Speaking at the Tasmanian State Convention of the Tax Institute today, TPB chair Ian Klug announced that the regulator would “reset” its investigations and enforcement strategy to clampdown on 2,000 tax practitioners it has identified as being of the highest risk.
These 2,000 practitioners, which include unregistered advisers, have been identified by the TPB in conjunction with the ATO using data analytics.
While representing only 2.5 per cent of the 80,000-strong registered tax practitioner community, Mr Klug said these 2,000 highest-risk practitioners had significant leverage, often as the drivers or initiators of illegal tax schemes.
“These highest risk practitioners and unregistered agents have significant reach into the community, and are linked to around 4,600 controlled entities and 2.9 million associated clients,” said Mr Klug.
“Looking at one indicator of risk in these 2.9 million clients shows alarmingly high work-related expenses.
“Early analysis in the 2018 year suggests this overclaim will be higher than $1 billion.”
Mr Klug said the TPB’s work in this space has already proven fruitful, with 749 sanctions applied to rogue tax adviser in 2018-19, a 200 per cent increase over 2017-18.
The TPB’s new compliance focus follows on directly from the ATO’s individuals not in business tax gap report, which found an $8.7 billion tax gap attributed to a high adjustment rate to tax agent prepared returns, despite concerns over the ATO’s methodology.
The findings had prompted ATO Commissioner Chris Jordan to criticise some agents for failing to be “guardians of the system”.
In his speech, Mr Klug acknowledged that the TPB’s new body of work was intrinsically tied to the ATO’s tax gap program.
“Tax gap reduction is not just the job of the ATO. There’s a role for every Australian, and especially for tax practitioners and the TPB,” said Mr Klug.
“Tax practitioners who are involved in the black economy and related activities such as phoenixing are clearly at the more extreme end of the misconduct scale.
“So while you could feel your practice is removed from the high stakes of the black economy, work-related expenses may bring the issue of misconduct a little closer to home,” he added.
“Incorrectly claiming work-related expenses may seem a low-risk activity, however registered tax practitioners risk their registration status by pushing the boundaries of appropriate claims.”
