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Tax practitioners told to use appropriate client verification processes

The Tax Practitioners Board (TPB) is urging all tax practitioners to ensure that they take appropriate steps to validate a taxpayer’s identity, and do not risk compromising client data which may lead to fraud.

Tax practitioners told to use appropriate client verification processes
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  • Maja Garaca Djurdjevic
  • September 24, 2020
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The TPB has issued a warning to all tax practitioners following a recent case where a registered tax practitioner failed to take appropriate steps in handling and verifying client data.

As a result, the TPB determined that the agent breached items of the Code of Professional Conduct in the Tax Agent Services Act 2009 relating to competency, honesty and integrity.

The registered tax practitioner from Western Sydney was approached by three individuals who asked him to lodge in excess of 100 income tax returns (ITRs) on behalf of their associated employees. Despite providing false documentation on behalf of these employees, the agent agreed to lodge these ITRs without undertaking proper enquiries about the identity of these taxpayers.

The TPB found that the “agent’s recklessness” facilitated fake tax returns and in turn fraudulent refunds, and so it terminated the agent’s registration, also imposing a five-year non-application period.

On appeal, the Administrative Appeals Tribunal affirmed the TPB’s termination decision, and varied the non-application period from five years to four years, noting that while there was no direct evidence of dishonesty, “the applicant’s lack of rigour in the conduct of his affairs and his apparent disregard for the duties of his role adds up to something that is almost as bad, and which certainly reflects poorly on his integrity and character. He may not be dishonest, but he has not demonstrated the commitment to competent and conscientious behaviour that one would expect of a tax agent.” 

Speaking about this issue, TPB chair Ian Klug AM commented: “The TPB is concerned to have seen a recent increase in cases relating to poor client verification processes.

“The verification of client data is of utmost importance in the interaction between tax agent and their client. The TPB is shortly to issue a Practice Note, which aims to give clear guidance on proof of identity checks and the policy around them.

“All tax practitioners are bound by the Code of Professional Conduct, and failing to take reasonable care when verifying an individual’s identity acts against the public interest in that it risks inaccurate or fraudulent claims and ultimately erodes trust of the tax profession.”

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