LEGAL PROFESSIONAL bodies say a $50 million jump in the tax debt of barristers and solicitors, following a crackdown by the Australian Taxation Office (ATO), shows its efforts to increase compliance have been successful.
Some acknowledge, however, this means more may get into difficulty and have been warning their members of the potentially serious consequences under national profession model standards.
The ATO’s annual report stated the total debt for the profession was close to $300 million at the end of the last financial year, an increase of $7.8 million for barristers and $44.9 million for solicitors.
It said the higher debt levels were largely a result of the increase in lodgements of tax returns and “assessments related to tax schemes”.
A spokesperson for the NSW Bar Association claimed NSW barristers were very close to full compliance.
“Our house is very much in better shape than everyone else. We are only down to a tiny handful that haven’t lodged.”
The Victorian Bar echoed the NSW Bar’s comments, and said it was doing what it could to increase compliance and help its members.
“We are giving what support we can, but they have got to pay their own bills,” said Christine Harvey, chief executive of the Victorian Bar Association.
“The thing is to get them into a situation where they are putting away money to pay tax and not spending it.”
Along with CLE seminars held by the ATO on tax compliance, and the inclusion of barristers’ tax obligations in the Bar Reader’s course, Harvey said she and the former chair of the Victorian Bar, Ross Ray QC, had met with barristers’ clerks to discuss ways that they could assist and support members in difficulty.
This included putting them in contact with accountants who had expertise in barristers’ tax arrangements.
In his last column for the Winter edition of the Victorian Bar News, Ray warned that under the Legal Profession Act 2004, due to commence in Victoria on 12 December, the wide definition of “tax offence” meant even “minor offences” and could constitute unsatisfactory professional conduct or professional misconduct.
The NSW Bar said there had been a provision in the NSW Legal Profession Regulations since 2003 requiring a barrister to declare if they had been made bankrupt. Its own Legal Profession Act had later deemed it to be professional misconduct to flout the taxation obligations.
The NSW Law Society said it had long required similar declarations.
“The NSW Law Society does not tolerate solicitors evading their tax obligations and the issue of compliance is one the Society has always taken very seriously,” said Law Society president John McIntyre.
“Solicitors in this state have for some time been required to disclose tax convictions to the Law Society and to show cause why they remain fit and proper to continue in practice. This level of disclosure and accountability on solicitors with regard to tax matters goes far beyond the requirements that apply in most other states.”
The ATO found that 718, or 16 per cent of practising barristers in Australia, had overdue returns as of 30 June 2005. This was a slight improvement on the 18 per cent in the previous financial year.
Twenty per cent of solicitors had a return overdue, down from 23 per cent the previous year.
All presiding judges and magistrates have now lodged tax returns up to and including 2003.