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Tax agents not on the government's horizon?

Dear Sir,

I refer to your media release on Friday 10 July 2009: "More Tax Return Options for Australians" (media release No.12, 2009).

Obviously the intent of the media release is to let people know of the various options they have to lodge their tax returns.

But there is one glaring omission, and that is that the media release does not mention the option of going to a tax agent even once (although it does refer to them in passing in relation to agents being able to use e-tax and to the retired tax agents who take part in the Tax Volunteers Program)!

This is despite the fact that 73% of individuals in Australia use tax agents to lodge their returns.

We hope that this is an oversight and that the Government is not actively trying to push people away from using tax agents.

In any event, we would like to encourage the Government to recognise that tax agents play an important, some would say integral, role in the administration of our tax system.

A recent article ("The Tax Office compliance model should be fundamentally changed") by Michael Ingliss, Tax Barrister in Sydney, in Issue 26 of Thomson Reuters Weekly Tax Bulletin makes the case that the ATO should also explicitly include tax agents in a new overall compliance model, on the basis of their importance to the system.

Admittedly, the ATO does recognise the importance of tax agents, and our work with the ATO is often very productive in ensuring smoother administration for all concerned; e.g., the ATO's 2008/09 Compliance Program stated:

The vast majority of tax agents in Australia are very knowledgeable about our complex tax laws, and work very hard to help all taxpayers comply with them.

Many Australians are happy with their tax agents being able to secure them some kind of refund, on top of being able to hand on the tough work of completing a tax return to a professional. Not to mention the fact that a tax agent is much more likely to complete the return correctly, and can ensure that people don't make claims for things they are not entitled to, or which they can't substantiate. This saves time and effort for the taxpayer and for the ATO.

So, in relation to your media release, we would submit that it is not a bad thing for the Assistant Treasurer to refer to these hard working souls, even if only to say something like "If you have more complex tax affairs, such as owning a rental property or small business, then you may well want to consider engaging a qualified registered tax agent."

We would appreciate it if you could take this submission into account in future.

Benchmarks still on the agenda

By way of background, the NTAA last year raised certain concerns surrounding the development of Industry Input Benchmarks (IBs) and how the IBs would be used by the Tax Office...

We note that the responses provided by the Tax Office . . . provided a practical and reasonable approach for taxpayers and tax practitioners. The NTAA therefore broadly supported the Tax Office's outline of intent and methodology of approach as stated above. The NTAA has since communicated the Tax Office's position to its members generally.

However, regarding the proposed BPB Guide, when read in conjunction with the "Benchmark Use" table provided at the meeting on 8 May 2009, there appears to be a shift in the Tax Office's approach to the use of IBs. Although the Benchmark Use table does not form part of the BPB Guide, the inclusion, for example, of IBs and BPBs as part of the "Tested as part of audit" and "Used to determine audit outcome and/or assessment" criteria, indicates that IBs and BPBs will be primarily used as audit selection tools...

(W)e submit that the use, for example, of IBs and BPBs to determine an audit outcome may not be appropriate for all taxpayers who can demonstrate that they do not necessarily fit within the benchmarks...

In particular, the fact that these benchmarks are averages needs to be recognised more explicitly if they are to be applied in an audit context. By their very nature, averages are made up of figures falling above and below the average, and it would, therefore, be unfair to insist that all taxpayers declaring income below the average have their taxable income increased.

The NTAA therefore requests that the Tax Office provides the methodology and intent as to how it proposes to apply the various benchmarks to the case selection criteria, "Tested as part of audit", and "Used to determine audit outcome and/or assessment", so that taxpayers and tax practitioners have a better understanding of how the benchmarks will be applied.

Nevertheless, we return to our original objection to benchmarks being used in an audit situation to amend a taxpayer's return or returns...

"We acknowledge your feedback that it would not be appropriate to use a benchmark to determine an audit outcome where a taxpayer has kept appropriate records.

"However, where taxpayers are totally uncooperative, haven't kept or have unreliable records, the benchmarks may be used, along with any other information in our possession to raise a default assessment.

"We ensure our compliance efforts are consistent with the Taxpayers' Charter and we offer taxpayers the opportunity to be heard when we make a decision.

"We also have rigorous quality assurance processes in place to ensure decisions are consistent with our procedures and practices."