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

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).
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).
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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] AATA 820
Decision Date: 23 October 2015

CaseChat Overview and Summary

In this case, the Tax Practitioners Board (TPB) brought proceedings against Mr Delis and his corporate entities, Delis Enterprises and Pinia Holdings, to challenge their eligibility for renewal of registration as tax agents. The TPB argued that Mr Delis, as the sole director of these entities, was not a fit and proper person to hold such a registration due to his failure to comply with taxation laws and his lack of good fame, integrity, and character. The Tribunal was tasked with determining whether Mr Delis and his entities met the eligibility criteria for registration under the Tax Agent Services Act 2009 (TASA).

The central legal issue before the Tribunal was whether Mr Delis was a fit and proper person to be registered as a tax agent. This determination required a comprehensive assessment of Mr Delis's conduct and the operations of the entities he controlled, specifically Delis Enterprises and Pinia Holdings. The Tribunal had to consider whether Mr Delis's failure to remit compulsory superannuation payments to employees and his general non-compliance with taxation laws reflected poorly on his integrity and character, thereby disqualifying him from registration.

In reaching its decision, the Tribunal found that Mr Delis's conduct revealed a pattern of behaviour that was manipulative and self-serving. Despite being warned by the TPB about the potential consequences of his non-compliance, Mr Delis did not take adequate steps to address his outstanding tax liabilities until after his applications for renewal of registration were rejected. This behaviour indicated a lack of the good fame, integrity, and character required for registration under the TASA. Consequently, the Tribunal concluded that Mr Delis was not a fit and proper person to be registered as a tax agent, and by extension, Delis Enterprises and Pinia Holdings were also ineligible for registration due to Mr Delis's role as their sole director.

The Tribunal affirmed the TPB's decisions to reject the renewal of registration applications for Mr Delis and his entities. This decision underscores the importance of compliance with taxation laws and the high standards expected of individuals and entities seeking to provide tax agent services in Australia.

Orders

Orders of the court

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.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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 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. 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.

Ratio Decidendi

Legal Principle Established

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

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

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