The ATO web portal is the Tax professional's first port of call for information when preparing to lodge tax returns and statements.
A wide range of information is available to ensure you meet ATO requirements as you assist your clients with preparing and submitting their materials to the ATO.
This information will change from time to time, especially when there are significant changes in legislation, and changes in focus for government policy.
Below is a brief outline of some of the information available to you, however you should visit the ATO portal directly for the most up to date information.
The ATO portal will ensure you know the key lodgement and payment dates for clients of registered agents for 2022–23, listed by month.
Key changes this tax time, what you can do to prepare, things to consider before lodging, and helpful resources.
Get up to date on how the ATO lodgement program framework recognises agents with good practice management, such as lodging electronically and on time.
The ATO will provide the lodgement and payment due dates and details for the tax agent lodgement program.
The ATO will provide BAS agent lodgement, payment due dates, and what to do if you can't lodge on time.
The ATO will provide information to help you manage your lodgement program.
See help available when exceptional or unforeseen circumstances prevent you from lodging by the due date for your clients.
See how the pre-filling service helps to ensure the accuracy of your client's tax returns.
The ATO will provide information on how you can do most of your tax reporting and transactions with them online.
The ATO can help if you or your clients are affected by a major incident or natural disaster disrupting life or business.
The ATO will provide how we can support you in managing your clients and your tax obligations during difficult times.
Notice of Assessment
With individual taxpayers, the ATO calculates the refund or tax payable based on the information provided in the tax return which includes the taxable income and tax offsets.
The taxpayer executes the return on the basis that the information contained is true and correct. The Commissioner for Taxation is required to make an assessment based on the taxpayer’s taxable income and tax payable (s166 ITAA36).
The ATO issues a notice of assessment to the taxpayer that details the balance of tax payable or refund due. There is no time limit on when the original assessment notice will be issued. If the taxpayer has not received a notice of assessment within twelve (12) months of lodging a return under s171 of the ITAA36 he or she may request that the Commissioner makes an assessment.
Discussing and Confirming Documentation with Client
As an accounting professional, it is your responsibility to advise your clients of their current tax obligations. This includes ensuring that they are up to date on their tax returns and filing them in a timely manner.
You should also advise your clients on any changes to the tax code that may affect them and make sure that they are taking advantage of all deductions and credits that they are entitled to.
By staying informed and keeping your clients updated on their tax obligations, you can help them avoid penalties and interest charges. Ultimately, this will save them both time and money.
Tax agents should exercise every reasonable care when preparing returns and should take positions in those returns that are reasonably arguable.
It is essential for tax agent to discuss and agree on returns with their clients. If clients disagree with the relevant tax treatments, tax agents need to confirm the statutory requirements with clients.
Errors or omission of items in the returns can thus be avoided if tax agents discuss the returns with clients. If tax agents fail to discuss and agree on the returns with clients, the returns may be lodged with errors.
Reviews and Audits
After the notice of assessment has been issued some assessments are either reviewed or audited by the ATO to ensure compliance with tax law. A review or audit involves checking a taxpayer’s tax affairs to ensure the information given is accurate and tax obligations have been complied with. The ATO may also contact other entities such as banks, employers, customers, and suppliers to obtain information.
The ATO may conduct a review to check for any errors and help the taxpayer to correct these and reviews may also be performed to collect information about particular industries and activities. A tax audit is a systematic examination of a taxpayer’s income tax affairs by the ATO to determine whether or not the taxpayer has fully complied with the tax laws. The objective is to detect shortfalls in tax payments.
Tax Objections
A tax objection is a formal process whereby you can dispute an ATO decision or assessment. In most cases, if you disagree with an ATO decision or ATO assessment, you have a legal right to lodge an objection against that decision. The ATO will then consider your objection and make a new decision on your case.
The ATO objection must be in the required form and lodged with the ATO within the time required under the law. For more information on lodging an objection with the ATO click here.
Tax Penalties and Tax Offences
Penalty taxes differ from tax offences. Penalties are imposed by way of additional tax, while tax offences are prosecuted by the courts. On 1 July 2000, a uniform administrative penalty regime came into force. The uniform penalty regime provides for the imposition of penalties:
- Relating to statements and schemes
- Late lodgement of returns
- Failing to meet other tax obligations
A penalty may be payable where:
- A taxpayer fails to lodge an income tax return or other document by the due date.
- A taxpayer refuses or fails to provide relevant information.
- A taxpayer fails to provide records.
- A taxpayer has understated an amount of assessable income, e.g., shortfall.
- Tax is paid after the due date.
The shortfall penalties apply where there is tax shortfall amount as a result of a taxpayer:
- Making a false or misleading statement.
- Taking a position for income tax purposes that is not reasonably arguable.
- Entering into a tax avoidance scheme.
- Failing to give documents to the commissioner.
The base penalty for a tax shortfall is calculated as a fixed percentage of the amount of the shortfall.
On 1 July 1999, the penalty arrangements for late payment and other obligations were streamlined with the introduction of a uniform tax-deductible general interest charge (GIC). Taxpayers who fail to lodge an income tax return are liable for a GIC. The GIC applies to late or underpayments, the late lodgement of returns and the late payment of penalties.
The GIC is updated quarterly with rates for the next quarter generally announced two weeks before the start of the quarter.
Income tax when due and payable becomes a debt to the Commonwealth of Australia. A taxpayer’s liability to pay tax is a civil liability. If the Commissioner has reason to believe the taxpayer will leave the country before the due date for payment, the tax becomes due before the departure date, or a departure prohibition order may be issued. The Commissioner may also obtain an injunction to freeze the assets of the taxpayer to prevent disposal.
Unpaid tax may be recovered after written notice from the taxpayer or any persons holding money on the taxpayer’s behalf e.g., financial institutions. A third-party notice cannot be issued by the ATO to deprive a taxpayer of all of their income.
The Implication of GST
GST is a broad-based, multi-stage tax of 10% on most goods, services and other items sold or consumed in Australia. Generally, businesses registered for GST will include GST in the price of sales to their customers and claim credits for the GST included in the price of business purchases.
A business must register for GST if the GST turnover is $75,000 or more (for non-profit organisations the threshold is $150,000 or more). Taxi drivers must register for GST regardless of turnover amount.
In Australia goods and services are generally taxable unless they are GST-free or input-taxed. Where goods and services are taxable, GST is included in the price. GST free sales include most basic foods, some education courses and some medical, healthcare products and services.
GST is a self-assessed tax. A GST-registered business must issue tax invoices to customers, collect GST, and send the amount with a business activity statement (BAS) to the ATO. GST credits can be claimed on GST amounts forwarded to the ATO by lodging a business activity statement (BAS) or an annual GST return. GST can be paid electronically, by mail or in person but must be paid on time to avoid interest and penalties.
Penalties and Audits
Penalties can be imposed by the ATO if an individual is unable to meet deadlines or requirements.
Individuals may also be subject to audits, where the ATO may find discrepancies between the taxpayer’s obligations and the amounts paid to the agency. In these cases, individuals can be fined and sanctioned for their non-compliance.
Readings
For more information on the when and how penalties can be imposed by the ATO access the information using the links below
Penalties
Penalties 2022, Ato.gov.au, viewed 20 September 2022.
For more information on how audits are conducted and access the following documents
Taxpayers charter – if you’re subject to review or audit
Taxpayers’ Charter - if you’re subject to review or audit 2022, Ato.gov.au, viewed 20 September 2022.
The process
Taxpayers’ Charter - if you’re subject to review or audit 2022, Ato.gov.au, viewed 20 September 2022.
Negligence of Tax Agent
A tax agent may face suspension or cancellation of their registration if they are found guilty of neglecting the client’s business. In addition to the penalties imposed by the ITAA97, tax agents may also be liable for offences under the Taxation Administration Act 1953 including making false or misleading statements or falsifying records.
Section 20.45 of the TAS Act details the events which may affect a tax agent’s ongoing registration. These events are where:
- A tax agent is convicted of a serious taxation offence.
- Is convicted of an offence involving fraud or dishonesty.
- Is penalised for being a promoter of a tax exploitation scheme.
- Is penalised for implementing a scheme that has been promoted based on conformity with a product ruling in a way that is materially different from that described in the product ruling.
- Becomes an undischarged bankrupt or goes into external administration.
- Is sentenced to a term of imprisonment.
Common law can be described as the unwritten law derived from the traditional law of England and has been developed by judicial precedence, interpretation, expansion, and modification. The chief feature of the common law system is that judges’ decisions in pending cases are informed by the decisions made in previously settled cases e.g., case law or precedent.2
Since March 2010 tax agents may only be sued at common law by clients for negligence or breach of contract to recover damages. Even where the tax agent is guilty of being negligent, the client is still liable to pay any fine or penalty to the ATO. The taxpayer is required to pay the amount and then recover the amount from the tax agent.
From 1 July 2011, all registered tax agents and BAS agents are generally required to have adequate professional indemnity insurance coverage. This is a requirement of the TPB, which is of the view that there need to be funds available to compensate clients who may suffer a loss due to negligence or misconduct on the part of the tax agent.
(Source: Natalie Gold 2016, Professional indemnity insurance for BAS agents | TPB, Tpb.gov.au, viewed 20 September 2022.
Civil Penalties
Registered agents are also subject to various civil penalty provisions which impose financial penalties for certain conduct. Unlike criminal penalties, civil penalties do not include criminal convictions or imprisonment.
Several of the penalties administered by the ATO are calculated using penalty units rather than dollar figures or percentages of shortfall amounts. On 28 December 2012, the value of a penalty unit increased from $110 to $170. As of 14 March 2017, one penalty unit is $180, based on the Australian Government website.
Refer to the ATO for the current penalty units:
Penalties 2022, Ato.gov.au, viewed 21 September 2022.
For tax agents, the implications of the legislative change are that:
- Administrative penalties that are calculated by the ATO using penalty units will be increased
- Maximum available penalties for court-imposed fines will also rise
The new penalty unit value will only apply to breaches that occur on or after 28 December 2012. This means that the changes will not impact on breaches that occurred before 28 December 2012 or current proceedings for offences that were committed before this date. Under the new legislation, the value of the penalty unit will be reviewed every three years.
Division 50 of the TAS Act sets out the civil penalties that apply to registered and unregistered agents for misconduct and contravention of the Act. The penalty amounts listed in s50 of the TAS Act reflect the current penalty unit value. For example, one penalty unit = $170 and accordingly 250 penalty units = $42,500.
(Source: Tax Agent Services Act 2009 2012, Legislation.gov.au, Attorney-General’s Department, viewed 20 September 2022)
Ethics and Professional Responsibility
The Code of Professional Conduct (Code) is a legislated code that sets out the professional and ethical standards required of registered tax agents and BAS agents. The Code applies to all registered tax agents and BAS agents. It has five (5) core principles and lists fourteen (14) duties and responsibilities that relate to the core principles.
