Coogan and Tax Practitioners Board
[2019] AATA 2432
•6 August 2019
Coogan and Tax Practitioners Board [2019] AATA 2432 (6 August 2019)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2019/3724
Re:Thomas Coogan
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Senior Member A Poljak
Date:6 August 2019
Place:Sydney
The applicant’s application for a stay pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) is refused.
The interim stay granted on 2 July 2019 is discharged.
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Senior Member A Poljak
CATCHWORDS
TAX AGENT REGISTRATION – application for a stay of the decision under review – termination of applicant's registration as a tax agent – failure to comply with taxation laws – interim stay order in operation – prospects of success – consequences to the applicant – the public interest – consequences for the respondent in carrying out its functions – whether the review would be rendered nugatory if a stay were not granted – stay application refused – interim stay discharged
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) s 41
Tax Agent Services Act 2009 (Cth) s 30-10
CASES
Carter v Tax Practitioners Board [2017] AATA 528
Delis v Tax Practitioners Board [2016] FCA 570
Re Scott and Australian Securities and Investments Commission (2009) 51 AAR 114
REASONS FOR DECISION
Senior Member A Poljak
6 August 2019
Mr Thomas Coogan, the applicant, seeks review of a decision of the Tax Practitioners Board (“the Board”) dated 30 May 2019. In its decision, the Board found that the applicant had breached subsection 30-10(2) of the Code of Professional Conduct (“Code of Conduct”) in the Tax Agent Services Act 2009 (Cth) (“The Act”) because he had failed to comply with taxation laws in the conduct of his personal affairs. He did so by failing to cause Coogans Pty Ltd (“the Company”), a company of which he is sole director, to lodge certain tax returns as required by taxation legislation, by failing to pay Company tax debts, and by failing to pay director penalty notices served on him personally. As a result the Board terminated the applicant’s registration as a tax agent and determined that the applicant may not apply for registration for a period of three years from the date of termination.
The applicant has applied for a stay of the decision under review pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”). The Board opposes the stay application.
An interim stay has been in place since 2 July 2019. For the reasons set out below the stay is refused and the interim stay discharged.
Relevant Legislative Provisions
Section 41(2) of the AAT Act provides:
The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
In considering whether to grant a stay, factors which may be taken into account were discussed by Justice Downes in Re Scott and Australian Securities and Investment Commission (2009) 51 AAR 114 at [4]. Relevant factors in these proceedings include the prospects of success; the consequences for the applicant of the refusal of the stay; the public interest; and whether the application for review would be rendered to nugatory if a stay were not granted.
Consideration
Prospects of Success
The applicant was at all material times the sole director and secretary of the Company.
As at 18 July 2019, the Company had twenty-five outstanding Business Activity Statements (BAS) dating back to April 2017 and three outstanding income tax returns.
According to ATO and ASIC records, as at 18 July 2019, the Company has an outstanding tax debt of $686,488.37 (consisting of $170,783.32 income tax account debt, and $515,705.05 in Client Activity Centre (CAC) debt). A CAC debt is a debt that relates to activity statements – for example GST, income tax withholding (PAYGW) and general interest charges (GIC). The Company has owed a CAC debt continuously since 22 May 2007. The last time a payment was made towards the CAC debt was on 16 July 2018, when the Company made a payment of $226.73. Since 15 January 2019, seventeen payments of $1000 have been made towards the income tax debt.
The applicant has also failed in his personal capacity to pay five Director Penalty Notices (DPN) totalling $357,535.93 by their respective due dates.
These breaches are uncontested and on any view, are significant.
The applicant submits that the Tribunal should ignore breaches of the taxation laws by the Company in deciding whether the applicant breached section 30-10(2) of the Code of Conduct. This is because section 30-10(2) of the Code of Conduct required the applicant to “comply with the taxation laws in the conduct of your personal affairs”. The applicant contends that the affairs of the Company are not his “personal affairs”. Further, the applicant submits that his application for review has prima facie merit because he has taken steps to manage his medical condition which has been the cause of his failure to comply with taxation laws; has entered into discussions with the ATO about his debts and compliance issues; and has submitted three outstanding BAS.
The applicant’s submission that the Company affairs do not reflect on the conduct of his personal affairs has limited prospects of success.
In Delis v Tax Practitioners Board [2016] FCA 570 Davies J endorsed (at [42]) the approach taken by the Tribunal at first instance when it held (at [90]):
Plainly, by breaching the taxation laws in the conduct of his personal affairs which includes when acting as a director of Delis Enterprises, Mr Delis has breached the Code of Professional Conduct which applies to registered tax agents. While the TASA prescribes sanctions for any such breach, failure to comply with the Code plainly says something about the good fame, integrity and character of an individual. Those matters are relevant criteria for determining whether an individual is a fit and proper person (s. 20-15 TASA). [Emphasis added]
In Carter v Tax Practitioners Board [2017] AATA 528, Deputy President Humphries said at [60]:
“At one point Mr Carter sought to distinguish his actions from those of the Company, at least implying that breaches of the Code by the Company could not be visited upon him. Given that Mr Carter was the supervising agent, and was at all relevant times the guiding force behind the Company, this distinction cannot be sustained…”
In any event, the applicant has failed to meet his personal obligations arising under the DPNs. This is concerning as the DPNs relate to PAYG withholding which he did not remit on behalf of the Company’s employees.
The second matter which the applicant says bears on his prospects of success are the actions he has taken to manage his medical condition and address and manage his outstanding tax matters.
In regards to his medical condition, the applicant suffers from a major depressive illness. This is supported by the evidence of Dr Judith Spurling from Spurling Medical. The applicant submits that his condition, together with personnel changes within the Company, were the cause of his failure to comply (and his failure to cause the Company to comply) with taxation laws. At hearing, the applicant advised that his condition is now stabilised. However, the most recent report of Dr Spurling dated 20 June 2019 does not confirm that the applicant’s medical condition has now stabilised. To the contrary, the report advises that on 27 May 2019 the applicant was referred to a psychologist for help with stress management.
Evidence about the applicant’s condition may assist in explaining the breaches of the taxation laws and why they occurred, but it does not alter the fact that they occurred nor does it alter the seriousness of the breaches. I accept that the applicant has actively sought treatment for his medical condition for many years, and continues to do so. It is a long standing condition. The available evidence supports a finding that the applicant’s medical condition has at times impacted on his ability to work with efficiency and complete difficult or complex tasks. This evidence may have some weight on prospects of success as it goes to a mitigating factor. However I note that on the available evidence, it is very limited. Currently the evidence demonstrates that the applicant has suffered from the same symptom of having difficulty completing tasks since at least January 2010. It is unclear what changed in 2017 such that the applicant then failed to comply with tax obligations.
The applicant submits that since the filing of the application for review with the Tribunal, he has entered into discussions with the Australian Taxation Office (ATO) in respect of a payment arrangement and the lodgement of outstanding returns and activity statements. To date, no payment arrangement has been put into place as a consequence of the applicant’s remaining outstanding BAS and Income Tax Returns. Despite this, the applicant maintains that he has every intention of entering into a payment arrangement.
I acknowledge that the applicant filed two outstanding BAS the night before the hearing in this matter. However, there are still twenty-three BAS that remain outstanding. This is a significant number. The Board also advised at hearing that the filing of the two outstanding BAS statements have increased the applicant’s debt by approximately $18,000.
Further, the sale of the applicant’s Company took place in March 2019. To date $200,000 has been paid to the applicant in respect of the sale. None of these funds were used to discharge some of the debt owing to the ATO but was instead used to pay priority creditors. At hearing the applicant advised that further funds will come through in September 2019, March 2020 and June 2020. It is submitted that these funds will be used to discharge the applicant’s debts with the ATO. The available evidence demonstrates that the applicant has made a number of small repayments towards his income tax debt since 15 January 2019. Whether or not future funds received from the sale of the Company will be used towards the outstanding debt remains to be seen.
As is the nature of an interlocutory hearing, the evidence before me is often limited and the facts can only be considered on a provisional basis. On the material before me, I am not satisfied that the applicant has demonstrated good prospects of success. This weighs against the granting of a stay.
Consequences for the Applicant
The applicant has been a registered tax agent since 29 April 1982. He is currently engaged as the Chief Financial Officer (CFO) of IRBS Holdings Pty Ltd (IRBS) and its associated companies and entities. He is also the CFO of two listed public companies, one unlisted public company and a director and nominee tax agent for a self-managed superannuation fund administration company.
The applicant says in written submissions that his current engagements require him to lodge activity statements and tax returns through his registration as a tax agent. This is an essential role in his role as CFO of IRBS and its associated companies and entities.
The applicant derives his income solely from these positions. He contends that if a stay is refused he will be forced to terminate his current engagements as CFO of IRBS and its associated companies and entities and his ability to earn a living and his personal financial position will be seriously affected. The applicant also contends that this will further exacerbate his medical condition.
The applicant relies on a letter from IRBS dated 11 July 2019. It relevantly states:
“Our company has engaged [the applicant] to provide CFO services to the group of companies in which we hold substantial interests. Those services require him to attend to all taxation compliance matters for the group companies including supervising and completing periodic Business Activity Statements and Instalment Activity Statements, FBT returns, Taxation Returns and any other taxation matter.
…His engagement as a consultant is the optimum method of engagement. I understand that a Tax or BAS agent registration (as [the applicant] holds) is required as a consequence.
If [the applicant’s] Tax Agent registration is cancelled, we will have no option but to seek to engage someone suitably registered to provide the services our group requires.”
While the letter from IRBS does state that the applicant is required to perform functions as a tax agent, the letter does not state that the applicant’s engagement as CFO will be terminated in the instance that he loses his registration. It merely states that the services of a tax agent will need to be engaged to provide tax agent services. Presumably the office of CFO of a listed corporation involves more than the preparation of tax related documents.
There is no evidence before me about the applicant’s other engagements as CFO of two listed public companies and one unlisted public company and what impact the cancellation of his registration as a tax agent may have on maintaining this engagement. Nor do I have any evidence about the applicant’s income or the actual financial difficulties he will face should his current engagements be terminated.
At the hearing, the applicant, through his legal representative, advised that he currently utilises his tax agent registration in a very limited capacity. Although, he does submit that his employment requires a tax agent registration. The applicant also advised that he sold his Company in March 2019, and now only consults with the entity and does not provide taxation advice due to a restraint of trade being in place. He submitted that he does not consult to the public at large and was only providing tax services in the context of a personal relationship.
I am not satisfied that the applicant had demonstrated that there will be significant consequences for him should the stay be refused.
In regards to the applicant’s medical condition, there is no evidence before me that his condition will be exacerbated should the stay application be refused.
Public Interest
Consistent with the objects of the Act, there is a public interest in maintaining appropriate standards of conduct and behaviour within the tax profession, and ensuring the community’s confidence in them. As such, it is in the public interest to ensure that a tax agent who has breached the Code of Conduct by failing to comply with taxation laws in his personal affairs be stopped from practicing as a tax agent. This is because if the tax agent were left to practice, there is a risk that he/she may cause others to breach taxation laws.
The applicant’s breaches of taxation law in this matter are substantial and prolonged. Despite the applicant’s submission that he only provides tax agent services in a very limited capacity, there is still a risk of him continuing to breach taxation law in the future. As already discussed, the medical evidence does not show that his medical condition has stabilised and he is still engaged as CFO for numerous companies and entities. He also remains a consultant for his Company since its sale. As such, I am satisfied that it is in the public interest for the stay application to be refused.
Utility of the Review
The application for review will not be rendered nugatory if the stay is not granted. The applicant’s registration as a tax agent will be terminated in the meantime. However, if successful, the determination that the applicant may not apply for registration for a period of three years from the date of termination may be set aside or reduced.
DECISION
For all of the above reasons, the stay application is refused. It follows that the interim stay should be discharged.
I certify that the preceding 35 (thirty -five) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak
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Associate
Dated: 6 August 2019
Date(s) of hearing: 25 July 2019 Solicitors for the Applicant: JHK Legal Counsel for the Respondent: Mr T Ritchie
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