Not all tax agents are created equal. Just like in every industry there are the good ones and the not so good ones and you as the taxpayer could be placed at an unnecessary risk because of the risk rating of your Tax Agent.
With the rise of technology, the ATO is capitalising and spending more than ever on sophisticated computer systems and algorithms to catch bad behaviour. You have to remember, if your TFN is linked to something then the ATO knows about it, and being the key tax authority in the country they have decades worth of data to interpret and use at their disposal.
This means the ATO is getting smarter with their data and using it to identify not only individuals who over claim, but also the tax agents that represent them. Each year a tax agent is given a risk rating, from low to high, which is based on a number of factors. One of these factors is the amount of deductions claimed within the tax agent’s client base and another is whether the Tax Agent is lodging returns within the due dates.
The ATO has been quite vocal about dealing with individuals and the tax agents who tend to overclaim, and now more than ever taxpayers are receiving a notice saying the ATO believes they’ve claimed too much relative to other taxpayers in the same industry. Who do you think is the first to be investigated? A low risk tax agent, or a high-risk tax agent? Those Tax Agents considered high-risk are often the first to be investigated, which is unfortunate for the clients within the client base who do the right thing.
Now your claims could be genuine, and at the end of the day, you as the taxpayer sign off saying that you can and would prove all of your claims if necessary. However, it is the role of the tax agent to better educate you on what you can and can’t claim and not just to accept every single answer provided by their clients.
I get it, tax isn’t exciting or fun or something you look forward to, but we as individuals need to appreciate the importance tax plays in society. If we can better understand it then we can make better decisions about it.
So, if you’re finding yourself constantly receiving a notice that the ATO is investigating your claims, you need to ask yourself if the tax agent you use is putting you at unnecessary risk? Because chances are they have some bad eggs within their client base that are automatically putting you at risk.