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Board Conduct Committee decisions - May to December 2017

Board Conduct Committee decisions – May to December 2017

During the period from May to December 2017, the Board Conduct Committee (BCC) imposed the following administrative sanctions: 

Sanctions Number of tax practitioners
Written caution 52
Order/s 47
Termination of registration 25

The BCC also rejected applications by two tax practitioners for renewal of their registration, on the basis that these practitioners did not meet the ‘fit and proper’ eligibility requirement for registration.

 

Written cautions and orders

Annual declaration matters

The BCC issued a written caution to 34 tax practitioners who had failed to complete their annual declaration by its due date. In 33 of these cases an order was issued to practitioners requiring them to lodge their annual declaration within 21 days from the date of the order.

Code breaches

A written caution was issued in 18 cases for various Code of Professional Conduct (Code) breaches. These breaches included failures by tax practitioners to:

  • comply with their personal tax obligations
  • maintain professional indemnity (PI) insurance that meets the Board’s requirements
  • respond to Board requests and directions in a timely, responsible and reasonable manner
  • account to clients for tax refund monies in a timely or appropriate manner
  • make sufficient enquiries into the relevant affairs of clients prior to making claims in returns they lodge on behalf of those clients with the Australian Taxation Office (ATO)
  • ensure that they correctly applied the tax laws to the relevant circumstances of clients when giving tax advice and lodging returns on behalf of those clients
  • obtain required written declarations and authorities from clients prior to lodging returns on their behalf
  • lodge clients’ tax returns and/or business activity statements in a timely manner
  • ensure adequate supervision and control over services provided by their employees
  • pass on ATO correspondence to clients and inform clients of their tax obligations.

In 14 of the above cases, the BCC also imposed various orders, which included requirements for tax practitioners to:

  • lodge their outstanding tax returns or business activity statements
  • address their outstanding tax debts to the ATO
  • complete and pass course/s of education or training in various subjects including the Code, ethics, preparation of tax returns and practice management (including trust account management)
  • not offer any form of fee from refund service or be involved in activities as part of tax agent services that involve holding money on behalf of clients.


Termination of registration

Annual declaration matters

The BCC terminated the registrations of 17 tax practitioners who breached the Code by failing to comply with Board orders to lodge their annual declaration.

In 15 of these cases, the BCC also found that these practitioners had failed to comply with their personal tax obligations and/or failed to maintain PI insurance that meets the Board’s requirements.


Code breaches

The BCC terminated the registrations of four tax practitioners after finding that these practitioners had breached the Code.

Case study - A tax agent registration terminated due to several Code breaches

After the Board completed an investigation into a registered tax agent, the BCC found that the tax agent had:

  • failed to ensure that income tax returns that the tax agent lodged on behalf of clients contained accurate information (breach of subsection 30-10(7) of the Tax Agent Services Act 2009 (TASA)) 
  • failed to ask sufficient or pertinent questions regarding allowances and work-related expense deductions that the tax agent claimed on behalf of clients in their income tax returns, or sight necessary evidence to substantiate those claims (breach of subsection 30-10(9) of the TASA)
  • failed to correctly apply the tax laws and substantiation rules that govern work-related expense deductions to the circumstances of the clients before claiming the deductions in their income tax returns (breach of subsection 30-10(10) of the TASA)
  • failed to pass on ATO correspondence to the tax agent’s clients regarding the audits of their income tax returns, which included penalty notices and notices of assessment and amended assessments (breach of subsection 30-10(12) of the TASA).

The BCC also considered evidence that the tax agent had failed to lodge several annual returns of a superannuation fund of which the tax agent was a trustee and failed to comply with an enforceable undertaking they provided to the ATO to lodge these returns. This conduct also breached the Superannuation Industry (Supervision) Act 1993 and resulted in a determination by the ATO that they were not a fit and proper person to be a trustee of a superannuation entity.

Based on the above, the BCC found that the tax agent had demonstrated a flagrant disregard for the tax laws (both in relation to their clients’ and their own tax affairs), and therefore the tax agent was no longer a fit and proper person for registration under the TASA. The tax agent’s registration was consequently terminated.


Ceasing to meet registration requirements

The BCC terminated the registrations of four tax practitioners after finding that they ceased to meet the tax practitioner registration requirements.

These included findings that individual practitioners:

  • ceased to be a fit and proper person, due to conduct that resulted in them being convicted of criminal offences involving fraud or dishonesty and being sentenced to a term of imprisonment, and for engaging in misleading and deceptive conduct under the Corporations Act 2001 in their dealings with clients
  • did not maintain PI insurance that meets the Board’s requirements.

In one case, the BCC determined that the tax practitioner should also be prohibited from applying for registration under the TASA for a period of five years. In making this decision, the BCC took into account the serious nature of the practitioner’s conduct and the Board’s role and objective to ensure public protection, and protect and maintain the standards of the registered tax practitioner profession.

In the case of a company tax agent, the BCC found that the company did not have a sufficient number of registered individual tax agents to competently provide tax agent services and carry out supervisory arrangements.

The BCC also found that the company ceased to meet the registration requirement that each director is a fit and proper person, having regard to evidence that the director:

  • made a false and misleading statement in the company’s annual declaration to the Board
  • failed to ensure that both the company met its personal tax obligations and that they met their own tax obligations
  • failed to ensure that the company complied with its obligation under the TASA to notify the Board that the company ceased to meet the requirement to have a sufficient number of registered individual tax agents
  • allowed the company to lodge income tax returns on behalf of clients without a supervising tax agent.


Rejection of renewal applications

The BCC rejected applications by two tax practitioners for renewal of their registration, on the basis that these practitioners did not meet the ‘fit and proper’ eligibility requirement for registration. In both cases, the BCC also found that the practitioners had engaged in conduct that breached the Code.

In the first case, the BCC found that the practitioner was not a fit and proper person on the basis that they:

  • understated their taxable income in two personal income tax returns they lodged with the ATO
  • failed to properly substantiate and calculate expenses and income in those income tax returns
  • provided false documents and statements to the ATO
  • provided false and misleading information about their employment history and PI insurance cover to the Board.

In rejecting the second practitioner’s application for renewal of registration, the BCC considered evidence that the tax practitioner had pleaded guilty to eight criminal theft charges for defrauding a client and failed to disclose the matter in their renewal application to the Board.


Last modified: 26 April 2018