Consider the liabilities that arise because of specific laws

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Reference no: EM13487152

Students are required to answer the following question. The essay must be fully referenced with in text citations and a bibliography.

You assisted Pamela to prepare her income tax return in 2009 when you were employed as an accountant for Dragon Taxation Services Pty Ltd. At that time your supervisor told you to ignore a transaction that Pamela mentioned which involved income of $220,000 being paid from a business in India to a bank account in Hong Kong. It seemed to you at the time that as Pamela was living in Australia at that time that this money was taxable income. However after your boss told you to ignore it you did not mention it again and you did not talk to Pamela about it. You signed the 2009 income tax return and lodged it with the Australian Taxation Office (ATO).You resigned from that company shortly afterwards and set up your own accounting business which you still operate. At all times you were a registered tax agent.

Last week Pamela's solicitors contacted you. They informed you that she has been contacted by the ATO which has amended her assessment for 2009 and included the $220,000. As a result she has to pay extra income tax of $105,000 plus penalties and interest totalling $195,000. She has also incurred legal and accounting fees of $15,500 already in negotiating with the ATO about this problem. The solicitors claim that this is all your fault and have demanded that you pay the monies owing to the ATO and reimburse Pamela for her legal and accounting costs.
What are the liabilities of Dragon Taxation Services Pvt Ltd and your former supervisor and you? You should discuss responsibilities under the common law (i.e in negligence and contract). You will need to consider vicarious liability of the employer. If it is possible to argue successfully with the ATO about the amended assessment and penalties and interest, how will that affect your liability ?

You will also need to consider the liabilities that arise because of the specific laws that cover tax agents. This would include liability to Pamela and any possible problems with your tax agents licence.

Reference no: EM13487152

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