Accountants’ second opinions will become more challenging from 1st July 2024

The ATO’s new Mandatory reporting standards target unethical accountants, and potentially you!

Death and taxes are inevitable, but paying your taxes usually comes first! 

HOWEVER

         “Poverty breeds ill health, and ill health breeds poverty”

WHO (World Health Organisation – abridged version)

Potentially all of this is at jeopardy if these new tax-agent whistleblower tax laws are not carefully reviewed for the many unintended consequences we outline in this edition.

Everyone has a right to financial security and be free to choose a self-fulfilled purpose. Proactive health and financial literacy is the only practical answer to living a healthy and wealthy life. 

From 1st July 2024 obtaining an innocent “second opinion” for a taxpayer who is trying to do the right thing has just got significantly harder and could lead to a criminal offence.

Depending on how bad your matter is, this has the potential to permanently hurt your credit rating by blowing up your life savings or inheritance and your well-being. 

The new ‘tax agent whistleblower laws’ will do more harm than good for the taxman and are not in the public interest and may harm our healthcare system.

The surreal thought you are seriously risking being criminally accused of tax fraud is now a reality.

Regardless of the penalty, the fear of time and cost can be harrowing and even if your adviser got it wrong, can you afford the time and money to sue them? 

For example sake, picture this.. 

Your son or daughter (regardless of whether they are an employee ‘or contractor’) is an ordinary tax paying teacher, nurse shop assistant, journalist, lawyer, politician or a doctor. 

Tick and flick accountant tax agent

It is the 1st July 2024, your daughter is looking for a new accountant because they are not happy with the usual family accountant. She prefers a cheaper ‘tick and flick job’ because  the accountant could never explain the tax law or where her money went. More importantly the accountant is more interested in making fast money because he is really focussed on retiring and not much else.

No signed car log book

He forgets to request and ask for a signed car log book that their usual cheap tick and flick tax agent signed off on. You, as her parent, suspect something and seek a second opinion from an ethical accountant who actually checks whether the first accountant has complyied. The ethical accountant now is forced to report your ‘tick and flick’ accountant to the tax agent board.  

Your smart and conscious daughter, who is more worried about doing the right thing, decides to pay a little more and seek a second opinion from a reputable firm. The second opinion registered tax agent accountant discovers not only her logs books are not correct her latest tax return shows she has received family trust distributions but there are no annually signed minutes. 

Second opinion triggers a family trust tax audit

Because you share the same family tick and flick tax agent, they start looking into your family trust income splitting distributions to your children and discover you have not been signing the right documents e.g. annual trustee minutes, and now you are implicated in the ATO’s latest 2024 family trust crackdown: Treasury eyes tax on $60b in family trusts

Feel free to share this with your friends and your local politician(s) to delay and reconsider the implementation of this law; that will most likely do more systemic harm than good on your own and the people who you care for financial security. Maybe our suggestion at the end of this article may be a kinder, gentler way of moving forward.

I would like to thank my well respected colleague xxx

I just returned to my office desk to be greeted with this charming newspaper headline. It is  targeted at me and my fellow highly respected accounting and tax colleagues. 

Tax adviser Ms Jacobson alarmingly states in her interview with the Accountants Daily:

“This is an obligation to dob in another agent where you think they have significantly breached the (ethical) code,” said Ms Jacobson in a recent Accountants Daily webcast.

The Tax Agent Board’s 1st July mandatory rules, means there is a race to find a competent ethical accountant (tax agent) adviser. If you do, do not be surprised if you are thrown under the ATO’s tax audit bus by your new accountant. This is bad news if you are looking for a second opinion about your dodgy tax agents work. 

Overall this law appears to have many unintended consequences and may do more harm than good.

I hope our accounting professional bodies are reading this. They have missed a remarkable opportunity to step in and save the day. Afterall statutory protection and freedom from red-tape is the main reason we pay for our annual membership subscriptions.

For all other non-accounting professional bodies such as the medical and healthcare profession this should serve as a BIG warning your members may be next unless you effectively self-regulate.

In a nutshell, from the 1st July 2024, we have to dob in our colleagues if we think they have breached the Tax Agent Services Act Code of Conduct, or face severe penalties for failing to report any breaches. 

Over the course of 30 years, I have given more than 2,500 second opinions on doctors’ medical and tax structures. In my opinion, after reviewing the code of conduct, , I have not yet come across a single instance where the individual’s arrangements were correct and not in breach of the code. 

It eventually got to the point, I was so confident at my national medical tax presentations with the pharma companies PHN’s and medical associations, I would offer a $500 bet for anyone who could prove to me they had got their business structures and tax arrangements right. 

Ehmm! There is a reason why we have a payroll tax pandemic on.

Due to the recent tax regulations,, you can still participate in the 30-minute confidential challenge until June 30th, 2023, provided that you are not currently a client.I hope we can get some understanding of what these new laws actually mean in practice. There is a serious problem that taxpayers will become too scared to seek a second opinion. This can only do more harm than good in the long run if they are hit with an audit that can go back beyond 5 years in some instances. Compounding this are other State regulators who collect payroll tax and workcover.

These new laws go to an unprecedented next level. They signal that the ATO have lost their patience. There is a risk you may end up with a distressing-time consuming expensive audit due to suboptimal tax agent advice. Regardless it remains your responsibility to make sure you are compliant, not your tax agent.

Daily we work with tax and commercial lawyers and for decades we have successfully been involved in medical practice tax litigation. We share these rare insights because we do not want to see this happen to you.

You only have to read our blogs and national media interviews to see we believe prevention is better than a cure. We believe it’s important to help educate everybody, because clearly tax audits are not good for our healthcare system, your health or your patients. 

We want you to start focusing on your patients and not your accountant. All of these problems are legally and ethically avoidable.

On a final point, we do not have the resources to save every single practice in the country. 

So if we can at least arm you with the right information, so that you could  go back to saving lives while legally and ethically saving on your tax bill, we have all done our job for the greater good. 

Whistleblower regulations – it takes a thief to catch a thief

The Tax Office’s unprecedented, what we believe looks like, it takes a thief to catch a thief laws begin 1st July 2024

In summary, if a good registered tax agent fails to report a “dodgy” registered tax agent who has breached the Tax Practitioners Board’s  revised code of conduct and failed to self report to the Board. Then it is the responsibility of the good registered tax agent to mandatorily report the dodgy tax agent to the Board.   

A failure to do so may result in the good tax agent being fined and sanctioned for not reporting the dodgy tax agents breach.

This places a competing or assisting accounting firm in a very difficult position, as this may implicate you as the taxpayer whose the client of the dodgy tax agent. We have provided some common examples in our “Tax Agent Medical and Healthcare Expert Test”. 

10 Key Tax Agent Medical and Healthcare Expert Test Questions you need to ask! 

  • Trust but verify

Glossy brochures and gilded letterheads will not save you. Bigger is not always better. 

A big shout out to PWC for triggering these new rules. We are all now paying the price for tax aggressive conduct. Just for the record, just because you are a high profiled billion dollar firm (they happen to be the biggest in the world) rubber stamping other people’s work without checking, validating or disclosing the source of the information is probably not a good idea. 

An alternative would be to try using the services of a super-niche medical and healthcare tax and accounting practitioners firm. 

Example, go to a specialist like your GP who should refer you to another specialist if it is outside scope or expertise. Do not be fooled by glossy “specialist” marketing. Test them. 

  1. Ask the right questions if you want the right answer

The biggest systemic mistake we see is that everybody keeps assuming that somebody else is on top of it because they think, look and act smart. The reality is seeing is believing: you have to provide evidence in front of a judge and then prove it. 

The leason to be learnt is: ask your tax agent and legal adviser better questions. 

If you are a general practice owner andyour tax agent hesitates, let your “gut feeling” take control. Do not waste anymore of your precious time and money until you can find an adviser who can explain simply, prove what they are saying and be prepared to put it in writing. 

Below are my top ten questions you should email them now. 

Tax Agent Medical and Healthcare Expert Test 

  1. Dependent Contractor Laws: If you have a “tenant doctor” arrangement for tax purposes- ask why is an independent website, letterheads and stationery critical? Do they know why it is important for a tax agent to regularly review their website? Do they know the 44 payroll tax tests? Are they aware of the 2024 new Fair Work dependent contractor rules and how it may financially impact your leave entitlements for contractors? In relation to contractor income and payroll tax do they know who is “Mr Duff ”. He was in the latest landmark payroll tax rulings in your state, it was a big corporate medical practice that lost their tax case.  
  2. Misclassified Annual Tax Return: Review your tax return, if it says “Medical Practice or General Practice/Medical Services” and you are actually a service trust or company or trust, it would be prudent to ask “why?”.
  3. Employee Registrars should not be employed by a Medical Centre: If you have a service trust or company, why do you employ registrars in the same entity? What are the tax implications?
  4. Billing Consumables: If you bill consumables to the patient from the service entity- ask what are the GST and tax implications and how can they fix it? 
  5. What is a SWOPE: Do they know what a SWOPE is and how does this affect the business model and tax compliance of the practice?
  6. Tenant Doctor Separate Banking Compliance Solution:

Due to the recent payroll tax ruling, has separate banking causing you significant cash flow problems and disputes? For more information see Payroll Tax Win: Direct GP Banking ?

Is your tax agent aware that there is an alternative and more convenient solution to separate banking (Direct GP Banking for Tenant DoctorsTM) is no longer necessary, as it can lead to cash flow issues, fraud, errors, and unnecessary disputes?

Due to the recent medical and allied health contractor payroll tax audits, does your tax agent know separate banking may not work with mandatory e-invoice being introduced in 2025? 

  • Substantiation: 

Can they substantiate all your pay records to: bank statements, signed service agreements and legal contracts, tax invoices, receipts and financial statements?

Can they provide an accurate and reconcilable audit trail beyond a fancy spreadsheet in the cloud beyond the marketing software ‘spiel’ that everyone supposedly uses so ‘it must be good’?! 

Be wary of shiny software tools:  ask has your tax agent reviewed the appropriateness of the tools in the context of your book keeping, accounting, tax and financial reporting system?  

  • Confirm Understanding: 

Do your tenant doctors understand and have they provided written consent they understand and have implemented the correct arrangements?

Can your tax agent clearly describe in writing your business model tax structure to you?

Have you sighted actual physical evidence that you are complying beyond assuming it has been attended to by your accountant or practice manager. For example each independent contract has a correctly worded website, tax invoice and letterhead.

Does your tax agent know that there is a payroll and income tax tested, accounting and legal way to have quasi-centralised banking?

Do your Tenant Doctors easily understand your “distribution” payment slip? Is their cash reconciled to every cent of cash collected including correctly accounting for Tenant Doctor approved practice fee write-offs and adjustments? Can your “Medical Centre” prove it has a clear audit trail that you or your accountant can verify?

  1. Independent Pathology Rent Valuations: Are they aware of the latest landmark pathology rent valuation ruling and how this affects their lease and the need for an independent pathology rent valuation?

 

  1. Experience and Expertise: Ask have you had more than 10 years of personal experience in setting up and working with tenant doctor practices and not just “Medical Centre” arrangements? Do they know the difference?  

 

  1. Conflicted Tax Agents: Does your tax agent have any conflict of interest? Conflicted accountants are more common than you think. You can pick them a mile away. They usually specialise in a niche sector like doctors. 

 

For example they work for “Medical centre owners” and some or all of the individual owners. Strictly speaking they should not act for the individual owner(s) if they are the group accountant for the medical practice. 

 

  1. Be wary of low balled fixed fee arrangements or product commission arrangement: 

The unprecedented legislation has now extended this once legal interpretation to include “ethical” behaviour such as the code’s conflict of interest provisions which is usually outside the scope of the common law and therefore may result in a breach of code.

This could be a clear signal your tax agent practitioner may be under pressure to cut corners or not provide a whole service that is in your best interests. 

Legalised kickback arrangements or unusually low fee firms may have given rise to a dangerous “tick and flick” accounting culture. This has enabled their accounting fees to appear significantly cheaper than non-conflicted ethical tax code complying accountants and tax agents

Examples include they sit on fee paying Boards/consultancies or receive undisclosed commissions or fees or indirect benefits from software companies or financial institutions. For this reason I avoid this and do everything pro bono.



A good example are accountants who advertise they specialise in medical and healthcare accounting and “financial planning”. They spoil a shiny government stamped Australian Financial Security Licence number (AFSL) on their letterhead.

 

On the whole the majority legally do the right thing however is this ethical under new legislation?

Ask does your accountant/tax agent earn any commission or financial benefit from providing financial planning and recommending products? Selling products like investments, loans, and life insurance policies generates a substantial amount of money or benefits for the tax agent or firm throughout the lifespan of the product, resulting in considerably reduced fees that you, as the consumer, are essentially paying for.

Are they conflicted? Are you taking on more debt or questionable investments or insurance that may not be suitable. It may be hard and somewhat embarrassing to obtain an objective answer if they are receiving a “conflicted” payment for their advice in the form of a long tail commission or trailer. To avoid this you should simply pay them their standard hourly rate.

Any such conflicted advice should always be approached with an abundance of caution. Read their engagement letter and any disclosures carefully and ask how this impacts the advice they provide to you. Is it in your best interests?

Remember the reason for the US opioid crisis?. These types of arrangements are akin to a GP receiving a commission for prescription drugs from a pharma company.

Personally, I find this unethical (so may the tax code), even though the tax agent board deems it is ok whether or not you disclose it. Informed consent is hard when your trusted accountant makes you feel conflicted to sign up.  

Afterall you can never be sure whether it was suitable to make that investment or take out that loan or insurance policy. It may be getting you deeper into debt or financial trouble. 

In Australia, the Banking Royal Commission and the 2019 Hayne Royal Commission into Financial planning and wealth management and Consumer lending practice was established. Notably…“the establishment of the commission followed revelations in the media of a culture of greed within several Australian financial institutions.[1] ” 

Interestingly largely accountants escaped scrutiny except for the former high profiled medical specialist tax accountant, lawyer AFSL certified financial planner Terry Mc Masters

Financial institutions triggered a national Royal Commission due to the predatory nature of these practices. Understandably re-branding themselves with trusted advisers such as doctors makes commercial sense. 

For ethical reasons, we do not provide a comprehensive “one-stop” financial planning service due to the blurred lines and our preference. 

Currently, based on a dangerously oversimplified Court decision, there is a heavy bank sponsored marketing push by practitioner bank owned or affiliated practitioner service fee calculator software companies for practitioners to create more “separate bank accounts”. 

Sadly the law is a little more complex. It goes beyond legal agreements, separate banking and sexy software. See Practice software could ping you for payroll tax and An app to help with payroll tax compliance

There are also serious new Federal Income Tax, Superannuation, Fair Work and Workcover and Health Insurance, ACCC laws to consider.See article If payroll tax didn’t scare you

To the contrary there is already a simpler and much safer payroll and income tax tested solution for cash flow and payroll taxes in the latest landmark QLD payroll tax Ruling.

To this end, big companies may provide a false sense of security when it comes to accounting and tax compliance advice. 

Unverifiable herd mentally third party statements are no substitute for written legal and accounting advice.

It is cold comfort to rely on statements like ‘every other practice’ or ‘the big medical corporates are doing it’, or inferring the banks support and their accountants support a tax solution so it must be ok. You must pay for specific legal and tax advice if you want to continue to eat well and sleep well. 

This type of dangerously oversimplified “groupthink” has led to this national GP payroll and now income tax compliance problem.  

It is naive to think that they have any special magical cure or moral or legal responsibility when it comes to tax compliance. The devil is always in the complex detail. You have to literally read every relevant court case and have tax audit and specialised commercial healthcare industry experience beyond on the subject matter before you can form an informed view. 

Frankly the judge(s) will not provide leniency for  doctors, software company or a bank’s opinion. The Courts will heavily cross-examine your accountant and tax agent who is a member of a professional body as a key witness of your “intentions” in any prosecution and not your lawyer.  

If you think otherwise, get ready for a world of pain. Ultimately it will always be your problem and not theirs. 

Start by getting a well experienced medical and healthcare accountant that specialises in your affairs.

It was only due to recent high-profile medical centre audits that it took over a decade of warnings by us about payroll tax before anybody, including the corporates (several are currently being investigated despite having top lawyers and accountants at their side), took it seriously.

The truth is, because of a very large medical corporation, which appeared to have a successful business model,  many medical centres have sadly attempted to copy their business model across Australia without seeking independent professional advice. This is the reason we have this nationwide systemic problem in the first place.

The same for pathology rent and Medicare audits, read point 2 below if you do not believe me. 

The bottom line: Be prepared for your tax agent to ask more questions and budget for your legal and accountants bill skyrocket. Sadly for many these problems were always preventable however the undercapitalisation of your legal and accounting systems is why we live in a high tax audit climate environment targeted at you.

  1. A better alternative: self-regulation by your trusted professional body

I fully support professional bodies self-regulating their members on behalf of regulators. This would prevent excessive bureaucracy and eliminate the need for higher insurance premiums that clients would typically have to cover. Additionally, it would spare tax agents from having to hire a lawyer just to file a basic tax return.

I would rather have professional bodies such as Chartered Accountants Australia and New Zealand or CPA Australia, who are already entrusted with this responsibility, approach me rather than a regulatory body like the Tax Practitioners Board, which is similar to the Australian Health Practitioner Board representing medical and healthcare professionals in Australia.

It does beg the question if the solution already exists: why did the Federal regulators by-pass the professional bodies? Is it due to poor governance by the professional bodies Board that is ultimately responsible?  

Maybe it is time to change the jockey and not the horse in this tax audit race.

Out of public interest, to protect patients and the medical and healthcare profession, it is for this similar reason I have been advocating for the International Healthcare Standards and Ethics Board.

Due to Medicare audit anxiety, notably I have been cited in two Federal Senate Inquiries into the Healthcare industry see article Stay safe, stop bulk billing! A simple cure for Medicare Audit Anxiety?:

In the absence of non-existent Medicare approved clinical rulings,I had found Doctors are unfairly prosecuted, causing Medicare anxiety and withdrawal of healthcare services for example due to investigations into excessive pap smears at a women’s clinic, care plans, drug and alcohol tests.

In 2009, I and a group of doctors were extremely concerned, and as a result, we successfully advocated for a Federal Senate investigation into the oversight of Medicare.

The issue had more to do with bean counters and archaic (“bell curve”) laws than to do with medicine. The end objective is we should be measuring actual effective healthcare outcomes and not just what we spend.

This idea in 2017 of an international healthcare standards ethics board had garnered further support in order to reduce red-tape and unfair prosecution of practitioners and safer patient care. See Senator Nick Xenophon: AHPRA Medical Bullying Federal Senate Inquiry.

Our professional associations have clearly not succeeded in this aspect. I don’t blame them, but rather an apathetic group of members who didn’t acknowledge (despite numerous warnings from grassroots members or should have known) this problem in advance and chose to do nothing.

This should be a clear and sobering example of what any ethical health, accounting, legal professional body should do to protect their membership.  Otherwise what are you paying for –  a decorative membership title that has no real teeth?

If I sound a tad upset about this it is because I am. I had sounded warning bells to all my peers back in 2017 and sadly my ethics motion was rejected by the new international Board in 2019 when I had requested it be embedded in the constitution. Some improvements were made but sadly it did not go far enough. 

In the end,  use an unconflicted adviser that you can trust to answer all your questions clearly. Understand that this is a complex issue, if you do not have the time or interest, then this does not mean you have a poor adviser. It simply means you have to rely more on your gut instincts, knowing that they are acting in your best interest. Ultimately, it is your responsibility to trust but verify. 

Stay, humble, hungry, curious, and focused.

For more insights visit our blog.

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Chartered Accountant, Chartered Tax Adviser, Registered Tax Agent, Former AGPAL Surveyor 10 years of service

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)

After a serious work related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal. I continue to provide accounting tax and practice management advice to many practices all over Australia.

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

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