Accountant or Tax Agent Made a Mistake on Your Return? Here’s Who Pays

You paid a professional so you wouldn’t have to worry. Now the ATO has sent an amended assessment, a penalty notice, and interest, because the agent claimed something they shouldn’t have, missed a lodgement deadline, or entered the wrong figures. Or you’ve discovered they missed thousands in deductions you were entitled to. And when you called, they said “the return is your responsibility, you signed it”.

You did sign it. That doesn’t make it your fault. Tax agents are registered professionals with a legal duty of care and mandatory insurance for exactly this situation.

Your rights

• Tax agents are regulated. Under the Tax Agent Services Act 2009, registered agents must comply with the Code of Professional Conduct: act honestly, with reasonable care and skill, and in your best interests; take reasonable care to ascertain your state of affairs; and hold professional indemnity insurance. The Tax Practitioners Board (TPB) enforces this and can sanction or deregister agents.
• Safe harbour from penalties. Under s 284-75(6) of Schedule 1 to the Taxation Administration Act 1953, if you gave your agent all relevant information and the error was the agent’s, you are not liable for administrative penalties for a false or misleading statement or late lodgement. You need to tell the ATO this and ask for the penalty to be remitted.
• Negligence and contract. The agent owes you a duty of care in tort and an implied term of reasonable skill under the engagement. Loss caused by their breach (penalties, interest, additional tax that could have been avoided, missed refunds, the cost of getting it fixed) is recoverable.
• Consumer guarantees (ss 60–61 ACL). Tax preparation is a service; it must be done with due care and skill. A botched return is a major failure, entitling you to a refund of fees plus consequential loss.
• Interest remission. The ATO has discretion to remit General Interest Charge (GIC) and Shortfall Interest Charge (SIC) where circumstances warrant, including agent error.

What to do right now

1. Get everything in writing from the agent. Request a copy of the lodged return, the working papers, and everything you provided them. Under the Code they must give you your documents.
2. Compare with what you gave them. Identify exactly what was wrong and whether it came from their error or missing information from you. Be honest here; it determines the strength of your claim.
3. Deal with the ATO first. Request penalty remission under the safe harbour provision, in writing, explaining the agent’s error. Request GIC/SIC remission. Consider having a different agent lodge an amendment if deductions were missed (you generally have 2 years for individuals, 4 for others).
4. Quantify your loss. Penalties not remitted, interest, extra tax that proper advice would have avoided, missed refunds outside the amendment window, and the fees you paid the second agent to fix it.
5. Write to the agent. Set out the error, the Code obligations breached, the loss, and a request that they notify their professional indemnity insurer and compensate you.
6. Send a Letter of Demand. A formal letter citing the Tax Agent Services Act, the Code of Professional Conduct, and the ACL sets out the quantified loss and a deadline before a TPB complaint and tribunal claim, which gives the agent reason to notify their insurer.
7. Complain to the TPB and escalate. The TPB complaint creates pressure and a record. The money claim goes to your state civil tribunal or court.

Typical agent errors and what they’re worth

• Missed lodgement deadline. Failure to lodge penalty (one penalty unit, currently at least $330, for each 28 days late, up to five units for small entities) plus interest on any tax owed. Safe harbour should remit the penalty if you gave the agent your information on time. The interest is claimable from the agent.
• Deductions claimed that weren’t allowable. Amended assessment, shortfall interest, and a penalty of 25–75% of the shortfall depending on culpability. If the agent invented or inflated deductions without your knowledge, the penalty should be remitted under safe harbour and the interest recovered from the agent.
• Deductions missed. Harder to quantify but real. If a competent agent would have claimed work-related expenses, depreciation, or offsets you were entitled to, the lost refund (for years now outside the amendment window) is your loss.
• Wrong structure or advice. Set up the wrong entity, missed a CGT concession, mis-timed a transaction. These can be very significant and typically need a specialist to quantify, but the claim is the same: negligence and breach of the engagement.
• Lodging without your approval. The Code requires your authorisation for each lodgement. A return lodged without your sign-off is a breach in itself, and the TPB takes it seriously.

Ask about their insurance. Registered tax agents must hold professional indemnity insurance meeting TPB requirements. Asking, in writing, for their insurer’s details and for them to notify the insurer of your claim is a normal request and often triggers a settlement conversation.

Don’t rely on the same agent to fix the error. Even if they offer to, use someone else for the amendment. You need an independent view of what went wrong, and you don’t want to give them a chance to bury it.

Limitation period. Six years from the breach for contract and negligence claims. That covers several tax years, so historic errors are still claimable.

Who to complain to

Tax Practitioners Board (TPB) for Code breaches. ATO for penalty and interest remission (and if they refuse, the Inspector-General of Taxation and Taxation Ombudsman). Professional bodies: CPA Australia, Chartered Accountants ANZ, Institute of Public Accountants all have disciplinary processes for members. Money claims: your state civil tribunal (NCAT, VCAT, QCAT, SACAT) for amounts within limits, or the local court.

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