Delis and Tax Practitioners Board

[2015] AATA 820

Delis and Tax Practitioners Board [2015] AATA 820 (23 October 2015)

Division

Taxation and Commercial Division 

File Number(s)

2014/5488

2014/5489

Re

Peter Delis

Delis Enterprises Pty Ltd

APPLICANTS

And

Tax Practitioners Board

RESPONDENT

DECISION

Tribunal	Egon Fice, Senior Member
Date	23 October 2015
Place	Melbourne

The Tribunal decides to affirm the decisions of the Tax Practitioners Board dated 25 September 2014 to reject the application of each of the applicants for renewal of registration as a tax agent.

......[sgd] Egon Fice.....................................................

Egon Fice, Senior Member

Catchwords

TAX AGENTS – Administration of federal tax legislation – Tax agents – Renewal of registration – Registration and cancellation – Fit and proper person – Good fame, integrity and character – Compliance with taxation laws – Failure to remit compulsory superannuation payments to employees – decisions affirmed

Legislation

Administrative Appeals Tribunal Act 1975 (Cth) ss 41, 43

Corporations Act 2001 (Cth) s 459E

Income Tax Assessment Act 1997 (Cth) s 995-1

Tax Agent Services Act 2009 (Cth) ss 20-5, 20-15 – 20-25, 20-50, 20-25, 30-10 – 30-30, 60-15, 70-10

Cases

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321

Carbery & Associates Pty Ltd and Tax Agent’s Board of Queensland [2001] AATA 107 (13 February 2001)

Hughes and Vale Proprietary Limited v New South Wales (1955) 93 CLR 127

Stasos v Tax Agents’ Board (1990) 21 ALD 437

Secondary Materials

Explanatory Paper (TPB (EP) 02/2010)

REASONS FOR DECISION

Egon Fice, Senior Member

23 October 2015

1. The Tax Practitioners Board (TPB) is a body established under the Tax Agent Services Act 2009 (TASA) pursuant to Subdivision 60-A.  Amongst its functions is the power to investigate applications for registration; and to impose sanctions for non-compliance with the Code of Professional Conduct (s. 60-15).  Prior to its commencement, essentially on 26 March 2009, registration of tax agents was made pursuant to Part VIIA of the Income Tax Assessment Act 1936 (ITAA 36).

2. Delis Enterprises Pty Ltd (Delis Enterprises) was first registered as a tax agent on 1 August 1993, that registration being pursuant to ITAA 36. Mr Peter Delis has, at all material times, been the sole director of Delis Enterprises. He was registered as a Nominee of Delis Enterprises for the purposes of ITAA 36 on 1 August 1993. Following the commencement of TASA, Mr Delis and Delis Enterprises were registered tax agents under that Act. Mr Delis is the sole nominated supervising tax agent for Delis Enterprises. Furthermore, on 1 March 2010 he was registered as an individual tax agent. Delis Enterprises trades in its capacity as trustee of the Delis Unit Trust (the Unit Trust).

3. Mr Delis and Delis Enterprises lodged an application with the TPB on 12 July 2014 seeking renewal of registration as tax agents.  In letters dated 25 September 2014, the TPB notified Mr Delis and Delis Enterprises that their respective applications for renewal of registration as a tax agent were rejected.  The reason given by the TPB was that Mr Delis was not a fit and proper person and therefore was not eligible for registration as a registered tax agent and, in respect of Delis Enterprises, because Mr Delis was the sole director of the company and he was regarded as not being a fit and proper person, the company was not eligible for renewal of registration.  Mr Delis and Delis Enterprises were advised by the TPB that their registration as tax agents would cease on 23 October 2014. 

4. On 23 October 2014 the Tribunal ordered that the operation and implementation of each of the decisions be stayed until 17 November 2014.  Following a further hearing by the Tribunal on 13 November 2014, the operation and implementation of the decisions to refuse registration to Mr Delis and Delis Enterprises was stayed until those applications were determined or until further order subject to conditions.  Given that their applications for registration were made at least 30 days before the day on which their registration expired, and that the operation and implementation of the decisions to refuse renewal of registration are stayed, that registration is taken to continue until both applications have been decided (s. 20-50 of the TASA).

5. Section 70-10(a) of the TASA provides that an application may be made to this Tribunal for review of a decision of the TPB regarding the rejection of an application for registration (including renewal of registration).  On 22 October 2014 Mr Delis and Delis Enterprises lodged an application with the Tribunal seeking review of the TPB decisions dated 25 September 2014.

6. The only issue which I am required to determine is whether Mr Delis is a fit and proper person and therefore eligible for registration as a registered tax agent.  In making that determination, I must look at the question in the context of the operations of Delis Enterprises as well as Mr Delis’ personal income tax position.  That is because Delis Enterprises traded under the name Peter Delis and Co and, at the relevant time, Mr Delis was responsible for that operation as sole director.  I should also consider the fit and proper person issue in light of the operations of Pinia Holdings Pty Ltd (Pinia Holdings), in its capacity as the trustee of the Pinia Investment Trust.  Mr Delis is also its sole director and it had substantial unpaid tax debts owing to the ATO.

   REGISTRATION AND RENEWAL OF REGISTRATION OF TAX AGENTS

7. The relevant eligibility criteria for registration as an individual tax agent are set out in s. 20-5 (1) of TASA which provides:

   Individuals

   (1)An individual, aged 18 years or more, is eligible for registration as a*registered tax agent, BAS agent or tax (financial) adviser if the Board is satisfied that:

   (a)the individual is a fit and proper person; and…

8. In the case of a corporation, the relevant eligibility criteria are set out in s. 20-5 (3) which provides:

   Companies

   (3) A company is eligible for registration as a*registered tax agent, BAS agent or tax (financial) adviser if the Board is satisfied that:

   (a)each director of the company is a fit and proper person; and…

9. The TASA also sets out matters which must be considered when determining whether an individual is a fit and proper person. These are found in s. 20-15 which provides:

   In deciding whether it is satisfied that an individual is a fit and proper person, the Board must have regard to:

   (a)whether the individual is of good fame, integrity and character; and

   (b)without limiting paragraph (a):

   (i)     whether an event described in section 20-45 has occurred during the previous 5 years; and

   (ii)    whether the individual had the status of an undischarged bankrupt at any time during the previous 5 years; and

   (iii)    whether the individual served a term of imprisonment, in whole or in part, at any time during the previous 5 years.

10. The grant of an application for registration is made by the TPB.  An application for registration includes an application for renewal of registration (s. 20-20).  Relevantly, s. 20-25 of TASA provides:

    Grant of application for registration

    (1)If you have applied to the Board for a type of registration, the Board must grant your application if you are eligible for registration of that type.  Otherwise, the Board must reject your application.

11. If the Board considers it appropriate, it may impose conditions on an applicant’s registration (s. 20-25 (5)).

12. The TPB has issued an Explanatory Paper (TPB (EP) 02/2010) dealing with the concept of a fit and proper person.  Although the Explanatory Paper is intended for information only, it provides a detailed explanation of the Board’s interpretation of the fitness and propriety requirements in Subdivision 20-A of the TASA dealing with eligibility for registration.  It does not create additional legal obligations beyond those contained in the TASA.  As is explained in the introduction to the Explanatory Paper, a finding on fitness and propriety will depend on a weighing of the considerations set out in that paper in the context of the particular facts and circumstances of the case in question.

13. Subdivision 30-A of the TASA sets out a Code of Professional Conduct for registered tax agents, BAS agents and tax (financial) advisers.  As the Explanatory Paper states in its introduction, it is possible that matters impacting on the fitness and propriety of an agent may also be relevant to a finding under the Code or under one of the civil penalty provisions.  The Code of Professional Conduct applies only to conduct which has occurred after the commencement of Part 3 of the TASA which was 1 March 2010.  Of significance in these matters is the following conduct set out in s. 30-10 (2) of the TASA:

    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.

    …

14. The expression taxation law is defined in s. 995-1 (1) of the Income Tax Assessment Act 1997 in the following way:

    taxation law means:

    (a)an Act of which the Commissioner has the general administration (including a part of an Act to the extent to which the Commissioner has the general administration of the Act); or

    (b)regulations under such an Act (including such a part of an Act); or

    (c)the Tax Agent Services Act 2009 or regulations made under that Act.

    NON-COMPLIANCE WITH TAXATION LAWS

15. The reason for the TPB determining that Mr Delis was not a fit and proper person to be a registered tax agent was that:

    ·he regularly failed to meet lodgment dates for his personal income tax returns;

    ·Delis Enterprises repeatedly failed to remit sufficient superannuation payments for its employees as and when they fell due;

    ·Delis Enterprises repeatedly failed to pay tax liabilities as and when they became due;

    ·Delis Enterprises failed to lodge 50/63 Business Activity Statements (BAS) when they became due for lodgement;

    ·Pinia Holdings, a company controlled by Mr Delis, as trustee for the Pinia Investment Trust, has failed to make payments of its tax liabilities since June 2010 and as at 19 June 2015 had outstanding tax liabilities totalling $52,840.48; and

    ·Mr Delis, despite entering into numerous payment arrangements with the Australian Taxation Office (ATO) on behalf of Delis Enterprises and on his own behalf, has defaulted on almost all of those arrangements.

16. Mr D Brown, a solicitor employed by the Australian Government Solicitor, who appeared on behalf of the TPB, tabulated in its Statement of Facts, Issues and Contentions the following failures, which were not disputed by Mr Delis.

    Failure to lodge income tax returns

Income Tax Period Bending	Due Date	Lodgment Date	Days Outstanding
30 June 2009	24 May 2010	12 November 2010	172
30 June 2010	1 November 2010	6 July 2011	247
30 June 2011	15 May 2012	18 October 2012	156

As at 22 May 2015 Mr Delis had outstanding personal income tax liabilities in the amount of $11,221.69.

Failure to make superannuation payments

Period	Total Shortfall in Superannuation Payments
1 July 2010 – 30 September 2010	$6,410.48
2 October 2010 – 31 December 2010	$6,287.72
1 January 2011 – 31 March 2011	$6,151.01
1 April 2011 – 30 June 2011	$6,219.38
1 July 2011 – 30 September 2011	$6,745.75
2 October 2011 – 31 December 2011	$6,877.24
1 January 2012 – 31 March 2012	$6,678.29
1 April 2012 – 30 June 2012	$6,738.24
1 July 2012 – 30 September 2012	$7,603.92
1 October 2012 – 31 December 2012	$7,259.49
1 January 2013 – 31 March 2013	$7,381.56
1 April 2013 – 30 June 2013	$7,605.24
1 July 2013 – 30 September 2013	$9,802.14
1 October 2013 – 31 December 2013	$7,426.71
Total Shortfall 1 July 2010/31 December 2013	$99,187.17

In August 2014 the ATO threatened recovery action which resulted in the Trustee making a payment of $40,000 in October 2014.  As at 7 January 2015 the outstanding superannuation guarantee liabilities totalled $28,946.47.

Failure to lodge business activity statements

BAS Period Bending	Due Date	Lodgment Date	Days Outstanding
31 January 2010	22 February 2010	18 March 2010	24
31 March 2010	26 May 2010	1 July 2010	36
30 June 2010	25 August 2010	25 January 2011	153
31 July 2010	23 August 2010	16 September 2010	24
30 September 2010	25 November 2010	1 June 2011	188
31 October 2010	22 November 2010	18 January 2011	57
30 November 2010	21 December 2010	18 January 2011	28
31 December 2010	28 February 2011	8 July 2011	130
31 January 2011	21 February 2011	6 April 2011	44
28 February 2011	21 March 2011	20 June 2011	91
31 March 2011	26 May 2011	11 July 2011	46
30 April 2011	23 May 2011	1 June 2011	9
30 June 2011	25 August 2011	5 September 2011	11
31 July 2011	22 August 2011	25 August 2011	3
31 August 2011	21 September 2011	17 October 2011	26
30 September 2011	25 November 2011	20 March 2012	116
31 October 2011	21 November 2011	22 December 2011	31
30 November 2011	21 December 2011	10 January 2012	20
31 January 2012	21 February 2012	27 February 2012	6
29 February 2012	21 March 2012	9 April 2012	19
31 March 2012	28 May 2012	1 October 2012	126
31 May 2012	21 June 2012	6 July 2012	15
30 June 2012	27 August 2012	22 November 2012	87
31 July 2012	21 August 2012	21 September 2012	31
30 September 2012	26 November 2012	13 February 2013	79
31 October 2012	21 November 2012	17 December 2012	26
31 December 2012	28 February 2013	14 May 2013	75
31 January 2013	21 February 2013	26 March 2013	33
28 February 2013	21 March 2013	25 March 2013	4
31 March 2013	27 May 2013	1 July 2013	35
30 April 2013	21 May 2013	28 June 2013	38
31 May 2013	21 June 2013	28 June 2013	7
30 June 2013	26 August 2013	1 August 2014	340
31 July 2013	21 August 2013	21 October 2013	61
31 August 2013	23 September 2013	18 October 2013	25
30 September 2013	25 November 2013	1 July 2014	218
31 October 2013	21 November 2013	15 January 2014	55
30 November 2013	23 December 2013	6 January 2014	14
31 December 2013	28 February 2014	1 July 2014	123
31 January 2014	21 February 2014	13 May 2014	81
28 February 2014	21 March 2014	13 May 2014	53
31 March 2014	26 May 2014	1 July 2014	36
31 May 2014	23 June 2014	1 July 2014	8
30 June 2014	25 August 2014	23 October 2014	59
31 July 2014	21 August 2014	24 September 2014	34
31 August 2014	22 September 2014	23 October 2014	31
30 September 2014	25 November 2014	27 November 2014	2
31 October 2014	21 November 2014	26 November 2014	5
30 November 2014	22 December 2014	3 March 2015	71
31 January 2015	23 February 2015	3 March 2015	8

THE EXTENT OF NON-COMPLIANCE WITH TAXATION LAWS

Peter Delis and Co

1. Mr N Rosenbaum of counsel, who appeared on behalf of Mr Delis and Delis Enterprises, conceded that the applicants did not dispute there had been instances of non-compliance with taxation laws by them.  Those failures to comply with taxation laws included failure to lodge income tax returns and business activity statements in a timely manner; and to pay tax liabilities and compulsory superannuation to employees of Delis enterprises. 

2. I had in evidence the Integrated Client Count – running balance account for Peter Delis and Co (the trading name of the accountancy practice conducted by Delis Enterprises) produced by the ATO  commencing on 1 April 2003.  On that date, the running account discloses a balance of $60,273.88 owing to the ATO.  Although a payment of $60,508.05 was made on 14 April 2003, by that date, the balance was $22,200.59.  While some payments were made by Peter Delis and Co in the following two years, on 17 March 2005 the balance stood at $185,344.51.  The increasing debt to the ATO was mainly due to PAYG tax withheld and GST.  Also included was the imposition of a penalty for failure to lodge activity statements on time on six occasions.

3. In the next two year period, by 27 March 2007, Peter Delis and Co’s debt was reduced to $31,837.04.  A penalty for failure to lodge activity statements was imposed on eight occasions.  By 27 March 2009, the balance owing to the ATO had risen to $101,240.79.  Penalties for failure to lodge activity statements were issued on four occasions.  In the next two year period, up to 26 March 2011, although the debt owing fluctuated, it remained fairly consistently high being in the amount of $95,666.43 on that day.  A penalty was imposed on only two occasions.

4. The next two year period concluding on 26 March 2013 discloses a debt in the amount of $135,480.89 as at that date.  Penalties were incurred on 13 occasions during the period.  The final period for which I had information concluded on 13 March 2015.  The balance on that day was $372,415.34.  A penalty was imposed on four occasions.

5. On 31 July 2012 the Deputy Commission of Taxation served a Statutory Demand on Delis Enterprises claiming it owed the Deputy Commissioner $178,053.31.  The amount of the debt was required to be paid within 21 days of service.  The ATO officer responsible for issuing the Statutory Demand swore in an accompanying affidavit that the debt was due and payable by Delis Enterprises and that there was no genuine dispute about the existence or amount of the debt.  In fact, as Mr Rosenbaum submitted, Delis Enterprises made a payment of $50,000 on 9 August 2012; $50,000 on 22 August 2012; and a further payment of $79,000 on 29 August 2012.  Those payments reduced the balance in the running account to $77.10.  However, no further payments were made for about 11 months by which time the balance had risen to $191,304.70.  Mr Delis made a number of smaller payments in July 2013 which reduced the running balance to $148,520.71.  He again made a series of payments on 13 November 2013 bringing the balance back down to $139,760.91.

6. No further payments were made until 12 months later when there were two small payments of $2,000 each.  By that time, the balance had accumulated to $352,622.66.  As at 13 March 2015 the balance in the running account stood at $372,415.34 DR.

7. What the running balance account for Peter Delis and Co discloses is a steadily increasing debt owed to the ATO over the 12 year period.  It also discloses a consistent failure to lodge all activity statements on time.  When Mr Delis was asked in cross-examination for an explanation of the increasing debt owed to the ATO, he responded by saying that he could not give specific reasons but suggested that clients were not paying their bills.  The problem with this response and in particular the reference to clients not paying their bills is that it simply cannot be correct.  That is because Mr Delis agreed, in re-examination, that Peter Delis and Co accounted on a cash basis rather than an accruals basis.  That means that PAYG statements and GST returns were lodged on the basis that payment had in fact been received from clients.  Had Peter Delis and Co accounted on an accruals basis, his explanation may have been meaningful.  However, given that the returns throughout the entire 12 year period were lodged with the ATO on a cash basis, failure by clients of the firm to pay cannot have played any significant part in the accumulating debt.  Furthermore, in cross-examination Mr Delis agreed that he was making investments in properties at around this time, which is a more likely explanation.

1. In a letter dated 3 June 2013 the ATO informed Mr Delis that it had reviewed the decision to refuse the remission of general interest charge (GIC) in respect of the Delis Unit Trust but that the decision remained unchanged.  Significantly, the ATO’s reasons included the fact that the trustee’s payment history indicated poor compliance since it began reporting in 2000 to June 2013.  The period for which remission was sought was considered to be a continuation of the trustee’s poor compliance rather than due to the circumstances outlined by Mr Delis or his representatives.  I should point out that I did not have in evidence a number of letters which went between the trustee of the Delis Unit Trust and the ATO in 2012 and 2013.

2. In a letter dated 12 December 2013 the Secretary of the TPB wrote to Mr Delis in his capacity as director of Delis Enterprises notifying him of an investigation regarding its tax agent registration.  In particular, the Secretary stated that the allegation against Delis Enterprises was that it had failed to comply with the taxation laws in the conduct of its affairs (contrary to subsection 30-10(2) of the TASA).  In accordance with s. 30-10(14) of the TASA, the TPB requested and directed that Mr Delis notify the TPB by 3 January 2014 whether he admitted or contested the allegations set out in the letter.  Mr Anthony Chimonis, a solicitor who at that time acted for Mr Delis and Delis Enterprises, responded to that notice.  In fact Mr Chimonis first requested an extension of time to 31 January 2014 followed by a further request extending time to 1 March 2014 to be able to provide submissions and a defence to the allegations.  It appears that extension of time was granted.

3. Mr Chimonis finally delivered submissions regarding the allegations set out in the TPB letter of 12 December 2013 in an undated letter.  It appears from TPB documents that the letter was said to be dated 18 February 2014 although the copy in evidence is clearly undated.  It was attached to an email from Mr Chimonis sent on 18 February 2014 at 5.50 pm.  The reasons given by Mr Chimonis for Delis Enterprises’ failure to meet its tax liabilities included:

   ·the company had not yet entered into a payment arrangement as it was waiting for a determination to its requests to have penalties for failure to lodge returns and the general interest charge remitted;

   ·Delis Enterprises was owed substantial moneys from delinquent clients and Mr Chimonis was assisting Delis Enterprises in the recovery of those monies;

   ·Mr Delis had been suffering from severe health issues which caused him to be away from the practice because hospital visits resulted in him requiring two weeks recovery time and that in 2013 he had visited the hospital over 10 times so he had 20 weeks away from the office recovery time;

   ·Mr Delis had problems with his daughter who had been bullied at school; and

   ·Delis Enterprises’ cash flow was severely affected by the collapse of Great Southern Plantations in which it had invested because the liquidator was withholding dividends from investments for almost 2 years.

   Peter Delis

4. As the table above in [16] discloses, Mr Delis failed to lodge income tax returns by the due date for the income years 2009, 2010 and 2011.  In a letter dated 23 November 2010 the Commissioner notified Mr Delis that he had imposed a penalty for failure to lodge his 2009 income tax return by the due date.  In a letter dated 18 July 2011 the Commissioner notified Mr Delis of the imposition of a penalty for failure to lodge his 2010 income year by the due date.  The Commissioner also notified Mr Delis that he had incurred an administrative penalty for failure to lodge his income tax return for the 2011 income year by the due date.  In a statement issued by the ATO on 27 May 2015, Mr Delis was informed that his personal income tax liabilities as at 22 May 2015 were in the amount of $11,221.69.

5. The explanation given by Mr Delis for failure to lodge his income tax returns by the due date and failure to pay his personal income tax liabilities was:

   … due principally to my ongoing physical ill health and associated issues including but not limited to my absence from the accounting and tax agent practice owned and operated by the second applicant (the Delis Practice).

6. In his first witness statement Mr Delis said the tax practice was conducted by Peter Delis and Co in his absence by two of the employees of the practice, who were registered as tax agents, undertaking supervision responsibilities.  He also said that he reviewed work conducted at the practice while convalescing, either in hospital or at home.  He said he was available by telephone to supervise and guide employees.  However, other than the evidence given by Mr Delis regarding his illness which he described as cellulitis, I had no other medical evidence (excluding Dr Klonis’ report) of his hospitalisation or the degree of incapacity he said was caused by his cellulitis.  In fact Dr Klonis appears to have relied solely on what he was told by Mr Delis and there was no objective evidence put before me regarding Mr Delis’ illness.

   Failure to make superannuation payments  

7. As is clear from the table set out at [16], Delis Enterprises has failed to meet its superannuation guarantee obligations between July 2010 and December 2013.  Not only had it failed to lodge completed superannuation guarantee statements, but it had failed to pay its employees their legally entitled superannuation contributions.  As at January 2015, the outstanding superannuation guarantee liabilities totalled $28,946.47.

8. On 21 May 2014 the ATO notified Mr Delis that it had completed an audit of his superannuation guarantee obligation (in his capacity as the Director of Delis Enterprises, the trustee for the Delis Unit Trust).  The ATO audited eight quarters between 1 July 2011 and 30 June 2013.  It amended the previous superannuation guarantee charge assessments indicating that amended assessments would follow.  Although the ATO noted that Mr Delis had failed to lodge superannuation guarantee statements on time, after considering the facts relevant to his personal circumstances, it exercised its discretion to not issue an administrative penalty.

9. On 11 August 2014 the ATO notified Delis Enterprises that it had provided the trustee with default assessments for failure to lodge its superannuation guarantee statements for the quarters ended 31 December 2010, 31 March 2011 and 30 June 2011.  Furthermore, on 13 August 2014, the ATO sent notices to Delis Enterprises requesting payment of the superannuation guarantee charge for the quarters ending 30 September 2010, 31 December 2010, 30 June 2011 and 31 December 2013.  The ATO also assessed Delis Enterprises to pay an additional superannuation guarantee charge in each of those quarters for failure to lodge a superannuation guarantee statement by the due date.

10. On 14 August 2014 the ATO issued a demand for payment to Delis Enterprises in the amount of $43,340.78 in respect of outstanding superannuation guarantee amounts.  That demand stated that failure to respond by 4 September 2014 would result in recovery action being commenced against the trustee.  It appears that Mr Delis responded to the demand on 8 October 2014 with a payment of $40,000.  Despite that payment, the balance of the superannuation guarantee employer account remained at $36,498.09 DR.

11. On 13 October 2014 the ATO provided to Mr Delis two further letters attaching a notice of his liability to pay a penalty for Delis Enterprises’ failure to make superannuation guarantee payments when due.

    Pinia Holdings’ tax debts

12. Pinia Holdings is the trustee of the Pinia Investment Trust.  Effectively, that trust is controlled by Mr Delis.  Attached to the Statement of Facts, Issues and Contentions of the TPB was the running balance account produced by the ATO in respect of the Pinia Investment Trust.  Although it is correct to say, as does Mr Delis in his first witness statement (paragraph 37) that a request made by Mr Chimonis regarding the remission of GIC and penalty for failure to lodge returns (FTL) was granted by the ATO, the running balance account tells a significant story.  As at 28 February 2008, the statement opening balance was $0.  On 19 June 2015 the balance stood at $53,123.01DR (allowing for remissions of GIC and FTL).  The total amount paid in tax over that period was $9,423.50.  In fact no tax has been paid on that account since 18 June 2010.

13. Attached to Mr Delis’ witness statement was a letter dated 24 October 2012 addressed to the Deputy Commission of Taxation.  This letter appears to have been written by Mr Arthur Athanasiou, a lawyer from the firm Thomsons Lawyers, regarding an application for remission of the general interest charge in respect of the Pinia Investment Trust.  The trustee of that trust is Pinia Holdings and Mr Delis is its director.  As with Delis Enterprises, the Pinia Investment Trust had also failed to lodge tax documents on time and had not paid tax.  Mr Athanasiou set out what he described were events which hindered the taxpayer to deal with its payment and lodgment obligations in a timely manner.  They were:

    ·Mr Delis had an operation for severe sleep apnoea in late 2007 and in February 2008 was still in the process of recovering;

    ·Mr Delis was required to have regular check-ups and commit to regular medical appointments resulting in numerous absences from the accountancy practice throughout 2008;

    ·in late November 2008 Mr Delis was admitted to hospital due to a venomous spider bite which almost resulted in the loss of his left leg and necessitated a hospital stay and recovery as well as a five-week absence from the accountancy practice;

    ·in February 2009 a Receiver was appointed over the file of a previous client legal practitioner allegedly involved in fraudulent activity which required Mr Delis to obtain legal assistance at a cost of approximately $5,000;

    ·in July 2009, following the collapse of Great Southern Ltd, Mr Delis was requested by ASIC to partake in an internal review of client files and an oral examination which consumed some 220 hours of his work time and the considerable costs of engaging a barrister at approximately $10,000;

    ·in late June 2009 he was involved in a lengthy dispute with a previous client which cost him in excess of $60,000 in legal fees and weeks away from the accountancy practice;

    ·in about April 2011 Mr Delis’ youngest child is exposed to bullying at a primary school resulting again in considerable absence from the accountancy practice;

    ·in late November 2011 Mr Delis’ permanent medical condition (presumably cellulitis) reappeared resulting in an eight day stay in hospital and a further three weeks recovery; and

    ·Mr Delis was again hospitalised with his medical condition in February 2012 for a further four days and required to say at home for another two weeks.

14. Mr Athanasiou concluded by stating that medical and other records were available to substantiate the personal health issues Mr Delis has faced.  Presumably, those records remain in the possession or control of Mr Delis but not one single document was produced for the purposes of this hearing.  Given his extensive reliance upon his medical condition and resulting incapacity and unavailability to attend to the accounting practice personally, logically, I expected more than the bare statements made by Mr Delis regarding his illness.

    EXCULPATING CONSIDERATIONS

15. Mr Rosenbaum submitted that there were a number of reasons why Mr Delis’ failure to comply with taxation laws should be excused.  They included:

    (a)Mr Delis’ ill-health and family problems;

    (b)Mr Delis’ appointment of Mr Chimonis in May 2013 to negotiate and resolve all outstanding taxation liabilities;

    (c)the ATO’s decisions to remit significant penalties for failure to lodge returns within the prescribed time and also the general interest charge;

    (d)Mr Delis’ non-compliance with taxation laws was not deliberate and he was attempting, as best he could, to rectify that position;

    (e)the TPB investigation which was commenced on 12 December 2013  determined, on 22 April 2014, that the appropriate sanction for Delis Enterprises failing to comply with the taxation laws was to impose a written caution for breach of s. 30-10(2) of the Code;

    (f)financial hardship arising from clients being delinquent in paying their significant professional fees; and

    (g)the fact that Mr Delis and Delis Enterprises had entered into payment arrangements with the ATO to clear their respective tax and superannuation guarantee debts.

16. Some of these matters need further exploration.

    Ill-health and family problems

17. Mr Rosenbaum submitted that non-compliance with taxation laws by Mr Delis and Delis Enterprises was not due to deliberate or reckless disregard of the relevant taxation laws.  He explained that the instances of non-compliance were due to ongoing episodes of the ill health of Mr Delis which adversely affected his ability to comply with his various taxation obligations and those of Delis Enterprises. 

18. As far as his illness is concerned, I had almost no evidence about his medical condition save that Mr Delis, in his oral evidence, said that he suffered a spider bite about five or six years ago and developed cellulitis.  Also, attached to a witness statement provided by Mr Chimonis, was a brief letter dated 15 May 2015 from Dr Evangelos Klonis who described himself as an Emergency Physician from The Valley Private Hospital.  Dr Klonis said that Mr Delis was currently suffering from stress-related physical exhaustion which had a high risk of exacerbating or triggering his existing cellulitis and diabetes condition.  He requested that a strict recovery period of a minimum of 3 weeks be observed commencing on 15 May 2015.  At the time of hearing this matter, that period had plainly passed.  Furthermore, Mr Delis attended the hearing and gave oral evidence without any obvious ill effects.

19. Furthermore, the draft letter which appears to have been written by Mr Athanasiou refers to Mr Delis suffering from severe sleep apnoea commencing in late 2007.  This illness was not raised by Mr Delis in any of his evidence to the Tribunal.  Again, there were no documents before me which might support such a claim.

20. Although Mr Delis cited his cellulitis as being the cause of the difficulties he experienced in lodging returns, paying taxes and paying his employees compulsory superannuation, these difficulties arose well before Mr Delis said he acquired cellulitis.  In a letter dated 3 June 2013, the ATO, in response to a request by Mr Delis to remit the GIC, refused his request stating: the trustee’s payment history indicates poor compliance since it began reporting from 2000 to the present, including failing to comply with 13 payment arrangements.  The integrated client account which was in evidence supports that statement.

21. Similarly, the ATO wrote to Mr Chimonis on 18 September 2013 regarding its refusal to remit the GIC and FTL penalties.  It appears Mr Chimonis also relied on Mr Delis’ ongoing illness as one of the reasons why remission should have been granted.  Relevantly, the Senior Case Manager with ATO Complaints said:

    1.    You have acknowledged awareness that your client has had a poor compliance history since 2000.…

    2.    … Your client has had an outstanding balance on their account for a period in excess of 10 years and ongoing periods where activity statements have not been lodged by the due date.  There have been periods in excess of 12 months where no payments have been made and times when the debt has reached $180,000 or more.

    You [sic] clients [sic] behaviour of non-compliance was prevalent well before any of the “circumstances provided” existed.  It is therefore clear that the “circumstances provided” were not the reason for their non-compliance as they had established a pattern long before any of these issues.  Furthermore, their pattern of non-compliance continued during the existence of the “circumstances provided” and continues at the time of writing.  There appears to be no evidence to support your client’s genuine attempt to relieve the circumstances in which they have placed themselves.…

22. In a further responding letter which is undated but was sent to the TPB sometime after 12 December 2013, Mr Chimonis said that Mr Delis had been suffering from severe health issues amongst other things.  He then said:

    4. With every hospital visit it takes our client two weeks recovery time.  In 2013 for example our client visited the hospital over 10 times so he had 20 weeks away from the office recovery time.…

    …

    6.  We have evidence regarding Mr Delis’ health issues as well as the bullying of his daughter which we have been instructed to provide to you if you require same.

23. From what was said by Mr Chimonis, it appears that Mr Delis has evidence regarding his health issues but no such evidence was produced to the Tribunal on the hearing of this matter.  Given that Mr Delis was legally represented, and that the issue of his claimed ill-health resulted in incapacity to such an extent that he was unable to lodge returns by their due date and was unable to make payments of tax or superannuation payments to employees of the accountancy practice, it does not fall to the Tribunal to make enquiries regarding the presence or absence of such documents.  Given that the nature of a hearing on review is by way of hearing de novo, I would have expected Mr Delis to have produced all relevant medical records to the Tribunal at the hearing.  He did not.

24. I should also refer to Mr Delis’ evidence regarding the fact that one of the employees of the accountancy practice was also a registered tax agent.  According to Mr Delis, when he was absent from the practice the registered tax agent employee undertook supervision responsibilities.  In his further witness statement dated 12 August 2015 Mr Delis said that Delis Enterprises was the registered tax agent for himself, the Delis Unit Trust, the Delis Family Trust and the Pinia Investment Trust.  Given that the accountancy practice was responsible not only for the lodgement of Mr Delis’ income tax returns and those of Delis Enterprises in its capacity as trustee of the Delis Unit Trust, I would also have expected an explanation as to why the employees under the supervision of the registered tax agent could not have performed the duties in the absence of Mr Delis.  I had in evidence financial statements for the year ended 30 June 2013 in respect of the Delis Unit Trust.  Those documents clearly disclose that Peter Delis & Co prepared those statements.  No explanation was provided by Mr Delis as to why the accountancy practice could not have dealt satisfactorily with all of his and Delis Enterprises’ lodgement and tax payment responsibilities.  In fact in his witness statement Mr Delis said that even when he was away from the practice, he reviewed work from the accountancy practice while convalescing either in hospital or at home.  He also said he was available by telephone to supervise and guide its employees.

25. Given the vague and general nature of the evidence given by Mr Delis about his health; the absence of an explanation for the production of medical documents supporting this claim; the fact that the documentary evidence before me plainly discloses that the late lodgement of income tax returns and business activity statements and failure to remit GST and PAYG tax when due as well as the failure to make superannuation guarantee payments to employees was an issue well before any claimed ill-health problems arose; and the absence of an explanation for why the accountancy practice could not have dealt with the lodgement of documents by due dates, I find that little weight can be given to Mr Delis’ claims that ill-health was the cause of those problems.

    Appointment of Mr Chimonis to deal with the ATO regarding Remission of FTL penalties and GIC

1. Mr Rosenbaum submitted that it was significant that the ATO granted Mr Delis and Delis Enterprises remissions for a very significant portion of penalties imposed and also the GIC.  He also submitted it was significant that the ATO had not commenced legal proceedings for the recovery of unpaid tax.  Mr Rosenbaum submitted that arrangements to pay existing tax liabilities would only be considered by the ATO if outstanding income tax returns and/or business activity statements were lodged by the taxpayer.  According to Mr Rosenbaum, the fact that the ATO was prepared to enter into payment plans with Mr Delis regarding outstanding income tax and GST was a significantly positive statement about his good character.

2. Furthermore, when Mr Delis realised he was unable to cope with his tax obligations, he engaged the services of Mr Chimonis to assist.  Mr Rosenbaum submitted that the fact that Mr Delis took all of these measures in order to rectify the defaults which had arisen spoke of his good character and integrity.

3. The problem for Mr Delis is, as Mr Brown submitted, that what Mr Rosenbaum submitted regarding remission of penalties and GIC is overstated.  In any event, its relevance to the central issue, that is whether Mr Delis is a fit and proper person to be a registered tax agent, is doubtful.

4. An examination of the integrated client account running balance between 1 April 2003 and 13 March 2015 reveals that save for the remission of minor sums (less than $100), GIC and penalty was debited to that account without remission.  I also had in evidence a letter dated 3 June 2013 from the ATO to Mr Delis regarding his complaint said to have been made on 7 May 2013 regarding the ATO’s refusal to remit GIC on Delis Enterprises’ account.  In that letter, the ATO set out a number of reasons why the request had been refused including:

   ·Delis Enterprises’ payment history indicating poor compliance since it began reporting in 2000 including failure to comply with 13 payment arrangements;

   ·the period for which remission was sought was considered to be a continuation of Delis Enterprises’ poor compliance rather than due to the circumstances described by Mr Delis when seeking remission;

   ·some matters were considered to be within the control of Mr Delis and part of his normal business practice as an accountant including ASIC’s review of client files;

   ·failing to take appropriate steps to relieve the circumstances causing late payment; and

   ·failing to demonstrate that the delay in lodgement and payment occurred due to circumstances beyond Delis Enterprises’ control and that it promptly took all reasonable steps to mitigate those circumstances.

5. The evidence indicates that Delis Enterprises has a long history of entering into payment arrangements with the ATO, almost all of which resulted in default or cancellation.  A Payment Arrangement History provided by the ATO discloses 14 standard payment arrangements and 7 other payment arrangements made by Delis Enterprises between 3 September 2003 and 26 May 2015.  Fifteen of those arrangements resulted in default; five were cancelled and the most recent of those was active.  Delis Enterprises also entered into two interim arrangements, on 17 November 2014 and 10 December 2014.  The first was cancelled and the second ended in default.

6. Mr Delis also entered into a payment arrangement with the ATO on 13 November 2012 but that was cancelled on 28 February 2013.  He entered into a further standard arrangement on 11 June 2015 and that remains active.

7. In his witness statement Mr Chimonis referred to the ATO granting Mr Delis’ request regarding the remission of penalties and GIC for the Pinia Investment Trust as a consequence of the letter drafted by Mr Athanasiou which is dated 24 October 2012.  I did not have any evidence of the ATO granting that request despite Mr Chimonis stating it was attached to the applicant’s Statement of Facts and Contentions.  Nevertheless, attached to the TPB Statement of Facts Issues and Contentions was a copy of the integrated client account for the Pinia Investment Trust between 28 February 2008 and 19 June 2015.  From that account, it appears that remissions for FTL and GIC were granted for the period ending 28 February 2011 through to the period ending 27 April 2013.  Except for two small amounts of GIC after that date, there is no evidence of any further remissions.

8. Mr Chimonis again wrote to ATO Complaints and on 18 September 2013 received a reply.  This complaint appeared to be solely in respect of Delis Enterprises.  The ATO responded by stating: In reviewing the facts of this case it was determined that there was no basis for any remission of GIC or FTL penalties.  In fact the ATO pointed out that since the lodgement of Delis Enterprises’ original request for remission on 7 May 2013, the amount of the outstanding debt had escalated and that Delis Enterprises remained non-compliant.  Furthermore, the ATO stated there was no evidence from Delis Enterprises’ behaviour suggesting it was likely to alter the manner in which it attended to its obligations.

9. Although Mr Chimonis in his witness statement referred to regular communications with an officer of the ATO regarding the payment and lodgement of superannuation guarantee statements, in his oral evidence he said that he had not kept notes of those discussions.  I do not place any weight on the evidence given by Mr Chimonis regarding those conversations.  The same comment applies to telephone discussions Mr Chimonis said he had with other ATO officers for which there was no apparent record.

10. Mr Chimonis In his witness statement said, of discussions he had with the ATO about the superannuation guarantee obligations of Delis Enterprises that: No such legal action has ever been taken by the ATO.  When asked about this in cross-examination, Mr Chimonis said he did not know whether such action had been taken in the period before he commenced to assist Mr Delis with his tax affairs.  He assumed that was the case.  The problem with the evidence given by Mr Chimonis in his written statement and oral evidence is that he tended to over-generalise matters about which he did not have specific information.  

11. On 4 March 2011 the ATO notified Delis Enterprises of intended legal action/garnishee proceedings for failure to pay an amount of $95,007.24 outstanding on its account at that time.  A further warning of intended recovery action was issued by the ATO to Delis Enterprises on 17 October 2011.  At that time, the outstanding balance on its accounts was $137,209.28.  Although it appears some payments were made, on 7 February 2012, a further warning of intended recovery action was issued to Delis Enterprises.  The ATO issued to Mr Delis a director penalty notice on 1 May 2012 on the ground that he was a director of Delis Enterprises which had failed to pay PAYG withholding liabilities. 

12. On 31 July 2012 the ATO issued a Creditor’s Statutory Demand for Payment of Debt to Delis Enterprises. A Statutory Demand is issued pursuant to s. 459E of the Corporations Act 2001 and failure to comply with the demand or to apply to a court seeking to have the demand set aside results in winding up action commencing.  It is a precursor to a court proceeding for winding up the company (ss 459P and 459Q).  As it turned out, the service of that Statutory Demand resulted in some payments being made and hence a winding up application was not brought at that time.  Similarly, on 14 August 2014 the ATO issued a Payment Demand on Delis Enterprises for the payment of superannuation guarantee payments outstanding.  The letter stated that if a response was not received by 4 September 2014, recovery action would be brought by the ATO including legal proceedings or recovery of the full amount from bank accounts or other income sources.

13. Although Mr Delis relied on the fact that a new payment arrangement had been entered into with the ATO, even if Mr Delis were to comply fully with that arrangement, it would not assist his case.  The history of his personal non-compliance and that of Delis Enterprises discloses a pattern of behaviour which is most likely to continue into the future.

    Issue of caution by TPB

14. Mr Rosenbaum submitted that while it is important that registered tax agents comply with the taxation laws, where a tax agent seeking reregistration has not complied with its obligations regarding lodgments or payment in a timely manner, reregistration under the TASA ought not be used in a punitive fashion so as to deny reregistration to a taxpayer who has defaulted.  If penalties were to be enforced against such a taxpayer, that would occur under the relevant taxation legislation and the TASA should not be used in that fashion.  Mr Rosenbaum submitted that is what in fact has occurred in this case.

15. By letter dated 12 December 2013 the TPB notified Mr Delis that Delis Enterprises was to be the subject of an investigation regarding its tax agent registration.  In that letter, the Secretary of the TPB cautioned that if there was no response to that notice by the Director (Mr Delis), an allegation that he had failed to comply with taxation laws in the conduct of his personal affairs would be referred to the Board’s Conduct Committee.  Failure to comply with the taxation laws in the conduct of a registered tax agent’s affairs constitutes a breach of the Code of Professional Conduct (the Code) set out in the TASA
    (s. 30-10(2)).

16. Following a request by Mr Chimonis that Mr Delis be given an extension of time to respond to TPB’s letter of 12 December 2013, although first denying that request, the TPB subsequently granted an extension to 31 January 2014.  A further extension to 18 February 2014 was subsequently granted.  Mr Chimonis’ submissions were received by email on 18 February 2014.  The TPB notified Mr Chimonis that the information provided on behalf of Mr Delis would be included in a submission going to the Board Conduct Committee for consideration.

17. The Board Conduct Committee met on 9 April 2014 and determined that, on the balance of probabilities, Delis Enterprises had breached s. 30-10(2) of the Code by failing to comply with the taxation laws in the conduct of its own affairs.  The sanctions which may be imposed under the TASA for breach of the Code include a written caution; orders requiring the tax agent to take one or more actions; suspension; and termination of registration (s. 30-15 – 30).  In this case, the TPB determined that an appropriate sanction would be to impose a written caution on Delis Enterprises.  Mr Rosenbaum submitted that the sanction imposed by the TPB was evidence that it was satisfied that Mr Delis and Delis Enterprises could remain registered as tax agents.  However, that is only part of what the decision statement says.  The Board Conduct Committee also said that the decision letter to Delis Enterprises should:

    (i)     direct the Company to bring its taxation affairs up to date; and

    (ii)    note that the Company’s lodgment and debt status with the ATO will be reviewed by the Board upon receipt of its renewal application and if they are not up to date this may reflect adversely on whether the Company meets the requirements for renewal of registration.

18. Plainly, the Board Conduct Committee was aware that the registration as a tax agent of Mr Delis and Delis Enterprises was due for renewal later that year.  In fact, the renewal date appears to be 1 August 2014.  As will become apparent presently, the Board Conduct Committee took into account the steps taken by Mr Delis and Delis Enterprises since the issue of a written caution to rectify their shortcomings in respect of lodgment of tax returns and payment of tax.  It formed one of the grounds upon which the Board made its decision.

19. Therefore, rather than being punished twice for the same conduct, the proper way of looking at the TPB action is to treat the written caution as a wake-up notice, allowing about four months to Mr Delis and Delis Enterprises to get their respective taxation matters back into order.  Furthermore, they were warned of the consequences upon renewal of registration were that not to be done.

    Failure to pay professional fees

20. One of the reasons frequently given by Mr Delis for inability to meet his personal and Delis Enterprises’ tax liabilities was that his and Delis Enterprises’ ability to make payments of outstanding tax liabilities always depended upon payment of professional fees by the clients of the accountancy practice.  According to Mr Delis, that accounted for why payments were in fact made, albeit well after they were due.  With respect to Mr Delis, as will become clear presently, the objective documentary evidence strongly suggests that this was not a reason for failure to make tax payments.

21. At my request, Mr Delis produced to the Tribunal the financial statements for the Delis Unit Trust for the year ended 30 June 2013.  Amongst those documents was a profit and loss statement which also set out the position in 2012.  That statement discloses that the trust had a net profit from ordinary activities before income tax of $522,784 in 2012 and $479,036 in 2013 from professional fees of $1,196,691 and $1,201,338 respectively.  While ordinarily these accounts would be prepared on an accruals basis, if that were the case, one would expect to see in the Balance Sheet, a current asset described as Receivables.  While the Delis Unit Trust Balance Sheet appears to have two non-current asset accounts described as Receivables, they are both loan accounts.  There is no current asset account described as Receivables.  Therefore, logically, in its Profit and Loss Statement under the heading Income, the professional fees described therein must be fees in fact paid and not fees which are yet to be paid.  Were it otherwise, accounting practice requires income or revenue accounts to be credited with income in fact received or to be received during an accounting period, with a corresponding debit in a bank account when moneys have been paid or a debit in an asset account indicating an asset to the extent to which payment is yet to be received.

22. Also, the notes attached to the financial statements include the following in relation to GST:

    Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office.  In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.  Receivables and payables in the balance sheet are shown inclusive of GST.

23. That means if the accountancy practice retained the GST component of fees paid by its clients instead of remitting those sums to the ATO as it was required to do, it had significantly more cash for its own use or for whatever other uses Mr Delis chose to apply the moneys.

24. The significance of the revenue figures from professional fees is amplified when understood in the light of Mr Delis’ evidence that the accountancy practice accounted on a cash basis rather than an accruals basis for GST purposes.  By and large, the tax debt accrued by Delis Enterprises arose from the provision of its services provided to clients of the accountancy practice.  Accounts rendered to clients of the accountancy practice must have included GST.  Because it accounted on a cash basis for GST, logically, its GST returns would only have been submitted on the basis of actual payment having been made by clients.  Therefore, clients for whom the accountancy practice had completed work but who had not paid their account would not have been included in those returns.  It follows that it cannot be correct, as Mr Delis said, that inability to pay its taxation liabilities occurred due to clients of the accountancy practice not paying their accounts.

25. The fact that the accountancy practice appears to account on a cash basis also makes a significant statement regarding the shortfall in the employer’s superannuation guarantee payments which were in arrears.  The net profit figures to which I have referred above take into account employees’ wages.  If accounting on an accruals basis, one would also have expected that figure to have included the superannuation guarantee which was payable by the employer to each of its employees over those periods.  It plainly does not.  Furthermore, those payments were said not to have been made to its employees because the accountancy practice did not have the money to pay them.  It simply appears that Mr Delis preferred to use what are described as the net profits in its accounts for other purposes.  The same applies to the Delis Enterprises tax liability.  Cash was plainly available to meet those liabilities, but Mr Delis, as its sole director, delayed making those payments to his and the company’s advantage.

26. In accordance with my request, Mr Delis also produced the financial statements for the Delis Family Trust for the year ended 30 June 2012.  The profit and loss statement for that trust records a distribution from the Delis Unit trust in the amount of $432,845.  That is, almost its entire net profit before tax.  In its balance sheet, the Delis Unit Trust discloses a financial liability for the 2012 income year being a loan to the Delis Family Trust in the amount of $449,054.  Logically, one would expect to see an asset recorded in the Delis Family Trust to that amount for the 2012 income year.  No such financial asset is recorded.  At the same time, the Delis Family Trust records as a financial liability a loan to the Delis Unit trust in the amount of $300,935.95.  There are two beneficiary loans recorded as Receivables being loans made to Mr Delis and Kelly Delis.  In total, they amount to $423,842.49.  Just why beneficiary loans are recorded as receivables is unclear.  The term receivable in accounting terminology is usually reserved for when using the accruals accounting methodology in respect of operating revenue.  The principal sum of loan is not a revenue or expense item.  It is either an asset or liability.

27. It is also clear that the majority of income derived by the Delis Family Trust results from a distribution by the Delis Unit Trust.  It has other income described as lease income and rents received, together responsible for $106,400.  In its balance sheet, it records property to the value of $359,705.66.  Plainly, the money for the purchase of that property appears to have come from the Delis Unit trust.  In addition to that, I have some concern about the Delis Family Trust current liabilities which record two Mercedes-Benz motor vehicles on hire purchase as well as a Honda CRV sport luxury vehicle on hire purchase.  There are some interest charges outstanding on those HP agreements and, curiously, there are four further beneficiary loans recorded under Financial Liabilities.  The total sum of current financial liabilities is recorded as $318,747.40.  Other than a small distribution from the Pinia Investment Trust, all of the Delis Family Trust liabilities appear to be funded by distributions from the Delis Unit trust and income from properties. 

28. Putting aside the confusion which arises from the accounts I have referred to above, what remains abundantly clear is that the accountancy practice had a substantial cash turnover in the 2012 and 2013 income years.  Despite that, Mr Delis claimed that he was unable to pay his tax liabilities as and when they fell due, nor was he able to make payments to the employees of the accountancy practice their superannuation guarantee entitlements.  The evidence does not support Mr Delis’ claim he was unable to make those payments.

    The significance of current repayment arrangements with the ATO

29. Mr Rosenbaum pointed to the fact that over the years, Mr Delis and Delis Enterprises had made a number of payments, amounting to many thousands of dollars towards discharging their tax liabilities.  So far as there remain outstanding debts, he submitted they were subject to payment arrangements put into place by agreement with the ATO.

1. However, Mr Delis, in a belated attempt to show that in his personal capacity and as a director of Delis Enterprises and Pinia Investment Holdings, was now compliant, after the conclusion of the hearing and certainly after both parties had concluded their cases, provided to the Tribunal evidence of primary tax payments and payment of the Superannuation Guarantee Charge liability.  I did not grant the applicant leave to lodge further evidentiary material following the conclusion of the hearing.  Nevertheless, I have mentioned those payments in these reasons for decision.  The purpose for doing so is to allow me to make the observation that Mr Delis’ pattern of behaviour has again been repeated.  When under significant pressure from the ATO and, subsequently, the TPB, at the risk of having legal proceedings brought for the recovery of debts owed to the ATO or the risk of losing his registration as a tax agent, Mr Delis is dragged reluctantly to the compliance table.  Absent such threats, there was no evidence that Mr Delis would have complied with his tax or superannuation guarantee obligations.  In fact more significantly, it also strongly suggests that without serious threats being made against his ability to earn an income as he has done in the past, he is unlikely to comply with taxation laws in the future.

2. In my opinion, the evidence discloses a pattern of behaviour by Mr Delis which is, understandably, of serious concern to the TPB.  Despite being warned, following the TPB’s investigation into the conduct of Delis Enterprises as a registered tax agent, and receiving a written caution which warned Mr Delis that failure to bring its lodgment and debt status up to date may adversely affect its (and as a consequence his) renewal of registration, that did not happen.  It was not until his and Delis Enterprises’ applications for renewal of registration were rejected and Mr Delis sought review by the Tribunal of those decisions that steps were taken to remedy the failures to lodge outstanding returns and pay outstanding tax.  That behaviour says much about Mr Delis’ integrity and character, none of which is good.  Although I have no doubt that Mr Delis has at all times been aware of his obligations to meet his taxation liabilities and lodgment requirements, he has not complied, not for reasons of ill health or lack of funds, but rather because he has preferred to make personal use of those monies to which he was not entitled.  In my opinion, the evidence plainly discloses a pattern of behaviour which is manipulative and self-serving.  These are not the characteristics of an individual who is of good fame, integrity and character.  I find that Mr Delis is not fit and proper person to be registered as a tax agent under the TASA.  It follows that because he is the sole director of Delis Enterprises, Delis Enterprises is not eligible to be registered as a tax agent.

   CONCLUSION

3. Following a TPB investigation into the conduct of Delis Enterprises, a corporate entity for which Mr Delis was responsible as its sole director, the TPB determined that Delis Enterprises had breached the Code of Professional Conduct which applied to registered tax agents.  After allowing Delis Enterprises to make submissions regarding its findings that Delis Enterprises had failed to comply with the taxation laws in the conduct of its affairs, in accordance with s. 30-15(2) of the TASA, it gave Delis Enterprises a written caution.  The decision letter from the TPB also noted that Delis Enterprises’ lodgment and debt status with the ATO would be reviewed upon receipt of its renewal of registration application and if those issues had not been resolved, that may reflect adversely on whether Delis Enterprises met the requirements for renewal of registration.

4. Despite being given a very clear warning about the consequences of failure to comply with the taxation laws, other than have Mr Chimonis attempt to negotiate with the ATO to have penalties and the GIC remitted, which in fact Mr Chimonis made clear could not occur until primary tax owing had been paid; and entering into a payment arrangement with the ATO which was almost immediately breached following failure to make the first instalment payment; little else happened.  Although it is true that Mr Delis proceeded to sell a property belonging to another corporate entity which he controlled in order to access sufficient funds to clear all of the ATO debts, that contract was only entered into on
   5 August 2015.  While it appears as though all of the tax debts owed by Mr Delis personally and entities which he controls may have been discharged at the time of writing these reasons for decision, as Mr Brown submitted, that does not go to the fitness and propriety of Mr Delis or Delis Enterprises to conduct the practice of a registered tax agent.  The discharge of those debts in the present circumstances is not evidence that Mr Delis’ pattern of behaviour has ceased.  It is not necessarily indicative of the fact that the behaviour, once the immediate threat has passed, will not once again be established.

5. The evidence before me clearly discloses a pattern of behaviour by Mr Delis regarding his dealings with the ATO over a period of some 14 years.  The reasons for non-payment of tax liabilities and superannuation guarantee payments to the employees of Delis Enterprises cannot be explained by his claimed ill-health or lack of funds from the accounting practice.  The accountancy practice Financial Statements disclose significant net profits before tax in the 2012 and 2013 income years.  Plainly, Mr Delis has preferred to use those monies to his own and his company’s advantage, disregarding his and the company’s obligations regarding monies which were effectively held on trust for others.  For those reasons, I have found that Mr Delis is not a fit and proper person to be registered as a tax agent.

6. I find that the decisions made by the TPB on 25 September 2014 refusing the renewal of registration of Mr Delis and Delis Enterprises as tax agents were the correct decisions.  I affirm both decisions. 

7. I am mindful of the effect this decision will have on the operation of the accounting practice. As I have explained above [4], the Tribunal made an order under s. 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) staying the operation and implementation of the decisions made by the TPB. That stay order is said to remain in effect until the applications are determined by the Tribunal or until further order. The Tribunal’s decision comes into operation on the date it is given unless the Tribunal specifies that the decision is not to come into operation until a later date (AAT Act

   
   

   s. 43(5A) and (5B)). However s. 43(5C) provides that where a stay order was in force immediately before the decision was given by the Tribunal on the review, unless the Tribunal otherwise orders, the operation or implementation of the Tribunal’s decision is stayed until either the end of the period within which a party to the proceeding before the Tribunal may appeal from the decision to the Federal Court of Australia or, if an appeal is brought, the appeal is determined.

105.    I certify that the preceding 104 (one hundred and four) paragraphs are a true copy of the reasons for the decision herein of Egon Fice, Senior Member

......[sgd]...............................................................

Associate

Dated 23 October 2015

Dates of hearing

12 and 13 August 2015

Counsel for the Applicant

Solicitor for the Applicant

Mr N Rosenbaum

Ms E Kavadas
Charlesworth Josem & Partners

Solicitor for the Respondent

Mr D Brown
Australian Government Solicitor