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Lawyers warned on ATO investigations

Lawyers warned on ATO investigations

FOLLOWING THE Australian Taxation Office’s (ATO’s) discovery of non-compliant behaviour by barristers in NSW, its Legal Profession Project, now armed with the ammunition of victory in this…

FOLLOWING THE Australian Taxation Office’s (ATO’s) discovery of non-compliant behaviour by barristers in NSW, its Legal Profession Project, now armed with the ammunition of victory in this state, is headed for the other states and territories. NSW Law Society president Gordon Salier warned of the inevitable pressure from the ATO, with the force of the law behind it.

The ATO is currently obtaining the registration details of all the states’ and territories’ solicitors and barristers on the basis of its findings in NSW last year, which uncovered several aspects of non-compliant behaviour, including the abuse of laws governing bankruptcy.

The regulatory bodies governing the legal profession in each state are required to provide the ATO with any information it requires. This will be compared against tax office records to identify solicitors and barristers who are operating outside the tax system or who are not meeting their taxation obligations.

A spokesperson for the ATO said “the aim was to make sure people are in the systems and are lodging a tax return”.

“We do a range of this data matching across other industries. We are making sure people meet their tax obligations,” she said.

Having already been under ATO scrutiny, NSW Law Society president Salier spoke to Lawyers Weekly about its clash with the ATO, which he said “gave the barristers a hard time” and resulted in a number of prosecutions.

At the outset, the Law Society considered the information being gathered by the tax office was considerable, and endeavoured to determine exactly what was required, and what information could be kept in the hands of the Society.

“We considered the information being sought was far too wide initially, so now the ATO is asking for information that we are absolutely obliged to provide by law,” Salier said.

Salier also stressed that the Society was able to exercise its discretion in some areas. “We have been cooperative with the tax office, while seeking to preserve the information that we were advised we shouldn’t provide,” he said.

He said the Society was also concerned about the unreciprocated nature of the demands imposed by the ATO. “We asked the ATO if they were aware of solicitors who did have problems to let us know. If lawyers are not paying tax, and are going into bankruptcy, then they are matters that concern us,” he said.

“Being a regulator of our own profession, we are obliged to pursue our practitioners who may be guilty of professional misconduct. So we asked the ATO to let us know if there were people they were concerned about.”

The ATO website offers legal proof of its right to question and extract information from the bodies governing the legal profession across Australia. It is empowered under section 264 of the Income Tax Assessment Act 1936, section 128 of the Fringe Benefits Tax Assessment Act 1986, section 77 of the Superannuation Guarantee (Administration) Act 1992, and under sections 65 and 353-10 in schedule 1 of the Taxation Administration Act 1953.

But Salier explained that the regulatory bodies governing the legal profession in each state had no supporting law which said they too required this information from the tax office. “While we are legally obliged to give information to them, they are not obliged to do the same,” he said.

Pressed as to whether Salier envisaged the ATO would discover any further taxation deviances by the legal profession, he said: “I am sure if there are problems nationally, we will hear about them.”

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