Christou and the Tax Agents' Board of Western Australia

[2007] AATA 2007

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 2007

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W 200700005

GENERAL ADMINISTRATIVE DIVISION		)
Re		NICK CHRISTOU

Applicant

And THE TAX AGENTS' BOARD OF WESTERN AUSTRALIA

Respondent

DECISION

Tribunal Mr A Sweidan, Senior Member

Date30 November 2007

PlacePerth

Decision The Tribunal affirms the decision under review.

.........(Sgd. A Sweidan)..........

Senior Member

CATCHWORDS

Tax Agent - cancellation of registration - application for review - whether fit and proper person to remain registered - convictions for failure to lodge Business Activity Statements - history of non-compliance in relation to lodgement of income tax returns - cancellation affirmed.

LEGISLATION

Income Tax Assessment Act 1936 (C’th) S251 (2), s 251BC (1) (e), s 251A

Taxation Administration Act 1953 (C’th) S 8A

CASES

Carbery and Associates Pty Ltd v Tax Agents’ Board of Queensland [2001] ATC 2025

Case U122 87 ATC 731

Chapman and Tax Agents’ Board of South Australia (1984) 15 ATR 691

Houvardas and Tax Agents’ Board of New South Wales 91 ATC 2032

Pappalardo v Tax Agents’ Board of Victoria [2003] AATA 990

Reichert v Tax Agents’ Board of New South Wales [2005] AATA 188

Stasos v Tax Agents’ Board of New South Wales (1990) 90 ATC 4950 

Su and the Tax Agents’ Board, South Australia (1982) 82 ATC 4284

DECISION AND REASONS FOR DECISION

30 November 2007 Mr A Sweidan, Senior Member    

BACKGROUND

1. On 11 December 2006 the respondent cancelled the applicant’s registration as a tax agent on the basis that the applicant is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers on income tax matters within Section 251K (2) (d) of the Income Tax Assessment Act 1936 (ITAA 36) by reason of the matters set out below.  The applicant seeks a review of that decision.

2. The respondent found that the 9 convictions of the applicant on 29 June 2006 under section 8C(1)(a) of the Taxation Administration Act 1953 (TAA 1953) in the Perth Court of Petty Sessions for failure to lodge Business Activity Statements for the quarters ending September 2002, December 2002, March 2003, June 2003, September 2003, December 2003, March 2004, June 2004 and September 2004, constituted serious taxation offences within the previous five years for the purpose of Section 251A of the ITAA36, which, by reason of Section 251BC(1)(e) of the ITAA36, disqualified the applicant from being a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers.

3.        The respondent also took into account that the applicant has a history of repeated non-compliance dating back to 2001 with the legal requirements for lodgement of his personal income tax returns and BAS Statements.

ISSUES FOR DETERMINATION BY THE TRIBUNAL

4.         A person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters if that person has been convicted of a serious taxation offence during the previous 5 years: Income Tax Assessment Act 1936, s 251BC. The respondent may cancel the registration of a tax agent upon being satisfied that the tax agent is not a fit and proper person: s 251K (2). The first issue is whether the offences for which the applicant was convicted are serious taxation offences, so that the applicant is not a fit and proper person in the relevant sense.

5. If the answer to the first question is in the affirmative, the Tribunal must then determine whether the registration of the applicant as a tax agent should be cancelled under s 251K (2) because of those offences and the applicant’s history of non-compliance in relation to the lodgement of income tax returns, including his non-lodgement of income tax returns since 2000.

FACTS

6.      The core facts are not in dispute and are set out as follows in the applicant’s Statement of Facts and Contentions dated 30 April 2007, the Section 37 Documents and the respondent’s Statement of Facts and Contentions dated 25 May 2007:-

(a)The applicant was registered by the respondent as a tax agent under Part VIIA of the Income Tax Assessment Act 1936.

(b)On 29 June 2006, the applicant was convicted of 9 breaches of section 8C(1)(a) of the Taxation Administration Act 1953 (“TAA53”) in the Perth Court of Petty Sessions for failure to submit Business Activity Statements in the quarters ending September 2002, December 2002, March 2003, June 2003, September 2003, December 2003, March 2004, June 2004 and September 2004.

(c)The applicant was fined $1,000.00 plus $93.00 in costs.

(d)On 23 August 2006 the respondent requested the applicant to show cause why he should not be de-registered as a tax agent in light of:

i)his 29 June 2006 convictions,

ii)his history of non-compliance in relation to the lodgement of income tax returns, and

iii)his non-lodgement of income tax returns since 2000 (at T10, 20).

(e)On 12 September 2006, the applicant responded to the request to show cause referring inter alia to the matters set out in para. 7 below.

(f)The applicant was interviewed by the members of the respondent in relation to the matter on 13 November 2006. 

(g)On 11 December 2006 the respondent resolved to cancel the applicant’s registration pursuant to s 251K (2) effective from 15 December 2006.

APPLICANT’S EVIDENCE

7.      The applicant has been in dispute with his ex-partners in the accounting practice of Stanton Partners in relation to his share of the income earned by the partnership in the years ended 30 June 2001, 2002 and 2003. The dispute is currently before the Supreme Court of Western Australia in proceedings commenced in 2003.  The applicant says:

(a)that he was entitled to a third of the partnership income of Stanton Partners, but did not receive that amount;

(b)that he has therefore not been able to accurately quantify his income for the years to which the dispute relates;

(c)that his failure to lodge his income tax returns for the year ended 30 June 2001 and subsequent years is because of that dispute; and

(d)the partnership dispute resulted in the applicant maintaining a registration for GST in relation to payments due to the partnership and not having the information to complete the relevant BAS returns.  It is claimed that this situation led to the conviction in June 2006 in circumstances where the applicant now claims that registration was not necessary so the BAS returns should not have been required.

8.        The applicant contends that the partnership dispute in conjunction with his financial and health problems should be considered in the context that there has been no detrimental affect on the applicant’s clients and in combination are sufficient justification for exercising the discretion, if it is enlivened, by setting aside the decision of the respondent to cancel his registration as a tax agent.

RELEVANT LEGISLATION

9.        Part VIIA of the Income Tax Assessment Act 1936 governs the registration of Tax Agents.

10.      By s 251JA, the respondent shall register a natural person as a tax agent if:

(i)the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and

(ii)the applicant is not an undischarged bankrupt.

The respondent shall refuse to register a (natural person) applicant in any other case   s 251JA (2). Registration shall, unless terminated, cancelled or surrendered under the Act, be for a period of 3 years: 251JG (2).

11. Cancellation of registration is governed by s 251K. By s 251K (2), the Board may suspend or cancel the registration of a tax agent on being satisfied of the matters there set out, including:

(d)     if the tax agent is a natural person—the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.

12. Section 251BC deals with whether a person is a fit and proper person in the relevant sense. A person is not fit and proper if (among other things)

(d)     the person is not of good fame, integrity and character; [or]

(e)    the person has been convicted of a serious taxation offence during the previous 5 years.

13. The Tribunal notes that on an application for re-registration, the respondent shall refuse to re-register an applicant unless it is satisfied that the applicant is fit and proper in the relevant sense: see s 251JC(1)(a) and (2). This is subject to s 251BC (3), under which, because of special circumstances, the respondent may disregard certain things (including a conviction) in considering an application for re-registration.

14. A serious taxation offence is defined in s.251A as, relevantly:

(c)   An offence that is:

(i)a taxation offence within the meaning of Part III of the Taxation Administration Act 1953; and

(ii)punishable on conviction by either or both of the following:

A.a fine exceeding $2,000;

B.    imprisonment.

15. Section 8A, in Part III of the Taxation Administration Act, defines taxation offence as meaning:

A.   An offence against a taxation law; or

B.   An offence against:

(i)Section 6, 7 or 7A of the Crimes Act 1914; or

(ii)Subsection 86(1) of that Act by virtue of paragraph (a) of that subsection:  …

being an offence that relates to an offence against taxation law.

The Taxation Administration Act is a taxation law: see definition in s 2.

APPLICANT’S CONTENTIONS

16.     The applicant asserts that:

(a)The conviction of the applicant on 26 June 2006 does not engage s251BC (e) of the Income Tax Assessment Act 1936 in relation to the status of the applicant not being a fit and proper person.

(b)The conviction of the applicant on 26 June 2006 does not enliven the discretion under s251K (2) (d) of the Income Tax Assessment Act 1936.

(c)The circumstances of the applicant taken as a whole are such that any discretion under s251K (2) (d) of the Income Tax Assessment Act 1936, should be exercised by setting aside the decision of the respondent to cancel the registration as a tax agent.

For the reasons set out below the Tribunal does not accept these assertions

Applicant’s Convictions

17. The applicant was convicted of 9 offences under s 8C(1) of the Taxation Administration Act, which provides that it is an offence for a person to refuse or fail, when and as required under or pursuant to taxation law to do so, to furnish an approved form or any information to the Commissioner or another person. Specifically, he was convicted of failing to lodge Business Activity Statements as required.

18. The penalties for offences under s 8C are found in s 8E. A first offence is punishable by a fine not exceeding $2,000. Under s 8E (2) the penalty for a second offence is a fine not exceeding $4,000. Under s 8E(3) the penalty for a third and subsequent offences is a fine not exceeding $5,000 or imprisonment for a period not exceeding 12 months or both.

19.      Although the applicant was convicted of all offences on the one occasion, it is clear in the Tribunal’s view that by s 8B (2) he is to be treated for “subsequent offences” as having been previously convicted of a relevant offence.  That is, the applicant was liable to a penalty exceeding $2,000 on each offence to be treated as a subsequent offence.

Whether the applicant is a fit and proper person

20. The 9 convictions of 26 June 2006 under s 8C (1) of the Taxation Administration Act are not in dispute.

21. Given the penalties to which the applicant, in the Tribunal’s opinion, was liable for second, third and subsequent offences against s 8C, the applicant has been convicted of serious taxation offences within the previous five years for the purposes of s 251A of the Income Tax Assessment Act1936. What constitutes a serious taxation offence is determined by the extent of the fine which can be imposed under legislation, rather than the fine actually imposed in a particular case. The terms of the definition in s.251A of the ITAA 1936 are unambiguous in this regard.

Carbery and Associates Pty Ltd v Tax Agents’ Board of Queensland [2001] ATC 2025 at paragraph 51.

22. It follows that the applicant is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers: s 251BC(1)(e), Income Tax Assessment Act 1936.

Whether the registration should be cancelled

23. The legislation does not prescribe any particular test for the exercise of the discretion to cancel the registration of a tax agent under s 251K (2) (compare ss 251JC and 251BC (3) under which the respondent shall not re-register the applicant unless it is satisfied that, because of special circumstances, a conviction shall be disregarded).

24.      The Tribunal has previously expressed the view that the overriding concern in considering whether registration of a tax agent should continue is the public interest. In Re: Chapman and Tax Agents’ Board of South Australia (1984) 15 ATR 691 at page 702, Deputy President Hall summarised the position as follows:

“When considering the exercise of discretion with respect to cancellation, it is necessary, in my view, to bear closely in mind the purposes for which that power is conferred. It is true that the power of cancellation, once exercised, will necessarily occasion some punishment to the individual affected. But punishment is not the primary object of the exercise of that power (cf. re Upton and Secretary, Department of Transport (1987) 1 ALD 150). The predominant purpose for the exercise of the power of cancellation is to protect the public by ensuring that only those practitioners who are fit and proper persons to be allowed to conduct the taxation affairs of clients are permitted to remain in practice (cf. Glyn v. Denham and Monk [1978] VR 349: Hoban v Davey (1972) 1 NSWLR 59; New South Wales Bar Association v Evatt (1968) 117 CLR 177 at 183; and Re. Guild and Re. Legal Practitioners Ordinance (1978) 32 ATCR 13 at 35-36). Because of the need to protect the public, considerations of personal hardship cannot have overriding effect if maintenance of proper standards of conduct in the profession require that the registration be cancelled (cf. Re. Su and Evatt at CLR 183 and Re. Taylor and Department of Transport (1978) 1 ALD 312 at 319 et seq)”.

See also Pappalardo v Tax Agents’ Board of Victoria [2003] AATA 990 (Senior Member Dwyer) at paragraphs 44-45

25.      The Tribunal has also previously determined that failure by a tax agent to comply with the requirements for lodgement of his own personal taxation returns is not a matter of technical default. It is a serious dereliction of a fundamental duty: see Carbery, where at paragraph 21, Senior Member Fayle said:

“In the opinion of this Tribunal this failure on the part of Mr Carbery to comply with basic requirements of the Australian Taxation Office in regards to its conditions for lodgement of the personal income tax returns of tax agents is tantamount to gross dereliction of a fundamental duty. This failure is exacerbated, in the opinion of the Tribunal, because it is a failure to comply by a person who, he is responsible for the management of his clients’ income tax requirements.”

These comments were cited with approval by the Tribunal in Pappalardo, at paragraphs 17 and 19 and in Reichert v Tax Agents’ Board of New South Wales [2005] AATA 188 (Deputy President Purvis QC) at paragraph 21. And see also the comments of Davies J in Re: Su and the Tax Agents’ Board, South Australia (1982) 82 ATC 4284, at page 4,286- 4.287; Hill J in Stasos v Tax Agents Board of New South Wales (1990) 90 ATC 4950 at 4959; and the comments of Deputy President Thompson in Case U122 87 ATC 731 at page 735.

26.      In the Tribunal’s opinion, the applicant’s explanation for his failure to lodge his own personal taxation returns and Business Activity Statements within the required time, namely, that he has been involved in litigation with his former partners and has been unable to obtain the necessary information is not acceptable.  The applicant was late in lodging his income tax returns for the years ended 30 June 1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1999, 2001, 2002, 2003 and 2004 and the Australian Taxation Office demanded the lodgement of the returns in those years.  Income tax returns for the years ended 2001, 2002, 2003, 2004, 2005 and 2006 are still outstanding.  As noted above, the applicant was convicted on 26 June 2006 for failing to lodge Business Activity Statements (BAS) for the quarters ending September 2002, December 2002, March 2003, June 2003, September 2003, December 2003, March 2004, June 2004 and September 2004.  The evidence also shows that a number of companies with which the applicant is associated have failed to file income tax returns since 2001.

27.      The Tribunal notes that all taxpayers are under an obligation to lodge annual income tax returns: see Income Tax Assessment Act 1936, Part IV, and in particular, ss161 and 163A. Section 388‑55 of the Taxation Administration Act provides:

“The Commissioner may defer the time within which an approved form is required to be given to the Commissioner of to another entity. 

(2)   A deferral under subsection (1) does not defer the time for payment of any amount to the Commissioner.”

28. Section 166 of the ITAA 1936 provides:

“From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income (or that there is no taxable income) of any taxpayer, and of the tax payable thereon (or that no tax is payable)”. 

29. The Tribunal notes further that once an assessment has been made it can be amended within certain time periods as set out in s 170 of the Income Tax Assessment Act 1936. In the case of the applicant therefore the Commissioner may amend his assessment within four years after the day on which the original assessment was given to him: s 170(1), item 4. Further, the applicant may lodge an objection to any assessment issued: see s 175A of the Income Tax Assessment Act 1936 and Taxation Administration Act, Part IVC. By lodging an objection to his assessment, the applicant would thereby increase the time within which the Commissioner could amend his assessment: s 170(1) Item 6. The applicant could clearly have lodged his returns on the basis of the information available to him and, if this subsequently turned out to be inaccurate, sought an amended assessment and objected to an incorrect assessment.

30.      In the Tribunal’s opinion, the applicant has not shown any acceptable basis for his failure to lodge income tax returns or pay tax for successive years of income commencing for the year ended 30 June 2001.  As a tax agent, the applicant should be well aware of the above provisions.   

31. In the view of the Tribunal, it is clear that by reason of his convictions, the applicant is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. Furthermore, in all of the circumstances, having regard to the applicant’s convictions for serious tax offences, his history of non compliance, and his failure to lodge returns for the years of income 2001-2005, the Tribunal’s view is that the correct exercise of the power in s 251K(2) is that the applicant’s registration as a tax agent should be cancelled. The Tribunal is of the view that the applicant has not put forward any reasons sufficient to outweigh “the need to allow the public to be confident that those who practice as tax agents are fit and proper persons and competent professional people” (Re Houvardas and Tax Agents’ Board of New South Wales 91 ATC 2032, O’Connor J at paragraph 28.

DECISION

32.      The decision under review is affirmed.

I certify that the thirty two [32] preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member

Signed:          …………(Sgd. R Riberi)………

Associate

Date of Hearing  10 September 2007
Date of Decision  30 November 2007
Counsel for the Applicant         Mr Alan Rumsley
Solicitor for the Applicant          Mr Alan Rumsley
Counsel for the Respondent     Mr J Allanson
Solicitor for the Respondent     Australian Government Solicitor