Compliance is following a rule or order. A compliance system is basically a set of structures that conform to certain regulation and policies.
Tax compliance is the level to which one complies with tax regulation of a particular region.
Tax agents offer the services of ensuring that individuals have met the required tax compliance level.
In Australia, the tax compliance system is generally overseen by the federal government.
The tax compliance system is applied to Australian residents. They may include citizens and foreigners on various types of visas, as well as corporates.
Tax agents play a crucial role in helping individuals be in line with the tax compliance system. The services that they offer include:
Due diligence acquisition
Tax litigation support
Business succession planning
Corporate and commercial tax planning
The purpose of the tax compliance system is to ensure all individuals and business pay their taxes. Many individuals and corporates have come up with ways of avoiding taxation such as opening and operating offshore accounts.
It is not uncommon for large enterprises to report massive financial losses every financial year so as to be able to avoid the taxman. The tax compliance system therefore puts in place structures that ensures the tax base is broadened and most people and businesses if not all are able to pay their taxes. The system also has laws in place regarding to those who may use unscrupulous methods so as to avoid paying tax.
Under the tax compliance system, one may opt to use the services of a tax agent in lodging their tax returns. Tax agents are the only individuals who can legally ask for payments for lodging tax returns of other individuals. The agents have to be registered by a tax practioners board. Agents who are registered usually meet and maintain the required standard of qualifications and experience. This is helpful to the taxpayers as having tax filed by unscrupulous individuals may lead to loss of money and data. These agents are also able to comply with the code of professional conduct as they are highly trained.
74% of Australians lodge their tax through a tax agent. This is according to etax accountants which is a tax agency in the country. Tax agents therefore play a major role in advising their clients on the existing regulations as well as helping them fill their tax returns thereby enabling them to be in line with the compliance system in place.
Individuals earning less than $18000 per year and couples earning less than $21000 are able to enjoy a tax-free threshold. Tax agents similarly enable their clients to recoup this money when they fill their returns.
Majority of the people tend to use tax agents because of the high-quality services that they offer. They first provide channels through which their clients may store their receipts. This is crucial as the figures in the receipts are used in final calculations. A commonwealth bank study found out that lost receipts costs one in every two Australians up to $1000 in rebates per annuum. This may arise even after spending at least two hours looking for the receipts. One of the various methods of storage could simply be, providing of a physical filing system. Even better, several tax agents have mobile applications which allows people to take pictures of their receipts and post them there. This basically serves as a storage for the receipts and it is easier to access them while filing tax returns.
Tax agents then create online accounts for their clients. The account which is mygov account is simply an entry portal that enables citizens to access government services. The account is then linked to the ATO and the tax lodging process begins. The tax agents file all the income that the client was able to accumulate during the financial year. All the deductions are then calculated as they are not incorporated in the taxable income. The amount of tax is then determined. Amounts within the tax-free threshold and the deductions are then given back to the client. By doing so, tax agents enable their clients to be in compliance with the tax system and are free from any tax bills.
A tax compliance system is intended to collect revenue that will facilitate the governments projects. This may include; education, security, healthcare, transport and payment of recurrent expenditure.
Having been in place for quite some time now and with changes along the years, various individuals as well as the government have claimed that the tax compliance system is doing considerably well.
On an online platform for news.com.au, Charis Chang reports that the government plan for its full package of tax cuts where one may get up to $1080 per year. She further explains how the government intends to fulfill this new plan, thereby appearing to be supporting the plan.
Another area of success of the tax compliance system is the broadening of the tax base. So as to ensure there is an increase in the amount that is collected the more individuals have been incorporated as Australian tax residents. This has been done through issuing of tax file numbers to international students and individuals on other various types of visa especially the working tourist visa. Those who fall on this category are able to work on a given period of time as stated in their visa. In return, they also pay tax which results in an increase of the total revenue collected by the federal government.
Efficient tax filing system has also been lauded as much of the filing is now done digitally on online platforms. This has gone a long way in reducing the amount of paperwork involved and could also be viewed as a way of environment conservation.
The tax compliance system however at times may have some unintended consequence. Various individuals who may not afford the services of tax agents may end up paying more if they are not well informed. This is especially common among foreigners. They may also accrue excessive penalties which may make it hard for them to be in compliance with the system.
Tax payers may also find themselves in a tax trap. This happens when one may be holding more than one job. The first job may have a tax-free threshold leading to the under taxing of the other jobs. This results to one having a tax bill at the end of the financial year. As a result, the tax bill may end up being higher than the initial tax leading to increased amounts of payment.
In conclusion, a tax compliance system sets the framework within which revenue will be collected. Tax agents play a key role in ensuring the tax compliance system of the country is adhered to as by helping their clients file their returns, they are basically acting as the link between the citizens and the government.
Australian Taxation Office, viewed 19 October 2019,
Etax accountants, viewed 19 October 2019,
H&R BLOCK 2019, viewed 19 October 2019,
News.com.au 2019, viewed on 19 October 2019,