At a glance
By Elinor Kasapidis
With the dust settling on the implementation of the Australian Government’s economic stimulus measures, the Australian Taxation Office (ATO) has signalled its intentions to review claims and undertake compliance activities to maintain the integrity of the tax and superannuation systems.
Thousands of small businesses have been contacted about incorrect JobKeeper payments while the ATO has warned those who accessed their superannuation early that they will be checking eligibility and reviewing recontributions.
As tax agents have begun meeting with their clients for Tax Time 2020, many are checking income received from the stimulus measures as part of income tax return discussions.
Such an approach ensures that tax agents are meeting the standards prescribed by the Tax Practitioners Board (TPB) in relation to ascertaining a client’s affairs and ensuring tax laws applied correctly are met.
In some instances, tax agents may come across information that suggests potential fraud or behaviours of concern or the client may disclose actions that contravene the integrity rules.
This can include:
- Artificially restructuring or arranging the business to meet the eligibility criteria
- Resurrecting dormant entities or phoenixing
- Increasing wages paid in a particular month to maximise amounts
- Changes to the characterisation of payments
- Deferring or bringing forward the making of supplies
- Making false statements or fraudulent attempts to create an entitlement
The consequences for taxpayers may include repayments, interest charges, penalties and convictions for offences under the Taxation Administration Act 1953 and the Criminal Code Act 1995 as well as sanctions under the Tax Agent Services Act 2009.
The JobKeeper legislation also introduces joint and several liability for employers and employees for the repayment of JobKeeper amounts.
The consequences of non-compliance
When facing such a situation, tax agents should take the time to ensure that clients are properly informed about entitlements and the consequences of non-compliance, and that any advice given is properly documented.
Where fraud is suspected, it may be prudent to undertake further enquiries to gain a better understanding of the facts and circumstances of the arrangement before determining a course of action.
CPA Australia members will need to consider APES 110 Code of Ethics for Professional Accountants (Code of Ethics) which contains provisions relating to responsibilities with respect to Non-Compliance with Laws and Regulations (NOCLAR).
This standard provides the framework for members to apply should they identify a NOCLAR that has a material effect on the financial statement of an entity, or is fundamental to the operating aspects of the client’s business, to its ability to continue its business, or to avoid material penalties.
It is important for members to be aware that reporting to an authority under NOCLAR may only be appropriate in limited circumstances and is applied only after other attempts to rectify the NOCLAR with Those Charged With Governance (TCWG) have been unsuccessful.
While NOCLAR does not impose an obligation to members to disclose a non-compliance, or suspected non-compliance to an authority, when there is no legal obligation to do so, members must comply with the relevant NOCLAR requirements and consider whether disclosure to an appropriate authority is an appropriate course of action in the circumstances.
These vary depending on the role and specific characteristics of each case, but there are requirements for members to respond to NOCLAR and not turn a blind eye.
A tax agent may seek to engage with the client to reduce the threat of NOCLAR to an acceptable level or to withdraw from the engagement.
Tax whistleblower protections: how they work
From 1 July 2019, the tax whistleblower protections contained in the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 came into effect. This allows whistleblowers, for example a tax agent, to make protected disclosures to the ATO or other eligible recipients.
Such disclosures include where:
- There are reasonable grounds to suspect that the information indicates misconduct or an improper state of affairs or circumstances, in relation to an entity or associate’s tax affairs
- The information may assist the eligible recipient (e.g. the ATO) to perform functions or duties in relation to those tax affairs
- When a whistleblower reports any form of reasonably suspected impropriety – be it making false statements or falsifying business documents to get a tax benefit, through to large-scale tax fraud – they are potentially eligible for protection.
Eligible whistleblowers are protected from any civil, criminal or administrative liability. There is also explicit protection against contractual or other actions being taken in response to the disclosure.
The tax whistleblower laws do not, however, include mandatory reporting. This means that the choice to disclose information remains with the tax agent, subject to their obligations under the Code of Ethics.
Because disclosures made to legal practitioners to obtain legal advice are also protected, tax agents unsure of their obligations or rights may consider speaking with a legal professional to determine the most appropriate course of action.
CPA Australia resources
- Policy bulletin on tax whistleblower protections (PDF)
- Non-Compliance with Laws and Regulations (NOCLAR)
- APES 110 Code of Ethics for professional accountants
- IESBA Responding to NOCLAR pronouncement
- ATO cash flow boost guidance
- PCG 2020/4 Schemes in relation to the JobKeeper payment (PDF)
- LCR 2020/1 JobKeeper payment – decline in turnover test (PDF)
- TPB(I) 17/2013 Reasonable care - ascertain client's state of affairs
- TPB(I) 18/2013 Reasonable care - ensure taxation laws are applied correctly