Code breach lands tax agent company with written caution

A tax agent company has received a written warning from the Tax Practitioners Board as the Board Conduct Committee (BCC) found the sole director and supervising agent to have breached the Professional Code of Conduct (the code).

The BCC found the director of the company and a supervising agent to have breached code item seven of the Code, which says a tax agent service must be provided competently.

According to the TPB, following an investigation, the BCC found the tax agent company and its sole director “failed to take reasonable care” in the preparation and lodgment of 217 income tax returns for clients, subject to ATO compliance activities.

The TPB said: “They were found to have included overclaimed or incorrect deductions that did not have a sufficient link to assessable income or could not be substantiated resulting in tax shortfalls and penalties for clients.”

“In response to the alleged breach of the Code, the individual tax agent and sole director advised they had lodged objections to some of the ATO audits. With subsequent objections resulting in favourable outcomes that have not been reflected in the figures provided to the BCC.”

Within the investigation, the BCC was able to verify as much information as possible as the individual tax agent advised it that the company in question had various checks in place to ensure the validity of claims made.

Based on the factors and evidence raised by the agent, the BCC determined the issue remained with the supervision and control of the company, leading to the issue of the written caution as well as the sole director being ordered to complete a course in the Tax Agent Services Act 2009, including work-related expenses.

“The BCC was of the view that a sole person being responsible for the affairs of 8,700 clients was not appropriate, especially given the recent audits,” the TPB said.

The company was also ordered to report to the TPB the steps it would implement to improve supervision and control within the company, have at least three supervising agents working for the company on a full-time basis and provide written confirmation that the company had implemented new processes.

It was also revealed by the TPB that the BCC had somewhat recently banned a tax agent for breaching code items one, two, three, seven, 13 and 14.

The investigation into the tax agent and the company they were sole director of found that the agent had failed to act honestly and with integrity, comply with the taxation laws in the conduct of their own related entities’ affairs, account to their clients for a substantial sum of money received on trust into two separate bank accounts they controlled, competently provide tax agent services, maintain required professional indemnity and respond to TPB requests for information during its investigation.

Based on these breaches, the BCC determined the director was no longer a fit and proper person and no longer met the registration requirements as it did not hold PI insurance that met the Board’s requirements, leading to registration termination and a five-year ban on re-applying for registration.

“This case highlights the critical importance of tax agents adhering to the Code of Professional Conduct and upholding the ethical and professional standards that are expected of registered tax practitioners, who hold positions of trust in our community.”

“Failure to do so can result in serious consequences, including the termination of their registration and a period of exclusion from re-applying.”