Birdseye and Tax Practitioners Board

[2021] AATA 1011

Birdseye and Tax Practitioners Board [2021] AATA 1011 (20 April 2021)

Division:TAXATION AND COMMERCIAL DIVISION

File Numbers:2020/1829, 2020/6693         

Re:Nicholas Birdseye

APPLICANT

AndTax Practitioners Board

RESPONDENT

File Numbers:         2020/1830, 2020/6694

Re:Claim IT (SA) Pty Ltd

APPLICANT

AndTax Practitioners Board

RESPONDENT

DECISION

Tribunal:Mr P W Taylor SC, Senior Member

Date:20 April 2021

Place:Adelaide

2020/1829, 2020/1830

Each of the Board’s 20 February 2020 registration termination decisions is affirmed. 

2020/6693, 2020/6694

Each of the Board’s 20 February 2020 five year determination decisions is set aside and in substitution for those determinations, the Tribunal determines that there is no period in which the respective review applicants may not apply for registration.

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

Mr P W Taylor SC, Senior Member

CATCHWORDS

TAX AGENTS – tax agent registration termination – whether applicants breached the Code of Professional Conduct – acting honestly and with integrity – conduct of personal affairs – competent provision of tax agent services – whether applicant is a fit and proper person – lodgement and payment defaults – decisions under review affirmed

TAX AGENTS – re-application determination – applicants ineligible to re-apply for registration for five year period – maximum ineligibility period – consideration of purpose of registration preclusion period – decisions under review set aside and substituted

LEGISLATION

A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 2-30, 27-5, 31-5, 31-15, 31-25, 33-3, 33-5, 162-5, 195-1

Corporations Act 2001 (Cth) s 203A

Fringe Benefits Tax Assessment Act 1986 (Cth) s 30

Income Tax Assessment Act 1936 (Cth) ss 8, 23L, 161, 161A, 162, 163, 166, 167, 168, 169, 252

Income Tax Assessment Act 1997 (Cth) ss 1-7, 5-5, 8, 28-115, 318, 355-100, 995

Industry Research and Development Act 1986(Cth) s 27A

Superannuation Guarantee (Administration) Act 1992 (Cth) ss 17, 19, 22, 23, 33, 35, 43, 46, 49, 57, 59

Superannuation Industry (Supervision) Act 1993 (Cth) ss 6, 11A, 35D

Tax Agents Services Act 2009 (Cth) ss 2-5, 2-10, 20-5, 20-15, 20-25, 20-45, 20-50, 30-5, 30-10, 30-15, 30-20, 30-35, 40-5, 40-15, 40-25, 50-5, 60-95, 60-100, 60-105, 60-110, 60-115, 60-120, 60-125, 90-5

Tax Agent Services Regulations 2009 (Cth) reg 8

Taxation Administration Act 1953 (Cth) ss 3A, 8C, 8D, 8F, 8Y, sch 1

CASES

A Solicitor v Council of the Law Society of NSW [2004] HCA 1; (2004) 216 CLR 253

Aero Marine Consulting Pty Ltd [2003] FCA 1016

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321

Carter and Tax Practitioners Board [2017] AATA 528

Cheng Li and Tax Practitioners Board [2014] AATA 299

Comino v Tax Agents’ Board of NSW [2009] AATA 766

Delis and Tax Practitioners Board [2015] AATA 820

Delis v Tax Practitioners’ Board [2016] FCA 570

Hancox and Commissioner of Taxation [2012] AATA 836

Hancox v Commissioner of Taxation [2013] FCA 735

Hughes and Vale Pty Ltd v State of NSW (No 2) (1955) 93 CLR 127

Phillip Same Accountants Pty Ltd and Tax Practitioners Board [2010] AATA 439

Proh and Tax Agents’ Board of Victoria [2010] AATA 149; (2010) 78 ATR 663

Shmuel and Tax Practitioners Board [2019] AATA 2168

SRBP and Tax Practitioners Board [2016] AATA 456; (2016) 103 ATR 708

Stasos v Tax Agents’ Board of New South Wales [1990] AATA 346; (1990) 21 ALD 437

Re Su and Tax Agents’ Board, South Australia [1982] AATA 127; (1982) 61 FLR 1

The Roads and Traffic Authority of NSW v Commissioner of Taxation (1993) 43 FCR 223

Toohey and Tax Agents' Board of Victoria [2009] AATA 603

Toohey v Tax Agents Board of Victoria (No 2) [2008] FCA 1796; (2008) 106 ALD 506

Toohey v Tax Agents' Board of Victoria (No 3) [2010] FCA 356; (2010) 78 ATR 905

Wyborn v Tax Agents’ Board of NSW [2007] AATA 1492

SECONDARY MATERIALS

Explanatory Paper TPB 01/2010 “Code of Professional Conduct”

Explanatory Paper TPB(EP) 02/2010 “Fit and proper person”

Information Sheet TPB(I) 28/2016

Notice of Requirement to Lodge a Return for the Year of Income Ended 30 June 2018

Practice Statement Law Administration PS LA 2011/15

REASONS FOR DECISION

Mr P W Taylor SC, Senior Member

20 April 2021

1. Mr Nicholas Birdseye (“Mr Birdseye”) has been a registered tax agent since about 1981.  Claim It SA Pty Ltd (“Claim It”) has been a registered tax agent since May 2002.  Claim It is the (or a) trustee of the Nicholas Birdseye Family Trust.[1]  Mr Birdseye is Claim It’s public officer and sole director, as well as being a beneficiary of the family trust.

   [1]Between March 2016 and March 2018 Claim It was the subject of a Federal Court of Australia insolvency winding up order.  During that period Claim It Financial Planning Pty Ltd, a company of which Mr Birdseye was also the sole director, was appointed as a trustee of the Family Trust, either in addition to, or in substitution for, Claim It.

2. Consistent with their similar registration status, and close association, Mr Birdseye and Claim It operated together, under the trading name Nicholas Birdseye & Associates (“NB&A”).[2]  After the Tax Agents Services Act 2009 (Cth) (“TASA”) came into operation Mr Birdseye and Claim It retained their status as registered agents, and continued to operate together.  NB&A had up to nine employees, including three other registered tax agents.  Its client base appears to have varied over time, and been within a range from about 2,500 to something in the order of 3,000 clients.  That was broadly the state of things at the time of the circumstances giving rise to the present proceedings.

   [2]In the review hearing Mr Birdseye estimated that he tried to conduct all the initial client interviews, and would have been personally involved in the preparation of about 80% of the client taxpayer income tax returns lodged by the combined practice.  Those claims may not be completely accurate, at least in relation to past events.  They seem rather extravagant claims, given that NB&A had about nine other staff members, including three registered tax agents.  They involve assertions that appear to differ significantly from what Mr Birdseye told the ATO in March 2015:-  see paragraph ‎171(c) below.  Nevertheless, I have accepted that Mr Birdseye was a controlling and active influence in the practice and, for the sake of simplicity, I will usually simply refer to the tax agent practice entity as “NB&A” – without attempting to differentiate between Mr Birdseye’s conduct and the activities of other Claim It personnel.

3. The principal aspects of those circumstances were the decisions by the Tax Practitioners Board (“the Board”), at its 20 February 2020 meeting, to terminate the registrations of both Mr Birdseye and Claim It.  The Board also decided to prohibit each of them from applying for re-registration for a period of five years .  The Board made those decisions, under TASA ss 40-5(1)(b), 40-15(1)(b) & 40-25(1).  The Board’s 2 March 2020 letters notified Mr Birdseye of those findings and decisions.  The letters informed him that the termination decisions would take effect from 1 April 2020.

4. The termination decisions were the subject of an interim, and conditional, stay ordered by this Tribunal on 31 March 2020.  That stay came to an end on 8 May 2020, when the Tribunal’s reserved decision formally refused the stay applications Mr Birdseye and Claim It had made.

   THE GROUNDS FOR THE BOARD’S TERMINATION DECISION

5. The Board’s February 2020 decisions followed investigations it had notified to Mr Birdseye in letters dated 20 September 2019.  The notice letters alluded to allegations that Mr Birdseye and Claim It had failed to comply with / satisfy various TASA provisions.  The specific, but unparticularised, allegations were that the two tax agents (i) had not acted with honesty and integrity as tax agents, (ii) had not complied with taxation laws in relation to their personal affairs and, (iii) were not “fit and proper” entities for registration.  In the case of Claim It, the investigation notice also alleged that the company “may have” failed to ensure that its tax agent services were provided competently.

6. Although the Board’s investigation notices were themselves uninformative, they followed, and were likely prompted by, three misconduct complaint referrals from the ATO.  Those referrals had occurred in August 2018, November 2018 and July 2019.

7. August 2018:- The 29 August 2018 referral was the result of the Australian Taxation Office’s (“ATO”), partially completed, audit of 53 income tax returns (“ITRs”) of NB&A clients.  Those ITRs predominantly related to the 2015 / 2016 tax year.  The ATO’s August 2018 letter explained that the particular clients had been selected for audit because they had large claims for work related expenses, and for rental property expenses.  The substance of the ATO audit findings, and related assessments, was that the 31 completed client audits had resulted in:  

   (a)approximately 168 audit adjustments, of which 76 involved work related expense claims, and another 76 involved property expense claims;

   (b)42 adjustments (the majority of which necessarily involved either work related, or property, expense claims) that had been the result of voluntary disclosure by the taxpayer clients;

   (c)a total (net) value of $581,724 for all the audit adjustments, and an overall tax shortfall of $193,120.45;

   (d)an overall total of 147 penalties (121 for lack of reasonable care, and only 23 for recklessness) totalling $46,815.35;

   (e)only eight instances where the audit assessment had been the subject of objections – and resulted in (i) six objection decisions, (ii) three instances where all the expenses claims had been allowed and, (iii) three instances where the property expense claims had been allowed.

8. November 2018:- The ATO’s 8 November 2018 referral related to three companies of which Mr Birdseye was recorded as being a director.  Those companies, and the subject matter of the ATO’s concerns, were as follows:-

   (a)Medlow Chocolates Pty Ltd:-  The company had unpaid superannuation guarantee obligations for at least the period from 1 July 2016 to 30 September 2017, and a vaguely described, but apparently relatively modest, GST shortfall and penalty liability in relation to Business Activity Statements (“BAS”) for the three quarters in the tax year ended June 2015.

   (b)Sazzii Pty Ltd:-  The company had an outstanding tax debt of $124,189.  The debt arose from an unsubstantiated research and development expense claim in Sazzii’s 2013 ITR.  The 2013 ITR was the only income tax return the company had lodged in the 11 year period from 2008 to 2018.

   (c)Podpac Pty Ltd:-  The company had not lodged its 2013 ITR.

9. July 2019:-  The ATO’s 2 July 2019 referral report also related to Medlow Chocolates Pty Ltd.  It identified three aspects of the company’s ongoing taxation obligation defaults.  They were (i) ITR lodgement default (for all the tax years from June 2015 to June 2018), (ii) BAS lodgement defaults (for the 30 month period from January 2016 to September 2018) and, (iii) superannuation guarantee lodgement and payment defaults (for the period from December 2017 to June 2018).

10. The extent of, and Mr Birdseye’s activities during, the Board’s investigation process are not readily apparent.  At about the same time he received the Board’s notice Mr Birdseye was apprised of the ATO’s intention to audit his 2018 ITR, and consider the state of his lodgement compliance.  Perhaps unsurprisingly, therefore, his immediate response to the Board’s notice conveyed a lack of surprise, an expectation the ATO would make submissions to the Board, and an assumption that he would have an opportunity to respond to those submissions.  Shortly after that initial response he contacted the ATO, ascertained the extent of outstanding ITR lodgement obligations of entities with which he was associated, and agreed to lodge the required returns by 11 October 2019. 

11. For its part the Board’s investigation appears to have involved consideration of the ATO’s previous referrals, obtaining further information from the ATO about Mr Birdseye’s association with various entities, and their outstanding lodgement and debt obligations.  In addition, in mid December 2019 the Board issued questionnaires to, but obtained only five uninformative responses from, 22 NB&A clients.  Those clients had not been included in the ATO’s previous referrals, but the Board knew their 2018 / 2019 ITRs had recently been audited.  (The audit results were later included in the ATO’s April 2020 referral).[3]  This limited information indicates the Board’s investigation, particularly in relation to the ATO client audits, proceeded largely as a document gathering exercise, and attached primary significance to the appearance (from the ATO’s referral documents) of taxation law non-compliance by Mr Birdseye and Claim It.  At least in hindsight, and perhaps not only so, this apparently limited nature of the investigation process was regrettable.  The Board had ample powers of investigation (see paragraph ‎32 below), it knew that Mr Birdseye was critical of the ATO audit process and conclusions, and his response to the investigation notices indicated (clearly enough) that he expected to be afforded an opportunity to address the ATO’s views about the client audit issues during the investigation process.  Against that background, the miscommunication that preceded the Board’s termination decisions (see paragraph ‎16 below), and the somewhat ambiguous, but essentially serious (and ultimately abandoned), adverse finding the Board made about Mr Birdseye’s honesty in relation to work related expense claims (see paragraphs ‎17 & ‎22 below), it would have been preferable if the investigation process had fully utilised the Board’s powers.  Such a course would likely have diminished (and perhaps avoided) not only the questionable factual basis for some of the Board’s findings (see paragraphs ‎97 & ‎138 to ‎142 below), but also the subjective perception of procedural unfairness that was detectable both in Mr Birdseye’s April 2020 affidavit (see, for example, paragraphs ‎206(a) & ‎206(b) below) and in his submissions in the course of the review proceedings.

    [3]A sixth questionnaire response, not included in the February 2020 submissions documents, was provided with a 21 August 2020 email from the Board to Mr Birdseye’s solicitor.  That email also confirms that the Board neither interviewed any NB&A clients nor requested any further information from them.

12. In any event, by early February 2020 Board officers had prepared two submissions.  They were provided to Mr Birdseye in early February 2020, and considered by the Board at its 20 February 2020 meeting.  The Board submission relating to Claim It was a 923 page document that included a 13 page summary and 30 attachments.  The summary noted the ATO’s March 2016 referral to the Board, and recorded the following matters:-

    (a)Claim It’s BAS lodgement defaults for the period from May to November 2019:- see paragraph ‎52 below.

    (b)the fact that Claim It had made no BAS payments since mid-October 2018, and that its currently recorded (GST and PAYG withholding) tax debt approximated $68,500: – see paragraph ‎59 below.

    (c)the fact of a substantial tax debt, that Claim It had incurred prior to March 2016:-  see paragraph ‎13 below.

    (d)the ATO’s referrals of December 2015 (see paragraph ‎171 below) and August 2018 (see paragraphs ‎7 above & ‎175 below) concerning the quality of Claim It’s tax agent services.

13. In relation to Claim It’s March 2016 tax debt, the February 2020 submission briefly recorded the following series of events:- 

    (a)April 2015:-  Claim It had a (GST and PAYG withholding) tax related debt of $275,814 and had received a statutory demand from the ATO.

    (b)October 2015:-  Claim It failed to have the statutory demand set aside.

    (c)January 2016:-  Relying on the statutory demand, the Deputy Commissioner of Taxation commenced winding up proceedings against Claim It.

    (d)February 2016:-  By the beginning of February 2016, Claim It’s tax related debt had increased to $351,430.  On 24 February 2016, Mr Birdseye had been issued with a $152,130 director penalty notice.  (The notice related to Claim It’s unpaid PAYG withholding liabilities for substantially the whole of the three year period from September 2012 to November 2015.)

    (e)23 March 2016:-  The Federal Court of Australia had ordered that Claim It be wound up in insolvency.  At that date, Claim It’s tax related debt approximated $411,000.

    (f)March 2018:-  Claim It and Mr Birdseye had disputed the 2014 to 2016 income tax liabilities of the Nicholas Birdseye Family Trust.  That dispute had been resolved by a 13 March 2018 Deed of Settlement.  As part of the underlying arrangements Claim It had first been placed in administration and, in the latter part of 2018, funded by a $230,000 payment from Mr Birdseye, it then “traded” out of administration.

14. Proper understanding of that, somewhat cryptic, summary of the circumstances of Claim It’s tax debt as at March 2016 requires regard to the supporting attachments to the Board’s February 2020 submission document.  They establish that under the March 2018 arrangements:-

    (a)the Commissioner of Taxation had agreed

    (i)not to disallow “carry-forward loss” claims in the Family Trust’s pre 2016 ITRs;

    (ii)to support a Deed of Company Arrangement for Claim It;

    (iii)to release Mr Birdseye from liability under the February 2016 director penalty notice.

    (b)Claim It Financial Planning Pty Ltd (as the then trustee of the Family Trust) agreed to discharge all of the Trust’s 2016 to 2018 (i.e. Claim It’s period in liquidation) BAS lodgement, and payment, obligations by 31 March 2018.

    (c)Mr Birdseye provided $230,000 to fund the Deed of Company Arrangement.

    (d)Creditors accepted their Deed rights and otherwise released their claims.

    (e)The Deed Administrator was to distribute the fund between Claim It’s admitted creditors.

15. The Board submission relating to Mr Birdseye himself contained a 22 page summary and 64 attachments, resulting in just over 1,100 pages of material.  A substantial part of the summary addressed the ATO’s December 2015 referral and its August 2018 audit.  It also outlined Mr Birdseye’s apparent status, as a director or trustee, of eight different entities.  In relation to those entities, the submission noted various lodgement defaults and tax debts, including instances where Mr Birdseye had received a director penalty notice.

16. As an apparent result of their sheer volume, and some miscommunication between the Board officers and Mr Birdseye’s representative, Mr Birdseye did not respond to the substance of the submission documents before the Board’s 20 February 2020 meeting.  Perhaps unsurprisingly therefore, the Board substantially accepted the submissions, and the findings they invited.  In relation to Mr Birdseye the Board found that, in the following respects, he had breached the TASA “Code of Professional Conduct” (“Code”) obligation to comply with taxation laws in the conduct of his personal affairs:-  see TASA s 30-10(2)

    (a)he had an undischarged direct personal tax debt of $998[4];

    (b)as a director of Claim It, he had an undischarged (GST and PAYG withholding) tax liability approximating $69,000;

    (c)as a director of the corporate trustee of the Nicholas Birdseye Family Trust (relevantly, Claim It) he had failed to lodge seven BAS since about May 2019;

    (d)at numerous times between about June 2014 and early 2020, he had failed to lodge ITRs and BAS for about three entities (Medlow Chocolates Pty Ltd, and the two Group (ii) superfund entities listed in Schedule 1 to these reasons) of which he was (or had been) either a director or trustee;

    (e)as a former director of Sazzii Pty Ltd he had an undischarged (income) tax liability approximating $124,000, resulting from a false and misleading research and development / tax offset claim in the company’s 2013 ITR;

    (f)as a director of AFG Group Pty Ltd he had an undischarged (superannuation guarantee charge) tax liability approximating $56,000.

    [4]This debt was not identified in the Board’s February 2020 submission document.  It was not included in the Board’s contention document, nor in the Board’s written submissions.  It was not referred to in the oral evidence.  In those circumstances I have assumed the asserted debt is immaterial and I have not included reference to it in the Schedules to these reasons.

1. The Board also decided Mr Birdseye no longer satisfied the TASA s 20-5(1) registration eligibility requirement (relevantly, the requirement to be of “good fame, integrity and character”).  The Board’s decision resulted from findings that Mr Birdseye:

   (a)had “facilitated” Sazzii Pty Ltd’s unsupported tax offset claim;

   (b)had been “party to” AFG Group Ltd’s failure to lodge / make its superannuation guarantee payments for the December 2015 quarter;

   (c)as a former director of AFG Group Ltd, had an undischarged tax liability, approximating $122,000, relating to the company’s superannuation guarantee obligations;

   (d)as a former director, was relevantly “responsible” for various tax lodgement defaults, misleading statements, and payment defaults by another corporation - Medlow Chocolates Pty Ltd

   (e)had knowingly obstructed the proper administration of taxation laws by lodging ITRs (specifically for the 2012, 2013 and “2017” tax years) that contained “unsubstantiated or false” work related expense claims;[5]

   (f)had repeatedly made similar unsubstantiated claims, despite previous warnings about the client risks they presented;

   (g)over a long time, had demonstrated a “pattern of dishonesty” that went beyond being merely careless or reckless;

   (h)had been unprofessional and unco-operative in dealings with ATO officers.[6]

   [5]The Board’s 14 October 2020 contention document adhered to the proposition that Mr Birdseye had knowingly submitted “unsubstantiated or false” work related expense claims.  However, in its oral final submissions (recorded at Transcript 202.5) the Board expressly abandoned that contention. 

   [6]The Board did not articulate, in its letter to Mr Birdseye, his involvement in / responsibility for Claim It’s lodgement and payment defaults as a reason for its adverse assessment of his registration fitness.  However, it did rely on that matter in its adverse assessment of Claim It’s registration fitness:  see paragraph ‎22 below. 

2. The Board’s finding about 2012 and 2013 client ITRs relied on information contained in two ATO referrals, dated 17 September 2014 and 8 December 2015, that are discussed later in these reasons:-  see paragraphs ‎168 to ‎171 & ‎172 to ‎175.  The Board’s finding about the contents of client ITRs for the 2017 tax year was a misdescription.  It relied on the information contained in the ATO’s 29 August 2018 referral report.  That report addressed client ITRs for 2014 and 2016 (not 2017), and is also addressed later in these reasons:  see paragraphs ‎175 to ‎184 below.

3. The Board’s five year registration application prohibition relating to Mr Birdseye was based on (i) its characterisation of his taxation law non-compliance as serious, (ii) its assessment of the “dishonesty” involved in the client ITR work expense claims and, (iii) its view that he had failed to heed a formal May 2013 caution relating to similar client ITR expense claims (and apparently similar “personal affairs” non-compliance):-  see paragraphs ‎159 & ‎161 below.

4. In relation to Claim It, the Board found that it had also breached the TASA Code obligation to comply with taxation laws in the conduct of its “personal affairs”:-  see TASA s 30-10(2).  The grounds for this conclusion were Claim It’s:

   (a)failure to lodge seven BAS for the periods from May 2019 to November 2019;

   (b)undischarged (GST and PAYG withholding) tax liabilities approximating $69,000.

5. The Board also found that Claim It had breached the TASA Code obligation of competent service provision:-  see TASA s 30-10(7).  The grounds for this conclusion were:

   (a)shortfall and penalty assessments (approximating a combined total of $720,000) that resulted from an ATO audit of 2012 and 2013 ITRs for 46 NB&A clients;

   (b)similar shortfall and penalty assessments (approximating $400,000) that resulted from an ATO audit of various 2014, 2015 and 2016 ITRs for 48 NB&A clients;

   (c)the ATO’s audit determinations that the relevant shortfalls were attributable to “a lack of reasonable care and / or recklessness”.

6. The Board’s ultimate finding was that Claim It no longer met the “fit and proper” registration eligibility requirement:-  see TASA s 20-5(3)(a).  This was because of the Board’s dissatisfaction that Mr Birdseye, its sole director, himself met that eligibility criterion.  The Board’s dissatisfaction resulted from its findings that Mr Birdseye:  

   (a)had been the sole director of Claim It when it incurred the $351,430 tax debt, that had led to the company’s insolvency, and (temporary) winding up, in March 2016: - see paragraphs ‎13 & ‎14 above;

   (b)had caused Claim it to fail to comply with its BAS lodgement, and related payment, obligations:-   see paragraph ‎18 above;

   (c)through “recklessness, lack of reasonable care and disregarding [relevant] decisions”[7] had “participated in the facilitation of a series of” unsubstantiated work related expense claims in clients ITRs, throughout a period up to 2018;

   (d)had demonstrated a level of dishonesty in submitting unsubstantiated work related expense claims in clients ITRs.[8]

   [7]The “relevant decisions” were Hancox v Commissioner of Taxation [2013] FCA 735. They are discussed later in these reasons: see paragraphs ‎160 to ‎166 below.

   [8]In its oral final submissions (recorded at Transcript 202.3) the Board expressly abandoned any contention that Mr Birdseye had knowingly submitted “unsubstantiated or false” work related expense claims.

7. In imposing a five year registration application prohibition on Claim It, the Board seems to have considered that the prohibition would have some general deterrent effect.  The Board relied on substantially the same findings on which it had based its decision relating to Mr Birdseye:-  see paragraph ‎18 above.  It supplemented those findings with the observation that the “consistent and systemic” (mis)behaviour involved in the submission of unsubstantiated expense claims carried with it an unacceptable risk of repetition, even if Claim It came under the control of another supervising agent.  Inherent in that aspect of the Board’s reasoning was the view that the registration application prohibition had some protective effect, in promoting confidence in the integrity of the “registered tax practitioner profession”.

   TASA PROVISIONS RELEVANT TO AGENT REGISTRATION AND CONDUCT

8. Evaluating the significance of the circumstances on which the Board relies as warranting the affirmation of its decisions requires an understanding of the underlying TASA purpose, and the role of the Code in the statutory TASA scheme.  The TASA purpose is to ensure that tax agent services are provided “in accordance with appropriate standards of professional and ethical conduct”:- see TASA s 2-5.[9] The TASA scheme involves the establishment of the Board, endowing the Board with registration, conduct investigation and disciplinary functions, and the enactment of a mandatory “Code of Professional Conduct” for tax agents. The Board administered registration regime is a fundamental means of effectuating TASA’s stated purpose. A person must be a registered tax agent to be able to charge for providing “tax agent services” - unless they do so as a practising lawyer:- see TASA ss 2-10 & 50-5. 

   [9]The expression “tax agent services” is broadly defined, and generally includes providing advice and representation services relating to Commonwealth taxation matters: see TASA s 90-5.

9. A threshold registration eligibility requirement is an applicant’s probity and good repute. An individual registration applicant must satisfy the Board that they are a “fit and proper person”:- see TASA s 20-5(1)(a). A corporate applicant for tax agent registration must satisfy the Board that each of its directors is a “fit and proper person”:- TASA s 20-5(3)(a).

10. Subject to any more specific eligibility requirements, an individual applicant (and any director of a corporate applicant) will likely satisfy the Board they are “fit and proper” if they can adequately demonstrate they are of “good fame, integrity and character”:- TASA s 20-15(a). The considerations that may inform such an assessment are not prescriptively defined:- see TASA s 20-15(b); Toohey v Tax Agents’ Board of Victoria (No 2) [2008] FCA 1796; (2008) 106 ALD 506 at [3]. They must include, but the assessment is neither limited to, nor explicitly determined by, circumstances where, in the preceding five years, the person has:-

    (a)served, or has been sentenced to, a term of imprisonment:- TASA ss 20-15(b)(i) & 20-45(f); 20-15(b)(iii);

    (b)had the status of an undischarged bankrupt:- TASA ss 20-15(b)(ii) & 20-45(e);

    (c)been convicted of any offences involving fraud or dishonesty:- TASA ss 20-15(b)(i) & 20-45(b); and

    (d)been convicted of a “serious taxation offence”[10] or sanctioned for certain other kinds of tax related misconduct:- TASA ss 20-15(b)(i) & 20-45(a), (c) & (d).

    [10]A “serious taxation offence” is either (i) a tax liability related dishonesty offence against the Criminal Code (specifically ss 134.1, 134.2, 135.1, 135.2 or 135.4) or, (ii) a “taxation offence” that is punishable by either imprisonment or a fine exceeding 40 penalty units: TASA s 90-1. A “taxation offence” includes any offence against legislation administered by the Commissioner of Taxation: see paragraph ‎38 below.

11. The registration eligibility criteria for an individual tax agent include appropriate qualifications, experience and professional indemnity insurance:- TASA s 20-5(1)(b) & (c); Tax Agent Services Regulations 2009 (Cth) reg 8. The similar eligibility criteria for an incorporated tax agent entity include (i) not having incurred a conviction for fraud, dishonesty or a “serious taxation offence” within the preceding five years, (ii) having sufficient registered individual tax agents to provide (and supervise the provision of) competent tax agent services and, (iii) having requisite professional indemnity insurance:- TASA s 20-5(3).

12. An applicant who satisfies the relevant eligibility requirements, must be registered:- TASA s 20-25. Their registration may be subject to conditions relating to the subject matter of the services the tax agent can provide:- TASA s 20-25(5) & (6). Registration must be for a minimum period of three years:- TASA s 20-25(4). Registration is renewable in response to a timely (or otherwise permitted) application:- TASA s 20-50(1). Where an agent has submitted a timely renewal application, their registration is taken to continue until the Board determines the application:- TASA s 20-50(2).

13. As a registered person, a tax agent is subject to various obligations. They include:-

    (a)compliance with any registration conditions imposed by the Board:- TASA s 20-25(5);

    (b)notifying the Board “whenever” they cease to meet any registration requirements:- TASA s 30-35(1)(a);

    (c)notifying the Board if they have (amongst other things) been convicted of a “serious taxation offence”, convicted of any other offence involving fraud or dishonesty, or sentenced to imprisonment:- TASA ss 30-35(1)(b) & 20-45(a), (b) & (f); and

    (d)compliance with the statutory Code of Professional Conduct:- TASA ss 30-5 & 30-10.

14. The TASA Code sets out basic requirements of honesty, competence, lawfulness, and client best interest.  Relevant to the Board’s findings, they include the following obligations:

    (a)to act honestly:-  TASA 30-10(1);

    (b)to comply with “taxation laws” in the conduct of their “personal affairs”:-  TASA 30-10(2);

    (c)to ensure that tax agent services are provided competently, and not “knowingly obstruct” the proper administration of taxation laws:-  TASA 30-10(7); 30-10(11);

    (d)to take “reasonable care”, both in ascertaining a client’s state of affairs and in advising a client, “to ensure that taxation laws are applied correctly”:-  TASA 30-10(9) & 30-10(10);

    (e)to advise clients of their taxation law rights and obligations:-   TASA 30-10(12).

15. The Board can terminate a tax agent’s registration in various circumstances. One obvious circumstance is where the agent ceases to meet a registration requirement:- TASA s 40-5(1)(b). Another is where an agent has breached a condition of their registration:- TASA s 40-5(1)(c). Further termination grounds include those where a tax agent has either (i) been convicted of a “serious taxation offence” (or a dishonesty offence), (ii) become bankrupt or, (iii) been sentenced to imprisonment:- TASA ss 40-5(1)(a) & 20-45(a), (b), (e) & (f). Where the Board has conducted an investigation into an agent’s conduct, and concluded the agent has failed to comply with the Code, there are further statutory powers to (i) impose a requirement for supervision of the agent, (ii) require the agent to undergo training or education, and (iii) suspend or terminate the agent’s registration:- TASA ss 30-15(2) & 30-20(1). 

16. In conducting an investigation, the Board has some procedural restrictions, but significant powers.  The Board:

    (a)must give prompt written notice of its decision to investigate:-  TASA s 60-95(2);

    (b)may compel any person to produce (and may itself retain) documents, and to provide information:-  TASA ss 60-100, 60-120;

    (c)may require the appearance of persons for the purpose of giving evidence on oath or affirmation, and require their response even it would tend to expose them to a risk of penalty or incrimination:-  TASA ss 60-105, 60-110 & 60-115;

    (d)must (ordinarily) make any determinative investigation decision within six months:-  TASA ss 60-125(3)-(6); and

    (e)must notify its investigation decision within 30 days:-  TASA s 60-125(8).

17. When the Board terminates a tax agent’s registration (for reasons other than the agent’s insolvency) it may also preclude the agent from applying for re-registration, for a period of up to five years:- TASA s 40-25(1) & (2).

18. The TASA registration eligibility criteria, and the TASA Code provisions, clearly show that probity (both as to character and repute) and lawful conduct (particularly in relation to Commonwealth taxation laws) are fundamental requirements of registered tax agents.  Competence is also an important eligibility and performance requirement.  That combination of considerations demonstrates that the TASA scheme involves two aspects of “public interest”.  One aspect is that of facilitating the general availability of competent tax agent services provided by persons who satisfy the TASA registration and conduct requirements.  The other is that of establishing a supervised regime for ensuring compliance with appropriate standards in the provision of those services.  A person who satisfies the requirements of competence, and is also of good character, is ordinarily entitled to registration.  Conversely, a person who does not satisfy both the competence and character (i.e. fit and proper) requirements is not eligible for registration and, if registered, is liable to have that registration terminated.

    THE CONTENT OF THE TASA CODE COMPETENCE AND REASONABLE CARE OBLIGATIONS

19. The competence and care obligations of the Code provisions in TASA s 30-10(7), (9) & (10) obviously require a registered tax agent to possess, and maintain, relevant qualifications, appropriate knowledge and skills, and to ensure that their relevant employees and contractors have correspondingly appropriate competence and skills.  These general requirements are the subject of extended, and informative, exegetical guidance in several Board publications, particularly (i) the Board’s Explanatory Paper TPB 01/2010 “Code of Professional Conduct” (“TPB 01/2010”) (at paragraphs 96 to 115) and, (ii) the Board’s Information Sheet TPB(I) 28/2016 (“TPB(I) 28/2016”) (at paragraphs 7 to 19).

20. The Board’s guidance in relation to the Code obligation to ensure competent provision of tax agent services (TASA s 30-10(7)) focusses principally on the basic requirements of a tax agent’s underlying integrity, knowledge and capacity:-   see TPB 01/2010 paragraphs 101 & 105 to 113.  Beyond those requirements, the Code’s concerns about competence inevitably overlap with the “reasonable care” obligations expressed in TASA s 30-10(9) & (10).  Competence in the provision of tax agent services necessarily requires the exercise of “reasonable care”, both in the agent’s own client dealings, and in the supervision and review of client services provided by the agent’s employees and contractors.

21. The exercise of “reasonable care”, particularly in the context of the scope of appropriate client enquiry, and the acceptance / assessment of client provided information, is clearly a matter of considerable aspirational (and practical) importance to the TASA scheme.  The content of the “reasonable care” standard or requirement is not however, readily amenable to precise or inflexible prescription.  That reality is readily apparent from other parts of the guidance contained in TPB 01/2010 (and the similar content in TPB(I) 28/2016).  That guidance includes the following propositions:-

    (a)A registered tax agent, because of their qualifications, knowledge and experience, should display a greater degree of care than that expected of an “ordinary” taxpayer:-  TPB 01/2010 paragraph 121;

    (b)The scope of a registered tax agent’s “reasonable care” obligation necessarily depends on the nature of their engagement, and the particular circumstances, including the knowledge and experience of the particular client:-  TPB 01/2010 paragraphs 120 & 125;

    (c)A registered tax agent is not required to “audit” the information provided by clients, and may accept that information, without further checking where it is apparently “plausible” / consistent / complete / reliable, and the agent does not have a basis to doubt its accuracy:-  TPB 01/2010 paragraphs 122, 127 & 129;

    (d)Notwithstanding the disavowal of any “audit” requirement, “reasonable care” requires appropriate client enquiry, awareness of potential inaccuracy in / omission from, information provided by “ordinary” taxpayers (i.e. unqualified / inexperienced clients without a sound understanding of their relevant taxation obligations), and appropriate enquiry about any such inaccuracy or omission:-  TPB 01/2010 paragraphs 123, 126 & 128;

    (e)Reasonable care enquiry may “where appropriate” require a registered agent to obtain supporting documents and records:-  TPB 01/2010 paragraph 124;

    (f)The “where appropriate” qualification (in the preceding proposition) likely depends on a “professional judgment” that takes into account the quality of the information provided, its consistency with other known information, and “the nature of the client themselves”:-  TPB(I) 28/2016 paragraph 9;

    (g)Reasonable care to “ensure” taxation law compliance requires a tax agent to give “appropriately serious attention” to the relevant principle or obligation, rather than to achieve the objectively correct interpretation, or application, of the relevant law:-  TPB 01/2010 paragraphs 133 & 135.

    THE RELEVANT TAXATION LAW OBLIGATIONS

22. The “taxation law” compliance obligation in TASA s 30-10(2) obviously applies to the TASA provisions, and extends to require compliance with any legislation to the extent it is administered by the Commissioner:-  see TASA s 90-1(2) & ITAA 97 s 995(1).  That legislation includes:-

    (a)the Income Tax Assessment Act 1936 (Cth) (“ITAA 36”):- ITAA 36 s 8

    (b)the Income Tax Assessment Act 1997 (Cth) (“ITAA 97”):-  ITAA 97 s 1-7

    (c)the Taxation Administration Act 1953 (Cth) (“TAA”):- TAA s 3A

    (d)the GST Act (i.e. A New Tax System (Goods and Services Tax) Act 1999 (Cth)):- GST Act s 2-30; TAA s 3A;  TAA Schedule 1 s 155-15

    (e)the Superannuation Guarantee (Administration) Act 1992 (Cth) (“SGAA”):- SGAA s 43

    (f)the Superannuation Industry (Supervision) Act 1993 (Cth) (“SISA”) – in relation to self managed superannuation funds:- SISA s 6(1)(e)(i) (ea) & (f).

1. ITR lodgement and payment obligations:- A taxpayer’s ordinary obligation to lodge an income tax return arises from the combined effect of ITAA 36 s 161(1), and the content of the annual Government Gazette notice which that section contemplates. Consistent with the ITAA 36 s 161 authority, such a notice typically describes the exempted persons, the persons required to lodge an income tax return for the income year, and the date by which their return is to be lodged. Both ITAA 36 s 161A and the notice require the return to be in the form approved by the Commissioner:- see TAA Schedule 1 s 388-50.  Failure to lodge a required return is an “absolute liability” offence, ordinarily punishable by a fine not exceeding 20 penalty units (and, in the case of convictions for subsequent offences, potentially by a fine exceeding 50 penalty units and/or by imprisonment):-  TAA ss 8C, 8D & 8F.  The offence also gives rise to an administrative penalty liability:-  see TAA Schedule 1 ss 286-75 & 286-80.

2. The Board (uncontentiously) proffered the 14 page Notice of Requirement to Lodge a Return for the Year of Income Ended 30 June 2018 as an illustrative example of the usual content and timing of the ITR lodgement obligation, and the exemption criteria. That notice described 10 categories of persons required to lodge returns, and six categories of persons exempt from the lodgement requirement.  Many of both the lodgement and exemption criteria are subject to conditions, and some overlap.  The nature and complexity of the criteria can lead to difficulty in identifying instances of non-compliance.  As a practical means of obviating those potential difficulties, a taxpayer who considers that the lodgement requirement does not apply to them can notify the ATO that their return is “not necessary”.  In such a case, the ATO has indicated that it is likely to accept the notification, but retains the statutory power to require an ITR lodgement:- see Practice Statement Law Administration PS LA 2011/15 at [88] & ITAA 36 ss 162 & 163. 

3. Given the circumstances of Mr Birdseye and Claim It, the relevant ITR lodgement requirement categories (as typified in the 2018 Notice) included the following entities:- 

   (a)Australian residents (other than trustees, and those who received various social security payments) whose income exceeded the $18,200 assessable threshold:-  Table B Item (1);

   (b)Business operators:-  Table A item (6);

   (c)Australian resident superannuation fund trustees:-  Table D item (1);

   (d)Most other kinds of trustees, where they derived income during the tax year:- Table E.

4. The generally applicable time for lodging an ITR, where the taxpayer’s year ends on 30 June, is the end of the October in the same year. Thereafter, income tax becomes due and payable only if the Commissioner makes (or is deemed to have made) an assessment: under ITAA 36 ss 166 to 169:- ITAA 97 s 5-5(2).  The assessed income tax amount is ordinarily payable 21 days after the required ITR lodgement date, or 21 days after any notice of an assessment made in response to a timely return or, in the case of a “self assessment entity” (ordinarily a corporation or trustee) five months after the end of the person’s tax year:  ITAA 1997 s 5-5(4) to 5-5(6).  Where income tax has not been paid by the due date it becomes recoverable as a debt due to the Commonwealth:- TAA Schedule 1 s 255-5.  The Commissioner has a general discretion to permit any “tax related liability” to be paid by instalments under a “payment arrangement”:-  see TAA Schedule 1 s 255-15.

5. Withholding and P(ay)A(s)Y(ou)G(o) obligations:-  Where an entity pays remuneration to any of their employees or directors they are required to withhold part of the otherwise payable remuneration amount:-  TAA Schedule 1 ss 12‑35, 12-40 & 16-5.  The amount required to be withheld depends on either the withholding schedules made by the Commissioner of Taxation, or any applicable regulations:-  TAA Schedule 1 ss 15-10 to 15-35. Failure to withhold the required amount constitutes a strict liability offence.  That offence is punishable by a fine not exceeding 10 penalty units, and also renders the person liable to the Commissioner for the amount that ought to have been withheld:- TAA Schedule 1 ss 16-25, 16-30.  An entity must pay any withheld amounts to the Commissioner.  The time for making any such payment depends on whether the entity is a “large”, “medium” or “small” withholder.  A “medium” withholder (i.e. broadly speaking, an entity whose withheld amounts in the preceding year were more than $25,000 but less than $2 million) must typically pay the withheld amount monthly (by the end of the fourth week of the following month) and in a manner approved by the Commissioner:-  TAA Schedule 1 ss 16-70, 16-75, 16-85(2),16-95 to 16-105. (Such a medium withholder must submit a monthly “IAS” - Instalment Activity Statement.)A “small” withholder must typically make the payment within three weeks after the end of the quarter in which the amount was withheld:-  TAA Schedule 1 s 16-75. Any payment delay attracts a general interest charge liability:- see TAA Schedule 1 s 16-80; and exposes the defaulter to the risk of being subject to the Commissioner’s “estimate” liability in relation to payment default:- see TAA Schedule 1 ss 268-5 to 268-30.

6. An entity that has business or investment income can be required, by a Commissioner’s notice, to make (typically monthly) instalment payments towards their income tax liability:-   TAA Schedule 1 ss 45-5, 45-15 & 45-50.  Such an entity must provide the Commissioner with an approved form of notice of their “instalment income”, and do so by the time any instalment payment is due:-  TAA Schedule 1 s 45-20.  Generally speaking, quarterly instalment payments are due 21 days after the quarter ends:-  TAA Schedule 1 s 45-61. Notification, and payment, failures attract a monetary penalty, as well as a general interest charge:-  TAA Schedule 1 ss 45-25 & 45-80.

7. BAS lodgement and payment obligations:- Persons who carry on an enterprise and are either registered, or required to be registered, under the GST Act must submit a GST return within (broadly speaking) 21 to 28 days after the end of their applicable tax period (typically either monthly or quarterly). That GST return obligation applies irrespective of the amount of their GST liability:- GST Act ss 27-5, 31-5.  In the ordinary case, the GST return must be in the approved form, and may be lodged electronically:-  GST Act ss 31-15, 31-25, 195-1; TAA Schedule 1 s 388-50.  Lodgement failure is another absolute liability offence, and attracts the same fine sanctions as those that apply to ITR lodgement failure:-  see paragraph ‎39 above.

8. A BAS return takes effect as an assessment by the Commissioner:-  TAA Schedule 1 s 155-15(1). Where the GST return discloses an “assessed net amount” the person must ordinarily pay that amount within the return lodgement period:-  GST Act s 33-3, 33-5.  In some limited instances (typically involving quarterly tax periods and turnovers less than $2 million) a person may elect to pay GST by instalments:-  GST Act s 162-5.

9. Superannuation lodgement and guarantee obligations:-  The trustee of a self managed superannuation trust entity must give the Commissioner an annual return in the approved form, and typically within their required ITR lodgement period:-  SISA ss 11A, 35D(2)(b).  (The approved form of annual return typically requires the trustee to disclose (amongst other things) (i) the fund income and expenses, (ii) member contributions and, (iii) a calculation of the fund’s income tax liability.)  Failure to comply with that annual return obligation constitutes an offence, potentially punishable by a 50 penalty unit fine (or 25 units in the case of a matter prosecuted as a strict liability offence):-  SISA s 35D(4) & (5). 

10. An employer will have a “superannuation guarantee shortfall” where (broadly speaking), they fail to pay the required charge percentage of an employee’s quarterly salary to an approved superannuation scheme or retirement savings account provider:-  SGAA ss 17, 19, 22 & 23.  Such an employer must lodge an approved form of superannuation guarantee statement within (approximately) two months after the end of the relevant quarter:-  SGAA s 33.  The statement takes effect as an assessment of the shortfall amount, and the amount of any corresponding shortfall charge:-  SGAA s 35.  The employer is (ordinarily) required to pay the charge amount within the permissible lodgement period for the employer’s superannuation guarantee statement.  Payment delay or failure attracts a general interest charge liability, and a penalty liability equal to double the charge amount otherwise payable:-  SGAA ss 33, 46, 49 & 59.   As in the case of unpaid PAYG amounts, lodgement / payment default also exposes the defaulter to the risk of being subject to the Commissioner’s “estimate” liability in relation to the superannuation guarantee:- see TAA Schedule 1 ss 268-5 to 268-30.

11. Liabilities of directors and public officers:-  Each of the directors of a company may be personally liable for any of the company’s taxation offences (i.e. lodgement and withholding offences), unless they establish that they neither assisted, nor were knowingly concerned in, the offence:-  TAA s 8Y. Similarly, each director has an obligation to ensure / cause a company’s compliance with the withholding and payment obligations (relating to PAYG withholding instalments and superannuation guarantee payments) arising under TAA Schedule 1 Subdivision 16-B and Division 268, and under SGAA Part 3 (superannuation guarantee charge):- see TAA Schedule 1 ss 269-5 to 269-15. 

12. Where a company fails to make the required payments, individual directors may be liable to either a “PAYG withholding non compliance tax” (see TAA Schedule 1 ss 18-125 & 18-140) or to a penalty, corresponding to the amount unpaid by the company, unless they either (i) reasonably took no part in company management or, (ii) took all reasonable steps to cause the company to comply or initiate administration or winding up:- TAA Schedule 1 ss 269-20 & 269-35. The penalty is a tax related liability that constitutes a debt recoverable by the Commissioner:- see TAA Schedule 1 ss 255-1 & 255-5. However, the absence of any instalment arrangement (under TAA Schedule 1 s 255-15) and the issuing of a “Director Penalty Notice”, are both preconditions to the Commissioner’s ability to recover a penalty amount from a director:- see TAA Schedule 1 ss 269-15(3) & 269-25.

13. A company must have an appointed “public officer” for income tax purposes:-  ITAA 36 s 252(1). The appointed “public officer” is “answerable” for all of the company’s obligations (and for any corresponding default penalties) under ITAA 36, the SGAA and the GST Act:- ITAA 36 s 252(1)(f); SGAA s 57(3); TAA Schedule 1 s 444-10 & ITAA 97 s 995-1.

    THE ITR, BAS / IAS AND SGC LODGEMENT AND PAYMENT DEFAULT ISSUES

14. The ITR and BAS (including IAS) lodgement defaults on which the Board ultimately relied were detailed in a schedule to the Board’s review hearing submissions, and not actively contested by Mr Birdseye and Claim It.  The nature and approximate duration of those defaults are indicated in the following schedules to these reasons[11]:- 

    (a)Schedule 1 – Birdseye entities – ITR defaults – lodgements;

    (b)Schedule 2 – Birdseye entities – BAS lodgement defaults (chronological order).

    [11]Where relevant remediating (or partly remediating) lodgements have occurred, that information is also indicated in each Schedule.

15. The Schedule 1 details differentiate between (i) entities directly involved in the conduct of the NB&A tax agent business,[12] (ii) entities obviously related to Mr Birdseye, but not directly involved in the conduct of the NB&A tax agent business, (iii) other entities not directly involved in the practice business and, (iv) entities where (in the course of the review proceedings) the Board appears to have accepted that no return was in fact “necessary”:  see paragraph ‎40 above.  In the case of the first three of those groups I have included a row to indicate, in relation to each tax year, the absence of specific information to establish the fact, or the amount, of any actual income tax liability or debt.

    [12]I have excluded Claim It Financial Planning Pty Ltd from Group (i) for two reasons.  The first is that it appears to have had a limited role, acting merely as “the” trustee of the Nicholas Birdseye Family Trust during the (temporary) period of the insolvency of Claim It SA Pty Ltd.  The second reason is that the Board’s submission schedule recorded the notification that the company’s ITR lodgement was “not necessary”.

16. The following propositions can be extracted from the information in (and underlying) Schedule 1:-

    (a)The Board’s February 2020 decisions relied on a total of about 51 ITR lodgement defaults over the seven year period from 2012 to 2019;

    (b)The Board’s review hearing submissions added a further four ITR lodgement defaults relating to Torrens Finance Brokers Pty Ltd;

    (c)None of the ITR lodgement defaults related to the returns of either Mr Birdseye or Claim It;

    (d)Approximately 12 ITR lodgement defaults related to three entities with which Mr Birdseye concededly had a close personal / familial association (i.e. the “Group (ii)” entities);

    (e)About four ITR lodgement delays related to Medlow Chocolates Pty Ltd, a company of which Mr Birdseye was a director, but in which he disavowed any direct management participation:-  see paragraphs ‎102 to ‎115 below;

    (f)Approximately 41 ITR lodgement delays involved the seven “Group (iv)” Birdseye related entities that were the subject of “return not necessary” notifications made to the ATO, shortly after a 4 November 2019 lodgement reminder.  (In the course of the review hearing and submissions the Board effectively accepted that these entities most likely had not traded, and had not actually been required to lodge an ITR).

17. In the case of the two “Group (ii)” superfund entities listed in Schedule 1, in his written statements Mr Birdseye conceded the ITR lodgement delays but said that, with one exception, they had been remedied, by returns indicating an absence of trading and income derivation in any of the relevant tax years. (In cross examination Mr Birdseye acknowledged that, despite the reminders he had received in September and November 2019, he had not lodged these returns until March and April 2020.) The lodgement exception related to the N&T Birdseye Superfund’s 2019 ITR. In his 17 April 2020 written statement Mr Birdseye said the return would be lodged by 20 April 2020. In his 24 September 2020 written statement Mr Birdseye said he was “in the process” of lodging the return. Almost two months later, Mr Birdseye conceded, in the course of his cross examination, that he had still not lodged the N&T Birdseye Superfund’s 2019 ITR.

18. The third “Group (ii)” entity - Torrens Finance Brokers Pty Ltd (“Torrens”) – had not been alluded to in the Board’s February 2020 submission document, the decision minutes or the decision notification letters.  The existence of the company, and its ITR lodgement defaults, was first raised in the supplementary documents the Board provided to the Tribunal in April 2020, and was the subject of a condign allusion in the Board’s 22 April 2020 submissions opposing the stay applications to which I referred earlier in these reasons:-  see paragraph ‎4 above.  Mr Birdseye’s evidence was that the company had ceased to operate at the end of June 2012, and that its only subsequent activity was as the recipient of some small “trailing” commissions.  The Board’s submission schedules, and ATO records to which they refer, seem to be consistent with that proposition.  This is because they indicate (i) no outstanding BAS lodgements after June 2014, (ii) except for the 2013 and 2015 tax years, an ITR was “not necessary” in any of the years from 2001 to 2015 and, (iii) the company was not noted amongst the entities the ATO identified to Mr Birdseye in September and November 2019 as being the subject of outstanding lodgement obligations.

19. In its final oral submissions the Board ultimately contended that, as a taxpayer’s director, and especially because of his tax agent status, Mr Birdseye’s failure to attend to Torrens lodgement obligations placed his default at the “more serious end of the spectrum”.  That submission echoed the proposition, advanced in the Board’s earlier contention statement, that the Torrens lodgement defaults, and the delay in lodging the ITRs for the “Group (ii)” superfund entities (see paragraph ‎55 above), indicated that Mr Birdseye simply “did not take his [lodgement] obligations seriously”. In relation to these entities, and ITR lodgement obligations, I regard that submission as overstated, and it is one I do not accept. First of all, as I have already observed, no complaint appears to be made about the ITR lodgement compliance of either Claim It or Mr Birdseye. Second, Torrens circumstances (and those of the two “Group (ii)” superfund entities) were exceptional – in the sense that they all appear to have been essentially, or typically, dormant entities. Third, Mr Birdseye professed to have had some (regrettable, but in my view, genuine) confusion about the ITR lodgement obligation where a company or trust (as distinct from an individual) derived no assessable income. Fourth, Mr Birdseye did respond, relatively promptly to the ITR lodgement reminder he received in November 2019 (see the ITR lodgement date for the “Group (iv)” entities in Schedule 1.) Fifth, the apparent promptness of that response in relation to the “Group (iv)” entities, lends a degree of credibility to Mr Birdseye’s claim that he had at least attempted to fully respond to the November 2019 lodgement reminder, but had misapprehended his ability to submit a “return not necessary” notification in relation to the two “Group (ii)” superfund entities.

20. Notwithstanding those considerations, the apparent ITR lodgement delays and failures relating to Torrens and the two “Group (ii)” entities are regrettable.  That is particularly so in the case of the, substantially unexplained, failure to submit the 2019 ITR for the N&T Birdseye Superfund (see paragraph ‎55 above).  In those, perhaps few, instances where there clearly was a lodgement obligation (having regard to the criteria summarised in paragraph ‎40 above), they would justify a finding that Mr Birdseye failed to comply with taxation laws.   But, notwithstanding the unequivocal compliance obligation in TASA s 30-10(2), such a finding in relation to these (essentially dormant) entities would not contribute significantly to an adverse contemporary assessment of the registration fitness of either Mr Birdseye or Claim It.  The compliance performance of Claim It should be a far more important focus of any such assessment.  That performance is addressed later in these reasons:-  see paragraphs ‎63 to ‎84, ‎143 to ‎146, ‎236 to ‎242 & ‎264 to ‎265 below.

    THE TAX DEBT / LIABILITY AMOUNTS

21. The amount and nature of the various tax debts or liabilities on which the Board relies were also the subject of a further Schedule to the Board’s review hearing submissions.  That information was confined to the ultimately outstanding / undischarged liability at the time of the review hearing.  That “point in time” information needs to be supplemented by an understanding of the nature of the liability, and the period to which it relates.

22. That desirable supplementation is not easy to derive accurately from the available information.  Part of the reason for the difficulty derives from the combined circumstances of (a) the various lodgement delays and, (b) the ATO practice (evident in the material provided by the Board) of compiling its statements of account according to the “processing” date of individual lodgements and returns, rather than according to the actual tax period to which the lodgement or return related. 

1. In the second Schedule to these reasons - “Schedule 2 – Birdseye entities – BAS lodgement defaults (chronological order)” - I have included an indication of the nature and period of the liability of each of the three entities whose BAS lodgement delays and defaults were relied on by the Board.[13]  The information in the Schedule suggests that, of the three entities, only Claim It had been shown to have had a significant taxation related liability.

   [13]The BAS lodgement defaults attributed to Torrens Finance Brokers Pty Ltd had not figured in the Board’s 2020 deliberations or in its decision letter notification to Mr Birdseye.  For substantially the same reasons as those relating to that company’s ITR lodgement default (see paragraph ‎58 above) I do not regard the company’s BAS lodgement defaults as contributing significantly to any contemporary assessment of Mr Birdseye’s registration eligibility.

2. The third Schedule to these reasons - “Schedule 3 – Birdseye entity – taxation liabilities” includes the five entities revealed by the evidence as having had apparently relevant taxation liabilities in the period from 2016 to 2018.  The information in the Schedule suggests that the only liabilities of an apparently significant amount were those of (or attributable to) (i) Claim It / the Nicholas Birdseye Family Trust, (ii) AFG Group Pty Ltd and, (iii) Sazzii Pty Ltd.  Claim It’s debt principally related to unremitted GST and PAYG instalments, related penalties and general interest.

   CLAIM IT’S TAXATION LAW NON-COMPLIANCE

3. A significant aspect of the reasoning underlying the Board’s decisions involved findings that Claim It, and Mr Birdseye (particularly as Claim It’s sole director and public officer) had not fully and consistently complied with their taxation law obligations.  That non-compliance included the conduct underlying the (approximately) $351,000 liability that had led to Claim It’s winding up in March 2016:-  see paragraph ‎13 above.  Although the precise nature (and perhaps the accurate amount:-  see paragraph ‎75 below) of that liability is not clear, the recitals to the 13 March 2018 Deed, the schedule to Mr Birdseye’s 24 February 2016 director penalty notice, and the ATO’s account statement, combine to indicate that:-

   (a)a substantial part of the total liability (about $100,000 as at April 2015) likely arose from Claim It’s non-payment of PAYG withholding instalments after September 2012;

   (b)Claim It’s PAYG payment defaults continued up until at least November 2015 and then exceeded $152,000;

   (c)as at the end of March 2016 (after taking into account then overdue activity statements) the total debt (predominantly attributable to GST and PAYG withholding liabilities) approximated $441,000;

   (d)the 13 March 2018 Deed acknowledged the ongoing liability in relation to post March 2016 BAS lodgements and payments, and required them to be brought up to date by 31 March 2018;

   (e)under the 13 March 2018 Deed, the Commissioner released Mr Birdseye from liability under director penalty notices that had been issued to him as a director of the company (i.e. the February 2016 notice relating to Claim It’s PAYG payment defaults).

4. The disputes about net income and carried forward losses acknowledged in the 13 March 2018 Settlement Deed did not expressly extend to Claim It’s default in its GST and PAYG withholding payment obligations under TAA Schedule 1 Subdivision 16A:- see paragraph ‎43 above.  Consequently, neither the Settlement Deed, nor the dispute underlying it, provides a readily apparent explanation for Claim It’s chronic failure to comply with those GST and PAYG payment obligations.  (The ATO account statement records some irregular payments at times in 2012 and 2013, but no material payments between September 2014 and March 2016.)  I infer that the March 2018 settlement may have involved hindsight offsetting of those payment obligations against the recognition of Claim It’s contentious carried forward tax losses.  Because of that inferred likelihood, the limited evidence of the circumstances involved, and the passage of time, what would otherwise appear to have been serious and chronic non-payment of GST and PAYG withholding instalments, is not itself determinative of Mr Birdseye’s contemporary fitness.  Nevertheless, the respective payment obligations (see paragraphs ‎43 & ‎45 above) were unambiguous, and the significant period of non-payment is therefore a relevant consideration in any contemporary assessment:-  see paragraph ‎75 below.  An additional relevant consideration is the concurrent history of activity statement lodgement defaults and delays during the period of non-payment.

5. Comparison of the schedule to the February 2016 director penalty notice with the entries in Claim It’s ATO account statement reveals that Claim It’s activity statement lodgement compliance, throughout the period covered by the schedule (September 2012 to November 2015), was typically tardy, and multiple delays were periodically the subject of cathartic remedial lodgements.  Furthermore, some required activity statements (i.e. for months not included in the schedule to the notice) were not lodged until March 2016, and then attracted penalties for late lodgement. 

6. That dual history, of at least tardy lodgement, and chronic non-payment, was not a matter the Board sought to make the basis of positive findings of taxation law non-compliance.  It does however, provide relevant background in assessing the apparent significance of any subsequent non-compliance.  It is also relevant to the evaluation of the submission, advanced on Mr Birdseye’s behalf, that Claim It’s subsequent lodgement failures (identified in the Board’s submission and summarised in Schedule 2) were comparatively minor and immaterial to a contemporary assessment of his registration fitness.

7. The 13 March 2018 Deed between the ATO and Claim It Financial Planning indicated that the Nicholas Birdseye Family Trust had outstanding activity statement lodgement and payment obligations for the period after March 2016.  The ATO account records for the Nicholas Birdseye Family Trust suggest that the last of the BAS covered by the Deed was not in fact lodged until late July 2018.  After September 2018 Claim It had again defaulted in its activity statement lodgements, and lodged none until May 2019.  At that time Claim It had made no payments since early October 2018 and its “integrated client account” tax debt, which was primarily made up of GST and PAYG withholding obligations (plus interest), approximated $61,000.

8. In his April 2020 statement Mr Birdseye said that “in about October 2018” he had come to an arrangement with the ATO.  He claimed the arrangement satisfied all his personal and employer taxation obligations, that he had completed the requirements under the arrangement, and that he had achieved a “clean slate” with the ATO.  In the course of cross examination Mr Birdseye explained that this was a reference to the 13 March 2018 Deed, and reflected Claim It’s status, pursuant to that Deed, as a company in administration and subject to a deed of company arrangement.  To that extent the explanation appears to be broadly correct.  It is consistent with the formal ASIC company search, which records the termination of Claim It’s administration in January 2019.  It is also partly corroborated by fact that by mid August 2018, Claim It had complied with the activity statement lodgement and payment obligations covered by the Deed, and had achieved a modest credit balance in its ATO account.  However, and despite the fact that the Board did not press for any taxation law non-compliance finding in relation to Claim It’s conduct prior to October 2018, it is both simplistic and inaccurate to regard Claim It as having achieved a “clean slate”, and as having satisfied all its taxation law obligations by October 2018.  The inaccuracy of any such claim is patent from the previously noted lodgement and payment defaults after September 2018:-  see paragraph ‎67 above.

9. In any event, Claim It’s (post September 2018) lodgement defaults appear to have continued until May / June 2019.  At that time Claim It had made no GST and PAYG payments since October 2018 and its tax debt, consisting entirely of GST, PAYG withholding and general interest components, had increased to about $65,000.  On 22 June 2019, Claim It entered into a payment plan arrangement with the ATO, for a total debt of $67,604.  The payment plan:

   (a)required an initial $5,000 payment by 28 June 2019, and subsequent monthly payments of $10,000 until the end of December 2019;

   (b)was expressly conditional upon timely payment of those instalments, and timely lodgement and payment of all other tax related obligations;

   (c)invited Claim It to contact the ATO if its circumstances changed.

10. Claim It made none of the required plan payments.  Furthermore, after June 2019, (as the details in Schedule 2 indicate) Claim It’s BAS lodgement defaults re-occurred, and were not remedied until March 2020.  By that time, despite the content and conditions of the June 2019 payment plan, Claim It had made no payments since October 2018, and its total tax debt, relating to GST and PAYG withholding payment liabilities, had substantially increased.

11. On 31 March 2020, shortly after attending to its outstanding activity statement lodgements, Claim It entered into a further payment plan arrangement with the ATO, for a tax debt that had increased to $188,434.  The plan:  

    (a)required a $94,217 payment by 29 May 2020, and 11 subsequent monthly payments of $9,500;

    (b)was again expressly conditional on timely payment of those instalments, and timely lodgement and payment of all other tax related obligations;

    (c)invited Claim It to contact the ATO if it was unable to make any payment.

12. Claim It’s registered status came to an end on 8 May 2020:-  see paragraph ‎4 above.  Claim It did not make that first payment required by the 31 March 2020 plan.  It has not made any of the other payments.  In fact, the only significant credit payments to Claim It’s ATO account between October 2018 and October 2020, were the “Cash Flow Boost" credits (associated with the Government's "COVID-19" relief measures) in March, April and May 2020.  By October 2020 Claim It’s tax debt had grown to $210,606.  Furthermore, and as Schedule 2 indicates, Claim It lodged no further activity statements until about three weeks after Mr Birdseye received the Board’s 2 March 2020 decision notification letters.

13. The Board’s November 2019 submission clearly placed considerable emphasis, in the context of non-compliance with the TASA s 30-10(2) Code obligation to comply with taxation laws, on Claim It’s BAS lodgement defaults and its corresponding tax related liability.  Despite that emphasis, neither matter was something Mr Birdseye comprehensively addressed in his pre-hearing witness statement and affidavits.  His response in those documents, in relation to Claim It’s lodgement defaults, was merely that they had been remedied.  His response in relation to the tax debt addressed only the approximately $65,000 debt as at December 2019, and involved the combined assertions that (i) “in general terms” he had sought to ensure that taxation debts were either paid or the subject of an agreed payment plan, (ii) he had been confident of his ability to comply with the payment plan obligations and, (iii) the Board’s February 2020 decisions, with the consequential removal of his ability to practice as a tax agent, were the substantial reason why Claim It had not been able to comply with its payment plan arrangements.

14. As I noted earlier (in paragraph ‎66 above) the submission advanced on behalf of Mr Birdseye and Claim It was that the company’s lodgement defaults, though probative of a failure to comply with the taxation law compliance obligation in TASA s 30-10(2) were minor and, having been remedied, fell well short of meaningful contribution to a contemporary finding that neither entity was “fit and proper” for registration.

15. The Board, on the other hand, emphasised that Claim It’s (post October 2018) lodgement defaults were not isolated instances, and tended inherently to demonstrate a lack of fitness for registration.  In so doing, despite disavowing any contention for positive non-compliance findings in relation to matters prior to October 2018, the Board pointed to instances where Claim It had been subjected to BAS lodgement delay penalties in 2007, 2011, 2013, 2015 and 2016.  Within that context the Board’s written submissions highlighted the appearances that Claim It’s (pre December 2018) “integrated client account” with the ATO:

    (a)had typically had a substantial debit balance, relating to GST and PAYG withholding obligations, for about three years from June 2008 to June 2011;

    (b)recorded no credit payments from December 2009 to June 2011;

    (c)reached a total debt of about $289,000 in May 2011, before being restored to credit in July 2011;

    (d)returned to a (small) debit balance in August 2011;

    (e)thereafter, because of significant recurring GST and PAYG non-payments (and despite some occasional lump sum payments), progressively increased its debit balance to about $128,000 by November 2013;

    (f)recorded no significant credit payments between December 2013 and March 2016, and consequently reached a total debt approximating $470,000;

    (g)recorded some credit payments in mid 2016, but no further payments between August 2016 and February 2018, by which time the total debt approximated $531,000.[14]

    [14]Mr Birdseye disputed the accuracy of the debt amount in the ATO statement of account.  The dispute derives some substance from the facts that (i) in March 2018 there was a substantial remission of a general interest charge, (ii) the 13 March 2018 Settlement Deed required payment of only $230,000 and, (iii) in June 2019, an amount approximating $397,000 was written off as “irrecoverable at law”.  It follows that there may be reason to doubt the accuracy of the $531,000 debt total.  Despite that doubt, it is clear that the debt amount was significant (i.e. several hundred thousand dollars) and reflected lengthy periods of non-payment of GST and PAYG withholding amounts.

16. I have already noted the appearance of Claim It’s tardy and cathartic BAS / IAS lodgements between September 2012 and November 2015 (see paragraph ‎65 above) and the ATO account statement does record various lodgement penalty assessments.  However, generally speaking the lodgement delays were only for a few months, and the penalty assessments were themselves very infrequent.  That infrequency, and the appearance of periodic lump sum payments, are arguably consistent with the existence of an underlying payment arrangement, and give rise to the possible existence of other relevant considerations.  In addition, the primary emphasis in the Board’s February 2020 submission document, and the March 2020 decision notification letter, was on the amount of the 2016 to 2018 tax debt.  The precise basis for criticism of Claim It’s lodgement history related to that debt did not emerge, with any clarity, until the Board provided its November 2020 written submissions, and from some of the supplementary documents, that were provided little more than a week before the review hearing.  In those circumstances, whilst the pre 2016 activity statement lodgement defaults to which the Board alluded appear to be established by the ATO records, and are relevant considerations, because they evidence a past history of BAS / IAS lodgement delay (and likely contributed to the Board’s formal caution in May 2013), I am not satisfied it would be appropriate to regard them as having significant additional probative / persuasive value in a contemporary assessment of Mr Birdseye’s fitness for registration.

17. On the other hand, the GST and PAYG withholding debt amounts that had been accumulated by June 2011, November 2013 and March 2016 / March 2018 were significant.  There was no exploration of the circumstances involved in the June 2011 debt total, but it appears to have been eliminated (presumably in a manner satisfactory to the Commissioner) by a series of payments made in June and July 2011.  The March 2016 / 2018 debt was apparently addressed as part of the resolution of the prolonged income tax liability dispute resolved by the 13 March 2018 Deed of Settlement referred to earlier in these reasons:-  see paragraphs ‎13 & ‎67 above.  Despite the very limited extent of the evidence of the circumstances underlying the accumulation of those significant liabilities, the history of apparent payment default evident from Claim It’s “integrated client account” is relevant, and tends to demonstrate both Mr Birdseye and Claim It’s awareness of regular periodic GST, and PAYG withholding, payment obligations.  That awareness is re-inforced by (i) the formal caution the Board issued to Claim It in May 2013 for a number of matters, but including its failure to comply with the “personal affairs” taxation law compliance obligation in TASA s 30-10(2):-  see paragraph ‎161 below, (ii) the terms of the 13 March 2018 Deed of Settlement, (iii) the June 2019 payment plan and, (iv) the unambiguous acknowledgment Mr Birdseye made in the course of his cross examination.  Against that background, Claim It’s conceded (post October 2019, and particularly post June 2019) BAS lodgement defaults, and the related GST and PAYG payment defaults, assume particular significance, and require adequate explanation.

18. As I have already noted, Mr Birdseye’s written evidence made no attempt at any such explanation:-  see paragraph ‎73 above.  In the course of cross examination he made the following assertions and acknowledgements:-

    (a)He treated his lodgement obligations seriously;

    (b)He was aware of those obligations, and the GST and PAYG withholding payment defaults that had led to Claim It’s 2016 liquidation, and claimed to have been doing his best in 2019 “to try and fix that situation”.  To that end, he consistently pushed his staff to attend to the lodgement obligations;

    (c)Prior to April 2019 there were no practical impediments to the timely lodgement of activity statements, but “big staffing issues”, and personal illness (in September, October and November 2019), were the reasons for the lodgement and payment delays after May 2019;

    (d)The activity statement lodgement defaults were also partly attributable to his personal inability (and that of the then available employees) to operate NB&A’s computerised accounting system to generate the required activity statement information;

    (e)Despite his, many month, awareness of activity statement lodgement and payment defaults, he never obtained external assistance to ensure compliance, nor did he convey the fact of either his non-compliance or his asserted compliance difficulties to the ATO;

    (f)He had tended to prioritise addressing client interests and practice administration, despite awareness of Claim It’s lodgement and payment obligations (and his related personal responsibilities as a director);

    (g)He had changed NB&A’s accounting software in early 2020, assertedly for the purpose of utilising his remaining staff to address and remedy NB&A’s lodgement and payment obligations;  

    (h)In January / February 2020 Mr Birdseye arranged for another employee to undertake relevant training and then, another existing employee got involved, and they eventually attended to most of the outstanding activity statement lodgements (as is evident from the details in Schedule 2);

    (i)He made no payments under the March 2020 payment plan, partly because of the drop in NB&A’s cash flow after the Tribunal’s 8 May 2020 stay refusal decision, and partly because of increased legal expenses associated with the review application;

    (j)Notwithstanding the default in meeting any of the payment obligations under the March 2020 payment plan, until two or three days before the review hearing, he had made no attempt to contact the ATO, and renegotiate the plan.  

1. Each of the Board’s registration termination decisions is affirmed.  Each of the Board’s five year determination decisions is set aside and in substitution for those determinations, no preclusion periods are imposed.

I certify that the preceding 273 (two hundred and seventy-three) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member

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

Associate

Dated: 20 April 2021

Dates of hearing:	18, 19, 20, 23 November 2020
Counsel for the Applicant:	Mr N Shaw
Solicitors for the Applicant:	Case Legal Pty Ltd
Counsel for the Respondent:	Ms G Walker
Solicitors for the Respondent:	Tax Practitioners Board

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3

Schedule 1 - Birdseye entities - ITR defaults - lodgments - Reasons paragraphs [52] to 58]

4

5

Taxpayer

Birdseye - personal status

ITR lodgement default status at 30 June // with subsequent [Lodgment date & number lodged]

6

Notes

2012

2013

2014

2015

2016

2017

2018

2019

2020

7

Incorp'ratn / form'ntn

Start

Director / Trustee status

End

Type

Type

8

(i) Birdseye - practice related entities

9

Claim It SA Pty Ltd

28-Jun-94

20-Mar-02

1

(continued)

10

[1]

Nicholas Birdseye Family Trust (Trustee:- Claim it SA Pty Ltd)

(continued)

11

[4]

"ITR" tax liablity / debt

disputed

disputed - [4]

??

??

??

??

??

12

13

(ii) Birdseye - familial entities

14

[2]

Birdseye Children Family Trust  (Trustee:- Birdseye)

20-Sep-13

sole

(continued)

overdue (1)

overdue (2)

overdue (3)

overdue (4)

overdue (5)

[2-Mar-20_"5"]

15

[2]

N&T Birdseye Superfund  (Trustee N & T Birdseye)

9-May-11

1 of 2

(continued)

overdue (1)

overdue (2)

overdue (3)

overdue (4)

[23-Apr-20_"3"]

16

Trust's "ITR" tax liablity / debt

??

??

??

??

??

17

Torrens Finance Brokers Pty Ltd

21-Nov-85

24-Jan-02

1

(continued)

[ITR not nec/y]

[20-Jun-19]

[ITR not nec/y]

[20-Jun-19]

overdue (2)

overdue (3)

overdue (4)

overdue (3)

??

18

"ITR" tax liablity / debt

??

??

??

??

19

20

(iii) Birdseye - non practice entities

21

Medlow Chocolates Pty Ltd

29-Jan-14

29-Jan-14

1

18-Feb-16

22

[3]

Medlow Chocolates Pty Ltd

"

19-Feb-16

1 of 3

9-Oct-18

overdue (1)

overdue (1)

overdue (3)

[April 2019 - 4]

23

"ITR" tax liablity / debt

??

2,670

400 (//)

??

24

25

(iv) Birdseye entities - ITR lodgements "not necessary" - per ATO records as at 15 November 2019

26

[2]

Accounting CRM Pty Ltd

29-Jun-16

29-Jun-16

1

(continued)

pre-incorp'n

pre-incorp'n

pre-incorp'n

pre-incorp'n

overdue (1)

overdue (2)

overdue (3)

[ITR's not nec/y]

27

[2]

Claim It Financial Planning Pty Ltd

21-Mar-16

21-Mar-16

1

(continued)

pre-incorp'n

pre-incorp'n

pre-incorp'n

pre-incorp'n

overdue (1)

overdue (2)

overdue (3)

[ITR's not nec/y]

28

[2]

Pfeiffer Services Modelling Pty Ltd

29-Jul-14

20-Sep-16

1

(continued)

pre-incorp'n

pre-incorp'n

pre-incorp'n

not director

not director

overdue (1)

overdue (2)

overdue (3)

[ITR's not nec/y]

29

[2]

Sinbird Nominees Pty Ltd

18-May-10

18-May-10

1 of 2

(continued)

overdue (1)

overdue (2)

overdue (3)

overdue (4)

overdue (5)

overdue (6)

overdue (7)

overdue (8)

[ITR's not nec/y]

30

[2]

Nick Sunshine Family Trust

20-May-10

sole

overdue (1)

overdue (2)

overdue (3)

overdue (4)

overdue (5)

overdue (6)

overdue (7)

overdue (8)

[ITR's not nec/y]

31

[2]

Peter and Nick Sunshine Unit Trust

1-Jul-10

1 of 3

overdue (1)

overdue (2)

overdue (3)

overdue (4)

overdue (5)

overdue (6)

overdue (7)

overdue (8)

[ITR's not nec/y]

32

[2]

Sylvia Family Trust

1-Jul-10

sole

overdue (1)

overdue (2)

overdue (3)

overdue (4)

overdue (5)

overdue (6)

overdue (7)

overdue (8)

[ITR's not nec/y]

33

34

Notes

35

[1]

Claim It and Claim It Financial Planning Pty Ltd may both have been trustees after March 2016. For the sake of convenience, and in view of the "return not necessary" classification of ITR lodgement by Claim It Financial Planning Pty Ltd (see Group (iv), I have assumed that the trustee obligations were those of Claim It.

36

[2]

In Mr Birdseye's communications with the ATO in September 2019, the fact of the ITR lodgement default by these entities was identified. Mr Birdseye is recorded as having agreed to lodge all of the outstanding ITRs by 11 October 2019. The lodgment dates noted in the table indicate that he did not fulfill that agreement. There was a substantial lodgement delay (apart from the ITR's whose lodgment was recorded as "not necessary"), even after a further reminder from the ATO in November 2019. In his April 2020 statement Mr Birdseye said that the N&T Birdseye Super Fund had not traded in any of the tax years from 2016 to 2018. The Super Fund's only outstanding ITR was for the 2019 tax year. Mr Birdseye anticipated that ITR would be lodged by 20 April 2020, and would not result in any tax being payable. In his Septemebt 2020 statement Mr Birdseye acknowledged that the N&T Birdseye Super Fund's 2019 ITR was still outstanding. (It was still outstanding in November 2020.) In the same statement he acknowledged the ITR lodgment default fot the Birdseye Children Family Trust, said that the Fund had not earned any income in the relevant years, and said that the Fund's corresponding ITR's had all been lodged.

37

[3]

An ATO 19 June 2017 phone call record indicates that Medlow's ITR lodgements for 2014, 2015 & 2016 were then all outstanding. The phone call record attributes to Mr Birdseye an assurance that all outstanding ITR (and BAS) lodgments would be attended to by 30 June 2017. Medlow also had outstanding SGC payment obligations, under an existing payment plan. The phone call record attributes to Mr Birdseye (i) ignorance about the SGC non-payment and, (ii) an assurance that it would be paid by 20 June 2017.

38

[4]

The 13 March 2018 Deed of Settlement involved a relase of all the disputed "tax related liabilities" of both the Family Trust and Mr Birdseye, up to 30 June 2015.

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Schedule 2 - Birdseye entities - BAS lodgement defaults (chronological order) - Reasons paragraphs [52] to 58]

4

5

Notes

Taxpayer

Entity & relationship details

BAS lodgment status - or "[Lodgement Date & "n"]"

2020

6

2002 to 2014

[Lodgements]

7

Start

Birdseye - personal status

2002

2003

2004-2010

2011

2012

2013

2014

2019

8

Incorp'ratn / form'ntn

Start

Director / Trustee status

End

9

10

Torrens Finance Brokers Pty Ltd

21-Nov-85

24-Jan-02

1

(continued)

overdue (4)

overdue (5)

overdue (5)

overdue (5)

overdue (9)

overdue (12)

overdue (14)

[Jun 2019 - "4"]

11

BAS liablity / debt

??

??

??

??

??

??

??

12

13

14

2015 to 2016

15

Start

Birdseye - personal status

December

March

June

September

December

16

Incorp'ratn / form'ntn

Start

Number

End

17

Medlow Chocolates Pty Ltd

29-Jan-14

29-Jan-14

1

18-Feb-16

18

[1]

Medlow Chocolates Pty Ltd

"

19-Feb-16

1 of 3

9-Oct-18

overdue (1)

overdue (1)

overdue (2)

overdue (3)

overdue (4)

19

[2]

BAS liablity / debt

6,438 ?

??

??

??

??

20

21

22

2017 to 2018

2019

23

March

June

September

December

March

June

September

[Lodgements]

24

Incorp'ratn / form'ntn

Start

Number

End

25

Medlow Chocolates Pty Ltd

"

19-Feb-16

1 of 3

9-Oct-18

overdue (5)

overdue (6)

overdue (7)

overdue (8)

overdue (9)

overdue (10)

overdue (11)

[April 2019 - "10"]

26

[1]

BAS liablity / debt

??

?

??

??

??

??

??

1,897

27

SGC liabuility / debt

1,262 ?

6,730

28

29

2019

2020

30

June

July

August

September

October

November

December

[Lodgements]

31

Incorp'ratn / form'ntn

Start

Number

End

32

33

[3] & [4]

Nicholas Birdseye Family Trust - (Trustee:- Claim it SA Pty Ltd)

28-Jun-94

20-Mar-02

1

(continued)

overdue (1)

overdue (2)

overdue (3)

overdue (4)

overdue (5)

overdue (6)

overdue (7)

[26-Mar-20 - "7"]

34

[5] [6] & [7]

BGST & PAYG liablity / debt

65,716

66,377

66,922

67,362

67,779

68,299

68,509

188,434

35

36

Notes

37

[1]

An ATO 19 June 2017 phone call record attributes to Mr Birdseye an assurance that all outstanding BAS lodgments would be attended to by 30 June 2017. Medlow also had outstanding SGC payment obligations (likely arising from the ATO's 10 January 2017 audit decision) that were subject to an existing payment plan, with which the company had not complied. The phone call record attributes to Mr Birdseye (i) ignorance about the non-payment and, (ii) an assurance that it would be paid by 20 June 2017.

38

[2]

The liability shown as at December 2015 is the GST shortfall penalty liability ammount for the 2015 tax year, as stated in the ATO's 8 November 2018 referral letter to the Board.

39

[3]

Claim it was the sole trustee until the company's (temporary) liquidation in March 2016. Claim It Financial Planning Pty Ltd was appointed as a trustee on 22 March 2016. After that date both companies were recorded by the ATO as trustees of the Nicholas Birdseye Family Trust. For the sake of convenience, I have assumed that the lodgement obligation was primarily that of Claim It - notwithstanding the March 2016 to March 2018 "temporary" period of Claim Its liquidation.

40

[4]

The 13 March 2018 Deed of Settlement between the ATO and Claim It Financial Planning indicated that the Trust had outstanding BAS lodgement obligations, and required them to be brought up to date by 31 March 2018.. The ATO account records for the Family Trust suggest that the last of the BAS covered by the Deed was not in fact lodged until early August 2018. Thereafter, the Family Trust continued to be in default of its BAS lodgement obligations until May / June 2019:- see Note [5]. After June 2019, the BAS lodgement defaults re-occurred, and were not remedied until March 2020.

41

[5]

Claim Its "BAS liability" as at June 2019 appears to have resulted from the (late) lodgment (and non-payment) of BAS for the period from September 2018 to April 2019. Those BAS were lodged and "processed" between May and June 2019. On 22 June 2019, the trustee entered into a payment plan arrangement with the ATO, for a total debt of $67,604. The payment plan required monthly payments, from late June 2019 to January 2020. None was made.

42

[6]

The "BAS (PAYG) liability" amounts are derived from the "processed date" entries in the ATO / ICP Statement of Account extracts. Reliance on the "processed date" understates the debt amount. The debt amount in March 2020, indicates the overall liability at that time. But those late lodgements were not "processed" in the order of the accounting periods to which they related. The processing sequence confounds the accuracy of any attempt to (retrospectively) determine the liability amount attributable to any particular activity statement period.

43

[7]

The BAS lodgements in March 2020 covered the period up to the end of February 2020. When all the late BAS lodgements had been processed, Claim Its ATO account debt had increased to $188,434. That debt was the subject of a 31 March 2020 payment plan arrangement with the ATO. Under that arrangement, an initial payment of about $94,000 was to be made by 29 May 2020, followed by monthly payments approximating $9.500. None of those payments was made. By October 2020 the tax debt had grown to $210,606. Between October 2018 and October 2020, the only significant credit payment to the account had been the Cash Flow Boost" credits (associated with the Government's "Covid" relief measures) in March, April & May 2020.

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W

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Schedule 3 - Birdseye entity - taxation liabilities - Reasons paragraphs [59] to [62]

4

5

Taxpayer

Birdseye - personal status

6

Notes

2016

2017

2018

2019

2020

7

June

March

June

September

December

March

June

September

December

March

October

8

Incorp'ratn / form'ntn

Start

Number

End - or ldereg'tn]

9

(i) Nicholas Birdseye - personal liabilities

10

Nicholas Birdseye - personal - income tax

11

Director Penalty Notice

12

SGC - AFG Group Pty Ltd - 7 May 2019

60,787

56,335

56,335

56,335

56,335

56,335

56,335

56,335

56,335

13

PAYG - AFG Group Pty Ltd - 25 Jun 2019

12,432

?

?

?

?

?

?

?

?

14

PAYG - Claim IT SA Pty Ltd - 24 Feb 2016

28-Jun-94

20-Mar-02

1

(continued)

152,130

152,130

(released)

15

16

(ii) Birdseye - practice related entities

17

[1] [2] [3]

Claim IT SA Pty Ltd           (GST & PAYG withholding)

28-Jun-94

20-Mar-02

1

(continued)

152,130

152,130

(released) ?

6,539

25,429

45,854

65,716

67,362

68,509

188,434

210,606

18

19

(iii) Birdseye - non practice entities

20

AFG Group Pty Ltd - (per ASIC register)      - [de-registered]

18-Jan-12

5-Jul-12

1 of 4

[17-Jun-18]

112,311

114,534

121,517

21

AFG Group Pty Ltd                (per Birdseye 24 Sep 20)

"

5-Jul-12

1 of 4+

11-Dec-12

22

Medlow Chocolates Pty Ltd

29-Jan-14

29-Jan-14

1

18-Feb-16

23

Medlow Chocolates Pty Ltd - income tax

29-Jan-14

19-Feb-16

1 of 3

9-Oct-18

2,670

?

381

?

?

?

?

?

?

?

?

24

Medlow Chocolates Pty Ltd - SGC

29-Jan-14

19-Feb-16

1 of 3

9-Oct-18

5,075

?

?

?

?

?

?

?

?

25

Sazzii Pty Ltd  (per ASIC register)

4-Dec-08

4-Dec-08

1

30-Jun-12

114,534

?

124,189

?

140,191

?

?

?

?

26

Notes

27

28

[1]

Claim It and Claim It Financial Planning Pty Ltd may both have been trustees of the Nicholas Birdseye Family Trust after March 2016. For the sake of convenience, and in view of the "return not necessary" classification of ITR lodgement by Claim It Financial Planning Pty Ltd (see Schedule 1 Group (iv)) I have assumed that the trustee obligations were those of Claim It.

29

[2]

Claim Its "BAS liability" as at June 2019 appears to have resulted from the (late) lodgment of BAS for the period from September 2018 to April 2019. Those BAS were lodged and "processed" between May and June 2019. On 22 June 2019, the trustee entered into a payment plan arrangement with the ATO, for a total debt of $67,604. The payment plan required monthly payments, from late June 2019 to January 2020. None was made.

30

[3]

The "BAS (PAYG) liability" amounts after June 2019 are derived from the "processed date" entries in the ATO / ICP Statement of Account extracts. Reliance on the "processed date" tends to understate the debt amount at the end of any particular reporting period, because late lodgements were not "processed" in the order of the accounting periods to which they related. The BAS lodgements in March 2020 covered the period up to the end of February 2020. When those lodgements had been processed, Claim Its ATO account debt had increased to $188,434. By October 2020 the tax debt had grown to $210,606. Between October 2018 and October 2020, the only significant credit payment to the account had been the Cash Flow Boost" credits (associated with the Government's "Covid" relief measures) in March, April & May 2020.

Schedule 4 - NB&A - profit and loss summary (re-presented)

-  Reasons paragraphs [82] to [84]

30-Jun-20	30-Sep-20	Evidence comments
Income
Sales	770,510	152,856	These are GST exclusive amounts - see Tcpt 74.23
Other income	58,395	84,000
Total income	828,904	236,856
Operating Expenses	GST inclusive ??
Computer expenses	42,649	8,062
Interest expenses	45,000	46,767	borrowing from Mrs Birdseye for past debts:-  Tcpt 76.35, 77.10
Legal expenses	16,903	40,800
Office expenses	8,271	883
Rates and taxes	42,396	8,243	"tax" amount unexplained
Rent	108,000	7,136	paid to a trust controlled by Mr Birdseye and of which he was a beneficiary - amount estimated by Mr Birdseye:- Tcpt 78
Rent penalty	32,908	an estimate by Mr Birdseye:- Tcpt 78
Salaries & wages	311,441	92,806	inconsistent evidence as to whether or not it includes the PAYG withheld - Tcp 75.7, 75.27 & Tcpt 75.35, 79.40
Subscriptions	36,934	14,154
Superannuation	57,096	29,308	timeously paid - Tcpt 79.18 - Note: - superannuation % of Salaries & wages is 18.3% for YE June 2020 and 31% to September 2020
Telephone & Internet	28,894	4,842
Expense Subtotal	730,492	253,000
Other Operating Expenses	98,218	26,752
Total expenses	828,710	279,752
Net Profit	194	-42,896

Schedule 5 - NB&A client audit results addressed in Birdseye cross examination

-  Reasons paragraphs [209] & [221]

Client	ITR	Label	Claimed	Audited	Objection		Later	Birdseye statement table
$	Result	Reason	Result	Reason
$	$
Part 5.1:- - Clients included in ATO audit result referrals 17 September 2014 & 8 December 2015
Note:- no ATO audit / objection decision, reasons documents in Tribunal documents)
Brown	2012	D1 - Car	16,871	3,750	substantiation	3,750	? Invalid logbook - ? Reason	3,750	receipt // log book discrepancy
Brown	2013	D1 - Car	17,005	4,506	substantiation	4,506	? Invalid logbook - ? Reason	4,506	receipt // log book discrepancy
Gava	2012	D1 - Car	17,504	0	no response	0	not stated	17,555	AAT s 42C agreement
Gava	2013	D1 - Car	20,610	0	no response	0	not stated	23,305	AAT s 42C agreement
Kuchel	2012	D2 - Travel	27,991	0	no response	??	??	26,844	AAT s 42C agreement
Kuchel	2013	D2 - Travel	23,599	0	no response	??	??	23,709	AAT s 42C agreement
Opie	2013	D1 - Car	15,893	3,750	substantiation	3,750	Invalid logbook - ? Reason	6,750	AAT s 42C - ? log book reason
Part 5.2:- - Clients included in ATO audit result referral 29 August 2018
Note:- ATO audit reasons, but no objection decision reasons, included in Tribunal documents
Borgas	2016	D1 - Car	4,141	3,300	log book - ? descriptive	na	insufficiently descriptive	na - "overloaded" in responding to Board
Gava	2016	D1 - Car	12,032	0	subs'tn - x log book	??	??	na - "overloaded" - (client handled obj'n)
Stewart	2016	D1 - Car	10,207	0	subs'tn - x log book	??	??	na - don't remember
Kaspersky	2016	D1 - Car	5,372	3,300	log book - ? descriptive	??	??	na - "overloaded" in responding to Board