Comino and Tax Agents' Board of NSW
[2009] AATA 766
•7 October 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 766
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2008/4566
GENERAL ADMINISTRATIVE DIVISION )
ReLeo Comino
Applicant
And Tax Agents’ Board of NSW
Respondent
DECISION
TribunalMr R P Handley, Deputy President
Professor R M Creyke, Senior Member
Date7 October 2009
PlaceSydney
DecisionThe decision under review is affirmed.
.................[sgd]................. …………[sgd]……….
Professor R M Creyke Mr R P Handley
Senior Member Deputy President
CATCHWORDS
TAX AGENTS – application for re-registration – fit and proper person – whether applicant a fit and proper person to prepare tax returns and transact business on behalf of taxpayer –obligations of a tax agent – failure to lodge tax returns – whether special circumstances exist - meaning of ‘special circumstances’ – decision under review affirmed
…
RELEVANT ACTS
Income Tax Assessment Act 1936 (Cth) ss 251A, 251BC, 251JB, 251JC)
Income Tax Assessment Act 1997 (Cth) s 995-1
Taxation Administration Act 1953 (Cth) ss 3A, 8A, 8C(1), 8ZG(4) and (9)
Crimes Act 1914 (Cth) s 4AA
…
CITATIONS
Toohey (formerly identified as 'VBY') v Tax Agents' Board of Victoria (2007) 171 FCR 291; (2007) 94 ALD 521; 2007 ATC 4413; (2007) 67 ATR 522; [2007] FCA 431
Re Beadle and Director-General of Social Security (1984) 6 ALD 1; (1984) 1 AAR 362
Re Toohey and Tax Agents’ Board (2008) 101 ALD 376; 2008 ATC 10-012; (2008) 70 ATR 939; [2008] AATA 262
Angelakos v Secretary, Department of Employment of Employment and Workplace Relations (2007) 100 ALD 9; (2007) 44 AAR 436; [2007] FCA 25
Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127; [1955] ALR 525; (1955) 29 ALJR 129 [1955] HCA 28
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; (1990) 94 ALR 11; (1990) 64 ALJR 462; (1990) 21 ALD 1; [1990] HCA 33
Stasos v Tax Agents Board (1990) 21 ALD 437; (1990) 90 ATC 4950; (1990) 21 ATR 974
Re Su and Tax Agents’ Board (1982) 61 FLR 1; (1982) 4 ALN No 168; (1982) 82 ATC 4284; (1982) 13 ATR 192
Toohey v Tax Agents’ Board of Victoria (No 2) (2008) 106 ALD 506; [2008] FCA 1796
Toohey and Tax Agents’ Board of Victoria [2009] AATA 603
…
REASONS FOR DECISION
| 7 October 2009 | Mr R P Handley, Deputy President Professor R M Creyke, Senior Member |
Mr Leo Comino has applied to the Tribunal for a review of a decision of the Tax Agents’ Board of NSW (the Board) which refused his application for re-registration as a tax agent on the ground that he was not a fit and proper person to prepare income tax returns.
Background
Mr Comino has been in practice as a chartered accountant since about September 1963 and became a tax agent in New South Wales on 16 November 1964. He is now aged 67. On 1 July 1972, Mr Comino went into partnership with his brother Mr Peter Comino (Peter) and thereafter they practised as chartered accountants from offices in Sydney under the name PJ Comino & Co. In November 2005, Peter was diagnosed with terminal cancer and terminated the partnership from 25 November 2005. Mr Comino said Peter died in October 2008.
Mr Comino has a number of convictions for failure to lodge income tax returns/business activity statements within the required time:
On 9 February 2000, for failure to lodge his personal income tax return for 1998 – fined $200, and ordered to pay court costs
On 14 March 2003, for failure to lodge his personal income tax return for 2000 – fined $700, and ordered to pay court costs
On 19 December 2007, five convictions, each for failure to lodge a business activity statement for the five quarters ending 30 June 2006, 30 September 2006, 31 December 2006, 31 March 2007 and 30 June 2007 respectively – fined $400 in respect of each offence (a total of $2,000), and ordered to pay costs.
Documents supplied by the Board also show that Mr Comino was late in lodging his personal income tax returns for the 2003, 2005, 2006 and 2007 tax years by between six weeks to seven months.
By letter dated 23 October 2007, Mr and Mrs Hartofillis, clients of PJ Comino & Co, complained to the Board about Mr Comino’s conduct, including his failure to return their business records. On 19 December 2007, Mr Comino responded to the Board about the particulars of this complaint, noting that he had asked for the payment of an unpaid account before being prepared to return their business records. In a letter to the Board dated 2 January 2008, Mr and Mrs Hartofillis said they had no unpaid accounts with Mr Comino’s firm. In a letter to the Board dated 16 July 2008, Mr Comino commented, concerning Mr and Mrs Hartofillis’ complaint, “I am now forwarding copies of previous year’s tax returns as requested. Their outstanding fees account has been paid in full.”
By letter dated 30 October 2007, George Matheos complained to the Board about Mr Comino having not returned his business documents. At the hearing, Mr Comino said he had provided Mr Matheos with copies of all the primary source documents but had not returned the originals because his account remains unpaid.
In late September/early October 2007, Mr Comino lodged all outstanding business activity statements.
On 31 January 2008, Mr Comino lodged an application with the Board for re‑registration as a tax agent. His then current registration was due to expire on 1 February 2008, and he was required to have lodged his application for re‑registration during the period commencing 60 days before and ending 30 days before that date: Income Tax Assessment Act 1936 (Cth) (ITAA 1936) s 251JB(4)(a).
By letter dated 8 February 2008, the Board raised concerns with Mr Comino about Tax Office records indicating that “you have compliance issues, being an integrated client account debt of $23,487.10 with no payment arrangements in place”. When no response was received from Mr Comino, the Board sent follow up letters dated 26 February 2008 and 14 March 2008. Although the Tribunal notes he replied by letter dated 25 March 2008, in oral evidence Mr Comino said he has no specific recollection of these letters. He has, however, now paid the amount owing. It appears, nevertheless, that having initially entered into an arrangement to pay the outstanding debt on 28 April 2008, by 23 May 2008 he had defaulted on that arrangement.
In an internal memorandum dated 19 June 2008, the Board noted that Mr Comino’s business activity statements for the quarters ended 31 December 2007 and 31 March 2008 were overdue. By letter dated 26 June 2008, the Board asked Mr Comino to ‘show cause’ why his re-registration should not be refused on the ground that he was no longer a fit and proper person to be registered. Mr Comino replied by letter dated 16 July 2008, addressing the issues raised by the Board, describing the events concerning the dissolution of his partnership with Peter, and contending that he continues to be a fit and proper person to be registered as a tax agent.
On 21 August 2008, the Board resolved to refuse Mr Comino’s application for re-registration on the ground that he is no longer a fit and proper person to be registered as tax agent, and Mr Comino was notified of this by letter dated 1 September 2008. On 29 September 2008, Mr Comino applied to the Tribunal for a review of this decision. On 9 December 2008, a stay of the decision was granted by consent pending the Tribunal’s decision on the application taking effect or until further order of the Tribunal.
The Tribunal notes that in the pre-hearing period, Mr Comino has been dilatory in complying with Tribunal directions, failing to do so by the times directed on two occasions.
Issues and legislation
The principal issue to be determined is whether Mr Comino is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. Section 251JC of the ITAA 1936 states relevantly:
(1) The Board shall re‑register the applicant as a tax agent if the applicant satisfies the Board that:
(a) if the applicant is a natural person:
(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; …
(2) The Board shall refuse to re‑register the applicant in any other case.
…
In so determining, because Mr Comino has been convicted of a number of taxation offences in the past five years, namely the five convictions on 19 December 2007 referred to above, the Tribunal must also consider whether s 251BC applies. This states relevantly:
(1) Without limiting the generality of an expression used in this Part, but subject to this section, 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, as at a particular time, if:
…
(e) the person has been convicted of a serious taxation offence during the previous 5 years; or
…
(3) Where:
(a) a Board is required, in considering an application for:
(i) re‑registration as a tax agent; or …
…
to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
(b) the person is not under sentence of imprisonment for a serious taxation offence; and
(c) the Board is satisfied that, because of special circumstances:
(i) a conviction of the person;
(ii) the doing of an act or thing by the person; or
(iii) an omission of the person;
should be disregarded;
the Board may, in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or the omission, as the case requires.
The Tribunal notes that s 251BC applies where a person has been convicted of ‘serious taxation offences’. ‘Serious taxation offence’ is defined relevantly in s 251A as:
(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 20 penalty units;
(B) imprisonment.
Section 8A of the Taxation Administration Act 1953 (Cth) (TAA) provides that a ‘taxation offence’ is “an offence against a taxation law”. In turn, s 2(1) states that ‘taxation law’ “has the meaning given by the Income Tax Assessment Act 1997” (ITAA 1997). Section 995-1 of the ITAA 1997 states relevantly that ‘taxation law’ means “an Act of which the Commissioner has the general administration”. Pursuant to s 3A, the TAA is such an Act. Mr Comino’s convictions on 19 December 2007 were for offences under s 8C(1)(a) of the TAA for failure to furnish when required “an approved form or any information to the Commissioner”.
For such an offence to be a ‘serious taxation offence’ relevantly it must be punishable on conviction by a fine exceeding 20 penalty points. A penalty point is $110: Crimes Act 1914 (Cth) s 4AA. The TAA provides that where a person is convicted of a ‘prescribed taxation offence’ in the Local Court, the penalty, in the case of a natural person, is a fine of $5,000: subss 8ZG(4) and (9). An offence under s 8C(1)(a) is a ‘prescribed taxation offence’ (by virtue of the definitions of ‘prescribed offence’ and ‘prescribed taxation offence’ in s 8A(1)).
In Mr Comino’s case, because the offences of which he was convicted on 19 December 2007 were each punishable by a fine of up to $5,000, a fine exceeding 20 penalty points (20 x $110 = $2,200), his convictions were for ‘serious taxation offences’ within the meaning of the legislation. Thus, the application of s 251BC of the ITAA 1936 must also be considered in Mr Comino’s case. In particular, the Tribunal must consider whether, pursuant to s 251BC(3), it is satisfied that, because of special circumstances, Mr Comino’s 1997 convictions should be disregarded for the purposes of s 251BC(1).
Is the Tribunal satisfied that there are special circumstances warranting Mr Comino’s 2007 convictions being disregarded?
The Tribunal notes the offences of which Mr Comino was convicted are defined as ‘serious taxation offences’. However, in respect of each of the five offences, which were for failure to lodge a business activity statement for a quarter, he was fined $400, at the low end of the spectrum in the case of an offence punishable by a fine of $5,000.
Mr Comino attributed his failure to lodge these five business activity statements - for the five quarters ending 30 June 2006, 30 September 2006, 31 December 2006, 31 March 2007 and 30 June 2007 - to the dissolution of the partnership with his brother in November 2005 and continuing disputes with his brother in the period following this. Mr Comino said he assumed responsibility for lodging the partnership’s business activity statements in his own name.
The question for the Tribunal is whether it is satisfied that the circumstances in which the misconduct leading to the convictions occurred should be considered ‘special circumstances’. The meaning of the expression ‘special circumstances’ was referred to by Middleton J in Toohey (formerly identified as 'VBY') v Tax Agents' Board of Victoria (2007) 171 FCR 291; [2007] FCA 431, at [27], citing the decision in Re Beadle and Director-General of Social Security (1984) 1 AAR 362; (1984) 6 ALD 1 at 3:
An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
Justice Middleton said whether there are special circumstances is a question of fact for the Tribunal. The meaning of the expression was also discussed by Deputy President Forgie in Re Toohey and Tax Agents’ Board [2008] AATA 262 at [137] to [141], with reference to a range of authorities including, at [140], Angelakos v Secretary, Department of Employment of Employment and Workplace Relations [2007] FCA 25, where Besanko J concluded, at [33], referring to ‘special circumstances’ in the context of s 1237AAD of the Social Security Act 1991 (Cth) and the suggestion that the circumstances had to be exceptional:
It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case.
In our view, the circumstances in which the failure to lodge the business activity statements occurred were out of the ordinary and unusual and it seems likely that these circumstances may have been taken into account by the Local Court in sentencing Mr Comino, his having detailed these circumstances in an affidavit prepared for the Court dated 18 December 2007, and given that the fines imposed by the Court were at the low end of the spectrum. Thus, the Tribunal is satisfied that because of the special circumstances, we should disregard Mr Comino’s convictions for serious taxation offences under s 251BC(3).
Is Mr Comino a fit and proper person?
As stated above, the principal issue to be determined is whether Mr Comino is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as required by s 251JC(1)(a)(i) of the ITAA 1936.
The meaning of the phrase ‘fit and proper person’ was discussed by the High Court in Hughes & Vale Pty Ltd v New South Wales (No 2)[1955] HCA 28; (1955) 93 CLR 127, at [9], where Dixon CJ, McTiernan and Webb JJ found the word ‘fit’, in relation to an office, to involve honesty, knowledge and ability. The meaning of the phrase ‘fit and proper person’ was also discussed in Australian Broadcasting Tribunal v Bond[1990] HCA 33; (1990) 170 CLR 321, where Toohey and Gaudron JJ said, at [36]:
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.
As their Honours recognised, at [66], whether a person is a fit and proper person involves a value judgment to be made in the context of the particular activity to be licensed. In Stasos v Tax Agents’ Board (1990) 21 ALD 437; 21 ATR 974, at [55], Hill J, in discussing the obligations and responsibilities consequent upon registration as a tax agent, cited with approval Davies J’s comments in Re Su and Tax Agents’ Board (1982) 13 ATR 192, at 195:
Davies J expressed in Re Su and Tax Agents' Board, SA 82 ATC 4284 at 4286-7 the content of what is required of a person fit and proper to be registered or to retain registration as a tax agent in the following words:
"The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently."
With respect, but subject to the qualification that his Honour stated too narrowly the functions of a tax agent by limiting these to the preparation of returns, I agree with what his Honour there says.
Justice Hill had noted, at [48], that “the tax agent must keep up to date with the massive changes to the income tax law, no easy task in the present time, so that he can properly advise and represent his clients”. Further, at [53], he referred to the need for diligence and professionalism.
In Toohey v Tax Agents’ Board of Victoria (No 2) [2008] FCA 1796, at [16], Middleton J, also noted:
In determining whether a person is a fit and proper person the enquiry is directed not only to whether improper conduct has occurred, but whether it is likely to occur again, and whether the community will have confidence that it will not occur. This will involve an evaluation of character and reputation: see Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, 380 per Toohey and Gaudron JJ.
In Mr Comino’s case, the Tribunal considered the evidence as to his conduct. While Mr Comino has been a registered tax agent since November 1964, our general impression of his professionalism was not favourable. We recognise that the circumstances arising from the breakdown of his relationship with his brother and the dissolution of the partnership have caused Mr Comino significant difficulties, particularly of a financial nature. Mr Comino gave evidence about Peter’s son being employed in the business when the business could not afford this, of several large clients going into liquidation, of several of Peter’s clients refusing to pay their accounts, and of Peter reneging on an agreement with Mr Comino to apply money from a life insurance policy for the benefit of the business. The dissolution of the partnership was also very acrimonious and Mr Comino alleged that his brother encouraged former clients to complain about Mr Comino’s conduct both to the Board and the Taxation Office. An accountant employed by Mr Comino, Cos Psaltis, also gave evidence supporting Mr Comino’s account of the difficulties encountered in trying to sort out the affairs of the partnership.
Nevertheless, the evidence indicates Mr Comino has exhibited a lack of organisation and attention to timelines. This is not something we would ordinarily expect from a person of Mr Comino’s long professional experience. First, he failed to apply for re-registration as a tax agent within the required timeframe and failed to respond to the first two letters from the Board in response to his application. Yet, his registration as a tax agent is seemingly of paramount importance to his professional practice. It was only after a second follow-up letter from the Board that he responded, and then, having entered into an arrangement for the payment of the tax debt to which the Board had drawn his attention, he initially defaulted on that arrangement about four weeks later.
While the Tribunal has decided to disregard Mr Comino’s convictions for failure to lodge business activity statements on 19 December 2007, we note that on 19 June 2008, prior to his re-registration being considered by the Board, his business activity statements for the quarters ended 31 December 2007 and 31 March 2008 were overdue. After Mr Comino’s experience of being prosecuted for late lodgements in 2006/2007, we find this omission surprising. However, at the hearing, he told the Tribunal that he is now up to date in his lodgements.
We also note the history of his being late in lodging his personal income tax returns. Notwithstanding convictions for late lodgements of personal income tax returns on 9 February 2000 and 14 March 2003, his 2003 return was lodged two months late, his 2005 return seven months late, his 2006 return 6 months late and his 2007 return six weeks late. Mr Comino assured the Tribunal that he is now up to date with lodging his returns and said there was no liability to pay tax on the late returns.
With regard to the complaints by Mr and Mrs Hartofillis and Mr Matheos, Mr Comino acknowledged that after 2 January 2008, when Mr and Mrs Hartofillis told the Board that there were no outstanding fees payable to Mr Comino, Mr and Mrs Hartofillis made three further telephone calls requesting the return of their business records during the period before Mr Comino appears to have returned their records in about July 2008. In the case of Mr Matheos, we note Mr Comino’s evidence that he provided Mr Matheos with copies of the documents held and is retaining the originals because an account remains unpaid.
Mr Comino acknowledged that he had experienced problems with the introduction of the GST and that this had been a factor in the late lodgement of business activity statements. Given the importance of tax agents keeping up to date with the relevant law in order to fulfil their responsibilities in properly advising clients, Mr Comino’s acknowledgement, while a frank admission, does not give the Tribunal confidence in his ability to keep abreast of changes in the law, especially since the problems with business activity statements occurred in 2006/2007, and the introduction of GST took place in 2000. Moreover, notwithstanding the partnership problems experienced by Mr Comino, we agree with the Board that it is unsatisfactory for an accountant to have such a significant indebtedness to the Tax Office, estimated to be approximately $1.6m.
The Tribunal also notes Mr Comino’s failure to comply with two deadlines in respect of the lodgement of documents in the period leading up to the hearing. Once again, this tends to reinforce our view that Mr Comino has organisational difficulties and timeliness problems. Given the importance of the outcome of these proceedings to Mr Comino’s professional status, and despite Mr Comino not being represented in these proceedings, the Tribunal was surprised that he did not pay greater attention to the need to comply with directions for the filing of documents pre-hearing: See Toohey and Tax Agents’ Board of Victoria [2009] AATA 603 at [35]. While Mr Comino said his lack of compliance was a reflection of his ignorance, in our view, his obligations in relation to the proceedings were clear.
While the Tribunal has no concerns about Mr Comino’s honesty or integrity, or his goal of serving his clients, we are not satisfied on the evidence before us that Mr Comino is a fit and proper person to prepare income tax returns and transact income tax business on behalf of clients. In the context of his work as an accountant and tax agent, we have concerns about Mr Comino’s failure to comply with GST requirements for his business over a number of years and his failure to comply with the requirements for the lodgement of his income tax returns. In our view, these are matters relevant to a tax agent’s competence and ability and in which a tax agent’s demonstrated conduct should be above reproach, being central to the service provided to his clients.
In Mr Comino’s case, compliance has been a recurring problem and, in our view, this would be a matter of concern to the community. While Mr Comino may have the best intentions, the impression we have formed would not instil confidence in the community that such problems would not recur.
Since we are not satisfied that Mr Comino is a fit and proper person to prepare income tax returns and transact income tax business on behalf of clients, the decision under review - to refuse Mr Comino’s application for re-registration as a tax agent - must be affirmed.
I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R P Handley, Deputy President and Professor R M Creyke, Senior Member.
Signed: .................[sgd]..........................................................
A Veness, Associate
Date of Hearing: 17 September 2009
Date of Decision: 7 October 2009
Applicant representative: Self-representedRespondent representative: Ms R Deane, Australian Government Solicitor
Respondent counsel: Ms J Gleeson
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