Following consultations with the Tax Practitioners Board (TPB), the Australian Tax Office (ATO) has developed client verification guidelines to help tax professionals ensure consistency and alignment. The ATO has recommended that the guidelines be utilised alongside the TPB Practice Note (PN) 5/2022 that covers Proof Of Identity Requirements For Client Verification. A guide that helps tax professionals verify client identities.
The guidelines require that tax professionals should perform adequate identity checks on all new clients, new representatives of new clients, and new representatives of existing clients. They are not required to go back over their entire existing database to verify identities but should start to immediately be more stringent with new additions.
Different methods of verifying identities are detailed in the guidelines, including the use of the visual method that requires visual verification of client identification documents in person or via video, comparing data provided by the client or representative with what appears in the ATO system, and comparing a client’s government-issued identity document against details in a document verification service (DVS) provider’s system.
According to the ATO, the increased use of technology and remote work practices has led to higher risks of misuse and abuse of Australian tax and superannuation systems. This has resulted in identity theft and related problems emerging. The ATO reports that criminals have become more sophisticated and persistent at trying to perpetrate refund fraud upon stealing taxpayer identities. It was noted that tax professionals that had been affected by identity breaches could trace the problem to different levels of discrepancies when it came to client verification processes.
To address these problems, the ATO has issued these guidelines, which will with time likely become minimum standards of client verification. Though not yet mandatory, the ATO is recommending that practitioners voluntarily adopt these measures straightaway to protect their clients and practice. The ATO goes further to advise that these guidelines be considered a minimum and that if there are any concerns about a person’s identity, practitioners should be encouraged to take further steps.
In meeting the standard of reasonable care, the ATO recommends asking for additional proof of identity in situations where the client appears dismissive of the client verification process, does not seem forthcoming with information, and/or insists on providing documentation that appears to be fake or unusual. This means that in addition to applying these measures to new clients, they should also be judicious when handling existing clients that they may have suspicions about.
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