The Tax Practitioners Board (TPB) is conducting enquiries into tax time loans offered to taxpayers, who use the services of a tax practitioner, to ensure that they are supported with competent and independent advice from their tax practitioners. Tax time loans, from tax practitioners, may not be fair or in their clients’ best interests. Tax practitioners providing improper tax time loans may harm consumers, especially vulnerable members of our community. TPB reviews and investigations will address integrity issues and ensure tax advice is provided with care, competence and independence.

What are tax time loans?

Tax time loans may vary in structure, but in substance can involve a tax practitioner, or associated lender, providing a short-term loan or advance on an estimated tax refund to a client.

Most tax practitioners, acting professionally and ethically, provide tax services to support their clients in addressing tax and superannuation obligations and entitlements. These tax services include preparation of income tax returns and estimating tax payments or refunds for their clients, based on a reasonable assessment of the law and their client’s circumstances. 

If a client is expecting to receive a refund from the Australian Taxation Office (ATO), some tax practices provide, directly or indirectly, a tax time loan. This loan may be related to the size and timing of the expected tax refund.

Example of a tax time loan

Tax time loans may vary; however, one scenario might involve the following process:

• A tax practitioner estimates their client’s income tax refund and introduces the client to an associated lender.
• Subject to a short assessment process, the client and lender agree on the loan amount/ conditions.
• The loan amount, up to the value of the estimated tax refund, is provided to the client by the lender.
• The estimated tax refund from the ATO is paid to the client via the tax practitioner. The tax practitioner will forward the balance of the tax refund to their client, after deducting their fees and after repaying the loan to the associated lender.
• If the client’s tax refund (or estimated amount) is not paid to the tax practitioner (or within the expected timeframe), the associated lender may be entitled to recover the loan via direct debits to the client’s bank account.

Concerns raised

We are aware of consumer concerns raised about tax time loans, including potential harm from improper conduct including:

• high fees that may not be fully transparent to clients
• not managing conflicts of interest, when tax practitioners are paid percentage fees based on tax refund estimates
• not addressing client confidentiality in sharing client’s tax and financial information between tax practitioners and associated lenders
• failure by tax practitioners, or their associates, in exercising competence and reasonable care; and
• not acting lawfully, in the best interests of their clients, by making ‘incentive’ payments to staff when they promote or sell tax time loans. 

These concerns note that in such arrangements a tax practitioner is associated with the lender and may be paid a fee when introducing their clients to the lender, upon successful conclusion of the loan contract, and/ or upon repayment of the loan. Sometimes these fees may be a proportion of the loan amount, which in turn may be influenced by the estimated tax refund. These fees raise perceived or actual conflicts of interest, which must be disclosed and managed.

We recognise consumers and clients may have pressing financial needs, but it is vital consumers are well informed, so they can assess the benefits and risks associated with tax time loans.

The ATO is committed to supporting taxpayers, with most online returns processed within 2 weeks. In promoting tax time loans, tax practitioners must ensure their clients are aware of the risks, including the lender’s debt recovery action if their tax refund is delayed, or if it is less than their tax practitioner’s estimate.

For consumers: how to address your concerns

Registered tax practitioners have obligations under the Tax Agent Services Act 2009 (TASA), including the Code of Professional Conduct (Code) in order to maintain ethical and professional standards of their profession, and ensure public confidence in our tax system. 

These obligations include providing competent advice and services, acting honestly, lawfully and in their client’s best interests, as well as managing confidentiality and conflicts of interest.

If you have concerns about the tax services provided to you, discuss these with your tax practitioner first, wherever possible. If your concerns are not addressed, you can contact us by lodging a complaint. Refer to our website for information about our complaints process.

The ATO reassures taxpayers that there are options available for those experiencing vulnerable circumstances, and they should discuss any support they need with the ATO. The ATO encourages taxpayers who need help to reach out to the ATO or their trusted tax adviser to discuss their situation as early as possible. Taxpayers experiencing difficult circumstances can talk to the ATO or visit ato.gov.au/crisissupport for information on how the ATO can help.

Make a complaint

TPB enquiries related to tax time loans

We are addressing public protection responsibilities and consumer concerns by undertaking enquiries of tax practitioners associated with tax time loans. Our enquiries require tax practitioners to confirm that they:

• Provide advice and services only in areas they are registered and competent to provide – for example, they must not provide financial advice, such as on personal loans or other financial products, unless they hold appropriate qualifications and registration.
• Act honestly, with integrity and lawfully in the best interests of clients.
• Act ethically and uphold the professional standards of the tax profession.
• Ensure their client’s personal information is protected and do not share their client’s personal details or affairs with a third party without their client’s approval, unless they have a legal duty to do so.
• Account to their clients for any money or property they receive on their client’s behalf or hold on trust for their clients – this includes any tax refund that is paid to tax practitioners on their client’s behalf by the ATO.
• Have adequate arrangements to manage any conflicts of interest that may arise when providing services to their clients. For example, where they are registered and competent to provide advice on matters relating to personal loans or other financial products, they must make a full disclosure to their clients in writing of any financial incentives they may be entitled to for recommending those financial products.
• Advise their clients of their rights and obligations under the tax laws. 

Tax practitioners associated with tax time loans should review their services to ensure that they comply with the law and professional standards. We expect tax practitioners will address risks and compliance issues in a timely, transparent and cooperative manner, and engage with us early to protect consumers and improve regulatory outcomes.