Alan Gough and Vision Business Group Pty Ltd and Tax Practitioners Board
[2022] AATA 2757
•23 August 2022
Alan Gough and Vision Business Group Pty Ltd and Tax Practitioners Board [2022] AATA 2757 (23 August 2022)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2021/3360; 2021/3357
Re:Alan Gough and Vision Business Group Pty Ltd
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Senior Member Dr Linda Kirk
Date:23 August 2022
Place:Sydney
The Reviewable Decisions dated 1 April 2021 are affirmed.
.................................[SGD].......................................
Senior Member Dr Linda Kirk
CATCHWORDS
TAX AGENTS – termination of registration as tax agent – whether individual applicant is a fit and proper person – good fame, integrity and character – where individual applicant is sole director of corporate applicant – where individual applicant has lodged income tax returns late or not at all – where corporate applicant has lodged income tax returns and BAS late or not at all – alleged breaches of Code of Professional Conduct – whether applicant has failed to comply with taxation laws in the conduct of his personal affairs – whether applicant failed to respond to direction of Board in timely manner – decision affirmed
LEGISLATION
Tax Agents Services Act 2009 (Cth)
Income Tax Assessment Act 1997 (Cth)
CASES
Adamec and Tax Agents' Board of Victoria [2005] AATA 913
Cleary and Tax Practitioners Board [2014] AATA 260
Delis and Tax Practitioners Board [2015] AATA 820
G J Brown & Co Pty Ltd and Tax Practitioners Board [2016] AATA 740
Kishore and Tax Practitioners Board [2017] AATA 271
Madz and Tax Practitioners Board [2019] AATA 4773
Proh and Tax Agents' Board of Victoria [2010] AATA 149; (2010) 78 ATR 663
Re Charles Stuckey, (District Court of Queensland, Taylor J, 20 July 1959).
Re Su and Tax Agent's Board of South Australia (1982) 61 FLR 1
Ridden v Tax Practitioners Board [2020] AATA 422
Shmuel and Tax Practitioners Board [2019] AATA 2168
Stasos v Tax Agents’ Board of NSW (1990) 21 ATR 974
Toohey and Tax Agents’ Board of Victoria [2009] AATA 603
Yvonne Anderson and Associates Pty Ltd and Tax Practitioners Board (Taxation) [2020] AATA 1881REASONS FOR DECISION
Senior Member Dr Linda Kirk
23 August 2022
INTRODUCTION
Mr Alan Gough (‘Mr Gough’) and Vision Business Group Pty Ltd (‘Vision’) (collectively, ‘the Applicants’) have been registered tax agents since 13 February 2015 and 24 November 2008 respectively.[1] Mr Gough has been a director of Vision since its incorporation on 21 November 2006 and has been its sole director since 7 September 2007.[2]
[1] Gough T-Docs, T5, 16, 19
[2] Gough T-Docs, T5, 28, 30.
On 1 April 2021, the Tax Practitioners Board (‘the Respondent’) terminated Mr Gough’s tax agent registration pursuant to paragraph 40-5(1)(b) of the Tax Agents Services Act 2009 (Cth) (‘the Act’). On the same date the Respondent terminated Vision’s tax agent registration pursuant to paragraph 40-15(1)(b) of the Act (‘the Reviewable Decisions’).
The Respondent made the Reviewable Decisions based on its findings that:
a)Mr Gough had breached subsections 30-10(2) and 30-10(14) of the Code of Professional Conduct (‘the Code’) in the Act and was no longer a fit and proper person as required by paragraph 20- 5(1)(a) of the Act; and
b)Vision had breached subsections 30-10(2) and 30-10(14) of the Code in the Act and had ceased to meet the registration requirement in paragraph 20- 5(3)(a) of the Act requiring that each of its directors, namely Mr Gough, is a fit and proper person.
On 28 April 2021, the Respondent informed the Applicants of the Reviewable Decisions.[3]
[3] Gough T-Docs, T7, 74-80; Vision T-Docs, T7, 84-90.
On 21 May 2021, the Applicants each filed an application for review of the Reviewable Decisions pursuant to section 29 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) and section 70-10 of the Act (‘the Review Applications’).[4] These were accompanied by requests for stay orders pursuant to section 41(2) of the AAT Act (‘the Stay Applications’).
[4] Vision T-Docs, T1, 1-9; Gough T-Docs, T1, 1-9
On 8 June 2021, the Tribunal ordered that the operation of the Reviewable Decisions be stayed on an interim basis until determination of the Stay Applications.
On 21 July 2021, by consent, the Tribunal ordered that the implementation of the Reviewable Decisions be stayed (subject to certain conditions) until the decision of the Tribunal on the Review Applications or until further order of the Tribunal.
The Review Applications were heard by the Tribunal on 5 March 2021. Mr Gough attended the hearing by video-conference and represented both himself and Vision. He gave oral evidence and was cross-examined at the hearing.
The following documents were considered as evidence:
·Section 37 T-Documents in 2021/3357 (T1-T10, pp 1-221) filed on 28 June 2021 (Vision T-Docs);
·Supplementary T-Documents in 2021/3357 and 2021/3360 (ST1-ST15, pp 1-59) filed on 3 September 2021 (Supplementary T-Docs);
·The Respondent’s Bundle of Supplementary Documents (ST16-ST19, pp. 60-64) filed on 14 February 2022 (Respondent’s Bundle);
·An Email of Mr Alan Gough to the Tribunal dated 24 February 2022 (Applicant’s Email);
·Section 37 T-Documents in 2021/3360 (T1-T10, pp 1-211) filed on 28 June 2021 (Gough T-Docs).
The Tribunal has jurisdiction to review the Reviewable Decisions pursuant to section 25 of the AAT Act and sub-section 70-10(e) of the Act.
The Tribunal has reviewed the evidence and refers to all relevant materials below.
LEGISLATIVE FRAMEWORK
The object of the Act, as stated in section 2-5 is ‘to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct’. This objective is achieved through the registration regime found in Part 2 of the Act, the Code in Part 3 of the Act, and a graduated system of sanctions for disciplining tax practitioners.
Registration requirements
The Act establishes the Tax Practitioners Board (‘TPB’) and provides for the registration and regulation of tax agents. Part 2 of the Act contains the registration regime that applies to all entities who provide tax agent services. The term ‘tax practitioner registration requirements’ is defined in the dictionary in section 90-1 of the Act and means ‘the matters about which the Board must, under Subdivision 20-A, be satisfied before the Board is obliged to grant an application for registration under this Act’. Being a ‘fit and proper person’ is a ‘tax practitioner registration requirement’.
Paragraph 20-5(1)(a) of the Act provides that an individual is eligible for registration as a registered tax agent or BAS agent if the TPB is satisfied that the individual is a ‘fit and proper person’. In determining whether a person is a ‘fit and proper person’ to be registered as a tax agent the TPB must, pursuant to paragraph 20-15(a) of the Act, have regard to whether the individual ‘is of good fame, integrity and character’.
Paragraph 20-5(3)(a) of the Act provides that a company is eligible for registration as a registered tax agent if the TPB is satisfied that each director of the company is a ‘fit and proper person.’
The Code of Professional Conduct
Part 3 of the Act contains the Code that applies to all registered tax agents, BAS agents, and tax (financial) advisers. Section 30-10 sets out the Code, which relevantly includes:
Honesty and integrity
(1) You must act honestly and with integrity.
(2)You must comply with the taxation laws in the conduct of your personal affairs.
Other responsibilities
…
(14) You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.
In respect of sub-section 30-10(2) of the Code, the term ‘taxation law’ is defined in section 995-1 of the Income Tax Assessment Act 1997 (Cth) and refers to the Act and regulations made under the Act, and any Act of which the Commissioner of Taxation has general administration (for example, the Income Tax Assessment Act 1936 (Cth), Income Tax Assessment Act 1997 (Cth), A New Tax System (Goods and Services Tax) Act 1999 (Cth) and the Taxation Administration Act 1953 (Cth), and any regulations made under those Acts).
The term ‘personal affairs’ includes a tax practitioner’s practice and the affairs of all associated entities that the tax practitioner has direct or indirect control over.[5]
[5] TPB Information Sheet 34-2018 at [7].
Termination of registration
Section 30-15 provides that if the TPB is satisfied, after conducting an investigation under Subdivision 60-E, that the agent has failed to comply with the Code, then the TPB may do one or more of the following:
(a)give the agent a written caution;
(b)give the agent an order under section 30-20;
(c)suspend the agent’s registration under section 30-25; and
(d)terminate the agent’s registration under section 30-30.
Paragraph 40-5(1)(b) and paragraph 40-15(1)(b) provide that the TPB may terminate the registration of a registered tax agent who is an individual if they cease to meet one of the tax practitioner registration requirements. Paragraph 40-15(1)(b) similarly provides that the TPB may terminate the registration of a company that is a registered tax agent if it ceases to meet one or the tax practitioner registration requirements.
ISSUES FOR DETERMINATION
The issues for determination by the Tribunal are as follows:
1)In relation to Vision:
a)whether Vision breached subsection 30-10(2) of the Code;
b)whether Vision breached subsection 30-10(14) of the Code;
c)whether Vision ceased to meet the registration requirement in paragraph 20-5(3)(a) of the Act that each director is a fit and proper person; and
d)if c) is answered in the affirmative, whether termination of Vision’s tax agent registration under paragraph 40-15(1)(b) of the Act is appropriate.
2)In relation to Mr Gough:
a)whether Mr Gough breached subsection 30-10(2) of the Code;
b)whether Mr Gough breached subsection 30-10(14) of the Code;
c)whether Mr Gough is a fit and proper person as required by paragraph 20-5(1)(a) of the Act; and
d)if c) is not answered in the affirmative, whether termination of Mr Gough’s tax agent registration under paragraph 40-5(1)(b) of the Act is appropriate.
EVIDENCE BEFORE THE TRIBUNAL
By notice dated 15 May 2020, the TPB imposed an order pursuant to section 30-20 of the Act requiring the Applicants to bring all of their outstanding taxation debts and lodgements up to date by 15 September 2020 (‘the Debt and Lodgement Orders’).[6]
[6] Gough T-Docs, T5, 34; Vision T-Docs, T5, 28.
The Applicants did not comply with the Debt and Lodgement Orders. The relevant outstanding obligations the subject of the Debt and Lodgement Orders are outlined below.
By notice dated 9 June 2020, the TPB issued an order pursuant to section 30-20 of the Act requiring Mr Gough to complete and pass, by 9 September 2020, a course of education in relation to the Act and the Code (‘the Education Order’).[7]
[7] Gough T-Docs, T5, 34.
The Education Order required Mr Gough to provide the TPB with written evidence that he completed the courses within 14 days after successful completion. Mr Gough is yet to provide evidence that he has completed the course in relation to the Act and the Code.
Mr Gough failed to lodge the following four income tax returns (‘ITRs’) by their respective due dates:[8]
[8] Supplementary T-Docs, ST6, 26; Respondent’s Bundle, ST18, 63; Applicant’s Email.
ITR year ended
Lodgement due date
Lodgement date
Days outstanding as at 14 February 2022
30 June 2016
15 May 2017
Not lodged
1736
30 June 2017
31 October 2017
Not lodged
1567
30 June 2019
31 October 2019
Not lodged
837
30 June 2020
2 November 2020
Not lodged
469
Mr Gough failed to lodge the following GST Activity Statement by its due date:[9]
[9] Supplementary T-Docs, ST7, 30.
GST Activity Statement period ended
Lodgement due date
Lodgement date
Days outstanding as at 14 February 2022
30 June 2016
15 May 2017
Not lodged
1736
Mr Gough had a debt of $3,090.90 on his income tax account (‘ITA’) since 14 August 2019.[10] This was paid on 24 June 2021.[11]
[10] Respondent’s Bundle, ST19, 64.
[11] Supplementary T-Docs, ST9, 41.
Vision failed to lodge the following two ITRs by their respective due dates:[12]
[12] Supplementary T-Docs, ST1, 1.
| ITR year ended | Lodgement due date | Lodgement date | Days outstanding as at 14 February 2022 |
| 30 June 2019 | 15 May 2020 | Not lodged | 640 |
| 30 June 2020 | 2 November 2020 | Not lodged | 469 |
Vision failed to lodge the following BAS by their respective due dates:[13]
[13] Supplementary T-Docs, ST2, 3.
BAS period ended
Lodgement due date
Lodgement date
Days outstanding as at 14 February 2022
30 September 2018
26 November 2018
Not lodged
1176
31 December 2018
28 February 2019
Not lodged
1082
31 March 2019
28 May 2019
Not lodged
993
30 June 2019
26 August 2019
Not lodged
903
30 September 2019
25 November 2019
Not lodged
812
31 December 2019
28 February 2020
Not lodged
717
31 March 2020
26 May 2020
Not lodged
629
30 June 2020
25 August 2020
Not lodged
538
30 September 2020
25 November 2020
Not lodged
446
31 December 2020
2 March 2021
Not lodged
349
31 March 2021
26 May 2021
Not lodged
264
30 June 2021
25 August 2021
Not lodged
173
Vision does not have any outstanding debts, however, a debt of $3,450 (accrued on 1 April 2016) was written off its ITA on 23 June 2016 and $62,817.12 was written off its Integrated Client Account (‘ICA’) on 23 June 2017, both by reason of being “uneconomical to pursue”.[14] Vision’s ICA balance has been consistently in debit since 12 October 2010.[15]
[14] Supplementary T-Docs, ST4, 16; Supplementary T-Docs, ST5, 17.
[15] Supplementary T-Docs, ST5, 17.
The Applicants failed to lodge the returns described below, which became due for lodgement after the Debt and Lodgement Orders were issued:[16]
[16] Respondent’s Bundle, ST16, 60; Respondent’s Bundle, ST17, 61; Respondent’s Bundle, ST18, 63.
Entity
Type of return
Period
Lodgement due date
Days outstanding as at 14 February 2022
Mr Gough
ITR
Year ended 30 June 2021
1 November 2021
105
Vision
ITR
Year ended 30 June 2021
1 November 2021
105
Vision
BAS
Quarter ended 31 September 2021
25 November 2021
81
On the day of the Tribunal hearing of the Review Application, Mr Gough’s ITR for the year ended 30 June 2019, Vision’s ITR for the years ended 30 June 2019 and 30 June 2020, and all of Vision’s overdue BAS were lodged.
During cross-examination at the hearing, Mr Gough explained that he had recently found a large box that had been mislabelled which contained the documents required to complete and lodge the above returns.[17] It was never his intention to lodge these returns late. He acknowledged that he did not obtain any assistance from another tax agent to complete and lodge these returns. He did not do so due to the practical difficulties created by the COVID restrictions in having another person come into his small office.[18]
[17] Transcript of Proceedings, 8, 9.
[18] Transcript of Proceedings, 8.
The following lodgements remain outstanding:
·Mr Gough’s ITR for the year ended 30 June 2016
·Mr Gough’s ITR for the year ended 30 June 2017
·Mr Gough’s ITR for the year ended 30 June 2020
·Mr Gough’s ITR for the year ended 30 June 2021
·Mr Gough’s GST activity statement for the year ended 30 June 2016
·Vision’s ITR for the year ended 30 June 2021
Mr Gough’s evidence is that he will not continue to miss deadlines in the future for the lodgement of returns as his situation is now ‘stable’ and he is ‘not being interrupted’.[19]
SUBMISSIONS
[19] Transcript of Proceedings, 8.
Submissions for the Applicants
The Applicants claim that the Respondent’s decision is ‘excessive in relation to quantum of breach.’ Mr Gough has only received one complaint in over 35 years as a registered tax agent.[20] The current tax and SGC liability of the Applicants is nil and overdue tax returns are being addressed along with BAS returns for all overdue and outstanding returns.[21]
[20] Applicants’ SFIC, 2.
[21] Ibid.
The Applicants further claim that the decision is ‘excessively penalty driven in context of breach potential threat to public purse.’ If the Applicants have their tax agent registration terminated, they will be unable to earn any income. Mr Gough would be unable to obtain suitable employment due to his age and his location, being 75kms south of Gladstone. He would have to apply for the age pension and become a drain on the public purse.[22]
[22] Applicants’ SFIC, 3.
The Applicants contend that the decision is ‘against the public interest.’ Mr Gough acknowledges that the Act requires that tax agents ‘are held to a higher standard than ordinary taxpayers and that accordingly they must continuously strive to not only satisfy their own personal and corporate tax obligations – because otherwise they cannot tell their clients to do so.’ However, should the Applicants’ tax agent registration be terminated there will be significant public inconvenience. The terminated agents will be unable to open mail received on behalf of clients, answer client queries about assessments, or contact the ATO on clients’ behalf with queries about assessments, delays, refunds, penalties, interests, fines etc.[23] In addition, the terminated agents will be unable to handover client records to a new agent and will be unable to access clients’ records and tax software.[24]
[23] Applicants’ SFIC, 2; Transcript of Proceedings, 10-11.
[24] Applicants’ SFIC, 2-3.
The Applicants further contend that the decision is ‘based upon incomplete information’. The entire case was brought about solely because of information provided to the Respondent by the ATO. No additional information or factual evidence was obtained by the Respondent. At no point in the process was any additional information added to the original ATO Overdue Returns and Liability Report to indicate that the Respondent had in fact investigated or audited the Applicants’ affairs and/or information.[25]
[25] Applicants’ SFIC, 3-4.
The Applicants claim that the decision did not allow for the following extenuating circumstances:[26]
[26] Applicants’ SFIC, 1 at [6].
a)Mr Gough’s health conditions involving consultations with multiple doctors and specialists including visits for referrals, appointments, procedures and recoveries and reviews post-surgery etc
b)Excessive demands on accountants under COVID to assist clients first
c)Many clients suffered severe financial loss and/or distress during COVID and were unable to pay Accountant
d)Demands by clients to assist with claims and entitlements for JobKeeper, CashFlow Boost Government Subsidies
e)Additional mental health stress on Mr Gough of TPB demands to
(i)Lodge outstanding returns during COVID
(ii)Locate personal taxation records to lodge returns with – despite having recently moved following a relationship breakdown and being unable to locate all records
(iii)Supply mountains of information re personal medical records
(iv)Acknowledged by ATO increased mental health issues among tax agents due to COVID and higher Clients demands for advice and support
(f)Relocation of office in Nov/Dec 2019 period to a remote location (75kms south of Gladstone) on five acres and lack of any suitable support structure to cope with multitude of changes in circumstances
(g)Remote location requires Wi-Fi access to internet and emails – with numerous intermittent dropouts and infrequent quality of signal resulting in much slower productivity and transmissions.
The Applicants contend that the decision appears to be ‘quota based’ rather than based on historical or specific criteria. The decision ‘to pursue relentlessly and without relevance to the magnitude or significance of the overdue returns and/or liability – indicates that it may not be as diligent a process as needed to ensure fairness and best use of resources.’[27]
[27] Applicants’ SFIC, 10.
Finally, the Applicants contend that the decision may have been ‘age related’ – to try and phase out/remove older tax agents.[28]
Submissions for the Respondent
[28] Ibid.
Sub-sections 30-10(2) and 30-10(14)
Vision
Vision breached subsection 30-10(2) of the Code as it did not comply with the taxation laws in the conduct of its personal affairs, by Mr Gough, in his capacity as sole director, causing Vision to:
a)fail to lodge its ITRs for the periods ending 30 June 2019 and 30 June 2020 by their respective due dates;
b)fail to lodge its BAS for the quarterly periods ending 31 March 2020 to 30 June 2021 by their respective due dates; and
c)continue to fail to lodge its BAS for the quarterly periods ending 30 September 2018 to 31 December 2019 by their respective due dates after the Respondent’s Debt and Lodgement Order dated 15 May 2020 required it to lodge them by 15 September 2020.[29]
[29] Respondent’s SFIC at [52].
Vision breached subsection 30-10(14) of the Code by failing to respond to requests from the Respondent in a timely, responsible and reasonable manner by Mr Gough, in his capacity as sole director, causing Vision to fail to:
a)comply with the Respondent’s Debt and Lodgement Order dated 15 May 2020, by 15 September 2020, to:
(i)bring all outstanding lodgements up to date; and
(ii)pay all outstanding tax debts in full, or enter into and adhere to a formal payment arrangement with the ATO to pay all outstanding debts, including any debts that arose from further lodgements, and comply with all requirements under that arrangement (and advise the Respondent accordingly, including of any default or cancellation of that arrangement).[30]
Mr Gough
[30] Respondent’s SFIC at [53].
Mr Gough breached subsection 30-10(2) of the Code as he did not comply with the taxation laws in the conduct of his personal affairs, by:
a)failing to lodge his own ITR for the period ending 30 June 2020 by its due date;
b)continuing to fail to lodge his own ITRs for the periods ending 30 June 2016, 30 June 2017 and 30 June 2019 by their respective due dates after the Respondent’s Debt and Lodgement Order dated 15 May 2020 required him to lodge them by 15 September 2020;
c)continuing to fail to lodge his own annual GST Activity Statement for the period ending 30 June 2016 by its due date after the Respondent’s Debt and Lodgement Order dated 15 May 2020 required him to lodge it by 15 September 2020; and
d)continuing to fail to pay his ITA debt of $3,090.90 by 15 September 2020 as required by the Respondent’s Debt and Lodgement Order dated 15 May 2020.[31]
[31] Respondent’s SFIC at [54].
Mr Gough breached subsection 30-10(14) of the Code by failing to respond to requests from the Respondent in a timely, responsible and reasonable manner, by failing to:
a)nominate an appropriate course of education or training in relation to the Code by close of business on 28 May 2020, as requested by the Respondent in its investigation outcome letter to Mr Gough dated 15 May 2020;
b)comply with the Respondent’s Debt and Lodgement Order dated 15 May 2020, by 15 September 2020, to:
(i)bring all outstanding lodgements up to date; and
(ii)pay all outstanding tax debts in full, or enter into and adhere to a formal payment arrangement with the ATO to pay all outstanding debts, including any debts that arose from further lodgements, and comply with all requirements under that arrangement (and advise the Respondent accordingly, including of any default or cancellation of that arrangement);
c)comply with the Respondent’s Education Order dated 9 June 2020, which required Mr Gough to complete and pass a course in the Act and the Code offered by the Tax Institute by 9 September 2020, and provide written evidence of same to the Respondent within fourteen days of completion;
d)provide a response to the Respondent’s request dated 24 September 2020 that Mr Gough provide relevant medical evidence detailing how the treatment would impact his ability to comply with the Debt and Lodgement Order and Education Order, and a detailed response regarding what steps he was taking to comply with the orders, by 30 September 2020; and
e)provide a response to the Respondent’s request dated 28 January 2021 that Mr Gough provide relevant medical evidence and current progress of his outstanding lodgements and debts in relation to himself and Vision, as required by the separate Debt and Lodgement Orders dated 15 May 2020, by 5 February 2021.[32]
[32] Respondent’s SFIC at [55].
Mr Gough is not a fit and proper person as required by paragraphs 20-5(1)(a) and 20- 5(3)(a) of the Act, as evidenced by:
a)the Code breaches outlined above at paragraphs [46]-[47];
b)Mr Gough’s failure, in his personal capacity and as sole director of Vision, to ensure ongoing compliance with taxation obligations; and
c)Mr Gough’s failure to engage with the Respondent or the ATO in order to rectify this non-compliance.[33]
[33] Respondent’s SFIC at [56].
Appropriate sanction
The Respondent contends termination of the Applicants’ tax agent registrations is the appropriate sanction in consideration of the above, and the following factors:
a)the Applicants’ long history of non-compliance with the taxation laws, including their pattern of not lodging ITRs and BAS by their due dates (or at all), demonstrates a lack of regard for the taxation laws and their obligations as registered tax agents under the Act;
b)the Applicants’ history of not paying debts (or not bringing debts under payment arrangement), defaulting on scheduled payment arrangement instalments and not engaging with the ATO to otherwise voluntarily pay or bring their debts under arrangement, over a protracted period of time such that the ATO has written off debts totalling $70,784.08 as “uneconomical to pursue”, further demonstrates a lack of regard for their obligations under the Act, and for the ATO; and
c)the Applicants’ failure to comply with the Respondent’s Debt and Lodgement Orders and the Education Order (including their lack of engagement with the Respondent about these failures) is a serious breach that demonstrates a lack of appreciation of the importance of complying with their obligations as registered tax practitioners under the Act, a lack of regard for the Respondent as the regulator of their profession, and does not give the Respondent any confidence that the non-compliance will not occur again in the future.[34]
[34] Respondent’s SFIC at [57].
In respect of the above matters (and given the admissions made by the Applicants), the Respondent contends that the Tribunal may readily find that the Applicants breached subsection 30-10(2) and subsection 30-10(14) of the Code in the Act.[35]
CONSIDERATION AND REASONS
[35] Respondent’s Written Outline of Submissions at [28].
1) Have the Applicants breached sub-sections 30-10(1) and 30-10(14) of the Code?
Based on the evidence before the Tribunal and for the reasons that follow, the Tribunal finds that the Applicants breached sub-sections 30-10(1) and 30-10(14) of the Code.
In relation to the breach by the Applicants of sub-section 30-10(1) of the Code, the Tribunal notes that the number of outstanding lodgements and the length of time that contraventions occurred, being a period of five years, are significant. Prior to the day of the Tribunal hearing, Mr Gough made limited meaningful progress towards remedying his outstanding tax obligations and those of Vision. He was given every opportunity to remedy these defaults and yet he failed to do so. Whereas the lodgements made on the day of the hearing remedied some of the outstanding obligations, there remains a number of outstanding lodgements.
Madz and Tax Practitioners Board[36] involved similar circumstances to those in this matter, namely consecutive outstanding lodgements over a period of two years and a breach of an order issued by the TPB under s 30-20. Deputy President Pascoe stated:[37]
I am satisfied that the failure of the Applicant to lodge his income tax returns and business activity statements over such a long period of time justified the decision of the Respondent to terminate his tax agent registration. The Applicant was clearly well aware of the need for all taxpayers to comply with the law and in particular for those who hold a position of trust as a tax agent to conduct their affairs in a way which maintains public confidence. The non-compliance is exacerbated by the fact that the Applicant failed to comply with an Outstanding Lodgement Order issued by the Respondent pursuant to section 30-20 of the Code or to communicate appropriately with the Respondent as to his problems more generally, especially once the Respondent had written to him personally (including through follow up letters) about his outstanding obligations to file his income tax returns and business activity statements.
Further the Applicant failed to seek outside assistance to assist him in meeting his obligations; assistance which it is reasonable to assume would have been easy for him to access. Nor did he take any reasonable steps to deal with outstanding lodgements right up until the date of the hearing, despite the fact that the Applicant must have been aware of the seriousness of his failure to lodge and the importance of being able to demonstrate a reasonable effort to address the outstanding issues.
[36] [2019] AATA 4773.
[37] at [27] and [28].
In relation to Mr Gough’s breach of sub-section 30-10(14) of the Code, the Tribunal notes that it had been 18 months since the date of compliance in the Debt and Lodgement Orders and Education Order passed, and yet no steps had been taken by him to comply with these Orders, save for him enrolling in a course. Mr Gough was subject to a second investigation resulting in the Reviewable Decisions, but he still failed to act.
2) Is Mr Gough a ‘fit and proper person’
A determination of whether an individual is a ‘fit and proper person’ within the meaning of sub-section 20-15(a) of the Act requires the Tribunal to have regard to, among other things, whether the individual ‘is of good fame, integrity and character’.
The application of this criterion must be made in the context of the objectives of the Act. These were recently outlined by Deputy President McCabe in Ridden v Tax Practitioners Board (‘Ridden’):[38]
Tax agents play an important role in our community. They assist ordinary taxpayers and businesses to manage their (sometimes complex) tax affairs. Tax agents deal with the Commissioner of Taxation on a client’s behalf. Tax agents must exhibit a high level of competence and skill if Australia’s self-assessment system is to work efficiently as intended. They must also be trustworthy. There is a strong public interest in ensuring that tax agents are properly regulated.
To that end, Parliament established a regulatory regime for tax agents … At the heart of the regime is a requirement that a person providing tax agent services must be registered by the Tax Practitioners Board…
A registered tax agent enjoys a privileged position relative to others who are not registered. The privileges associated with registration come with expectations. For example, a person must have appropriate qualifications in order to be registered. The person must also conform to certain rules and standards in order to maintain their registration.[39]
[38] [2020] AATA 422.
[39] at [1]-[3].
In Re Su and Tax Agents’ Board of South Australia (‘Su’)[40] Davies J (then President of the Tribunal) set out what is required for a person to be considered fit and proper to manage the income tax returns of a client:[41]
The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
[40] (1982) 61 FLR 1.
[41] at [95].
The Tribunal has consistently recognised that compliance by tax agents with their own tax obligations is necessary to ‘uphold the confidence and trust that the public are entitled to expect in the services offered by a registered tax agent.’[42] In Proh and Tax Agents' Board of Victoria (‘Proh’)[43] Deputy President McDonald observed:
It is generally accepted, and the Tribunal accepts, that a failure of an agent to attend to his/her own taxation affairs demonstrates a lack of suitability, rendering the agent unfit to handle the affairs of those who may seek to utilise his/her services.[44]
[42] Cleary and Tax Practitioners Board [2014] AATA 260 at [19]. See also G J Brown & Co Pty Ltd and Tax Practitioners Board [2016] AATA 740 at [71]; Proh and Tax Agents' Board of Victoria [2010] AATA 149; (2010) 78 ATR 663 (‘Proh’) at [15].
[43] [2010] AATA 149; (2010) 78 ATR 663.
[44] at [15].
In Su, Davies J found that a failure by an agent to comply with their taxation obligations may render them not a fit and proper person to be a registered tax agent because of the impact such conduct would have on the person’s relationship with the ATO, which may in turn reflect on their handling of their client’s taxation affairs:
... A tax agent who allows his own tax affairs to get into a state of disorder, who has constant problems himself with the Taxation Department, may not be a proper person to handle clients’ affairs for there may come a time when dissatisfaction which officers of the Department may have with the tax agent personally may be reflected in their handling of his clients’ affairs … Undoubtedly, even minor offences, if sufficient in number, can so interfere with a tax agent’s standing that he is rendered not a fit and proper person to be registered as a tax agent.[45]
[45] at 5.
Davies J referred to Re Charles Stuckey,[46] where Judge Taylor said:
In principle, I consider that a sufficiently bad personal record in tax matters by a tax agent, even if no question of fraud or dishonesty arises, could constitute misconduct, accepting misconduct to be a course of conduct which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency. I also consider that a sufficiently bad personal record in tax matters by a tax agent, even if no question of fraud or dishonesty arises, could render that person not a fit and proper person to remain registered as a tax agent.
(emphasis added)
[46] District Court of Queensland, Taylor J, 20 July 1959.
In Su, Davies J found that the failure of Mr Su to lodge his personal income tax returns and the failure to pay group tax instalments on time indicated incompetence.
In Toohey and Tax Agents’ Board of Victoria (‘Toohey’)[47] the Tribunal noted:
As a tax agent, the applicant should hold himself up to a higher standard than the general public. He has an intricate knowledge of tax laws and it is reasonable to assume that he knows the importance of lodging tax returns on time. His clients, as well the general public, should be able to entrust their taxation affairs to him and have confidence that he is able to lead by example and file his tax returns on time as required by the law.[48]
[47] [2009] AATA 603.
[48] at [36].
In Shmuel and Tax Practitioners Board,[49] the Tribunal found that an agent’s conduct in failing to comply with their own tax obligations reflects adversely on their good fame and character and is inconsistent with the ‘fit and proper person’ requirement.[50] Senior Member Groom stated:
There is clear authority that a failure by a tax agent to comply with taxation obligations is sufficiently serious of itself to justify a finding that a person fails to meet the fit and proper person requirement. Complying with taxation obligations is a fundamental duty of a tax agent and goes to the heart of an agent’s capacity and willingness to perform their function. A failure to comply with taxation obligations must raise serious doubt about the capacity and commitment of an agent to competently handle other people’s taxation affairs. As described by Deputy President Handley and Senior Member Professor Creyke, in the case of a tax agent, compliance with taxation obligations is a matter that goes to the agent’s competence and ability and that “a tax agent’s demonstrated conduct should be above reproach, being central to the service provided to his clients”.[9] In addition, a failure to comply with taxation laws in the conduct of your personal affairs is a breach of the Code, which itself provides basis for termination of a tax agent’s registration under section 30-30 of the Act.[51]
[49] [2019] AATA 2168.
[50] at [24].
[51] at [23].
In G J Brown & Co Ltd v Tax Practitioners Board,[52] the Tribunal found that, not only was a failure to comply with tax obligations a breach of the taxation law, it is also conduct which undermines clients’ confidence.[53]
[52] [2016] AATA 740.
[53] at [71].
Specifically, in relation to the non-payment of tax liabilities, Senior Member Fice in Delis and Tax Practitioners Board (‘Delis’)[54] stated:[55]
every taxpayer is required to pay in full his, her or its taxation liability as and when it falls due. Making some payments towards those liabilities over many years in small amounts, often well in arrears of those liabilities arising, and often under the threat of legal action for recovery, is hardly something which should attract an expression of satisfaction. To the contrary, given that in this case that position appears to have been the norm for Mr Delis and Delis Enterprises since around 2000, it deserves condemnation.
[54] [2015] AATA 820.
[55] At [78].
Senior Member Fice considered that, notwithstanding that Mr Delis demonstrated that his tax compliance was up to date, absent significant pressure from the ATO and the Tax Practitioners Board, there was no evidence that Mr Delis would have complied with his tax or superannuation guarantee obligations and “[i]n fact more significantly, it also strongly suggests that without serious threats being made against his ability to earn an income as he has done in the past, he is unlikely to comply with taxation laws in the future”.[56]
[56] [2015] AATA 820, at [98].
These remarks by Senior Member Fice have relevance to the Applicants’ circumstances. The evidence demonstrates that Mr Gough took steps to rectify his non-compliance with his taxation obligations and those of Vision only once significant pressure was brought to bear on him, particularly the prospect of loss of his registration as a tax agent. In light of the evidence that the Applicants only complied with their tax obligations under threat of de-registration, the Tribunal cannot be satisfied, following the principles outlined in the authorities cited above, that the Applicants are fit and proper persons to be registered as a tax agent.
Mr Gough blames exigencies associated with the COVID-19 pandemic and the consequent need for him to deal with an increased workload, and his various health conditions for causing the contraventions. The Tribunal however notes that a significant number of the contraventions happened well before the onset of COVID-19. Irrespective of this, the Tribunal finds that the inability of Mr Gough to manage his own tax affairs while managing the tax affairs of clients poses a real risk to the clients, as this suggests that the tax affairs of the clients will suffer if he prioritises his own tax affairs. Mr Gough did not seek help from another tax practitioner, which would have been reasonably available to him if not in person then remotely, to assist him with bringing his tax affairs into order.
In relation to Mr Gough’s stated personal reasons for his lodgement delays the Tribunal finds that these do not justify his breaches of the Code. In Adamec and Tax Agents' Board of Victoria,[57] the Tribunal stated:
Family sickness, bereavement, domestic responsibilities, personality clashes in the workplace, fluctuating work loads and failed business ventures are not uncommon… No doubt, some people are better equipped, psychologically, than others to cope with these vicissitudes, but this cannot alter the characterisation of the events themselves. In making an allowance for "special circumstances", the authorities provide that something more than misfortune is required. The existence of professional standards would become impossibly compromised if they were to be subject, as a matter of course, to the prevailing domestic harmony, physical wellbeing and general equanimity of the individual professional.[58]
[57] [2005] AATA 913.
[58] at [70].
Having regard to the evidence before it and the relevant authorities cited above, the Tribunal finds that Mr Gough’s conduct in breach of the Code indicates a deficiency in his integrity and character such that it cannot be satisfied he is a ‘fit and proper person’ as required for registration as a tax agent. The Applicant’s conduct falls short of the high standards expected of a tax agent by the Act and the general public. As Deputy President McDonald observed in Toohey, a tax agent’s clients and the public should be able to have confidence that the agent is able to ‘lead by example’ and meet his or her tax obligations on time as required by law.[59] Mr Gough’s non-compliance with his personal taxation obligations and those of Vision demonstrate that he did not ‘hold himself up to a higher standard than the general public’, nor did he ‘lead by example’ by meeting his tax obligations in a timely manner.
[59] at [36].
The Tribunal has considered whether there is evidence of Mr Gough’s contrition and a genuine insight into his conduct in assessing his fitness and propriety to be registered as a tax agent. In Stasos v Tax Agents’ Board of NSW,[60] Hill J held that in determining whether a person is fit and proper, it is relevant to consider whether the person understands the impropriety of their previous conduct:[61]
Where the issue is whether a person, who has been guilty of misconduct is at a time somewhat after that misconduct a fit and proper person to exercise a particular occupation carrying with it privileges and responsibilities, it will be relevant whether that person has understood the error of his ways. Failure so to do would, of itself, demonstrate his unfitness: NSW Bar Assoc v Evatt (1968) 117 CLR177 at 184.
[60] (1990) 21 ATR 974.
[61] at 983.
There is limited evidence that Mr Gough has demonstrated significant contrition, remorse or insight into his conduct. An obvious demonstration of genuine contrition or remorse in relation to his conduct would be to rectify all his outstanding lodgements and those of Vision and comply with the Education Order. The fact that these steps have not been taken by him supports a finding that Mr Gough lacks insight and contrition.
The Tribunal finds it difficult to accept that it was only days before the hearing that Mr Gough located the box that contained the documents required to complete a number of the outstanding lodgements. The Tribunal finds that the manner in which he has dealt with the Respondent including during the course of the Review Application indicates that he does not consider his failure to meet his tax obligations to be serious.
Based on the evidence before it, the Tribunal finds that Mr Gough is not a fit and proper person as required by paragraph 20-5(1)(a) of the Act. Accordingly, it is also satisfied that Vision ceased to meet the registration requirement in paragraph 20-5(3)(a) of the Act that each director is a fit and proper person for reason that Mr Gough, its sole director, fails to meet this requirement.
3) Is termination of the Applicants’ tax agent registration appropriate?
Having regard to the Code breaches outlined above, the Tribunal finds for the reasons that follow that the termination of the Applicants’ tax agent registration under paragraph 40-15(1)(b) of the Act is appropriate.
In Yvonne Anderson and Associates Pty Ltd and Tax Practitioners Board (Taxation),[62] the Tribunal observed:
… Deregistration of tax agents is a step taken by the TPB to protect the public; it is not a punishment. The TPB’s focus is on ensuring that taxpayers can have confidence that they are obtaining competent services.
[62] [2020] AATA 1881 at [79].
Termination of registration acts as a deterrence to the agent under investigation and to other agents. In Kishore and Tax Practitioners Board,[63] Deputy President Frost explained:[64]
The imposition of a sanction is not for the purpose of punishing the individual, but for the protection of the public and the maintenance of proper standards within the regulated industry. A sanction may also serve the purpose of personal deterrence (to encourage the individual to comply with standards in the future) or general deterrence (to encourage others to comply).
[63] [2017] AATA 271.
[64] at [18].
Deputy President Frost identified the following non-exhaustive list of factors relevant to deciding the appropriate sanction:[65]
(a)the seriousness of the conduct warranting the sanction;
(b)the likelihood that the conduct will be repeated and the potential harm to the public if it is;
(c)the impact of a particular sanction on the individual (and especially where the sanction may inhibit or prevent the individual’s capacity to earn a living);
(d)the interest of the public in seeing appropriate sanctions applied;
(e)the extent to which the individual has acknowledged the breaches and the seriousness of them; and
(f)the extent to which the individual has demonstrated genuine contrition or remorse.
[65] at [19].
The Applicants contend that the appropriate sanction is ‘suitable counselling and assistance’ to lodge their outstanding tax obligations under ‘existing CoVid19 restrictions’.[66] No specific details have been provided by the Applicants about the proposed counselling, why it is required and the purpose it would seek to achieve. The Tribunal finds that Mr Gough has had ample time and opportunity to obtain assistance to complete and lodge outstanding returns. It is not persuaded by Mr Gough’s claims that COVID-19 restrictions prevented him from preparing and lodging his and Vision’s returns or completing the Education Order. In any event, despite the fact COVID-19 restrictions have largely been lifted, Mr Gough has not lodged all outstanding returns and has failed to complete the Education Order.
[66] Applicant’s Reply to the Respondent’s SFIC, 14.
Based on the evidence before it, the Tribunal finds that the Applicants have committed significant breaches of the Code, and Mr Gough both in his personal capacity and as the sole director of Vision has demonstrated that he is not of sufficient competence and integrity to hold the privilege of acting for clients and providing tax agent services. In relation to the likelihood that the Applicants’ conduct will be repeated, the length of the history of their non-compliance and the delay in lodging many of the outstanding returns until the day of the hearing provide objective evidence that points to a significant likelihood that the contravening conduct will be repeated. In terms of the potential harm to the public, it is essential that tax agents meet their tax obligations if the integrity of the regulatory regime is to be maintained and the public interest protected.
As regards the impact on the Applicants of the termination of their registration, the extent to which it may inhibit or prevent their capacity to earn an income is an important consideration. The Respondent does not seek nor does the Tribunal impose a period of non-application in the Applicants’ circumstances. Accordingly, it is open to them to apply to be registered as tax agents in the future at a time when they meet the registration requirements.
DECISION
The Reviewable Decisions dated 1 April 2021 are affirmed.
I certify that the preceding 82 (eighty-two) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr Linda Kirk
..................................[SGD]......................................
Associate
Dated: 23 August 2022
Date(s) of hearing: 24 February 2022 Applicants: In person Counsel for the Respondent: Mr M McKenny
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