Misappropriation of client funds lands director with 5-year ban

A tax agent company and its director have been found to have breached the Code of Professional Conduct, resulting in termination by the Tax Practitioners Board’s Conduct Committee.

The company and the individual's tax agent registrations were terminated with a maximum five-year ban from re-applying.

The Board Conduct Committee (BCC) found code items one, two, three, seven, 13 and 14 all to be breached by the tax agent company and its director, who was deemed “no longer a fit and proper person to be registered.’’

According to the BCC, in addition to the various code breaches, the director had acted dishonestly and without integrity which led to the Tax Office having to expend undue resources conducting audits into their related entities and clients of the company.

The BCC said the terminated director also misappropriated client ATO refunds when they transferred the amounts into accounts in their own name and misused the funds with redirection to gambling sites.

“The misappropriation of client funds for financial gain is a serious and inexcusable abuse of their position and a breach of trust. The seriousness and systemic conduct, plus the failure to manage their tax obligations demonstrated a lack of integrity and a disregard of the tax laws,” the BCC said.

In the investigation, it was also found the company and its director had made pay-as-you-go withholding claims totalling $30,000 in tax returns but failed to remit these to the ATO for their related entities.

Additionally, the director failed to notify the TPB they were no longer a member of a professional association and ceased to meet the registration requirement, as well as having engaged in dishonest conduct with a former employer which resulted in the cessation of the employment.

The terminated tax agent company and director were found to have breached multiple items of the code by:

· Making unauthorised amendments to clients’ tax returns and business activity statements.

· Changing clients’ financial institution account details in income tax returns to a bank account that the director was a sole owner and authorised operator, without obtaining authority from the clients.

· Misappropriating over $114,000 in refunds which were transferred into the company’s trust account.

· Failing to comply with its tax obligations not lodging outstanding tax returns and BAS, and not paying tax debts of approximately $50,000 by their due dates.

· Failing to provide tax agent services it invoiced clients for.

· Failing to notify and pass on refunds to clients in a timely manner.

· Failing to ensure that the tax agent services it provided were provided competently by listing a supervising agent for the company without their knowledge and submitting several clients' returns during a period when the company did not have a supervising agent.

· Failing to maintain adequate professional indemnity insurance.

The BCC noted the company and its director also failed to respond to requests for information in a timely, responsible and reasonable manner, adding to the various reasons and code breaches that led to the five-year termination.