Cvek and Tax Practitioners Board (Taxation)
[2020] AATA 1422
•21 May 2020
Cvek and Tax Practitioners Board (Taxation) [2020] AATA 1422 (21 May 2020)
Division: Taxation and Commercial Division
File Number: 2019/8406
Re:Vladimir Cvek
APPLICANT
Tax Practitioners BoardAnd
RESPONDENT
INTERLOCUTORY ORDERS
Tribunal:Senior Member Keith James
Date:21 May 2020
Place:Melbourne
1.Having formed the view that it is desirable and appropriate for the purposes of securing the effectiveness of the hearing and determination of the application for review, in exercise of powers conferred by section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act), the Tribunal orders that subject to the conditions set out in paragraphs (a) and (b) being observed by the Applicant, the operation of the Respondent’s 5 December 2019 decision terminating the Applicant’s registration as a tax agent is stayed until the decision of the Tribunal on the application for review comes into operation PROVIDED THAT:
a.from 18 June 2020, the Applicant must not conduct any tax agent services in his personal capacity, or as sole director of a company, as a registered tax agent; and
b.the Applicant is permitted to provide tax agent services after the date specified above at Order 1(a), but may only do so under the supervision of, and employed by, a registered tax practitioner approved by the Respondent.
2.The application for confidentiality orders pursuant to section 35 of the AAT Act is refused.
......[sgd]........................................................
Senior Member
Catchwords
PRACTICE AND PROCEDURE – application to stay decision under review – decision to terminate tax agent registration – where public interest concerns – applicant’s personal circumstances – interest of clients – stay granted subject to conditions
PRACTICE AND PROCEDURE – application for confidentiality order in respect of stay application – where desirable that proceedings before the Tribunal be held in public – confidentiality order refused
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Tax Agent Services Act 2009 (Cth)
Cases
Coogan and Tax Practitioners Board [2019] AATA 2432
Gao and Tax Practitioners Board [2019] AATA 3651
GJ Brown & Co Pty Ltd and Tax Practitioners Board [2016] AATA 740
Gould and Tax Practitioners Board [2019] AATA 1056
Evans and Tax Practitioners Board [2019] AATA 1408
Scott and Australian Securities and Investments Commission, Re (2009) 51 AAR 114
S & T Income Tax Aid Specialists Pty Ltd trading as Alpha Tax Aid and Tax Practitioners Board (Taxation) [2019] AATA 4099
Toohey v Tax Agents Board of Victoria (2009) 76 ATR 125XTWK and Australian Securities and Investments Commission, Re (2007) 98 ALD 131
Secondary Materials
Explanatory Memorandum, Tax Agent Services Bill 2008 (Cth)
REASONS FOR INTERLOCUTORY ORDERS
Senior Member Keith James
21 May 2020
On 5 December 2019, the Respondent terminated the Applicant’s registration as a tax agent in accordance with section 40-5(1)(b) of the Tax Agent Services Act 2009 (TASA) with effect from 10 January 2020. The Respondent further held that he should be prohibited from applying for registration under the TASA for a period of four years from the date of the termination of his registration taking effect.
The Applicant was notified of the decision in a letter dated 13 December 2019.
On 17 December 2019, the Applicant applied to the Tribunal for a review of that decision. He also requested that the Tribunal make an order staying the Respondent’s decision pending the hearing and determination of his application for review of that decision.
On 10 March 2020, he also sought a confidentiality order pursuant to section 35 of the Administrative Appeals Tribunal Act 1975 (AAT Act).
These requests, for stay and confidentiality orders, are the subject of this decision.
I have concluded that the stay should be granted subject to conditions and the application for confidentiality orders be refused.
THE TRIBUNAL’S STAY POWER
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 this case, the Tribunal has the power to grant a stay order if it:
·is of the opinion that it is desirable to do so after taking into account who may be affected by the Tribunal’s review of the Boards decision; and
·considers that the stay order is appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for the review.
Added to these two statutory tests is considerable precedent that the following considerations should be examined in determining whether a stay application should be granted:
·is a stay in the public interest;
·whether the substantive application for review would be rendered nugatory if the request for the stay order not be granted;
·are there consequences for the Applicant should the request be refused;
·what are the prospects of success of the substantive application for review;
·are there consequences for the Respondent in carrying out its functions should the request for the stay order be granted (or refused); and
·any other relevant matters.[1]
[1] Scott and Australian Securities and Investments Commission, Re (2009) 51 AAR 114 at [4]; Gould and Tax Practitioners Board [2019] AATA 1056 at [7].
In respect of the above, it is clear that the Applicant has a ‘practical onus’ of establishing on the evidence that the above considerations point to the grant of a stay.[2]
[2] XTWK and Australian Securities and Investments Commission, Re (2007) 98 ALD 131, 132 at [15]; Evans and Tax Practitioners Board [2019] AATA 1408 at [13].
BOARD CONDUCT COMMITTEE DECISION
The minutes of the meeting of the Board Conduct Committee on 5 December 2019 record:
Findings
Subsection 30-10(1) of the Code
The Committee determined it was satisfied that Mr Cvek had breached subsection 30-10(1) of the Code of Professional Conduct (Code), in that he failed to act honestly and with integrity by making false declarations in his:
(a)Annual Declaration to the Board on 27 August 2018, in that he answered ’No’ to the question:
(i) “Have any of the above events happened to you in the last five years’’, being “matters that may affect your good fame, integrity and character e.g. subject to any disciplinary action by a regulator or professional association” despite having been subject to disciplinary action by the IPA on 5 June 2015.
(ii) “Do you have any overdue personal tax obligations”, despite having an income tax debt of at least $26,210.30.
(b)Application for renewal of registration made to the Board on 31 July 2019, in that he answered ‘No’ to the question “Do you have any overdue tax obligations?”, despite having an income tax debt of at least $18,893.47 as at the date of the application.
Subsection 30-10(2) of the Code
The Committee determined it was satisfied that Mr Cvek had breached subsection 30-10(2) of the Code, in that he failed to comply with taxation laws in the conduct of his personal affairs by failing to meet his taxation obligations by their respective due dates and for the periods he had been in control of the relevant affairs of the entities to which he was responsible:
(a)failing to pay his taxation debts as and when they fell due, by having an unpaid debt of $27,067.80 which was incurred as due and payable on 1 December 2014 and outstanding until subject to a payment arrangement on 6 October 2016
(b)failing to comply with three director penalties notices dated 11 March 2014, 11 March 2014, and 28 May 2014 by not paying the amount due under the notices by the due dates, including for debts arising from unpaid employee entitlements
(c)failing to comply with payment demand letters dated 1 September 2011, and 28 August 2014, by not paying the amount due under the letters by the due dates
(d)Mr Cvek, in his capacity as director of Citywide Accounting Services Pty Ltd, and until such time as a liquidator was appointed on 29 June 2018, failed to cause Citywide Accounting Services Pty Ltd:
(i) To lodge Income Tax Returns for the income years ended 30 June 2013, 30 June 2014, 30 June 2015, 30 June 2016, and 30 June 2017 by their respective due dates.
(ii) To lodge Business Activity Statements for the quarterly tax periods ended 30 June 2014, 30 September 2014, 31 December 2014, 31 March 2015, by their respective due dates.
(iii) To lodge annual GST returns for the years ended 30 June 2013 and 30 June 2014 by their respective due dates.
(iv) To pay a taxation debt of $231,836.25, being a debt that was due and payable up until 29 June 2018 (the day the liquidator was appointed).
(e)Mr Cvek, in his capacity as director of Citywide Accounting Services (VIC) Pty Ltd, failed to cause Citywide Accounting Services (VIC) Pty Ltd to pay a taxation debt of $13,448.98, being a debt that was due and payable on 2 June 2019 (the day it was deregistered as a company by the Australian Securities and Investments Commission).
Section 20-5(1)(a) Individual does not meet registration requirement - fit and proper
The Committee determined that it was satisfied that Mr Cvek had ceased to meet the tax practitioner registration requirement under section 20-5(1)(a) of the TASA, that he be a fit and proper person, as a result of the conduct described in the submission including that he has:
(a)Been unable to satisfy the Board that he is of good fame, integrity and character.
(b)Shown a pattern of dishonest behaviour and conduct lacking integrity.
(c)Failed to comply with taxation laws in his personal affairs.
(d)Continued to show a lack of acknowledgment or contrition of his behaviour.
The Committee took the following into account when making its findings:
(a)Mr Cvek's correspondence to date.
(b)Mr Cvek was liable for the obligations of Citywide Accounting Services Pty Ltd prior to its liquidation.
(c)the payment demand letters and director penalties notices were issued for debts not associated with the judgement order.
(d)the pattern of ongoing behaviour of similar activities.
(e)the active payment arrangement for the judgement order.
(f)the decision by the IPA to terminate Mr Cvek’s membership based on ethical grounds.
Decision
Given the above, the Committee decided to terminate Mr Cvek’s registration as a tax agent in accordance with paragraph 40-5(1)(b) of the TASA, on the basis that he has ceased to meet the tax practitioner registration requirement under section 20-5(1)(a) of the TASA, of being a fit and proper person.
In determining that it was appropriate to terminate Mr Cvek’s registration, the Committee noted the serious nature of tax practitioner’s behaviour and the Board’s role to ensure public protection.
Taking into account Mr Cvek’s conduct and the TASA’s requirement to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct, the Committee also determined in accordance with subsection 40-25(1) of the TASA that Mr Cvek should be prohibited from applying for registration under the TASA for a period of four (4) years from the date the termination of his registration takes effect.
ACTS SCHEME AND REGISTRATION AND REGULATING POWER
Section 2-5 of the TASA provides that the object of the TASA “is to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct.”
The TASA scheme involves the establishment of the Board, endowing the Board with registration, conduct investigation and discipline functions, and the enactment of a mandatory Code of Professional Conduct (Code).
The Respondent’s findings in this matter relate to breaches of the Code. In the Explanatory Memorandum to the Bill that became the TASA legislation, under the heading “Key elements of the new legislative Scheme”, it is stated:
The introduction of a Code of Professional Conduct
1.19 A Code of Professional Conduct (Code) governs the ethical and professional standards of tax agents and BAS agents. The Code is set out as a statement of principles and the Board may issue binding written guidelines for the interpretation and application of the Code.
1.20 A formal legislative code has been a key aspect of the new legislative regime since it was first recommended in 1994 by the Report of the National Review of Standards for the Tax Profession, Tax Services for the Public. This report recommended that any such code should be made binding through legislation to enable the Board to impose sanctions for breaches and thereby to enforce compliance with the code.
A Range of sanctions for breaches of the Code of Professional Conduct
1.21 Under the new arrangements, if a tax agent or BAS agent has breached the Code, the Board has a range of options. The Board may caution the agent, require the agent to complete a course of training, subject the agent to practising restrictions, require the agent to practice under supervision, or suspend or terminate the agent’s registration. (Currently, the state Boards are only able to suspend or terminate registration.)
This later paragraph is an explanation of section 30-15 of the TASA which provides where the Board has found that there has been a failure to comply with the Code, the Board may do one or more of the following:
(a)give [the tax agent] a written caution;
(b)give [the tax agent] an order under section 30-20;
(c)suspend [the tax agent’s] registration under section 30-25;
(d)Terminate [the tax agent’s] registration under section 30-30.
Section 30-20(1) provides:
(1)The Board may make an order that requires you take one or more actions including, but not limited to, the following:
(a)completing a course of education or training specified in the order;
(b)providing *tax agent services for which you are registered only under the supervision of a *registered tax agent, BAS agent or tax (financial) adviser specified in the order;
(c)providing only those tax agent services that are specified in the order.
Section 30-25 provides:
Suspension
(1) The Board may, by notice in writing, suspend your registration for a period determined by the Board.
Note: The Board must cause notice of its decision to be published in the Gazette: see section 60-140.
(2) You must not provide tax agent services during the period of suspension.
Note: If you provide tax agent services while suspended, you may contravene a civil penalty provision: see subsection (4) and Subdivision 50-A.
(3) If, when the Board suspends your registration under subsection (1), your registration is already suspended, suspension is for a further period that the Board determines is appropriate. The further period commences at the end of the period of suspension.
(4) While you are suspended, you are taken not to be a registered tax agent, BAS agent or tax (financial) adviser, except for the purposes of:
(a)Part 2 (Registration), Subdivision 30-C (Notifying a change of circumstances) and Part 4 (Termination of registration); and
(b)this Division.
Section 30-30 provides that the Board may terminate a person’s registration.
The Explanatory Memorandum also highlights that the Code outlines “duties that agents owe to their clients, the Board and other agents.”[3]
[3] Explanatory Memorandum, Tax Agent Services Bill 2008 (Cth) 51, [3.19].
The Code consists of fourteen requirements under five key principles.
As outlined above, the Respondent found the Applicant to be in breach of two provisions under the key principle of Honesty and Integrity.
Firstly, there were three breaches of the requirement to act honestly and with integrity.[4] These findings are discussed in subsequent paragraphs of the decision (under the heading “Respondent Concessions” at paragraphs 27 to 34).
[4] Code 30-10(1) of the TASA.
Secondly, the Respondent also found the Applicant to have breached the second of the fourteen Code provisions (Code 30-10(2) of the TASA), which requires that tax agents must comply with taxation laws in the conduct of their personal affairs.
The Explanatory Memorandum highlights that personal tax affairs includes “lodging their personal income tax returns and activity statements on time” and also includes “affairs relating to the tax agent’s or BAS agent’s practice.”[5]
[5] Explanatory Memorandum, Tax Agent Services Bill 2008 (Cth) 53, [3.28], [3.29].
As discussed below, if these findings are upheld at the Hearing, they are, in the Tribunal’s view, significant and serious breaches of the Code.
The Applicant was not found by the Respondent to have breached any other provision of the Code.
RESPONDENT CONCESSIONS
At the hearing of the stay application, the Respondent advised:
that at the hearing of the application for review, it does not intend to press the allegation that the Applicant contravened subsection 30-10(1) of the Code by making a false statement to the Respondent in connection with the disciplinary proceedings conducted by the Institute of Public Accountants in 2015.
This takes off the table the Respondent’s first finding of a failure to act honestly and with integrity (a breach of Code 30-10(1)).
In submissions, the Respondent also clarified that the Applicant had in place a payment arrangement in respect of his personal tax debt. The Applicant’s solicitor submitted that this payment arrangement provides an explanation or, at least context, for the Applicant’s answers on his annual declarations.
Pursuant to the payment arrangement, the personal tax debt had been reduced by approximately $12,000 from its peak.
If the personal tax debt was the only breach found, there seems a reasonable basis to argue that cancellation of the registration, in all of the circumstances, would be on the harsh side.
The existence of the payment arrangement and all of the history and circumstances of the personal tax debt was not conceded by the Respondent as a ground for finding there was not a breach of the Code, which again is validly a matter to be determined at Hearing.
The Respondent did not concede that a May 2018 judgement debt of $21,680 in proceedings brought by the Deputy Commissioner of Taxation in the Magistrates’ Court of Victoria for unpaid director penalty liabilities with respect of City Wide Accounting Services Pty Ltd (a company of which the Applicant was sole director), has ever been part of the personal tax payment arrangements.
The Applicant’s solicitor submitted that this judgment debt was part of the payment arrangements entered into with the Commissioner. The Respondent’s counsel questioned this conclusion, and on the material currently before the Tribunal, there is nothing linking the judgment debt and the personal tax liability, the subject of the payment arrangement. As stated earlier, at a stay hearing the Applicant has the ‘practical onus’ of establishing evidence.
The Tribunal notes that this director penalty debt has a long history. Payment demand letters were issued in September 2011 and August 2014. The ATO initiated Magistrates’ Court proceedings to recover on the penalty notices in May 2017. Pre-hearing conferences were held in August 2017, resulting in a compromised amount of $21,660 in November 2017, down from a claim of $98,712, being agreed by the parties. In December, minutes of the agreement were filed with the Court and by consent the matter was struck out with the plaintiff (the Australian Taxation Office (ATO)) having a right of reinstatement. The minutes provided that the agreed amount was to be paid on or before 29 January 2018. No payment was made by that date or later, noting the Applicant’s submission that the payment arrangement also includes this amount as discussed previously.
REMAINING ISSUES
On these amended facts, the Respondent submitted that the Applicant has limited prospects of success at the substantive hearing.
The facts on which the Respondent relied are in summary:
(a)The unpaid director penalty judgment discussed above of $21,680;
(b)That the personal tax debt subject of the payment arrangement includes amounts dating back to 2011 and 2014, in respect of which payment demand letters were issued to the Applicant. It was not until 2017, by which time the Applicant’s debt had reached $30,331.90, that the Applicant entered into the payment arrangement and began making payments in reduction of this debt;
(c)That Citywide Accounting Services Pty Ltd (CAS), of which the Applicant was the sole director, failed to lodge two income tax returns (2013 and 2014), four Business Activity Statements (for the quarters June 2014, September 2014 December 2014 and March 2015) and a GST return for the year ended 30 June 2013.
(d)On 19 May 2015, the Supreme Court of Victoria granted an application (brought by the Deputy Commissioner of Taxation) for a winding up order in respect of CAS, and a liquidator was appointed. On that date, CAS had outstanding taxation liabilities (dating back to 2011) totalling $166,772.27 which included $11,760.67 in respect of unpaid employee superannuation entitlements;
(e)That City Mortgage and Finance Pty Ltd (CMFPL), again a company the Applicant was the sole director of, failed to comply with payment demand letters in respect of overdue taxation liabilities dated 12 June 2014, 18 August 2014 and 30 March 2016 by their respective due dates; and pay taxation liabilities between 2011 and 2017 totalling in excess of $98,000, which were written off by the Commissioner on the basis they were considered “uneconomical to pursue”;
(f)The Applicant has also been the sole director of Citywide Accounting Services (Vic) Pty Ltd (CASV) which had tax debts totalling $10,778.98 written off in 2018 by the Commissioner, again on the basis that they were “uneconomical to pursue”;
(g)CASV, on deregistration in June 2019, had outstanding tax liabilities for outstanding penalties for the 2014, 2015, and 2016 income years; and
(h)On 27 August 2018, in his annual declaration to the Respondent the Applicant declared that he did not have any overdue personal tax obligations. At the time the Respondent now alleges that the Applicant had a $21,680 (down from $26,210 cited in the findings in the Respondent’s decision) liability to the Deputy Commissioner of Taxation.
Only paragraph (h) above goes to the issue of a breach of Section 30-10(1); “you must act honestly and with integrity.”
The other seven matters go to go to breaches of 30-10(2); “you must comply with the taxation laws in the conduct of your personal affairs.”
The Applicant’s submissions on the breach of complying with the taxation laws are based around
issues being derived from errors by the ATO which inter alia, resulted in the liquidation of Citywide Accounting Service Pty Ltd, an insurmountable amount of costs and loss to the Applicant and endless and unavoidable need for the Applicant to re-explain the circumstances of the errors in order to defend himself.
The Tribunal takes this to be, in part, in relation to paragraphs (c) and (d) above. It provides background to long running disputes between the Commissioner and CAS but, in respect of Code 30-10(2) of the TASA, not an explanation of why returns were not lodged. A dispute about an income tax assessment is one matter, but when the company was liquidated there was also an unpaid amount of $11,760 in respect of unpaid employee superannuation entitlements.
Given the Applicant has a ‘practical onus’ of establishing the evidence to justify a stay, there remains, at a minimum, the unexplained tax debts of two practice entities and, at the minimum, the unpaid employee entitlements of a third. Added to which is the non-payment of the amount agreed in the Magistrates’ Court agreement relating to director penalty notices.
There is also the failure to lodge returns by CAS, set out in paragraph (c) above.
The Tribunal accepts the submission of the Respondent that:
As a registered tax agent, the Applicant should know what his tax obligations are and comply with them. This includes maintaining appropriate records of his dealings with the Commissioner. The Applicant owes a higher standard of care when it comes to complying with taxation obligations than other individuals. As stated by McDonald DP in Toohey v Tax Agents Board of Victoria (2009) 76 ATR 125:
As a tax agent, the applicant should hold himself up to a higher standard than the general public. He has an intricate knowledge of tax laws and it is reasonable to assume that he knows the importance of lodging tax returns on time. His clients, as well the general public, should be able to entrust their taxation affairs to him and have confidence that he will be able to lead by example and file his tax returns on time as required by the law.
PUBLIC INTEREST
It is mandatory that tax agents comply with the Code.[6] The Code’s purpose is to ensure that tax agents’ services are provided to the public in accordance with appropriate standards of professional and ethical conduct.[7]
[6] Explanatory Memorandum, Tax Agent Services Bill 2008 (Cth) 10 [1.20], 47 [3.1], 51 [3.28]; TASA ss 2-10(2), 30-5.
[7] Explanatory Memorandum, Tax Agent Services Bill 2008 (Cth) 13, [1.34].
The preservation of the general community’s confidence in tax agents is of fundamental concern.[8] Those who hold a position of trust as a tax agent should conduct their affairs in a way which maintains public confidence.[9]
[8] G J Brown & Co Pty Ltd and Tax Practitioners Board [2016] AATA 740 at [82].
[9] Evans and Tax Practitioners Board (Taxation) [2019] AATA 1408 at [131].
The standing of the profession in the eyes of the public is a public interest risk to be considered.[10]
[10] Ibid.
Managing your own tax affairs (Code 30-10(2) of the TASA) is a founding pillar of a tax agent’s place in the taxation system. There is a public interest in ensuring that a registered tax practitioner who has breached the Code by failing to comply with taxation laws in his personal affairs be stopped from practising as a tax agent, because if permitted to continue practising, it may cause others to breach taxation laws (directly or indirectly).[11]
[11] Coogan and Tax Practitioners Board [2019] AATA 2432 at [32]; S & T Income Tax Aid Specialists Pty Ltd trading as Alpha Tax Aid and Tax Practitioners Board (Taxation) [2019] AATA 4099 at [23].
Given their nature, the issuing of director penalty notices, should be regarded as a most serious matter. On the evidence before the Tribunal, the matter is compounded by both the non-compliance in respect of the original notices together with the failure to comply with the agreement in the Magistrates’ Court proceeding to enforce their effect.
The Respondent is also on good grounds to be very concerned that in a short period of time three practice entities, where the Applicant had been the sole director, had outstanding tax liabilities when liquidated or struck off.
Practitioners adhering to the Code also have every expectation that other practitioners take their responsibilities under the Code seriously. As the Respondent submitted, it has the responsibility for ensuring that the public is protected and in doing so, an ‘atmosphere of mutual trust’ is maintained between the Respondent and tax practitioners.[12]
WILL THE APPLICATION FOR REVIEW BE RENDERED NUGATORY IF THE STAY IS NOT GRANTED AND CONSEQUENCES FOR THE APPLICANT
[12] Stasos v Tax Agents’ Board (1990) 21 ALD 437 at [50].
It was submitted on behalf of the Applicant that “a refusal of a stay will render the subsequent final decision before the Tribunal nugatory, given that the Applicant will more than likely have lost the majority, if not all of his business’ clients.”
Other than a loss of clients, no other reason has been advanced as to why the review would be rendered nugatory in the event that a stay is not granted. A similar but, importantly, different submission was also put, as discussed below at paragraph 58.
As for the loss of clients, this is the situation faced by anyone operating a small business that is in the position of losing their registration.[13] The inability to service clients can arise for many reasons, for example, through sickness or injury. There is no evidence before the Tribunal that a plan to deal with an unforeseeable incident could not also be invoked when a foreseeable incident is confronted.[14]
[13] See, eg, Gao and Tax Practitioners Board [2019] AATA 3651 at [65]; Taxation Guru Pty Ltd and Gambhir Watts and Tax Practitioners Board [2019] AATA 3249 at [45].
[14] See, eg, Gould and Tax Practitioners Board [2019] AATA 1056 at [31]–[32].
Put in the reverse way, a small business owner should not be encouraged to not have a plan to deal with business interruptions however they arise. To hold otherwise is to in effect provide that small business practitioners without a business interruption plan have an almost automatic entitlement to a stay. This would be unfair to better organised businesses with such a plan and therefore put them at a disadvantage as a consequence of their professionalism.
The Tribunal accepts there will be some inconvenience to clients by refusing the stay but finds that inconvenience is greatly outweighed by the public interest considerations discussed above.
It was also put to the Tribunal that the Applicant’s sole source of income is derived from his work as a tax agent. It was submitted that the Applicant has two dependants and that both the Applicant and his dependents will suffer significant financial hardship if the stay is not granted.
The Tribunal notes that the Board made no findings as to the Applicant’s competence in undertaking tax compliance activities. The substantial findings that he breached the provision of the Code dealing with the management or payment of his tax obligations, as opposed to those provisions dealing with his tax expertise or competence, go to his responsibilities as a tax principal not his capacity to earn an income. Put another way, were his actions so bad that his capacity to provide an income for himself and his family ought to be severely curtailed, or would the appropriate outcome be that he should be prohibited from being given the opportunity to transgress again. Section 30-20 discussed above indicates that termination is not in all circumstances the only possible outcome. The question of why the Applicant should not be able to be employed by a registered agent that takes on the responsibility for the Applicant’s client list as not being a preferable outcome is a matter to be considered at the hearing.
Among other things, section 50-25 of the TASA provides that it is a civil offence for a person to employ, or use the services of, an entity to provide tax agent services on behalf of the first person, if the first person knew or ought to have known that the entity is not a registered tax agent.
If the Boards decision stands, the Applicant will not be able to obtain employment with any practice offering tax agent services. Disqualifying the Applicant from working under supervision, will not only impact the Applicant and his dependants, it has the potential to prevent him from having the capacity to meet his past and important tax obligations.
PROSPECTS OF SUCCESS
It should be understood from the above discussion that, without finally determining one of the issues to be answered on review, the prospects of success of overturning the decision that there has been a breach of Code section 30-10(2) of the TASA are unlikely. However, if the Tribunal does find that there has been a breach (or breaches) of the Code there remains the question of whether the correct or preferable decision would be to apply the remedies or penalties provided in Part 3 of the TASA or through a combination of Parts 2 and 4, or some other action.
This is especially the case given that section 30-20 of the TASA provides for the alternative administrative action of ordering that the tax agent services have to be conducted under the supervision of an agent specified in an order made under that section.
Given the serious nature of the breaches alleged in respect of section 30-10(2) of the TASA, the considerations discussed in paragraphs 44 to 50 above on both public interest and the mutual trust expectations suggest the penalty should reflect that seriousness.
No evidence was presented by the Applicant at the stay hearing that the breaches of section 30-10(2) of the TASA should not be considered as serious. That is not to be taken as a criticism of his current legal advisors who have extracted from the Respondent the concessions discussed above. They have however been placed on notice that at the substantive hearing, they will need to establish evidence that convinces the Tribunal of an alternative determination that is either correct or more preferable to that made by the Respondent.
The Applicant has demonstrated that he has not been able to manage his practice entities’ tax affairs as a Principal. At the same time his competence as a tax practitioner has not been challenged. Working as an employee with a competent practitioner is in his clients’, his and his dependants’ best interests. This needs to be considered in the context of the issue of the Board’s mutual trust obligations with other practitioners and that question is properly a matter for the hearing.
CONCLUSION ON THE GRANTING OF A STAY
Notwithstanding the reservations about the seriousness of the repeated instances of unpaid tax liabilities, the Tribunal considers it desirable to order a conditional stay of the Board’s termination decision. The Tribunal finds that a stay order should be granted but only on such terms that protect the public interest until the hearing of the appeal. The stay is conditional on the Applicant not providing any tax agent services, other than as an employee of a registered practitioner approved by the Board consistent with an order that might otherwise have been ordered pursuant to section 30-20(1)(b) of the TASA.
The Applicant has conducted his professional activities through two corporate entities which were struck off or liquidated before he became a sole practitioner. The entities have a history of compliance breaches, breaches of remission of withholding obligations, and the non-payment of tax. A related practice entity also failed to comply with payment demand letters and pay taxation liabilities.
Importantly, no evidence has been presented of payment towards the Magistrates’ Court settlement relating to an agreement to pay an amount sourced in unpaid director penalty notices in respect of unpaid PAYG employee entitlements. The amounts were unpaid by CAS, a practice company in which the Applicant was the sole director.
On the other hand, breaches of the Code dealing with competence have not been alleged and it is in the interests of his clients and his dependants that he is able, if he wishes, to be employed by another registered practitioner acceptable to the Board (and, practically, to his clients) until the finalisation of the application for review in this matter.
CONFIDENTIALITY ORDER REQUEST
The Applicant also made an application pursuant to section 35 of the AAT Act for confidentiality orders to be made in relation to this matter.
Subsection 35(1) of the AAT Act provides that, subject to the section, “the hearing of a proceeding before the Tribunal must be in public.” The Tribunal’s discretion to make orders includes:
(a)under subsection 35(2) of the AAT Act, where the Tribunal may “direct that a hearing or part of a hearing is to take place in private”;
(b)under subsection 35(3) of the AAT Act, where the Tribunal may restrict “the publication or other disclosure of” information revealing the identity of a party and/or information concerning a party; and
(c)under subsection 35(4) of the AAT Act, where the Tribunal may prohibit or restrict the publication of information that relates to the proceedings generally.
Subsection 35(5) of the AAT Act provides that in considering whether to make an order under those above subsections, the Tribunal must take as the basis of its consideration the principle that it is desirable:
(a)that hearings of proceedings before the Tribunal should be held in public;
(b)that evidence given before the Tribunal and the contents of documents received in evidence by the Tribunal should be made available to the public and to all the parties; and
(c)that the contents of documents lodged with the Tribunal should be made available to all parties.
The Tribunal must also pay due regard to any reasons in favour of making an order under subsections 35(2), (3) or (4), including the confidential nature (if applicable) of the information.
The Applicant gave no reason why the discretion in subsection 35(2) of the AAT Act regarding a public hearing should apply in these circumstances.
In regard to subsection 35(3) of the AAT Act, the Applicant did not identify any specific document filed with the Tribunal as being confidential. The Tribunal documents do not include any of the Applicant’s personal tax returns other than his personal 2019 return included in submissions made by the Applicant in respect of the stay application. The Tribunal has not made any reference to that return in these reasons.
In regard to subsection 35(5) of the AAT Act, submissions made in the stay matter relating to the ‘irreparable damage’ of the Applicant’s ability to successfully continue operating his business, were repeated.
There are numerous authorities which emphasise the fundamental importance of and public interest in, maintaining open justice.
Consistent with the reasons set out above in considering the stay matter, there are also special and additional public interest considerations in relation to the TASA.
CONCLUSION ON THE GRANTING OF A CONFIDENTIALITY ORDER
The Tribunal finds that the Applicant has not made out any case as to why the Tribunal should exercise its discretion to: prohibit publication of its reason for refusing the application for a stay; or make orders pursuant to subsections (2), (3) and (4) of section 35 of the AAT Act more generally.
Accordingly, the Tribunal refuses the Applicant’s application for confidentiality orders pursuant to section 35 of the AAT Act.
I certify that the preceding seventy-eighty (78) paragraphs are a true copy of the reasons for the interlocutory decision herein of Senior Member Keith James.
......[sgd]........................................................
Dated: 21 May 2020
Date of hearing: 23 March 2020 Solicitors for the Applicant: Mr Bishoy Hanna,
FSC LawCounsel for the Respondent: Claire Horan
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