Colin and Tax Practitioners Board
[2024] ARTA 43
•13 November 2024
Colin and Tax Practitioners Board [2024] ARTA 43 (13 November 2024)
Applicant/s: Philippe Colin
Respondent: Tax Practitioners Board
Tribunal Number: 2024/1283
Tribunal:General Member Darian-Smith
Place:Sydney
Date:13 November 2024
Decision:The Tribunal affirms the decision under review.
.......................[SGD].................................................
General Member Darian-Smith
Catchwords
TAX AGENTS – termination of registration – prohibition on applying for registration for four years – breaches of Code of Professional Conduct – whether “fit and proper person” – factors determining whether length of ban appropriate – protective purpose of sanctions – lack of insight into seriousness of shortcomings – decision under review affirmed.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) ss. 25, 29, 43
Administrative Review Tribunal Act 2024 (Cth) ss. 12, 105
Income Tax Assessment Act 1997 (Cth) s.995-1
Tax Agent Services Act 1953 (Cth) ss. 2-5, 2-10, 20-5, 30-5, 30-10, 30-15, 30-30, 30-35, 40-5, 40-15,40-25, 50-5, 50-10, 60-95, 60-125, 70-10, 90-1
Cases
Colin and Tax Practitioners Board [2024] AATA 2151
Frugtniet v Australian Securities and Investments Commission (2019) 266 CLR 250
Smith and Commissioner of Taxation (Taxation) [2023] AATA 3090
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Stasos v Tax Agents’ Board of New South Wales (1990) 21 ATR 974
Su v Tax Agents’ Board of South Australia (1982) 61 FLR 1
Jack and Tax Agents’ Board of New South Wales [1997] AATA 678
Kishore and Tax Practitioners Board [2017] AATA 271
Le’Sam Accounting Pty Ltd and Tax Practitioners Board [2020] AATA 890
Iseppi and Tax Practitioners Board (Taxation) [2020] AATA 1523
Hill and Tax Practitioners Board (Taxation) [2020] AATA 678
Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450
Middlebrook and Tax Practitioners Board [2020] AATA 3698
Ridden and Tax Practitioners Board [2020] AATA 422
Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80.
Li and Tax Practitioners Board [2014] AATA 299
Statement of Reasons
BACKGROUND AND DECISION UNDER REVIEW
In its decision dated 25 January 2024, the Tax Practitioners Board (The Respondent or Respondent) cancelled the Applicant’s registration as a taxation agent[1] and imposed a ban of four years duration from the date of termination of his taxation agent registration[2] (collectively the Reviewable Decision).
[1] Under s.40-5(1)(b) Tax Agent Services Act 2009 (Cth) (TASA).
[2] Under s.40-25(1) TASA.
The Reviewable Decision was made by the Respondent’s Board Conduct Committee at its meeting on 25 January 2024.[3] The Reviewable Decision was communicated to the Applicant in the Respondent’s letter to him dated 16 February 2024.[4]
[3] Minutes of Board Conduct Committee Meeting 25 January 2024 (CB 1725-1736).
[4] Letter from Respondent to Applicant dated 16 February 2024 (CB 1737-1748).
The critical elements of the Reviewable Decision are stated in the Respondent’s letter dated 16 February 2024, as follows:
“On 25 January 2024, the Board decided that you, Phillipe Colin, failed to comply with subsections 30-10(1), 30-10(2), 30-10(7), 30-10(11) and 30-10(14) of the Code of Professional Conduct (the Code) in the TASA.
The Board also found that you, Philippe Colin, no longer met the fit and proper person requirement under paragraph 20-5(1)(a) in the TASA. As such, the Board decided to terminate your registration as a tax agent under paragraph 40-5(1)(b) of the TASA.
The Board also decided under s.40-25 of the TASA that you may not apply for registration under the TASA for a period of four (4) years from the date the termination of your registration takes effect.”
The Reviewable Decision followed an investigation by the Respondent under Subdivision 60-E of TASA. The Respondent’s investigation concluded that the Applicant had engaged in a range of conduct in breach of tax legislation, which included:
(a)making unauthorised amendments to the income tax returns (ITR) of four current clients and one former client;
(b)failures to pay outstanding taxation debts owed to the Australian Taxation Office (ATO), both in respect of his own account and that of his company, Southern Beaches Accounting Pty Ltd (SBA);
(c)failures to provide the ATO with correct financial information on the ITR’s filed for himself and for SBA, and in Business Activity Statements for his tax agent business;
(d)allowing SBA to advertise on Gumtree that it could provide tax agent services when it was not registered as a tax agent with the Respondent; and
(e)demonstrating a history of non-compliance with earlier orders of the Respondent, including an order to complete the Ethics and Governance offered by CPA Australia.
On 23 February 2024, the Applicant filed an application for review of the Reviewable Decision.[5]
[5] Under ss. 70-10(e), (h) TASA and s.29 Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act).
On 14 March 2024, the Applicant applied for a stay of the Reviewable Decision.[6] The following day, an interim stay of the Reviewable Decision was consented to by the parties and granted by the Tribunal.
[6] Under s.43 AAT Act.
On 28 June 2024, the Tribunal refused to grant the Applicant a stay and dissolved the interim stay which had been in place.[7] The Applicant did not attend the hearing of his stay application. The Reviewable Decision came into effect on that date.
[7]Colin and Tax Practitioners Board [2024] AATA 2151 (28 June 2024).
THE ISSUES
The parties agreed at the hearing that the issues for determination by the Tribunal were as stated in the Respondent’s Amended Statement of Facts, Issues and Contentions dated 29 September 2024 (Respondents ASFIC).[8] Those issues were:
(a)whether the Applicant breached ss. 30-10(1), 30-10(2), 30-10(7), 30-10(11) and 30-10(14) of the Code in the TASA.
(b)whether the Applicant is a “fit and proper person” as required by s. 20-5(1)(a) of the TASA and
(c)whether:
(i)the termination of the Applicant’s tax agent registration under s.40-5(1)(b) of the TASA was appropriate; and
(ii)if so, whether a period of four years during which the Applicant is prohibited from applying for registration is appropriate, pursuant to s. 40-25(1) of the TASA.
[8] At paragraph 2.
The object clause of the TASA, s.2-5, provides as follows:
(1) The object of the Act is to support public trust and confidence in the integrity of the tax profession and of the tax system by ensuring that tax agent services are provided to the community in accordance with appropriate standards of professional and ethical conduct.
(2) This is to be achieved by (among other things) providing for:
(a) the registration and regulation, by a national Board, of entities that provide tax agent services; and
(b) a Code of Professional Conduct for registered tax agents and BAS agents; and
(c) sanctions to discipline entities in relation to their conduct as a registered tax agent or BAS agent; and
(d) sanctions where tax agent services are provided otherwise than in accordance with this Act.”
Part 3 of the TASA contains the Code[9] which applies to any person who is a registered tax agent.[10]
[9] s.30-10 TASA.
[10] s. 30-5 TASA.
The provisions of the Code, set out at s. 30-10 of the TASA, upon which the Respondent relies, are as follows:
Honesty and integrity
(1) You must act honestly and with integrity.
(2) You must comply with the taxation laws in the conduct of your personal affairs…
Competence
(7) You must ensure that a tax agent service that you provide, or that is provided on your behalf, is provided competently…
Other responsibilities
(11) You must not knowingly obstruct the proper administration of the taxation laws …
(14) You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.
The term “taxation law”, where referred to in TASA, has the same meaning as taxation law as is contained in the Dictionary definition in s.995-1 of the Income Tax Assessment Act 1997 (Cth), and refers to any Act or regulations made under any Act of which the Commissioner has the general administration and the TASA and regulations made under the TASA.
The Tribunal is required to make its decision based on the evidence and circumstances which exist at the date of its decision.[11] Accordingly, the Tribunal should consider the relevant conduct and events which occurred or became known after the Reviewable Decision.
[11] ss. 12, 105 Administrative Review Tribunal Act 2024 (ART Act); Frugtniet v Australian Securities and InvestmentsCommission (2019) 266 CLR 250 at [14]-[15] and [51].
THE FACTS
The facts upon which the Respondent relies are set out in the Respondents ASFIC at paragraphs [3]-[189]. Although the matrix of relevant facts referred to by the Respondent is extensive, the Applicant did not, with minor exceptions, seek to challenge those facts in his Statement of Facts Issues and Contentions filed 5 September 2024 (Applicants SFIC). Those minor exceptions are noted and responded to in the Respondent’s submissions dated 10 October 2024 (Respondents submissions).[12]
[12] At paragraph 12.
The facts upon which the Reviewable Decision has been based can be summarised in overview as falling into the following categories:
(a)alleged misconduct by the Applicant in acting as a registered tax agent with respect to 6 individual taxpayers (to be referred to as Taxpayer 1 to Taxpayer 6 in respect of those individuals to protect their privacy);[13]
(b)outstanding personal tax obligations of the Applicant;[14]
(c)outstanding tax obligations of SBA;[15]
(d)previous regulatory action taken by the Respondent, which resulted in the imposition of sanctions against the Applicant in each of 2019[16] and 2020,[17] and in the subsequent breach of certain of those sanctions by the Applicant;[18] and
(e)conduct by the Applicant and by SBA, relating to SBA’s webpage, constituting alleged obstruction of the administration of taxation laws.[19]
[13] Respondents ASFIC [15]-[97].
[14] Respondents ASFIC [98]-[103], [110]-[121].
[15] Respondents ASFIC [104]-[109], [122]-[130].
[16] Respondents ASFIC [132]-[134].
[17] Respondents ASFIC [135]-[136].
[18] Respondents ASFIC [137]-[148].
[19] Respondents ASFIC [149]-[159].
There are additional facts relied upon by the Respondent which post-date the Reviewable Decision (or came to the Respondent’s attention after the Reviewable Decision) and which pre-date the hearing on 23 October 2024. Those additional facts fall into the following categories:
(a)conduct by the Applicant leading up to the hearing of the Applicant’s stay application on 28 June 2024;[20]
(b)the posting by the Applicant of an advertisement on Gumtree;[21] and
(c)the Applicant’s exclusion (in around 2020) by the Queensland Building and Construction Commission (QBCC) from providing accounting services to licensed builders and the Applicant’s alleged non-disclosure to the Respondent of the QBCC exclusion.[22]
[20] Respondents ASFIC [160]-[177].
[21] Respondents ASFIC [178]-[179].
[22] Respondents ASFIC [180]-[189].
The main areas of factual disagreement raised by the Applicants SFIC related to:
·the context of the ATO’s audit of his personal tax affairs;
·whether the Applicant had any current payment plans in place with the ATO in respect of paying his and SBA’s tax debts;
·the steps taken by him to have SBA’s website page taken down;
·the circumstances in which taxpayers 1, 3, 4, 5 and 6 provided statutory declarations to the ATO; and
·whether completion of the IPA Ethics and Governance course (IPA Ethics course) rather than the CPA Ethics and Governance course (CPA Ethics course) amounted to compliance by him with the Respondent’s orders.
Each of these factual matters raised by the Applicant were the subject of cross-examination by the counsel for the Respondent.
I find that the Applicant’s evidence on the identified areas of factual disagreement:
(a)did not undermine the fact of, or the outcomes flowing from, the ATO’s audit of the Applicant’s personal tax affairs, or those of SBA.
(b)failed to establish that the Applicant had any current payment plans in place with the ATO in respect of his own or SBA’s tax debts. Counsel for the Respondent tendered ATO Integrated Core Processing extracts dated 22 October 2024 for each of the Applicant and SBA which showed that there are no active payment plans in place with the ATO for either taxpayer.[23]
(c)established that although there may have been telephone calls made by the Applicant to Sensis in 2022, no recent steps had been taken by the Applicant (with Sensis or with anybody else) to have the SBA website taken down.
(d)did not alter the fact of the making, or the truth of the contents, of the statutory declarations given to the ATO by Taxpayers 1, 3, 4, 5 and 6. Further, the Applicant did not dispute the factual matters referred to by the declarants in their respective statutory declarations. He accepted that he had not sought to cross-examine any of the declarants as to the circumstances of the making, or the contents of, their respective statutory declarations; and
(e)did not establish that the IPA Ethics course was, as a matter of fact, comparable to, or substitutable for, the CPA Ethics course, as a possible means of satisfying the Respondent’s compliance order made on 11 August 2020.
[23] See Exhibit 3.
THE APPLICANT’S CONTENTIONS
The Applicant’s substantive contentions can be summarised as:
(1)that although he “did wrong with a few things”, he ought not in all the circumstances, be de-registered as a licensed tax agent. The Applicant’s SFIC states that he “basically was de-registered for lodging 6 out of 1300 tax returns without signature and having a tax debt”.
(2)the present difficulties he finds himself in can be traced back to the decisions by the ATO in 2015 and 2016 to subject him and SBA to a tax audit of their 2015 and 2016 ITRs. The Applicant’s SFIC states,” [t]he tax office have been at me since 2015 trying to get me into trouble for reasons I don’t know.”
(3)that the ATO had, in late 2017, after he commenced trading as a sole practitioner, put him on a “program” with the ATO (which he remained on until December 2019).
(4)while conceding that he “did lodge quite a few tax returns in 2018 without signature”, he had been careful with the claims made for deductions and problems only arose because the clients who had complained about him thought they should have received larger refunds. Further, those clients did not pay him for his tax agent services, which put him in a “precarious position.”
(5)the ATO had continued, since 2016, to treat him unfairly as evidenced by him having been “audited 5 out of the last 8 years by the ATO”.
(6)he has been taking active steps to reduce his tax debt, including by paying “$120,000 off my tax debt in July and August 2023” and going onto a payment plan with the ATO.
(7)in respect of the SBA website, the Applicant’s SFIC states,” I have rung Sensis/Yellow Pages countless times to get my webpage down with no luck.”
(8)in relation to the lodgement of amended returns without signature, the Applicant’s SFIC states, “I am sure the ATO coerced the taxpayer to sign a statutory declaration and get me in trouble with the TPB.”
(9)in relation to the Respondent’s compliance order made on 11 August 2020, the Applicant’s SFIC states “I have passed my Ethics and Governance Course.”
(10)it is said by the Applicant to be in the public interest that he is able to continue to trade as a tax agent as he will otherwise be unable to pay his tax debt and will not be able to lodge over 1200 tax returns (those 1200 clients having been deprived of his tax agent services).
(11)if he remains de-registered that will leave him unable to pay his own and SBA’s tax bills and he will have to sell his home; and
(12)the Applicant’s SFIC states that he “will do whatever it takes to get [his] license back” and that he is “deeply remorseful for doing wrong in the past and I will not do anything wrong from now on and comply with the code of conduct.”
The Applicant’s contentions are only partly responsive to the Respondent’s contentions.
During the hearing, the Tribunal took the Applicant to paragraphs [206]-[212] of the Respondents ASFIC inclusive to make it clear to the Applicant that the case which he had to meet was wider than he was stating it in contention (1) in paragraph 20 above. The Applicant was invited to take, and given the opportunity to, address the Tribunal on any of the Respondent’s contentions which he had not dealt with in his SFIC. At the conclusion of the hearing, the Tribunal made a direction which provided the parties with an opportunity to file any further written closing submissions, should they choose to..
THE RESPONDENT’S SUBMISSIONS AND CONSIDERATIONS OF THE PARTIES’ SUBMISSIONS
The Respondent’s contentions are focussed on:
(a)the breaches by the Applicant of the Code, provisions s. 30-10 (1), (2), (7), (11) and (14) it identified during its investigation and subsequently; and
(b)whether the Applicant has ceased to meet the requirement for registration as a tax practitioner, that he is “a fit and proper person” under s. 20-5(1)(a) of the TASA.
The Tribunal notes that the Respondent’s Explanatory Paper “TPB(EP) 01/2010 Code of Professional Conduct”[24] (EP1) is a publicly available guide issued by the Respondent to provide guidance to registered tax practitioners and others as to the Respondent’s approach to the application of the Code. It follows that a registered tax practitioner who refers to EP1 would not be left in the dark as to what the Code is and how the Respondent expects it to operate.
[24] ST10, CB 1749-1830.
As has been previously noted, very little of the evidence in support of the Respondent’s contentions has been contested by the Applicant. That supporting evidence has been admitted and is accepted by the Tribunal on the basis that it has been expressly conceded by the Applicant or on the basis that the Applicant has chosen not to contest it.
The Applicant is said to have breached provision (1) of the Code by failing to “act honestly and with integrity”. The specific breaches relied upon by the Respondent are set out in the paragraphs [27] to [34] below.
The Applicant amended and lodged the 2021 ITR for Taxpayer 1, claiming certain deductions, without the knowledge or authorisation of Taxpayer 1.[25] At the time of making the amendment, Taxpayer 1 had not been a client of the Applicant for four years.[26] The Applicant subsequently made false statements to the ATO and to the Respondent in relation to the amendments.[27]
[25] Respondents ASFIC [15]-[19], [22]-[24].
[26] Respondents ASFIC [20]-[21].
[27] Respondents ASFIC [25]-[29].
The Applicant changed the financial institution account details for Taxpayer 1 to a bank account under his control, again without first obtaining authority and consent from Taxpayer 1 to making that change.[28]
[28] Respondents ASFIC [19].
The Applicant amended and lodged the 2021 ITR for Taxpayer 3, claiming certain deductions, without the knowledge or authorisation of Taxpayer 3.[29] The Applicant subsequently made false statements to the ATO and to the Respondent in relation to the amendments.[30]
[29] Respondents ASFIC [44]-[50].
[30] Respondents ASFIC [51]-[54].
The Applicant amended and lodged the 2021 ITR for Taxpayer 4, claiming certain deductions, without the knowledge or authorisation of Taxpayer 4.[31] The Applicant subsequently made false statements to the ATO and to the Respondent in relation to the amendments.[32]
[31] Respondents ASFIC [55]-[66].
[32] Respondents ASFIC [67]-[71].
The Applicant amended and lodged the 2021 ITR for Taxpayer 5, claiming certain deductions, without the knowledge or authorisation of Taxpayer 5.[33] The Applicant subsequently made false statements to the ATO and to the Respondent in relation to the amendments.[34]
[33] Respondents ASFIC [72]-[83].
[34] Respondents ASFIC [84]-[86].
The Applicant amended and lodged the 2021 ITR for Taxpayer 6, claiming certain deductions, without the knowledge or authorisation of Taxpayer 6.[35] The Applicant subsequently made false statements to the Respondent in relation to the amendments.[36]
[35] Respondents ASFIC [87]-[95].
[36] Respondents ASFIC [96]-[97].
When the Applicant applied to the Respondent in 2021 for renewal of his registration, in answer to the question whether he had, in the previous 5 years had “ had matters that may affect [his] good fame, integrity and character e.g. subject to any disciplinary action by a regulator or professional association”, he completed the declaration “no”.[37] That statement was false as he was at the time of making the declaration subject to an exclusion decision of the QBCC made in 2020, for making false and misleading statements. In cross examination about why he had provided a “no” declaration in circumstances which clearly called for a “yes” response, the Applicant was unable to provide an explanation which the Tribunal accepts.
[37] The Application for Renewal of Registration is at Court Book (CB) 2532, the declaration is at CB 2536.
After the Reviewable Decision was in place, the Applicant posted an advertisement on Gumtree, the effect of which was to seek to engage the services of a third party to enable the Applicant to continue to operate his business as a tax agent at a time when the Respondent had determined that his registration should be terminated. That conduct was designed to circumvent the Reviewable Decision in an impermissible way.[38] The Applicant’s evidence under cross-examination, that he was “desperate” at the time of the lodging by his wife the advertisement (on the same day that he was informed by the Respondent of the Reviewable Decision), that it “had fallen by the wayside” and was redundant in hindsight because it was not responded to, did not provide a satisfactory response to this contention.
[38] If the purpose of the advertisement had been achieved, it could potentially have given rise to possible breaches of the Disqualified Entities regime (Division 45 TASA) and/or a potential breach of s.50-25 TASA.
The Applicant is said to have breached provision (2) of the Code in that he did not comply with the taxation laws in the conduct of his personal affairs. That non-compliance occurred both in his capacity as an individual and in his capacity as director of SBA (a company of which he was sole director and the controlling mind).
The breaches of Code provision (2) in the Applicant’s individual capacity which the Respondent relies on are:
(a)failing to pay taxation debts as and when they fell due.
(b)failing to correctly report his personal income and expenses and his rental income and expenses in his 2020 ITR, resulting in a tax shortfall of $19,352.10 and a penalty amount of $9,676.05.
(c)failing to correctly report his personal income and expenses and his rental income and expenses in his 2021 ITR, resulting in a tax shortfall of $1,442.90 and a penalty amount of $721.50; and
(d)failing to lodge his individual ITR for the financial year ending 30 June 2023 by its due date.
The breaches of Code provision (2) in the Applicant’s capacity as director of SBA which the Respondent relies on are:
(a)failing to ensure that SBA paid its taxation debts as and when they fell due.
(b)failing to correctly report all the assessable income and business expenses in the SBA ITRs for the financial years ending 30 June 2020 and 2021 by:
(i)declaring taxable income of $47,719 in the 2020 ITR when the actual taxable income assessed by the ATO was $204,694, resulting in a tax shortfall of $47,093 and a penalty amount of $23,546.50; and
(ii)declaring taxable income of $0 in the 2021 ITR when the actual taxable income assessed by the ATO was $198,723, resulting in a tax shortfall of $59,616 and a penalty amount of $29,808.
(c)failing to correctly report and claim Input Tax Credits (ITCs) on acquisitions for the financial years ending 30 June 2020 and 2021 by:
(i)declaring GST of $5,129 for the financial year ending 30 June 2020 when the actual ITCs claimable assessed by the ATO was $29,340, resulting in a GST shortfall of $24,211 and a penalty amount (after 20% remission) of $9,684.40; and
(ii)declaring GST of $2,115 for the financial year ending 30 June 2021 when the actual ITCs claimable assessed by the ATO was $10,254, resulting in a GST shortfall of $13,925 and a penalty amount (after 20% remission) of $5,570.
(d)failing to correctly withhold and notify to the ATO amounts at labels W1 and W2 in activity statements for the financial years ending 30 June 2020 and 2021 by;
(i)declaring $0 PAYGW for the financial year ending 30 June 2020 when the actual amount of PAYGW assessed by the ATO was $35,028 resulting in a failure to withhold a penalty amount of $35,028 and final failure to withhold penalty (after 50% remission) of $17,514.
(ii)declaring $0 PAYGW for the financial year ending 30 June 2021 when the actual amount of PAYGW assessed by the ATO was $9,705.85 resulting in a failure to withhold a penalty amount of $9,705.85 and a final failure to withhold penalty (after 50% remission) of $4,852.90.
(e)failing to lodge SBA’s ITR for the financial year ending 30 June 2023 by its due date; and
(f)failing to lodge SBA’s BAS by the due dates for the quarterly periods ending 30 September 2023 and 30 April 2024.
The Applicant is said to have breached provision (7) of the Code by failing to ensure that the tax agent service provided by him, or on his behalf, was provided competently.
The specific breaches of the Applicant’s obligation to provide competent tax agent services arose in respect of the 2020 ITR amendment for Taxpayers 2, 3 and 4, the 2021 ITR amendment for Taxpayers 1 and 5 and the 2021 ITR for taxpayer 6.
The conduct of the Applicant which gave rise to the breaches arose from his failure to:
(a)obtain the client’s consent in respect of lodging each of the 2020 and 2021 ITR amendment and the 2021 ITR referred to in the previous paragraph.
(b)provide each of his clients or his former client, with the ITR or amended ITR for their review prior to lodgement.
(c)make sufficient enquiries to establish what deductions could correctly be claimed; and
(d)obtain and have adequate substantiation for deductions which were claimed.
The Applicant’s conduct in not complying with the substantiation rules in relation to the claiming of allowable deductions is a particularly obvious breach of Code provision (7) from the Respondent’s perspective because the rules are not complex and compliance with them is not onerous.
In Smith and Commissioner of Taxation (Taxation),[39] the Tribunal stated: “The substantiation rules are one of the few areas of the Australian income tax law that is easily understandable and well understood by most taxpayers-obtaining and retaining written evidence of work-related expenses, typically in the form of a receipt, is a primary requirement for seeking to claim a deduction. There is little mystery or magic to it.”[40]
[39] [2023] AATA 3090.
[40] [2023] AATA 3090, [24].
The Applicant is said to have breached provision (11) of the Code in knowingly obstructing the proper administration of the taxation laws by making or assisting SBA to advertise that it could provide tax agent and/or BAS agent services when it was not registered to do so. The advertising of tax agent services by a person who is not registered is a contravention of s.50-10(1) TASA.
The Applicant is said to have breached provision (14) of the Code in failing to respond in a “timely, responsible and reasonable manner” to an order of the Respondent dated 11 August 2020 that he successfully undertakes the CPA Ethics course by 11 January 2021.[41]
[41] Respondent’s submissions [64]-[68].
The Applicant attempted to pass the CPA Ethics course on two occasions. On 4 June 2021, the Applicant notified the Respondent by email that he had failed the CPA Ethics course.[42] The Respondent provided the Applicant with the opportunity to re-take the CPA Ethics course but on 3 June 2022, the Applicant notified the Respondent by email that he had failed the CPA Ethics course for a second time.[43]
[42] ST40, CB 2478.
[43] T5, CB 1671.
The Applicant lodged a special consideration application with CPA Australia in relation to his second failed attempt to pass the CPA Ethics course, stating in that application that he “only just failed” his exam and that he had received a score of 510.[44] The Candidate Exam report issued by CPA Australia stated that the Applicant’s scaled score was 471 when the passing scale score was 540.[45] Under cross-examination, the Applicant conceded that by obtaining a score of 471 when the pass mark was 540, he “did not just fail”.
[44] T5, CB 1684-1687 at 1685.
[45] T5, CB 1682-1683 at 1682.
The Applicant did not attempt the CPA Ethics course again. Sometime later, the Respondent asked him, in its second “preliminary enquiry” letter,[46] to advise whether he had completed the CPA Ethics course. The Applicant responded by email to the effect that he had “tried his best” to pass the CPA Ethics course and he “only just failed both times.”[47]
[46] T5, CB 300-306.
[47] T5, CB 308.
On 23 July 2024, the Applicant advised the Tribunal that he had successfully completed the IPA Ethics course.[48] The Respondent does not dispute that the Applicant completed the IPA Ethics course. However, the Respondent does not accept that the IPA Ethics course is of comparable rigour to the CPA Ethics course and consequently it cannot be regarded as substitutable for the CPA Ethics course in considering the adequacy of the Applicant’s response to its 11 August 2020 order.[49]
[48] Email from the Applicant to the Tribunal dated 23 July 2024 attaching copy of IPA Certificate of Completion (Certificate ST41, CB 2481.
[49] Respondents ASFIC [147]-[148].
The CPA Ethics course is of about 12 weeks duration, has 5 learning modules, a recommended study time of 15 hours per week and an open book exam with a pass mark of 540 out of 900.[50] In contrast, the IPA Ethics course has a total of about 6 hours learning time, can be completed within a week and has an assessment consisting of 10 multiple choice questions, with no limit on re-attempts until the course is passed.[51]
[50] ST42, CB 2483-2486; ST55, CB 2549-2554; ST56, CB 2555-2558.
[51] ST53, CB 2539-2545; ST54, CB 2546-2548.
I am satisfied that the IPA Ethics course is not comparable to the CPA Ethics course, in that the latter is a more rigorous and exacting ethics course. I find that the completion of the IPA Ethics course by the Applicant does not provide an answer, as the Applicant submits it should, to his failure to comply with the Respondent’s order that he complete the CPA Ethics course.
The Respondent contends that the Applicant has ceased to meet the eligibility requirement of being a “fit and proper person” necessary for registration as a tax agent under s.20-5(1)(a) TASA.
The Respondent points to a few matters which justify a finding that the Applicant is not, or that the Tribunal cannot be positively satisfied that he is, a fit and proper person within the meaning of TASA.
Those matters are:
(a)the various breaches of Code provisions (1), (2), (7), (11) and (14) and the nature and seriousness of those breaches.
(b)the fact that in 2019, following an investigation by the Respondent, the Applicant was found to have breached Code provisions (2), (7), (9) and (10)[52] (2019 Code breaches). The circumstances of the Applicant’s present breaches of Code provisions (2) and (7) were sufficiently like the 2019 Code breaches to give rise to the Respondent’s concern that the Applicant had not changed his behaviour over time.
(c)the length of time which the Applicant had remained in breach of Code provisions (11) and (14) showed a complete disregard for the Respondent and for his own obligations as a registered tax practitioner. The Applicant’s conduct in placing the Gumtree advertisement, demonstrated a willingness on his part to enter an arrangement which would be contrary to the regulatory regime imposed by the TASA.
(d)the failure of the Applicant to ensure that his personal tax affairs, and those of SBA, were and are above reproach. That failure is evidenced by the breaches of Code provision (2) involving the lodgement of ITR’s which were wrong (and resulted in penalties being imposed by the ATO) and which had been prepared carelessly and with a disregard for his tax obligations.
(e)the Applicant’s repeated conduct in claiming unsubstantiated deductions and lodging ITR’s or amended ITR’s without having received prior client authorisation to do so.
(f)the Applicant’s conduct in his present review application before the Tribunal in representing to the Tribunal that he was too unwell to work and hence to participate in the Tribunal proceedings, when in fact he was continuing to work.
(g)the Applicant’s exclusion for 3 years by the QBCC for making false and misleading statements and his subsequent failure to make a proper declaration when applying in 2021 for renewal of his registration as a tax agent; and
(h)his general downplaying of the significance of his wrongdoing and tendency to portray himself as having been victimised by the ATO. Those things run contrary to his expressions of remorse and contrition. They act to cast doubt that the Applicant truly appreciates the significance of his wrongdoing.
[52] ST1, CB 1876-1882; ST2, CB 1884-1886.
There is some evidence before the Tribunal about the Applicant’s mental health,[53] which raises a question about his general fitness to practise. The Applicant did not call any treating doctor to testify at the hearing, nor did he seek to tender any current medical evidence. During cross-examination, the Applicant made concessions about having suffered from depression in about June 2022 and having previously been given a diagnosis of schizophrenia. He said that these issues were not current. It is not necessary for me to make findings as to the Applicant’s mental health to determine his application for review.
[53] Emails from the Applicant to the Tribunal dated 7 May 2024, 17 May 2024 (A4, CB 2583-2585), 14 June 2024 and 17 June 2024 (A5, CB 2586-2587).
The Applicant has put some letters of support into evidence by way of character references.[54] The Respondent submits that limited weight should be given to this evidence.[55] In cross-examination the Applicant was asked some questions about an email sent by him on 10 July 2024[56] in which he sought to solicit a positive character reference. The Applicant conceded that when asking the recipient of the email for a reference, he did not tell them what allegations were being made against him by the Respondent. In my view these references can be received by the Tribunal, but in the circumstances, I have accorded them little weight in determining the fit and proper person issue.
[54] See A8, CB 2591; A9, CB2592; A10, CB 2593.
[55] Respondent’s submissions [85].
[56] CB 2591.
The Respondent’s Explanatory Paper “TPB(EP) 02/2010 Fit and proper person”[57] (EP2) provides a useful starting point for the Tribunal in considering the principles which guide a determination of fitness and propriety.
55. EP2 is not binding on the Tribunal but, as a publicly available guideline issued by the Respondent, regard should be had to it. As to determining fitness and propriety, EP2 states: A determination on whether a person is a fit and proper person requires the TPB to make a value judgment in the context of the activities in which the person is or will be engaged considering all the circumstances of a given case.
56. therefore, a determination on whether a person is fit and proper is not made by applying a single, standard test or rule, but rather, by balancing a range of considerations that may be seen to be relevant to fitness and propriety generally. Whether or not the considerations present in a given case result in a finding that a person is not fit and proper for registration will depend on a range of considerations, including (but not limited to) the nature and degree of the misconduct or improper conduct, and prior conduct or experience of the tax practitioner and any relevant surrounding circumstances.”[58]
[57] T10, CB 1831-1875.
[58] CB 1840.
In Australian Broadcasting Tribunal v Bond,[59] a case concerning whether Alan Bond was a “fit and proper person” to hold a broadcasting license, Toohey and Gaudron JJ. said:
“The expression “fit and proper person”, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept “fit and proper” cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of those activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur.”
[59] (1990) 170 CLR 321.
Narrowing the focus to whether a person is “fit and proper” to be a registered tax agent, the Tribunal is to consider the important and privileged role which the registered tax agent plays in the self-assessment system.
In Stasos v Tax Agents’ Board of New South Wales,[60] Hill J identified some of the key features of the tax agent’s role.
[60] (1990) 21 ATR 974.
First, the privilege inherent when the legislature has chosen “to confer upon registered tax agents a virtual monopoly in the preparation for reward of income tax returns and objections and in relation to the transaction of any business on behalf of a taxpayer in income tax matters for reward”.[61]
[61] (1990) 21 ATR 974, 983-984.
Second, that the conferral of that privilege upon registration carries with it a set of obligations and responsibilities, including keeping up to date with changes to the taxation laws so that the agent’s clients can be properly advised and represented.
Third, the agent must be able to carry on the dealings he will have with the ATO in an “atmosphere of mutual trust”. His Honour expanded on this point:
“The Commissioner and his officers must be able to accept that, to the best of the ability of the agent, returns have been prepared which are true and accurate. This is particularly so now that the Commissioner has proceeded to a system of self-assessment, with inaccuracies only coming to light in the case of random audit, or, presumably, other information coming to the hands of the Commissioner.”[62]
[62] (1990) 21 ATR 974, 984.
Finally, that it is imperative that the honesty and integrity of the tax agent not be called into doubt in the agent’s dealings with the ATO or in matters proceeding before the Board, the Tribunal, or a court.
In the earlier decision in Su v Tax Agents’ Board of South Australia,[63] Davies J said:
“The function of a tax agent is to prepare and lodge tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.”[64]
[63] (1982) 61 FLR 1.
[64] (1982) 61 FLR 1, 4-5.
The Respondent can terminate the Applicant for one or both of two reasons, first because of his breaches of the Code (under ss.30-15 and 30-30 TASA) and second, because he has ceased to be a fit and proper person for the purposes of s.20-5(1)(a) TASA (under s.40-5 TASA).
The Applicant bears the onus of proof in establishing his continued fitness and propriety.[65] An illustration of how that onus operates was given in Stasos in relation to the applicant’s expression of contrition, where Hill J explained: “It will not be sufficient for him to merely express his contrition. The Tribunal must be satisfied on the balance of probabilities that not only is the contrition actually felt, but that he will not again deviate from the high standards required of him as a registered tax agent.”[66]
[65]Jack and Tax Agents’ Board of New South Wales [1997] AATA 678 at [10]-[14].
[66] (1990) 21 ATR 974, 985.
In considering the appropriate sanction for breaches of the Code, the Respondent may, under s.30-15(2) TASA, take one or more of the following steps:
(a)give the agent a written caution.
(b)make an order under s.30-20 TASA.
(c)suspend the agent’s registration under s.30-25 TASA; and
(d)terminate the agent’s registration under s.30-30 TASA.
In considering which of the available sanctions for breaches of the Code would be appropriate, it is relevant to consider that previous sanctions (short of termination) imposed on the Applicant by the Respondent in 2019 and 2020 had not been effective in preventing further breaches of the Code.
The 2019 sanctions included a written caution under s.30-15(2)(a) TASA and an order under s.30-20 TASA.[67] The 2020 sanctions included a six-month suspension of the Applicant’s registration (from 9 September 2020 until 9 March 2021) under s.30-25 TASA and a new order under s.30-20 TASA.[68]
[67] ST1, CB 1876-1882; ST2, BB 1883-1888; ST3, CB 1889-1890.
[68] T5, BB 182-183.
The purpose of imposing a sanction is a protective purpose rather than a punitive one. This is consistent with the object of the TASA, stated in s.2.5(1) TASA to “support public trust and confidence in the integrity of the tax profession and of the tax system.”
In Kishore and Tax Practitioners Board,[69] DP Frost said:
“The imposition of a sanction is not for the purpose of punishing the individual, but for the protection of the public and the maintenance of proper standards within the regulated industry. A sanction may also serve the purpose of personal deterrence (to encourage the individual to comply with standards in the future) or general deterrence (to encourage others to comply).”[70] The DP went on to say: “Termination of registration should be reserved for the most serious cases of wrongdoing.”[71]
[69] [2017] AATA 271.
[70] [2017] AATA 271 at [18].
[71] [2017] AATA 271 at [20].
Where the Tribunal is not satisfied that the Applicant is a fit and proper person or is satisfied that he is not a fit and proper person,[72] a finding follows that he has ceased to meet the tax practitioner registration eligibility requirement on s.20-5(1)(a) TASA. The Respondent submits that the appropriate sanction in these circumstances is termination under s.40-5(1) TASA. Termination must follow because the TASA is predicated on the proposition that only “fit and proper” people should be able to remain registered to provide tax agent services.
[72] EP2, CB 1839.
The Applicant has framed his submissions as to why he should not be de-registered around the financial hardship which termination would impose upon him, his family and his clients. The practical reality is that adverse financial consequences for the agent are likely to follow as an inevitable outcome of his termination.
The enjoyment of the privileged status of registered tax agent necessarily carries with it a financial risk if lawful regulatory intervention occurs. In Le’Sam Accounting Pty Ltd and Tax Practitioners Board,[73] DP McCabe, in a tax agent case, explained:
“The parliament has seen fit to regulate this occupation. It has established barriers to entry to keep out unsatisfactory rivals but also incidentally suppress competition and confer benefits on registrants. One implicitly accepts the risk of regulatory action interrupting the business. The Tribunal’s review is one mechanism for ensuring regulatory action is not capricious or unfair.”[74]
[73] [2020] AATA 890.
[74] [2020] AATA 890 at [32].
In Iseppi and Tax Practitioners Board (Taxation),[75] DP McCabe said, in the context of a stay application but of general applicability:
“As the Tribunal has pointed out elsewhere, an individual who participates in a regulated occupation enjoys a measure of protection from competition in order to maintain standards. Anyone who is admitted to that occupation must accept the risk of the regulator’s lawful intervention in that cause.”[76]
[75] [2020] AATA 1523.
[76] [2020] AATA 1523 at [24].
As previously stated, the correct approach is the one which is consistent with the protective purpose of the sanction regime in the TASA. I adopt as appropriate to this case as well, the observation of Davies J in Su[77]:
“Although the power to remove a name from the register is discretionary, this is not a situation where personal hardship can be allowed to prevail over community interest.”[78]
[77]Su v Tax Agents’ Board South Australia (1982) 61 FLR 1.
[78] (1982) 61 FLR 1, 11.
Under s.40-25(1) TASA, if the Respondent terminates the registration of a registered tax agent, it may also determine a period of not more than five years during which the de-registered tax agent cannot apply for re-registration.
The Reviewable decision has imposed a four-year ban on the Applicant. It is important to note that the Respondent’s power to impose an exclusion period under s.40-25(1) TASA differs from the power to impose administrative sanctions for failure to comply with the Code (s.30-15 TASA, including termination under s.30-30 TASA) in that it is not an administrative sanction for wrongful conduct taken under sub-division 30B of the TASA. Rather, it is a protective power enlivened by the tax practitioner having ceased to meet one of the tax practitioner requirements[79] for the purposes of s.40-5(1)(b). The exclusion power in s.40-25 TASA is to be exercised with the object in s.2-5(1) TASA in mind.
[79] Defined in s.90-1 Dictionary TASA to be the matters in Sub-division 20A (thereby including the “fit and proper person” eligibility requirement in s.20-5(1)(a) TASA).
The Respondent submits that the approach which the Tribunal should adopt when deciding the exclusion period is that explained by SM Taylor SC in Hill and Tax Practitioner Board (Taxation),[80] where he said:
“Although the five year period is the maximum period of disqualification for re-application, it does not follow that the period imposed in any particular case must be determined by some impressionistic grading of the particular circumstances comparative to some “worst case”. TASSA s. 40-25(1) confers a general (that is, a not explicitly circumscribed) discretion. That discretion is to be exercised with regard to the particular circumstances of the individual case, and the overall TASA objective.”[81]
[80] [2020] AATA 678.
[81] [2020] AATA 678 at [157].
Counsel for the Respondent referred the Tribunal to the observations of the High Court in AustralianBuilding and Construction Commissioner v Pattinson,[82] as to the correct approach to be adopted in the imposition of civil penalties, and by analogy to the present case. In Pattinson the High Court rejected the approach of the Full Court below to s. 546 of the Fair Work Act2009 (Cth):
“The Full Court erred in treating the statutory maximum as implicitly requiring that contraventions be graded on a scale of increasing seriousness, with the maximum to be reserved exclusively for the worst category of contravening conduct. Nothing in the text of s 546, or its broader context, requires that the maximum constrain the statutory discretion in this way.”[83]
[82] (2022) 274 CLR 450.
[83] (2022) 274 CLR 450,471.
Counsel further submitted that to the extent that the Tribunal may have suggested in Middlebrook and Tax Practitioners Board[84] an approach which required a comparison between the disqualification period imposed in other cases to ascertain whether the case being heard was a worse case, or where it sat in relation to the worst case, the Tribunal should not adopt that course. I note that DP McCabe had warned in his earlier decision in Ridden and Tax Practitioners Board[85] that there “is some danger in rifling through reported cases in search of comparisons.”
[84] [2020] AATA 3698 at [37]-[39].
[85] [2020] AATA 422 at [40].
I adopt the approach described in Hill and the general observations as to the correct approach of the High Court in Pattinson. It is undesirable to impose any form of limitation on the exercise of the Respondent’s discretion in imposing a disqualification period by reference to earlier decisions as to the duration of the disqualification period which were based on their own facts and circumstances.
In Australian Securities and Investments Commission v Adler,[86] Santow J identified a range of factors relevant to disqualification orders to be imposed on directors under the Corporations Act 2001 (Cth). His Honour identified the public protective purpose as the single most important factor:
“The public protective purpose must clearly be paramount. That precludes a simple balancing exercise. While the disqualification order should not be disproportionate to the public protective purpose it is intended to serve, for that indeed would be punitive, it would subvert that public purpose if private interest considerations were to prevail or preclude an order which went no further than necessary to serve that public purpose. A lesser period of disqualification than that, designed to serve a private interest consideration, would thus sacrifice the public interests to be protected.”[87]
[86] (2002) 42 ACSR 80.
[87] (2002) 42 ACSR 80 at 105[80].
In addition to the paramount public interest factor identified in ASIC v Adler, there are a few other factors considered by Santow J. which have been considered in decisions of the Tribunal concerning the period of disqualification from re-applying for registration as a tax agent.
In Li and Tax Practitioners Board,[88] SM Redfern stated:
[88] [2014] AATA 299.
“The factors referred to by Santow J, that would also be relevant to this case, can be summarised as follows:
(i)Banning orders are designed to protect the public from the harm;
(ii)The banning order is protective against present and future breach;
(iii)A banning order has a motive of personal deterrence, though it is not punitive;
(iv)The objects of general deterrence are also sought to be achieved;
(v)In assessing the fitness of a person to be permitted to provide tax agent services, they have an understanding of their role and obligations;
(vi)In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public;
(vii)Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty;
(viii)It is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct;
(ix)A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming;
(x)It is necessary to assess matters such as the character of the person, the nature of the breaches, risks to others from the continued registration of the person;
(xi)Factors which lead to the imposition of the longest periods of disqualification include large financial losses, high propensity for the person to engage in similar conduct and lack of contrition or remorse.”[89]
[89] [2014] AATA 299 at [74].
In Kishore, DP Frost cited the paragraph from the Li decision referred to above and stated: “In deciding on the appropriate sanction, a decision maker should take into account the following’
·the seriousness of the conduct warranting the sanction;
·the likelihood that the conduct will be repeated and the potential harm to the public if it is;
·the impact of a particular sanction on the individual (and especially where the sanction may inhibit or prevent the individual’s capacity to earn a living);
·the interest of the public in seeing appropriate sanctions applied;
·the extent to which the individual has acknowledged the breaches and the seriousness of them; and
·the extent to which the individual has demonstrated genuine contrition or remorse.
·There may be other relevant factors in particular cases.”[90]
[90] [2017] AATA 271 at [19].
SHOULD THE DECISION AS TO THE DE-REGISTRATION BE AFFIRMED?
Having regard to the largely agreed facts, and to the legal principles which apply to those facts, I return to consider the agreed issues for determination by the Tribunal, which are set out at paragraph [8] above.
The first of those issues is whether the Applicant breached provisions (1), (2), (7), (11) and (14) of the Code. Having reviewed the documentary evidence in the Court Book and having heard oral evidence and the written and oral submissions of the Applicant, I am satisfied that there have been a breach or breaches by the Applicant of each of those provisions of the Code. I expand on that conclusion in the paragraphs below.
The conduct said to give rise to breaches of provision (1) of the Code involved at its heart the Applicant amending and lodging ITR’s for six different taxpayers without their authorisation.[91] The breaches in question cannot reasonably be explained as isolated and “petty” matters of oversight of the kind which might occur in error. Rather, the evidence shows a discernible pattern of behaviour by the Applicant comprised of most or all of the following elements: the lodging of an amended ITR without client authorisation, the claiming of significantly higher deductions upon amendment of the ITR’s (on an unsubstantiated and unauthorised basis) and then the making of statements or declarations to the Respondent and/or the ATO which were at best incomplete and at worst false and misleading.
[91] Respondents’ submissions [26]-[34].
The Applicant sought to persuade the Tribunal that he had not done much wrong because the conduct complained of by the Respondent only involved 6 out his 1500 clients. That submission is not accepted by the Tribunal. The evidence showed that the Applicant had been sanctioned by the Respondent in 2019 for conduct of a similar nature. He knew that conduct of this kind was wrong, that it would not be tolerated by the Respondent and would likely be the subject of investigation and the imposition of sanctions. Yet, within a few years the conduct was being engaged in again by him with multiple individual taxpayers. The Applicant’s repeated statement that he was “just trying to help out the clients” does not sit comfortably with the obligations he accepted in operating as a registered agent in a self- assessment system and with his not having sought client authorisation for the very conduct which he sought to defend.
As noted in paragraph [34] above, the placement by the Applicant of the advertisement in Gumtree seeking assistance to carry on his business while he was subject to the Reviewable Decision, was not adequately explained by him in cross-examination. In my view that conduct is not consistent with the requirement of “integrity” referred to by Davies J in Su (referred to in paragraph [64] above), in his description of the function of a tax agent. I am satisfied that breaches of provision (1) of the Code by the Applicant have been established.
The failures of the Applicant to comply with the taxation laws in the conduct of his personal affairs and those of SBA are repeated and span several financial years.[92] The factual detail of the non-compliance in the lodgement of ITR’s and BAS returns, and the non-payment of outstanding tax and penalties by the Applicant is extensively documented in the evidence. That documentary evidence is not contentious.
[92] Respondent’s submissions [40]-[46].
Further, under cross-examination, the Applicant agreed that he was the owner of SBA, made all the decisions for SBA and prepared SBA’s tax returns as well as his own. He accepted that both he and SBA had outstanding tax liabilities to the ATO, which had not been discharged in the period since 2022 and that he and SBA had not lodged tax returns and BAS statements for 2023. The Applicant’s responses to questions about whether he had systemic problems with his personal tax affairs and his apparent denials that he had done anything wrong in respect of his personal tax returns were unsatisfactory. I am satisfied that breaches of provision (2) of the Code by the Applicant have been established.
The breaches of provision (7) of the Code, which are said by the Respondent to call into question the Applicant’s competence to provide tax agent services, are also extensively documented. They focus on the lodgement of amended ITR’s for a few clients, without authorisation, and without substantiating the increased deductions claimed under the amendments made to the ITR’s.[93]
[93] Respondent’s submissions [50]-[55].
The Applicant was cross-examined about the details of the increased deductions which he had claimed on behalf of those clients. He accepted that the increased deductions had been claimed without instructions to claim them and that he had neither sought, nor been given, receipts or other documents to substantiate the deductions claimed. As the Tribunal’s decision in Smith (referred to at paragraph [42] above) makes clear, the substantiation rules contain no mystery for taxpayers themselves. It follows that there is no excuse for a registered tax agent not to follow the substantiation rules. I am satisfied that breaches of provision (7) of the Code by the Applicant have been established.
The conduct relied upon by the Respondent to establish a breach of provision (11) of the Code concerned the Applicant enabling SBA to advertise tax services on its website when SBA was not itself a registered tax agent.[94] The evidence established that taxation services had been advertised on the SBA website, that no steps had been taken in recent years to take the SBA website down and that the website still showed the advertising the Respondent complained of.
[94] Respondent’s submissions [60]-[63].
In cross-examination, the Applicant accepted that SBA should not be advertising tax services. The explanations provided by the Applicant as to why no recent steps had been taken to remove the offending advertising from the SBA website, or to close it down, were not persuasive. In addition, the Applicant did not adduce any documentary evidence to establish that the initial calls to Sensis, which he says were made after the Respondent alerted him to the problem, in fact occurred. I am satisfied that a breach of provision (11) of the Code by the Applicant has been established.
I have considered the circumstances of the Applicant’s breach of provision (14) of the Code in paragraphs [44]-[50] above. I am satisfied that a breach of provision (14) of the Code by the Applicant has been established.
The second of the issues to be determined is whether the Applicant is a “fit and proper person” as required by s. 20-5(1)(a) TASA. I have considered each of the matters summarised in paragraph [53] above, which are said by the Respondent to justify a finding by the Tribunal that the Applicant is not, or it cannot be positively satisfied that he is a “fit and proper person.” I find that on the evidence before the Tribunal the Applicant is not a “fit and proper person”. I expand on that conclusion in the paragraphs below.
At the time of his registration as a tax agent, the Applicant was eligible for registration if the Respondent was satisfied that he was a “fit and proper person.” The Applicant bears the onus of satisfying that eligibility requirement and he discharged that onus at the time of his registration. In circumstances where the Respondent has subsequently decided that the Applicant has ceased to meet the registration requirement of being a “fit and proper person”, and the Applicant seeks review of that decision, he bears the onus of proof as to his continued fitness and propriety.
The body of evidence of misconduct by the Applicant which weighs against him successfully establishing his continued fitness and propriety is significant. In addition to the present breaches of the provisions of the Code, there is further detailed and persuasive evidence of:
(a)the Applicants 2019 Code breaches, and their similarity to some of the present breaches;
(b)the Applicant’s preparedness to allow his breaches of Code provisions (11) and (14) to continue to date without resolution.
(c)the placing of the Gumtree advertisement.
(d)the unsatisfactory state of his personal taxation affairs and those of SBA.
(e)a pattern of claiming deductions in taxpayer ITR’s without instructions from those taxpayers to make those claims and his disregard for the substantiation rules; and
(f)his conduct post-dating the Reviewable Decision in relation to his exclusion by the QBCC and in relation to the conduct of his application for review.
The Applicant repeatedly sought in his submissions, and under cross-examination, to downplay the seriousness of aspects of this body of evidence. However, he has not been able to discharge the burden of proof borne by him to show that, on the balance of probabilities and having regard to the seriousness of the matters raised by the Respondent, he has continued to be a “fit and proper person.”
It follows from my findings that the Applicant has breached provisions (1), (2), (7), (11) and (14) and that he is not a “fit and proper person” as required by s.20-5(1)(a) of the TASA, that the termination of the Applicant’s tax agent registration under s.40-5(1)(b) of the TASA was the appropriate and correct decision.
Termination of the Applicant’s registration as a tax agent could have been effected by the Respondent either under ss.30-15 and 30-30 of the TASA or under s.40-5(1) of the TASA. Termination by the ss.30-15 and 30-30 route requires a consideration of the available sanctions set out in s.30-15(2), of which termination under s.30-30 is one. By way of contrast, termination under s.40-5(1) follows as a natural outcome of the Applicant no longer being eligible to be registered. It is a natural outcome because the object of the TASA in s.2-5(1) contemplates that only registered tax agents will provide tax agent services.
For completeness, it is noted that the Applicant has not provided compelling reasons for his registration as a tax agent not being terminated. The strongest arguments raised by the Applicant focussed on the financial consequences for himself, his family, and clients of his tax agent business if he could no longer trade as a registered tax agent. I accept the Respondent’s submission that these financial consequences for the Applicant, unfortunate as they may be, are outweighed by the public interest in ensuring that tax agent services are provided in accordance with “appropriate standards of professional and ethical conduct.”[95]
[95] S.2-5(1) TASA.
IS THE IMPOSITION OF A FOUR-YEAR EXCLUSION PERIOD APPROPRIATE?
The Respondent’s position is that a lengthy exclusion period for the Applicant is required to protect the public and achieve the object in s.2-5(1) of the TASA. The Respondent’s submissions identify a few factors which are relevant to the exclusion period being set at four years.[96]
[96] Respondent’s submissions [100]-[101].
Those factors include the previous conduct of the Applicant, the fact that some of the conduct is repeated (indicating a lack of reform over time), the objective seriousness of the conduct, the Applicant’s apparent lack of competence (in respect of the substantiation rules and otherwise), his ongoing disregard for the Respondent, his failure to show insight into what he has done wrong and his lack of genuine remorse.
Some additional points, relevant to the protective purpose of the sanction, were raised by counsel for the Respondent in his closing submissions. First, the fact that the Applicant’s conduct as a tax agent had posed a threat to the self-assessment system. Second, that the evidence was that many of the Applicant’s clients were relatively unsophisticated taxpayers, often with little English, who were properly described as vulnerable taxpayers in need of protection.
The Applicant’s position is that his registration ought not to be terminated. In his closing submissions, the Applicant said that imposing a four-year ban on him would be “very, very harsh” in circumstances where he said no fraud had been committed. The Applicant said he offered a genuine apology, that he had shown remorse and was pleading for another chance.
I have had regard to the parties’ respective submissions as to the duration of the exclusion period and to the principles set out in the authorities cited in paragraphs [79]-[86] above. I have considered the factors referred to by the Tribunal in Li and Tax Practitioners Board[97] and Kishore and Tax Practitioners Board.[98]
[97] [2014] AATA 299.
[98] [2017] AATA 271.
The Tribunal notes the following features of the facts in this case as being relevant to the appropriateness of a ban of four years duration being imposed:
(a)it is unclear whether the Applicant fully understands his role and obligations as a tax agent. This is evidenced by his apparent willingness to tolerate an unacceptable level of non-compliance with taxation laws in aspects of his practice (e.g., lodgement of amended ITR’s without authorisation and claiming unsubstantiated deductions).
(b)there is also an apparent lack of understanding by the Applicant of what is meant by the public interest in the context of his obligations as a tax agent.[99]
(c)there have been some serious contraventions of taxation laws both in respect of client taxpayers’ ITR’s and in respect of his own taxation affairs, and those of SBA.
(d)the Applicant has shown a propensity to engage in similar conduct in the face of earlier sanctions. This is evidenced by the similarities between the 2019 Code breaches and the present breaches of provisions of the Code.
(e)this is a case where a longer period of disqualification is appropriate because certain of the contraventions have involved dishonesty.
(f)there seems to be a high propensity, or at least a serious risk, that the Applicant will engage in similar conduct in the future. Sanctions imposed on the Applicant in 2019 and 2020 do not seem to have prevented the need for the further sanctions imposed in the Reviewable Decision.
(g)the Applicant has stated that he is remorseful and contrite, but the Tribunal is not satisfied on the evidence that not only is the contrition actually felt but that there will also be future conduct of the high standards required of a tax agent to match.
(h)the Applicant has not sufficiently acknowledged the various breaches of the Code and of the taxation laws, and the seriousness of them.
(i)there is a need to protect the public from the Applicant in his capacity as tax agent; and
(j)the public need to see that appropriate sanctions have been imposed by the Respondent where a tax agent has fallen well short of the appropriate standards of professional and ethical conduct.
[99] The Applicant’s notion of public interest is self-referenced rather than being referenced to the protection of members of the public as consumers.
The combined effect of these factors is sufficient to support the exercise of the Tribunal’s discretion in upholding and affirming a four-year period of disqualification as being appropriate in this case.
The Respondent submitted that, in the light of the Applicant’s additional conduct which occurred or became known to the Respondent after the Reviewable Decision, it was open to the Tribunal to impose a ban on the Applicant applying for re-registration for a greater period than four years[100] (the maximum period being five years). I am of the view that a ban of four years duration should not be increased, but the additional conduct serves to re-enforce the need for a four-year ban.
[100] Respondent’s submissions [103].
DECISION
The Reviewable Decision is affirmed.
Date(s) of hearing:
23 October 2024
Applicant:
Self-Represented
Counsel for the Respondent:
J Sproule
Solicitors for the Respondent:
A Seremetis, Tax Practitioners Board
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