust account management, professional ethics, income tax and BAS preparation and lodgment, and the Code
- bring their personal tax affairs in order
- provide evidence to the Board of their PI insurance details
- provide evidence of their continuing professional education (CPE) activities.
Suspension of registration
The BCC suspended the registration of three tax practitioners for periods ranging from one to four months for Code breaches.
Two of these practitioners had continued to non-comply with their personal tax obligations despite Board requests to address their tax affairs. The BCC also issued an order to these practitioners to bring their tax obligations up to date within a specified period.
In the third case where it was found that the tax practitioner had claimed incorrect work-related expense deductions for a number of clients, the BCC suspended the practitioner's registration for a period of four months and imposed orders to complete appropriate education courses. The case study below provides further details about this matter.
Case study: A tax agent faces suspension for incorrect work-related expense deductions
Following an investigation, the BCC found a tax agent had claimed significant travel and other work-related expense deductions in several of his clients’ tax returns. The agent had provided incorrect advice to clients about their eligibility to these claims. ATO audits revealed these expenses were clearly not deductible on the basis that they were private in nature, did not satisfy ATO rules for claiming deductions or were not adequately substantiated by supporting evidence.
The BCC found that the agent failed to:
- ensure that he provided tax agent services competently because he did not take adequate steps to ensure that income tax returns contained accurate information, did not notify clients of ATO audits and did not give clients correct advice
- take reasonable care in ascertaining the state of affairs of his clients by asking sufficient or pertinent questions regarding work-related expenses, and sighting the necessary evidence
- take reasonable care to ensure that taxation laws were applied correctly to his client’s circumstances
- properly advise his clients of their rights and obligations by not informing them of ATO audits and their outcomes.
The BCC considered the agent’s responses to the Board and his health condition before making its decision. The BCC noted the agent maintained his position regarding the validity of his claims in his clients’ tax returns and did not take any steps to improve his knowledge on work-related expense deductions.
Based on the above findings, the BCC determined the agent had breached Code items 7, 9, 10 and 12.
The BCC was of the view that the agent may present a risk to the public and the integrity of the profession if he is permitted to provide tax agent services in the immediate future. Consequently, it decided to suspend the agent’s registration for a period of four months and imposed an order requiring the agent to:
- complete and pass courses of education in income tax preparation and lodgment
- provide the Board with evidence of the CPE activities he has completed.
Termination of registration
The BCC terminated the registration of six individuals and one company tax practitioner for ceasing to meet one or more registration requirements.
In the cases of the individuals, the BCC determined these practitioners had ceased to be fit and proper persons to be registered.
In the case of the company, it was found that the company went into external administration, did not have the sufficient number of registered individuals to provide supervision, and failed to maintain PI insurance that met our requirements.
Case study: Dishonest and fraudulent acts lead to a BAS agent's registration termination
An investigation into the conduct of a registered BAS agent revealed the agent:
- had amended bank account details for some of her clients in the BAS Agent Portal to her own accounts to gain personal financial benefits from tax refunds
- lodged unsubstantiated and fraudulent original or amended business activity statements on behalf of clients without their knowledge or consent, which resulted in her receiving tax refunds from the ATO into her bank accounts
- obtained client funds on 30 occasions without their knowledge and used these funds to repay her personal taxation liabilities to the ATO
- failed to disclose in her annual declaration that she had been charged with a criminal offence for fraud
- failed to make a full disclosure of financial assets and beneficial interests that she held in response to the ATO’s request.
The BCC determined that the agent ceased to meet the registration requirement of being a fit and proper person.
The BCC noted its concerns that the agent’s conduct was systemic and egregious, as she had deliberately lodged unauthorised business activity statements and made false representations to the ATO to gain personal financial benefits.
The BCC therefore decided to terminate the agent’s registration and applied the heaviest sanction under the TASA by prohibiting her from applying for registration for a period of five years from the date of termination.
Case study: A tax agent found to be not fit and proper and loses registration
Following an investigation into the conduct of a registered tax agent, the BCC found the agent had:
- failed to lodge her personal income tax returns and business activity statements for several periods by their due dates
- failed to ensure a company of which she was a director complied with its superannuation guarantee obligations
- failed to ensure a trust, in her capacity as a co-director of the company trustee, complied with its tax and superannuation guarantee obligations
- been convicted of an offence involving fraud or dishonesty and sentenced to a term of imprisonment
- not provided the Board with evidence that she maintained PI insurance since it expired.
Based on the above findings, the BCC decided to terminate the tax agent’s registration for not meeting the registration requirements of:
- being a fit and proper person
- maintaining PI insurance that met our requirements.
The BCC also considered the egregious nature of the agent’s conduct and decided to prohibit her from applying for registration for a period of five years from the date of termination.
Rejection of renewal applications
The BCC rejected four registration renewal applications by tax practitioners for failing to meet the eligibility requirements for registration.
The BCC found the tax practitioners did not satisfy the fit and proper person requirements for several reasons, including their failures to:
- comply with their personal or company’s tax obligations
- comply with Board’s orders to address their outstanding tax obligations or successfully complete courses of education
- notify the Board of changes of circumstances, including events affecting registration
- provide clients with a means of communication and remain accessible to clients and the Board
- account to clients for tax refunds in a timely manner
- act with honesty and integrity by making false claims in their original and amended business activity statements to gain a financial benefit.
Case study: BCC refuses registration renewal for a tax agent for not being fit and proper
Following an investigation into the conduct of a registered tax agent, the BCC found the agent had failed to:
- comply with personal tax obligations and had significant outstanding tax debts with no payment arrangement in place with the ATO
- account to clients for tax refunds received from the ATO in a timely manner
- competently provide tax agent services because he:
- did not lodge, or had caused unreasonable delay in the preparation and lodgment of, clients’ tax returns
- did not ensure the tax refund of a client was received into an account as instructed by the client and account to them for a tax refund received on their behalf in a timely manner
- did not have in place adequate trust management arrangements to ensure tax refunds were returned to clients in a timely manner, and
- did not provide clients with a means of communicating with him or otherwise remain accessible to them
The BCC noted the delays between payment of client refunds by the ATO into the tax agent’s trust account, and the eventual receipt of those refunds by the clients, were significant and unacceptable. The BCC was particularly concerned that the tax agent’s responses to the Board demonstrated a lack of awareness and appreciation of the importance of reconciling and accounting to clients for refunds he receives on their behalf in a reasonable and timely manner, and of ensuring adequate arrangements in his practice to competently service and provide a means of contact to his clients.
The BCC particularly noted the significant size of the tax agent’s personal tax debt and that it had been accumulating since 2013. It also took into account that there was no payment arrangement in place with the ATO, the tax agent had not objected against the assessments giving rise to the debts, and the ATO had debt recovery proceedings on foot against the tax agent in the Supreme Court.
Given the above findings and the nature of the Code breaches, the BCC determined the agent did not meet the registration requirement of being a fit and proper person and rejected his renewal application.
Last modified: 26 September 2018