Aalders and Tax Agents' Board of Queensland
[2005] AATA 727
•29 July 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 727
ADMINISTRATIVE APPEALS TRIBUNAL )
) Q2004/110, 141
GENERAL ADMINISTRATIVE DIVISION ) Re HENRY ANTHONY AALDERS Applicant
And
TAX AGENTS' BOARD OF QUEENSLAND
Respondent
DECISION
Tribunal Deputy President Don Muller Date29 July 2005
PlaceBrisbane
Decision Q2004/110: The Tribunal affirms the decision to reject an application for registration as a tax agent in Australia, pursuant to the provisions of the Trans Tasman Mutual Recognition Act 1997.
Q2004/141: The Tribunal sets aside the decision to reject an application for registration as a tax agent pursuant to the provisions of the Income Tax Assessment Act 1936 and remits the matter to the Respondent for re-assessment with the direction that Henry Anthony Aalders qualifies for registration as a tax agent in Australia.
.................SIGNED.............................
D.W. MULLER
DEPUTY PRESIDENT
CATCHWORDS
TAX AGENT – application for registration by accountant registered as a tax agent in New Zealand – position of tax agent in New Zealand not an occupation as defined in Trans Tasman Mutual Recognition Act 1997, nor an equivalent occupation to tax agent in Australia – decision to reject application pursuant to the Trans Tasman Mutual Recognition Act 1997 affirmed – applicant has the necessary academic qualifications and has been engaged in the equivalent of relevant employment – decision to reject application for registration as a tax agent in Australia pursuant to the Income Tax Assessment Act 1936 set aside
Income Tax Assessment Act 1936: ss251JA, 251KA, 251JG, 251K(1), 251K(3), 251O
Reg 156, 168
Trans-Tasman Mutual Recognition Act 1997: ss 3,4,15, 16, 18, 19, 27, 28, 30 and 36
REASONS FOR DECISION
Deputy President Don Muller 1.Henry Anthony Aalders, the Applicant, is a citizen of New Zealand. He has been a Chartered Accountant in public practice in New Zealand for over 40 years. He is registered as a tax agent in New Zealand. He has applied for registration as a tax agent in Australia on two bases, namely:
(i)Pursuant to the provisions of the Trans-Tasman Mutual Recognition Act 1997 (TTMR Act); and
(ii)His academic qualifications and experience in taxation matters qualify him for registration as a tax agent.
2.Mr. Aalders’ application for registration as a tax agent in Australia has been rejected on the following grounds:
(i)There is no substantially equivalent occupation for which application for registration under the TTMR Act could be considered for the purposes of registration as a tax agent in Australia; and
(ii)The Board did not consider that the Applicant had acquired acceptable relevant employment or equivalent other employment of the kind specified in Reg 156 in which he has dealt specifically with Australian income tax matters and therefore the Board was not satisfied that the Applicant had sufficient experience in terms of the legislation to which the Board is bound.
3.Mr. Aalders seeks a review of the two decisions to reject his applications for registration. The decision under review relating to the TTMR Act has been designated Q2004/110. The decision under review relating to Mr. Aalders’ academic and professional experience qualifications has been designated Q2004/141.
4.At the hearing Mr. Aalders represented himself, and the Respondent was represented by Mr. Boddice SC.
5.The Tribunal had regard to the following documentary evidence:
Exhibit 1 – T documents: Q2004/110
Exhibit 2 – T documents: Q2004/141
Exhibit 3 - Statement by John Christopher Waugh dated 9 September 2004
Exhibit 4 – Statement by Richard Guise dated 28 September 2004
Exhibit 5 – Statement by Roger Hadfield dated 9 September 2004
Exhibit 6 – Statement by Kevin Yarrow dated 12 October 2004
Exhibit 7 – statement by Michelle Reynolds dated 12 October 2004
Exhibit 8 – Statement by Michael Baker dated 11 August 2004
Exhibit 9 – Bundle of documents numbered H1 – H 25
Exhibit 10 – Example of poaching letter dated 7 November 2000
Exhibit 11 – Respondent’s list of authorities and legislation: Q2004/110
Exhibit 12 – Respondent’s list of authorities and legislation: Q2004/141
6.The Tribunal also received oral evidence from:
(i)Mr. Aalders;
(ii)John Christopher Waugh who is a retired Chartered Accountant (NZ) of many years experience in taxation matters in New Zealand. He was at one time a member of a Consultative Committee for the New Zealand Government which compared the New Zealand system of registering tax agents and accountants, with that of the Australian system.
(iii)Roger James Hadfield, Chartered Accountant (NZ), formerly in public practice. He is a Fellow of the Australian Institute of Taxation. He produces computer software for use by accountants and tax agents in the preparation of tax returns in Australia and New Zealand.
(iv)Michael James Baker, assistant secretary of the Tax Agents Board, Queensland.
(v)Michelle Kaye Reynolds, an Australian accountant and tax agent
(vi)Kevin Thomas Yarrow, an Australian accountant and tax agent.
Q2004/110 – Trans Tasman Mutual Recognition Act 1997
7.The material available to the Tribunal indicates that there is a significant difference between the qualification for registration as a tax agent in Australia and the qualification for registration as a tax agent in New Zealand.
8.In Australia the qualifications for registration are set out in the following sections of the Income Tax Assessment Act 1936:
251JA requires an individual applicant to be
·A fit and proper person; and
·Not an undischarged bankrupt
251BC defines “Fit and proper persons to prepare income tax returns”
(including such qualifications (whether academic, by way of experience and otherwise) as are prescribed).
Regulation 156 sets out the prescribed qualifications for the purposes of subparagraph 251BC(1)(b)(ii) of the Act. The qualifications relevant to Mr. Aalders’ case are:
“(a) the person:
(i) shall have completed the academic requirements for the award of a degree, diploma or other qualification from an Australian university, college of advanced education or other tertiary institution of an equivalent standard, and have passed examinations in such subjects, under whatever name, which an appropriate authority of the university, college of advanced education or other tertiary institution certifies to the Board to represent a course of study in accountancy of not less than 3 years' duration and in commercial law of not less than 18 months' duration or shall possess such other qualifications as the Board regards as equivalent to those qualifications;
(ii) shall have:
(A) been engaged in relevant employment on a full-time basis for not less than a total of 12 months in the preceding 5 years;
(B) otherwise been engaged in relevant employment to an extent that the Board regards as equivalent to that referred to in sub-subparagraph (A); or
(C) been engaged in such other employment and for such time as the Board regards as equivalent to being engaged in relevant employment as referred to in sub-subparagraph (A); and
(iii) shall have, by written examination, successfully completed a course of study in Australian income tax law acceptable to the Board;
……”
9.In New Zealand there is no legislative basis for determining qualifications for registration as a tax agent. The features of the NZ tax agent system are:
·There are no criteria as to professional qualifications, experience or training.
·A tax agent does not have to be a member of a profession.
·Anyone can act as an agent of another in matters affecting their tax situation.
·There is no formal “tax registration board” – type pre-requisite to getting on the tax agency listing of the Inland Revenue Department (IRD).
·A person may voluntarily choose to register as a tax agent.
·In practice the NZ IRD will only register as tax agents those persons who exhibit a certain degree of professional, and/or personal integrity and perceived tax competence.
·There is an advantage in being a registered tax agent in that there are a number of administrative benefits such as being able to get extension of time facilities and being able to log into the IRD computer system.
·In general a person who is in public practice as an accountant, or who carries on the business of filing tax returns will be deemed to be a tax agent.
·If a person files ten or more tax returns on behalf of other people, that person will be deemed to be a tax agent. The example given to the Tribunal is the case of the “Mom and Pop” type business where “Mom” might file returns for the members of her family, or family business/partnership/group. “Mom” would then be deemed to be a tax agent.
·In a survey conducted in August/September 2003 it was ascertained that 58% of tax agents were members of a professional body and 42% were not.
·It was thought by the NZ Government that an insistence on tax agents being lawyers and accountants would unnecessarily raise the cost to the public of processing tax returns. It was also thought that such restrictions would unfairly limit competition to certain professions.
10.There is also a significant difference between the Australian system of regulation, control and discipline of tax agents and the New Zealand system where there is little official control by the IRD.
11.In Australia the Act and Regulations give to the Tax Agents’ Board wide powers of control by way of being able to receive complaints about tax agents from the public, to make enquiries and to suspend, cancel or refuse to renew registrations. For example, the following sections and regulations give the following powers (among others) to the Board:
· 251KA allows for a system of registration of nominees of partnerships and companies.
· 251JG allows for registration of a tax agent for three years. Applications for re-registration need to be made 30 days before an existing registration ceases (s.251JB). The criteria for re-registration specified in s.251JC mirror those for original registration.
· 251K(1) provides for the Board to suspend or cancel the registration of a tax agent where a tax agent has been convicted of any one of a number of offences.
· 251K(3C) provides that the Board must cancel the registration of a tax agent who becomes an undischarged bankrupt or who permanently ceases to carry on business as a tax agent.
· Regulation 168 gives the Board the power to take oral evidence on oath or affirmation and the Chairperson of a Board may require any person to attend and give evidence before the Board. The Board may also require any person to furnish the Board with information.
· 251O stipulates that a person who is not a registered tax agent shall not directly or indirectly describe himself or represent himself to be a tax agent, or advertise in any manner whatsoever that income tax returns will be prepared by him or that any other matter in connection with income tax will be attended to by him.
12.Division 7 of Part V11A of the Act specifies the activities authorised to be carried out by a registered tax agent, under the heading of “Privileges and Duties of Registered Tax Agents”.
13.The Act imposes penalties for non-compliance with certain sections of the Act.
14.In New Zealand a tax agent will not suffer an IRD imposed penalty for many types of breaches or defaults. The behaviour of tax agents is controlled by the criminal law for established offences involving fraud, deception and other offences of dishonesty, and by the civil law in relation to negligence or breach of contract. Those tax agents who belong to a professional body will also be subject to the standards associated with that body.
15.It is clear that there is a substantial difference between the pre-requisite qualifications required by prospective tax agents in New Zealand and the requirements for registration in Australia. In the New Zealand system the academic and experience qualifications among tax agents probably ranges from very basic to high powered. The material placed before the Tribunal suggests that just over half of the New Zealand tax agents have professional qualifications, whilst just under half of them do not.
16.It appears to me that half of the tax agents in New Zealand would probably have practices in which the level of work done would be comparable with a tax agent operating in Australia. The other half of the tax agents operating in New Zealand would probably not be competent to do a level of work equivalent to an Australian registered tax agent.
17.One of the questions to be answered in this case is whether the mere fact that Mr. Aalders is registered as a tax agent in New Zealand entitles him to registration as a tax agent in Australia, pursuant to the TTMR Act.
18.It is the Respondent’s case that the differences between the systems of registration and control in New Zealand compared to the systems in Australia are so great that the mere fact that a person is registered as a tax agent in New Zealand does not guarantee that the person has acquired a level of academic training, experience and expertise at an acceptable level to be comparable with an Australian registered tax agent. Indeed, it is possible to be registered as a tax agent in New Zealand with no academic qualifications at all. That is, there is no recognised occupation of tax agent in New Zealand. Consequently, it is submitted on behalf of the Respondent, that the position of tax agent in New Zealand is not equivalent to the occupation of tax agent in Australia, and that, therefore, the mere fact of registration as a tax agent in New Zealand is not sufficient to allow registration as a tax agent in Australia.
19.The sections of the TTMR Act relevant to this review are:
“3 Principal purpose
(1)The principal purpose of this Act is to enact legislation authorised by the Parliaments of States under paragraph (xxxvii) of section 51 of the Commonwealth Constitution, and requested by the legislatures of the Australian Capital Territory and the Northern Territory, for the purpose of recognising within Australia regulatory standards adopted in New Zealand regarding goods and occupations.
4 Interpretation
(1)In this Act, unless the contrary intention appears:
Australia means Australia in a geographical sense, and does not include the external territories.
Australian jurisdiction means a participating jurisdiction, other than New Zealand
Australian Tribunal means the Administrative Appeals Tribunal or a successor to that body.
equivalent, when used in relation to occupations, has a meaning affected by Division 4 of Part 3.
local registration authority of a participating jurisdiction for an occupation means the person or authority in the jurisdiction having the function conferred by legislation of registering persons in connection with their carrying on that occupation in the jurisdiction.
occupation means an occupation, trade, profession or calling of any kind that may be carried on only by registered persons, where registration is wholly or partly dependent on the attainment or possession of some qualification (for example, training, education, examination, experience, character or being fit or proper), and includes a specialisation in any of the above in which registration may be granted.
registration includes the licensing, approval, admission, certification (including by way of practising certificates), or any other form of authorisation, of a person required by or under legislation for carrying on an occupation.
15Trans-Tasman mutual recognition principle
(1)The Trans-Tasman mutual recognition principle as applying to occupations is as set out in this Part.
(2)This Part deals with the ability of a person who is registered in connection with an occupation in New Zealand to carry on an equivalent occupation in Australia
16 Entitlement to carry on occupation
(1).The Trans-Tasman mutual recognition principle is that, subject to this Part, a person who is registered in New Zealand for an occupation is, by virtue of this Act, entitled after notifying the local registration authority of an Australian jurisdiction for the equivalent occupation:
(a) to be registered in the jurisdiction for the equivalent occupation; and
(b) pending such registration, to carry on the equivalent occupation in the jurisdiction.
18 Notification to local registration authority
(1)A person who is registered in New Zealand for an occupation may lodge a written notice with the local registration authority of an Australian jurisdiction for the equivalent occupation, seeking registration for the equivalent occupation in accordance with the Trans-Tasman mutual recognition principle.
19 Entitlement to registration and continued registration
(1)A person who lodges a notice under section 18 with a local registration authority of an Australian jurisdiction is entitled to be registered in the equivalent occupation, as if the law of the jurisdiction that deals with registration expressly provided that registration in New Zealand is a sufficient ground of entitlement to registration.
27 Equivalent occupations
The equivalence of occupations carried on in different participating jurisdictions is, for the purposes of this Act, to be determined in accordance with this Part.
28 General principle
(1)An occupation for which persons may be registered in New Zealand is taken to be equivalent to an occupation for which persons may be registered in an Australian jurisdiction if the activities authorised to be carried out under each registration are substantially the same (whether or not this result is achieved by means of the imposition of conditions).
(2)Conditions may be imposed on registration under this Part so as to achieve equivalence between occupations in different participating jurisdictions.
30 Declarations by Australian Tribunal
(1)On a review, the Australian Tribunal may make an order that a person who is registered in a particular occupation in New Zealand is or is not entitled to registration in an Australian jurisdiction in a particular occupation, and may specify or describe conditions that will achieve equivalence.
(2)On a review, the Australian Tribunal may make a declaration that occupations carried on in New Zealand and an Australian jurisdiction are not equivalent, but only if the Australia Tribunal is satisfied that:
(a)the activities involved in the occupations are not substantially the same (even with the imposition of conditions); or
36 Residence or domicile
Residence or domicile in a particular participating jurisdiction is not to be a prerequisite for or a factor in entitlement to the grant, renewal or continuation of registration arising under this Part.
20.The first question to be answered in this part of the review is whether the position of tax agent in New Zealand is an “occupation” within the meaning of that term in the interpretation section (section 4(1)) of the TTMR Act. That section defines an occupation as an occupation, trade, profession or calling of any kind that may be carried on only by registered persons, where registration is wholly or partly dependent on the attainment or possession of some qualification and includes a specialisation in the occupation in which registration may be granted. The examples given in the section in relation to qualifications are “training, education, examination, experience, character or being fit and proper”.
21.The material placed before the Tribunal is to the effect that:
·In New Zealand there are no criteria as to professional qualifications, experience or training as pre-requisites to becoming registered as a tax agent;
·In New Zealand it is not necessary for a tax agent to be registered with the IRD before being able to carry on business as a tax agent;
·There is no New Zealand legislation which specifies the activities authorised to be carried out under the registration as a tax agent.
22.I find that the position of “tax agent” in New Zealand is not an “occupation” within the meaning of that term in s.4 of the TTMR Act.
23.I find further that the activities authorised to be carried out under registration as a tax agent in New Zealand are not substantially the same as the activities authorised to be carried out under registration as a tax agent in Australia.
24.I find that the occupation of registered tax agent in Australia is not an equivalent occupation to the position of tax agent in New Zealand.
25.Consequently, I find that Mr. Aalders is not entitled to registration as a tax agent in Australia on the basis of his registration as a tax agent in New Zealand, pursuant to the TTMR Act.
26.The decision under review in Q2004/110 is affirmed.
Q2004/141 – Income Tax Assessment Act 1936
27.It is common ground between the parties that Mr. Aalders satisfies all of the criteria for registration as a tax agent in Australia except those criteria relating to his experience as a tax agent. Mr. Aalders has the following qualifications:
·Bachelor of Commerce, Auckland University.
·Chartered Accountant in Public Practise for about 40 years.
·Member of the Institute of Chartered Accountants of New Zealand since 4 May 1968.
·A registered tax agent in New Zealand since 1968.
·Has a certificate of Public Practice issued by the New Zealand Institute of Chartered Accountants.
·On 12 October 2004, he was admitted as a full member of the Australian Institute of Chartered Accountants.
·He undertook and passed the courses of Australian Income Tax and Aspects of Australian Company Law at the University of Southern Queensland.
28.Mr. Aalders gave evidence to the Tribunal about his professional experience. He was an impressive witness and I have no reason to doubt his integrity. I find as follows:
· He has filed tax returns in New Zealand for over 38 years.
· He estimates that he has prepared about 14,000 tax returns of New Zealand companies, trusts, partnerships, sole traders and individuals.
· He has prepared thousands of returns involving GST and FBT.
· He has prepared and conducted ten cases before the Taxation Review Authority in New Zealand. (He won seven of them.)
· He has had involvement in the tax affairs of Dutch migrants in New Zealand who have encountered problems with Dutch and New Zealand tax authorities. He became involved on behalf of the New Zealand Minister of Finance to deal with the Dutch State Secretary for Finance and the Netherlands Commissioner of Tax, the War Pensions Board and the Dutch Social Welfare Department.
· He was involved on behalf of the New Zealand government in the Double Tax agreement with the Netherlands and also with Switzerland in relation to a Tax Treaty with New Zealand.
· For 15 years he was adviser on tax matters to a New Zealand member of parliament, who was for a time, Speaker of the House of Representatives.
· For three years he was retained as an auditor to investigate the staff of the Audit Division of Inland Revenue in Wellington.
· He has also filed tax returns in Australia, The Netherlands, United Kingdom, Denmark, Switzerland and the United States of America.
· Since 2000, he has lived at Hervey Bay, Queensland, where he runs a small accountancy practice. He has filed about 40 tax returns in Australia, for himself, his family and for “outsiders” for no fee.
· He has clients in New Zealand who have investments in Australia and who are liable to pay income tax and CGT in Australia.
· He has been flying back and forth from Australia to New Zealand to service his New Zealand clients.
· His study of the Australian tax course at the University of Southern Queensland brought home to him the fact that the New Zealand tax system and the Australian tax system are strikingly similar.
29.From the evidence of the various taxation agents who gave evidence to the Tribunal, I conclude that:
· The Australian system of taxation is very similar to the New Zealand system and indeed both of them are similar to the tax systems of other “Western economies”.
· The systems of accounting which take into account such matters as income and business expenses in determining profits are practically universal.
· The Australian and New Zealand tax systems have the same conceptual base, including FBT, GST, controlled foreign company rules, passive foreign investment rules and financial arrangement type accrual rules. New Zealand does not have a CGT but includes many capital gains in its general income base.
· New Zealand has a tax system which is sophisticated and complex.
· There are certainly many differences between the tax legislation in Australia and the tax legislation in New Zealand in the areas of rates of tax and many other more esoteric areas. However, the differences are not so vast that it would be beyond the capacity of an experienced New Zealand tax agent, with an appropriate professional background, to be able to read, understand and apply the tax legislation of Australia.
· A practitioner who runs a purely accounting practice would not necessarily be well equipped to run a tax agent’s practice. There are significant differences in the type of business and the way in which the practice is conducted. The statement and evidence of Ms. Reynolds sets out the differences at great length and it is not necessary to repeat them here.
30.The only matter left for determination by the Tribunal is whether Mr. Aalders can satisfy that part of regulation 156 which relates to training or experience, namely, 156(a)(ii)(A), (B) or (C), quoted in paragraph 8 above. The term “relevant employment” referred to in paragraphs (A) and (B) has been held to mean employment in an Australian registered tax agent’s office under the supervision of a registered tax agent. Mr. Aalders has never worked for an Australian tax agent. He does not satisfy paragraphs (A) or (B).
31.This matter comes down to a question as to whether Mr. Aalders satisfies paragraph (C) of regulation 156(a)(ii). That is, whether Mr. Aalders’ professional experience gathered over 40 years in New Zealand, as described above, is to be regarded as “other employment” equivalent to being engaged in “relevant employment” on a full-time basis for not less than a total of 12 months in the preceding five years.
32.I have no doubt that a budding tax agent who spent 12 months working for an Australian tax agent under the expert guidance of that tax agent, would acquire a significant amount of very important knowledge, skill and expertise. However, I seriously doubt whether the budding tax agent would gain in 12 months of employment the equivalent of the knowledge, skill and expertise of a professional person who had run their own private tax agent’s practice for over 40 years, even if that practice was in New Zealand and even if there were some differences in the tax legislation between the two countries. In my view Mr. Aalders “other employment” was more than equivalent to being employed by an Australian tax agent for 12 months.
33.I set aside the decision under review and remit the matter to the Respondent for re-assessment with the direction that Henry Anthony Aalders qualifies for registration in Australia as a tax agent pursuant to the provisions of the Income Tax Assessment Act 1936.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Don Muller
Signed: .....................................................................................
R. Link, AssociateDate/s of Hearing 11 November 2004
Date of Decision 29 July 2005
Applicant Mr. Aalders, himself
Counsel for the Respondent Mr. Boddice SC
Solicitor for the Respondent Australian Government Solicitor
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