A10.1 As outlined in Chapter 4, the ITX business line provides its officers with a behavioural observation record. This record focuses officers’ attention on the information needed to identify the level of care taken by taxpayers by posing the following questions.

Experience and background of the taxpayer

  • How long has the taxpayer been in business (details — business type etc)?
  • Does the taxpayer have any professional qualification?
  • What is the size of the taxpayer’s business?
  • Do they have access to resources (in-house accounting, employee, TAG) etc?
  • What is the taxpayer’s knowledge of the tax law/GST law? (for example knowledge on what needs to be reported in the BAS, how the transaction should be classified or treated, when they can claim credits and when they have to pay GST)
  • Has the taxpayer read any Tax Office publications regarding GST in paper form or on the website?
  • Do you believe that the taxpayer has made a genuine attempt to comply with their GST obligations? How/Why?
  • What is the taxpayer’s compliance history?
  • Has the taxpayer experienced any difficulties in meeting tax obligations in the past?
  • What steps, if any, has the taxpayer taken recently to improve future compliance (for example systems/procedure reviews)?

Preparation of the business activity statement

  • Who prepares the BAS for lodgement? (Self/TAG/Employee/Other (specify))
  • Who lodged the BAS?
  • What date was the BAS lodged? (If lodged on or after 1/3/10 Safe Harbour provisions may apply).
  • Is the TAG/Service provider registered? If yes what is their registration number?
  • Was the BAS checked and signed by the taxpayer before it was lodged?
  • Specify what information was provided to TAG/Service Provider and in what format (for example source documents or spreadsheet, etc).
    • If employee/taxpayer prepares and lodges the BAS?
    • How many employees do they employ in their accounts section?
    • Do employees perform multiple tasks, such as accounts payable and receivable as well as BAS reporting?
    • What is the employee’s expertise in preparation of the BAS?
    • What training have they received in relation to GST to enable them to determine the correct treatment of the transactions?
    • What controls are put in place to check the BAS figures?
    • Did the taxpayer obtain assistance from TAG/Service Provider?

How the shortfall arose

  • How was the shortfall identified? When and by whom?
  • How and why did the shortfall occur? (For example ask the taxpayer the leading question on why certain transactions were not reported, why the transactions were reported in a manner such that it gives rise to a shortfall, or why credits were claimed on certain transactions which the taxpayer was not entitled to.)
  • How often do transactions of this nature and/or magnitude occur?
  • How did the taxpayer treat the transaction/s for income tax purposes?
  • How was the decision to treat the transaction/s in this manner made? And by whom?
  • Was there any uncertainty regarding the issue at the time the decision was made? If yes, how was this uncertainty resolved?
  • Did the taxpayer seek any advice from anyone when making the decision? (For example from a tax agent, solicitor or from business associates, etc.) If so, please provide evidence of what advice was received.
  • If advice was sought, what information was given to the advisor? What documents were considered in the discussions?
  • Did they contact the ATO to seek clarification of the issues prior to making the statement (decision)? If so, please provide evidence of what advice was received.
  • What steps, if any, did the taxpayer take to rectify any mistakes after becoming aware of it or prevent it reoccurring in the future?
  • Can the taxpayer provide any ‘mitigating’ reasons as to why the shortfall occurred?

Behaviours of tax agent/service provider

  • How long has the taxpayer been the representative’s client?
  • Which returns does the representative prepare for the taxpayer? BAS, Income Tax, FBT, others — and for how long?
  • What other services does the representative provide to this taxpayer?
  • What information did the taxpayer provide to the representative for the relevant period in which the shortfall has been identified? What information does the taxpayer normally provide? (For example cashbook, tax invoices, computer records, cheque book, deposit book, etc.)
  • What steps, if any, did the representative take to verify that the information provided by the taxpayer was complete and accurate? What steps have they taken in the past to verify information provided?
  • If the taxpayer did not provide source documents to the representative why was the representative satisfied with just the summary?
  • To what degree is the representative satisfied that the taxpayer has appropriate record keeping systems and procedures? What gives them this degree of satisfaction?
  • What advice did the representative provide to the client?
  • Do the ‘safe harbour’ provisions apply? Why?