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Poorly executed communications by the ATO in recent months has confused taxpayers and created extra work for tax practitioners, the professional body has said.
‘Erroneous’ ATO letters burden tax agents with additional work and stress: IPA
14 April 2025
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9 minute read
The Institute of Public Accountants has raised concerns about the ATO’s work-related expense claim prompter campaign from November and its more recent rental income letter campaign, in response to the Tax Ombudsman’s review on ATO communications and letters.
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The Tax Ombudsman announced she would be undertaking a review into ATO letters and written communications last month with the quality of ATO communications still a major concern for registered agents.
The IPA said that erroneous and confusing letters sent out by the ATO in recent months had caused confusion and stress amongst taxpayers and their registered agents.
The submission referred to the work-related expense claim prompter campaign conducted by the ATO in November 2024.
The ATO sent letters to taxpayers and their tax agents, which appeared to reference a review of work-related expenses within 30 days.
The IPA said the correspondence gave the impression that the agent and the clients were to review their deductions within a mere 28 days.
The professional body noted that one of its members were extremely stressed about having such a short timeframe to consider the deductions of more than 90 clients.
“While it was a prompter campaign and not an audit, care should be taken in how messages are worded,” the accounting body said.
“Attention should also be given to the practical implications of requests — that is, even if there was no specific review or audit on foot, the need to merely consider dozens of clients’ claims in a short timeframe was unreasonable and unworkable.”
The IPA said its members found the experience extremely stressful and time consuming, and also found the lack of a specific contact person for the matter unhelpful.
The ATO’s more recent letter campaign concerning rental income has also highlighted issues with the Tax office’s approach to communication, it said.
In this campaign, taxpayers were sent letters advising that the taxpayer may not have included all rental income in their tax returns.
“Many clients receiving these letters do not own the rental property in their letter,” the IPA said.
Accountants Daily recently reported on some of the problems arising from the ATO’s rental income letters with a number of tax agents attributing the errors in the letters to issues with the ATO’s data-matching process.
The ATO told Accountants Daily it was continuing to work with property managers to improve the correctness of this data.
“We understand that this data may not always be completely accurate. Therefore, the wording in the letters is intended to prompt individuals to review and amend if mistakes were made in their return,” an ATO spokesperson said.
“The letter also encourages tax agents and taxpayers to contact us if they believe the information is incorrect. Based on feedback we have received so far this has been in a small minority of these letters. This will allow us to improve future campaigns to support taxpayers to meet their tax obligations.”
The IPA submission said that in situations where a practitioner has to deal with poorly executed communications campaigns, they are unable to recover the costs of resources spent on inefficiencies and attempts to sort out issues with the ATO.
The accounting body said there are also opportunity costs as registered agents are required to spend a disproportionate amount of time on such administrative tasks instead of productive work.
“In addition, there may be an unwarranted impact on the registered agent’s professional reputation — that is, clients may be given the impression that their registered agent had done something wrong, such as being incompetent or reckless in claiming expenses to which the taxpayer was not entitled,” it said.
“The rental income letters exemplify the importance of the ATO ensuring that its data is accurate and that the recipients are correctly identified before it sends out its written communications,” it said.
The IPA said it is important that the ATO improve its review procedures before communications are issued to ensure that taxpayers and their tax agents do not receive correspondence in error.
The use of clearer wording as to the purpose of a communication may also be necessary, it said.
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