Armstrong and Tax Agents' Board of Queensland

[2007] AATA 1767

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1767

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/1291

GENERAL ADMINISTRATIVE DIVISION		)
Re		RALPH ARMSTRONG

Applicant

And TAX AGENTS' BOARD OF QUEENSLAND

Respondent

DECISION

Tribunal Dr KS Levy, RFD, Senior Member

Date17 September 2007

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

...................[sgd]...........................

Senior Member

CATCHWORDS

TAX AGENTS – application to become a registered tax agent was rejected – fit and proper person – applicant does not satisfy the requirements of “relevant employment” – decision affirmed

Income Tax Assessment Act 1936 (Cth) ss 251BC, 251JA
Income Tax Regulations 1936 (Cth) reg 156

Shi v Migration Agents Registration Authority (2007) 158 FCR 525
Re D’Alessandro and Tax Agents’ Board of Victoria (1993) 25 ATR 1037
Re Egulian and Tax Agents’ Board of New South Wales (1991) 91 ATC 2060
Re Civiti and Tax Agents’ Board of Victoria (1990) 21 ATR 3781
Re Kerr and Tax Agents’ Board of Queensland (1998) 39 ATR 1001
Re Modini and Tax Agents’ Board of Queensland (2005) 89 ALD 496

REASONS FOR DECISION

17 September 2007   Dr KS Levy, RFD, Senior Member

Application and background

1.      Mr Ralph Armstrong applied to be registered as a tax agent with the Tax Agents’ Board of Queensland on or around 29 April 2005.  He was advised that there were “some concerns” and he agreed to withdraw his application and obtain a refund of his application fee.  He undertook further work experience, essentially unpaid work, with two accountants.  He then re-applied five months later, on 11 October 2006.  That application was formally rejected on 12 March 2007 and the applicant was informed of the decision on 28 March 2007.  The formal decision is dated 2 April 2007.  Mr Armstrong has asked the Tribunal to review that decision.  I have decided that the decision should be affirmed. 

2.      Mr Armstrong was self-represented.  The respondent was represented by Ms Helen Bowskill of Counsel.

3.      My reasons are as set out below.

Evidentiary material

4.      The Tribunal was provided with the T documents.  The applicant also had filed a series of documents on 25 May 2007 relating to qualifications and experience. He also filed a document dated 12 June 2007, which provided further background information on the recognition of tax agents internationally as well as some data relating to the work he has undertaken within the statutory period specified in the Regulations.

5.      Both the applicant and the respondent also presented written and oral submissions.

6.      After withdrawing the first application and before the submission of the application which is currently under review, Mr Armstrong undertook unpaid work with two accountants to address the advice to him that the Board “may have some concerns” (T6 Folio 44).  When he submitted a letter dated 4 October 2006, he stated that he now had the requisite “hands on experience” and asked for his application to proceed by using his original application. Mr Armstrong also submitted the required application fee.  In previous discussions with the Board prior to withdrawing his previous application, he understood that his application was “on hold”.  He expressed surprise that he was then asked for a fresh application form as his material was being held on file and was to be used when he re-applied.  The Board, however, by letter dated 9 October 2006 indicated that a fresh application was required to answer any questions about fraud, bankruptcy and criminal offences, as one year had elapsed since the first application had been withdrawn.  He resubmitted a fresh application form on 11 October 2006.

7.      The process was elongated.  There were many telephone calls between the applicant and the Board’s officers and as time progressed, he was then asked to provide further character references.  Mr Armstrong supplied further information and work history prior to 2000 to strengthen his case for registration.  He submitted that he had done all that had been asked of him, but the process was delayed and his application rejected. 

Relevant statutory regime

8. The statutory provisions pertaining to a person who applies for original registration as a tax agent (as opposed to a person seeking re-registration), must satisfy the criteria set out in s 251JA(1) of the Income Tax Assessment Act 1936 (the Act).  That section provides that such a person must be, inter alia, a “fit and proper person”.  That term is defined in s 251BC(1) and precludes a person being classified as a “fit and proper person”  if they fall within one of six situations.  There is only one of those criteria which is in contention with Mr Armstrong’s application, and that relates to whether he holds prescribed qualifications (whether academic, by way of experience or otherwise) under section 251BC(1)(b)(ii)).

9.      The interpretation of qualifications is to be found in the subordinate legislation.  In Regulation 156(2) of the Income Tax Regulations 1936, a qualification requires a person to have successfully completed certain academic requirements (Regulation 156(2)(a) and (b)) and, in addition, that the person seeking registration has experience as specified in Regulation 156(2)(c). It is this latter component which relates to the issue for determination in this case, and it provides as follows:

“INCOME TAX REGULATIONS 1936 - REG 156
Prescribed qualifications for subparagraph 251BC (1) (b) (ii) of the Act
…..

(2)        A qualification is that a person:
            ….

(c)    has :

(i)    been engaged in relevant employment on a full‑time basis for not less than a total of 12 months in the preceding 5 years; or
(ii)    otherwise been engaged in relevant employment to an extent that the Board regards as equivalent to the employment mentioned in subparagraph (i); or

(iii)    been engaged in such other employment, and for such time, as the Board regards as equivalent

to being engaged in the relevant employment mentioned in subparagraph (i); …” 

10.     To further refine the regulatory requirement, the term “relevant employment” is defined in Regulation 156(6) as follows:

“(6)   In this regulation:

"relevant employment" means employment by a person or a partnership, or as a member of a partnership, in the course of which there has been substantial involvement in income tax matters including:

(a)    the preparation or examination of a broad range of income tax returns; and

(b)    the preparation or examination of objections to assessments issued in respect of such returns; and

(c)    the provision of advice in relation to income tax returns, assessments or objections.”

Is the applicant a fit and proper person?

11.     The aim of the Regulations is to register “fit and proper persons” i.e. those who can prepare income tax returns and transact business on behalf of taxpayers in income tax matters, at the time of registration. 

12.     Mr Armstrong referred to how those who qualified in previous decades could have been immediately registered without having to demonstrate the experience now statutorily required.  He says they now have to be competent by maintaining current knowledge.  That is true, but the reason for more robust barrier tests in the 21^st century, is that the law and practice requirements of those undertaking the work of tax agents is now considerably more complex.  Formal qualifications are a pre-condition to registration.  No issue has been taken about Mr Armstrong’s professional educational qualifications.  Likewise, certain experience is required.  Mr Armstrong has a lengthy experience in a commercial accounting environment and his completing various courses from the 1960’s onwards in both the United Kingdom and Australia is ample evidence of that.  He has since completed a degree in accounting in Australia, as well as the CPA program, which is recognised as being of a high standard. 

13.     The question in this case is whether Mr Armstrong is a “fit and proper person” for the purposes of the Act.  This is not a reflection of his personal integrity or his academic credentials, but relates only to one narrow point, his experience.  It refers to a degree of currency in experience and requires not less than a total of 12 months in the preceding five years of relevant employment (Regulation 156(2)(c)(i)).  That employment must demonstrate a substantial involvement in a number of areas of tax practice, including “a broad range of income tax returns” (Regulation 156(6)). 

14.     The five year period, as was submitted by the respondent, runs retrospectively from 12 October 2006. That is it runs for the period 13 October 2001 to 12 October 2006.  The applicant contended that the matter was “on hold” since the date of the original application in May 2005. This is not sustainable.  For someone with his experience and knowledge of commercial law dating back to at least the 1970’s (folio 122), the withdrawal of an application and refund of the application fee makes it reasonably clear that that application had been formally ceased without a determination being made.  To interpret it otherwise would result in Mr Armstrong being able to have his application being regarded as current for a period when he did not satisfy the requirements of a current application and not having lodged the application fee (since it had been refunded). 

15.     I therefore consider that the five year period should run from the date of the formal application, ie from 13 October 2001 to 12 October 2006.    That also reflects the position that I am bound by, the decision of the Full Court of the Federal Court in Shi v Migration Agents Registration Authority (2007) 158 FCR 525, where it was held that events after the date of the Board’s decision cannot be taken into account.

16.     Mr Armstrong submitted that the Board should have considered other factors, “…. other than the five year work rule alone” (submission dated 20 July 2007).  There is some strength in that argument.  Regulation 156(2)(c) provides for relevant employment on a full-time basis for not less than a total of 12 months in the preceding five years (Regulation 156(2)(c)(i)) or such other employment as the Board regards as equivalent (Regulation 156(2)(c)(ii) and (iii)).  That implies therefore, that a rigid application of Regulation 156(2)(c)(i) is not the only construction to be placed on the applicant’s experience where it is determined under Regulation 156(2)(c)(ii) and (iii). But for the purposes of Regulation 156(2)(c)(i), there must be “relevant employment on a full time basis for not less than a total of 12 months in the preceding five years”, as determined by the Board. 

17.     “Relevant employment” as defined does not have to be viewed only in the sense of paid employment, as is the common expectation.  The Tax Agents’ Board viewed Mr Armstrong’s experience in the vein of education or training.  It was certainly practical training, but it had the virtue that they were real life returns upon which he worked (but with names obliterated).  The fact that he did it without remuneration is akin to the professional work environment for many newcomers in a particular professional discipline, with the exception that the characteristic of being paid was something which Mr Armstrong chose was not important to him for his present purposes.  

18.     The evidence submitted by Mr Armstrong is that he had completed a number of tax returns.  He equates this to an amount of weeks of work.  Given the rate of work of individuals differs, the better method of assessment from the Tribunal’s viewpoint is that based on the number of returns completed and compared against other precedents. 

19.     From the evidence provided, a summary of Mr Armstrong’s experience seems to be:

1 July 2000 to 28 October 2000	30 Individual tax returns 10 Partnership Returns
July to August 2000 (ITP)	18 Individual Returns
July to August 2000 (H&R Block)	33 Individual Returns
July to December 2001	166 Individual Returns
July to November 2002	9 Individual Returns
2006	9 Trust Tax Returns 5 Company Returns 3 Superannuation Returns

20.     In relation to the above statistics, I note that Mr Mar Fan has certified that Mr Armstrong worked for him for the period July to October 2001 (folio 94), whereas Mr Armstrong himself states that he worked from July to December 2001 (folio 135).  I have accepted Mr Armstrong’s submission in the absence of conflicting evidence.  I note also that Mr Armstrong has suggested that he has been involved in undertaking either “training” or completing a small number of non-individual taxation returns in 2005 in between the withdrawal of his first application and the submission of the current application.  These numbers seem to be similar to those quoted for the 2006 year (T13 folios 57 to 58) and I have assumed they are the same as those provided independently.  While I have not also taken account of a number of returns in 2005, they are relatively small comparatively and do not affect my judgement about Mr Armstrong’s satisfaction of the legislative requirements outlined below.

21.     Critically, the work experience must constitute “substantial involvement” in a “broad range of income tax returns”.  Mr Armstrong’s experience generally may be regarded as having covered a broad range of returns, albeit that some of that experience is now a little dated and not a volume of work that necessarily indicates a deep competency in some of those categories.  Therefore, I must determine whether there has been “substantial involvement” in the preparation of this broad range of returns.

22.     Ms Bowskill provided a comprehensive reference to relevant cases decided by previous Tribunals.  For example, in Re D’Alessandro and Tax Agents’ Board ofVictoria (1993) 25 ATR 1037 at [19] where the Full Tribunal (Deputy President Thompson and Members McLean and Woodward) concluded that “…. ‘substantial’ in reg 156(2) is well up on the scale”. 

23.     In Re Egulianand Tax Agents’ Board of New South Wales (1991) 91 ATC 2060 at [19], Deputy President McMahon said “[a] demonstration of academic capacity or a passing acquaintance with the types of problems that might be thrown up with the preparation or examination of such returns is not, in my view, sufficient to satisfy the requirements of the regulation.  Substantial involvement necessarily implies involvement to a substantial extent…. What is required is involvement in a substantial number of returns which represent a broad range.” 

24.     There must, therefore, be some extensive and deep competency at least in some areas of taxation returns.  There must also be experience in a “broad range of income tax returns”.  This does not necessarily mean extensive expertise in every type of tax return but must be considerable in at least some categories of returns.  This will depend on the circumstances in each case eg Re Civiti and Tax Agents’ Board of Victoria (1990) 21 ATR 3781; Re Kerr and Tax Agents’ Board of Queensland (1998) 39 ATR 1001; Re Modini and Tax Agents’ Board of Queensland (2005) 89 ALD 496.

25.     The facts of this case reveal an interesting dimension in the application of previous decisions concerning a broad range of tax returns.  Mr Armstrong clearly has a wealth of business experience and has some experience of a broad range of tax returns, but the number of returns completed over such a protracted period (even allowing for the inclusion of an extended period), cannot be said that he has had a “substantial involvement” in a “broad range of returns” over the preceding five years.  He has had experience of a broad range of returns but the volume of returns could not be regarded as a “substantial involvement”.  Importantly, in considering an assessment of this nature, is the issue of a person’s currency of knowledge and experience.  As the evidence shows, in the past five years, Mr Armstrong has undertaken 9 individual returns, 9 trust returns, 5 company returns and 3 superannuation returns.  If one was to consider an extended period from October 2000 (because of the circumstances of delay in dealing with his application), one could consider also that an additional 166 individual returns had been completed.  But it is apparent, that none of these latter returns have been completed since December 2001.  While that does not negate the degree of knowledge and experience accumulated over a long period of time, the importance of having current familiarity with the requirements of the law and tax rulings, should not be under-estimated.  For example, there have been quite significant changes in the law of Superannuation, and therefore the practice requirements, in the past 12 months or so. Therefore, the question is whether the small number of Superannuation returns undertaken in 2006 by the applicant is likely to provide a basis for coping, without supervision, with the issues of superannuation which previously existed and with the new requirements.

26.     In the final analysis, I am not satisfied that the applicant has either 12 months full-time relevant employment in the past five years nor is there evidence of sufficient “other employment” that would be relevant and equivalent to the requirements of Regulation 156(2)(c)(i).  To find otherwise, would defeat the purpose of the Regulations, that is, to register those who can transact business on behalf of taxpayers at the time of registration. 

Decision

27.     In the circumstances, the decision under review is affirmed.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, RFD, Senior Member

Signed:         ................[sgd].............................................................
           F. Kamst, Legal Research Officer

Date/s of Hearing  23 July 2007
Date of Decision  17 September 2007
Applicant  Mr Armstrong himself
Counsel for the Respondent     Ms H Bowskill      
Solicitor for the Respondent     Australian Government Solicitor