QLD ATO and Tax Accountants - Sue Tax Agency for Mistake?

[Sir Toby]

Hello everyone,

I lived and worked in Australia from 2007 to 2011 and each year had a tax agency (a large company) prepare my tax return. I only lodged the one for 2011 earlier this year and was surprised to get a refund as I had always had to pay something to the ATO in previous years.

Upon inquiring why I got a refund this year, I found out that I was exempt from paying Medicare Levy and Medicare Levy Surcharge because I had entered Australia from Germany. However, the tax accountants had failed to take this into consideration in 2008-10, only the one doing my return for 2011 seemed to be aware of this law.

When I followed this up with my tax agency, they realized their mistake and issued amended tax returns (free of charge to me) for the years in question. They told me to lodge these returns with the ATO which I did, only to find out that amendments need to be lodged within two years of the original return. Since that deadline has passed, there is nothing to be done now.

Hence, in my opinion it should be my tax agency´s responsibility to refund me the money that I have lost through their mistake. However, when I lodged a complaint with them they denied any responsibility. Would this case have a chance in a lawsuit? All communication between me and the tax agency was via e-mail and I still have copies of all emails exchanged.

Thank you very much in advance!

 

[Sophea]

Hi there,

If your accountant provided negligent advice and as a result you incurred additional tax beyond what you should have paid, then then there is a chance you could be successful in suing the accountant for any such loss. Accountants generally hold professional liability insurance for just such occasions.

However there are factors that you will need to establish and since not all the facts and circumstances of the matter are available its impossible to provide a definite answer. You can always talk to the accountants about repaying the additional tax that you are out of pocket and if they refuse, send them a letter of demand. They will then likely inform their insurer and you will have to deal with their insurer's lawyers. Whether or not you decide to engage lawyers will largely depend on how much tax you overpaid and whether it is worth throwing good money after bad.

 

[Sir Toby]

Hi Sophea,

Thank you very much for your reply!

I did in the meantime send a message to my accountant outlining my intention to take legal action and as a result their litigation department have now decided to appeal the ATO's decision. According to my accountant, there is a good chance of winning in this case, because the matter deals with a levy and not a tax. Again, it's unclear to me why my accountant wouldn't have shared this information with me before.

The sum at stake in this case is about 5K, 7K if I take interest into consideration, so certainly worth considering giving a lawsuit a shot in case the appeal doesn't lead to the desired outcome.