Elsawi and Tax Practitioners Board (Taxation)

[2020] AATA 998

Elsawi and Tax Practitioners Board (Taxation) [2020] AATA 998 (29 April 2020)

Division:TAXATION AND COMMERCIAL DIVISION

File Number:          2019/5669

Re:Mr Tarek Elsawi

APPLICANT

AndTax Practitioners Board

RESPONDENT

DECISION

Tribunal:Dr Keith Kendall, Member 

Date:29 April 2020

Place:Melbourne

The decision to terminate Mr Elsawi’s registration is affirmed, but the decision to prohibit him from applying for registration is varied so that he may seek registration after three years from the date of termination.

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

Member

Catchwords

TAXATION – Applicant’s registration as a tax agent terminated – Applicant prohibited from applying for registration for a period of four years – Applicant knowingly participated in lodgement of false business activity statements – Applicant made false and misleading statements to the Australian Taxation Office – fit and proper person – professional code of conduct – decision to terminate registration varied so that Applicant may seek registration after three years

Legislation

Tax Agent Services Act 2009

Taxation Administration Act 1953

Cases

Hill and Tax Practitioners Board [2020] AATA 678
Kishore and Tax Practitioners Board [2017] AATA 271
Ridden and Tax Practitioners Board [2020] AATA 422

REASONS FOR DECISION

Dr Keith Kendall, Member

29 April 2020

1. The Applicant in this matter, Mr Tarek Elsawi, was registered as a tax agent on 1 October 2009 and until at least 2016 practised as such without apparent incident.

2. In February 2019, Mr Elsawi was notified of the decision of the Respondent, the Tax Practitioners Board (the Board) to commence an investigation into Mr Elsawi’s conduct over the period 2016 to 2018. Further details of this conduct and the subsequent investigation are set out below, as are Mr Elsawi’s contentions. At this stage, it is sufficient to note that the Board, after conducting its investigation and considering Mr Elsawi’s submissions, concluded that Mr Elsawi had made a number of breaches of the Tax Agent Services Act 2009 (the TASA). Following this conclusion, the Board exercised its powers under the TASA to terminate Mr Elsawi’s registration and impose a further restriction in that Mr Elsawi could not apply for re-registration for four years from the date of effect of the termination. Mr Elsawi’s counsel described this further restriction as a “prohibition period”, I will adopt this language in the remainder of the reasons to describe this sanction.

3. On 5 September 2019, Mr Elsawi has applied to the Tribunal to review the Board’s decisions dated 22 August 2019 to terminate his registration and apply a prohibition period of four years.

4. At the outset, the Tribunal acknowledges the assistance that both counsel in this matter have provided. Both counsel provided detailed and comprehensive submissions, which the Tribunal has found to be of great assistance in conducting this review.

5. As set out below, the Board made 13 findings as a result of its investigation into Mr Elsawi’s practice. Of these, 11 were adverse to Mr Elsawi, while two were in his favour (and are not considered further).

6. Of the 11 adverse findings, Mr Elsawi concedes one, being the finding that he knowingly lodged false business activity statements (BAS) from 1 January 2016 to 30 September 2017 on behalf of his client, N Pty Ltd, without that client’s knowledge. This was for the purpose of obtaining goods and services tax (GST) refunds that were received into Mr Elsawi’s trust account and used for his own personal purposes.

7. To protect privacy, I have used abbreviations to refer to entities not a party to these proceedings throughout these reasons.

8. The evidence and arguments submitted are considered in proper detail below, particularly the reasoning leading to the final decision relating to the appropriate sanction. However, I regard it as appropriate to deal briefly with the matter of this conceded behaviour at the outset.

9. Mr Elsawi submitted in mitigation that he was facing severe financial pressure at the time, which motivated this behaviour. He contended that this was the only instance of such behaviour on his part (albeit conducted over a period of time), although the Board did present evidence of similar subsequent conduct, which was the primary focus of the hearing.

10. The Board submitted evidence and arguments that this particular breach (or, more correctly, series of breaches) was compounded by subsequent actions related to this breach (such as initial denials constituting false statements to the Australian Taxation Office (ATO)) and further breaches of a similar nature. Mr Elsawi contested those claims.

11. Even in the absence of these exacerbating circumstances, Mr Elsawi’s behaviour in respect of the conceded breach of the TASA is very concerning. Indeed, Mr Elsawi’s counsel opened with a concession that the Tribunal may “think why are we here?”.  As much as the answer to that particular question is apparent from the remaining ten contended findings from the Board, the serious nature of the conceded behaviour does merit that query.

12. A significant proportion of the hearing was dedicated to taking argument as to the appropriate sanction. Early in the hearing, counsel for Mr Elsawi correctly noted that the TASA provides for a range of sanctions, which are imposed at the discretion of the decision maker. Counsel also correctly noted that a breach of the TASA does not automatically lead to a decision to terminate the tax agent’s registration. Counsel acknowledged that while a caution and possibly an order for further education would be preferable, a suspension of Mr Elsawi’s registration would be more appropriate than a termination in the circumstances. It was also submitted that a suspension of four years would achieve the same practical effect as the Board’s sanction, being termination with a prohibition period of four years.

13. I have considered the implications of alternative sanctions, particularly suspension as opposed to termination, in greater detail below. This analysis was greatly aided by both counsel at the hearing.

14. In respect of this conceded behaviour, it was uncontested that one of the primary purposes of the TASA (derived from s 2-5) is protection of the public in the provision of tax agent services. In this regard, tax agents are entrusted with public confidence and recognised for their integral role in the integrity of the tax system.

15. It is undeniable that there is a spectrum of behaviour that breaches the TASA thereby meriting sanction. In other words, some breaches are more serious than others. This is reflected in the TASA providing for a range of sanctions, the imposition of which being at the discretion of the decision maker so that individual circumstances may be taken into account.

16. In this case, Mr Elsawi has conceded that he deliberately lodged false BASs for the purpose of generating GST refunds which he then used for his own purposes. As noted, this was done without the client’s knowledge. In other words, Mr Elsawi used his trusted position as his client’s tax agent to use that client’s information to procure a financial benefit for himself.

17. I note that Mr Elsawi submitted that he was under extreme financial distress at the time, most if not all of which was due to circumstances beyond his control. I also note that Mr Elsawi has ultimately repaid these funds.

18. Notwithstanding these mitigating circumstances, it is difficult to conceive of a breach of the TASA that would do more to undermine public confidence and the integrity of the tax system. Considering the purpose for which the TASA was established, using an entrusted position for one’s own financial benefit is a significant breach of that trust and goes to the heart of the system of regulation established under the TASA.

19. The implications of suspension as opposed to termination are considered further below. However, I respectfully disagree with counsel’s submission that a suspension of four years has the same practical effect as termination accompanied by a four year prohibition period. There are important practical, as well as, what I will refer to as signalling differences between these sanctions, not least of which relating to the latter is that termination may popularly be regarded as a more serious sanction than suspension (regardless of the term). It is important that the appropriate signals be conveyed when determining the appropriate sanction to apply to breaches.

20. Given the seriousness of the conceded breach, termination is the appropriate sanction in these circumstances. I note that this does not preclude Mr Elsawi from re-registering as a tax agent in the future; indeed, the provision for a prohibition period explicitly contemplates this eventuality.

21. I have not considered what prohibition period would be appropriate in the absence of the other evidence submitted by the parties. This is determined after having considered the remaining evidence of the contested matters and the parties’ arguments.

    THE REGULATORY SCHEME

22. The purpose of the TASA is set out in s 2-5 in the following terms:

    The object of this Act is to ensure that *tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct. This is to be achieved by (among other things):

    (a)  establishing a national Board to register tax agents, BAS agents and tax (financial) advisers; and

    (b)  introducing a *Code of Professional Conduct for *registered tax agents, BAS agents and tax (financial) advisers; and

    (c)  providing for sanctions to discipline registered tax agents, BAS agents and tax (financial) advisers.

23. Relevantly, the chapeau and paragraph (b) may be interpreted as broadly identifying a need to protect the public in its interaction with the tax system via tax agents, with the Code of Professional Conduct providing the content to the standards by which tax agents must abide for the public to be appropriately protected. Paragraph (c) provides for the means by which the Board (as the body entrusted with the administration of the TASA; see s 60-15(a)) may enforce these standards.

24. The centrepiece of the TASA is the Code of Professional Conduct, contained in s 30-10. That provision provides for 14 tenets by which tax agents registered under the TASA must abide in the following terms:

    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.

    (3)       If:

    (a)  you receive money or other property from or on behalf of a client; and

    (b)       you hold the money or other property on trust;

    you must account to your client for the money or other property.

    Independence

    (4)        You must act lawfully in the best interests of your client.

    (5)  You must have in place adequate arrangements for the management of conflicts of interest that may arise in relation to the activities that you undertake in the capacity of a *registered tax agent, BAS agent or tax (financial) adviser

    Confidentiality

    (6)  Unless you have a legal duty to do so, you must not disclose any information relating to a client's affairs to a third party without your client's permission.

    Competence

    (7)  You must ensure that a *tax agent service that you provide, or that is provided on your behalf, is provided competently.

    (8)  You must maintain knowledge and skills relevant to the *tax agent services that you provide.

    (9)  You must take reasonable care in ascertaining a client's state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or a thing you are doing on behalf of the client.

    (10)  You must take reasonable care to ensure that *taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client.

    Other responsibilities

    (11)You must not knowingly obstruct the proper administration of the *taxation laws.

    (12)  You must advise your client of the client's rights and obligations under the *taxation laws that are materially related to the *tax agent services you provide.

    (13)  You must maintain professional indemnity insurance that meets the Board's requirements.

    (14) You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.

25. Section 60-95 provides the Board with the power to investigate any conduct that may be in breach of the TASA. Subdivision 60-E governs the means by which the Board can conduct investigations, including requisite notice requirements that must be complied with both at the commencement of an investigation and of any decision reached (which are not at issue in this matter).

26. Having completed its investigation, s 60-125 requires that the Board make a decision, this may include a decision that no further action be taken.

27. The Board’s sanction powers are contained in Subdivision 30-B, which include suspension (s 30-25) and termination (s 30-30). In the event of a termination, s 40-25 allows the Board to impose a period of up to five years during which the tax agent may not apply for registration (the prohibition period).

    THE BOARD’S INVESTIGATION

28. In a letter dated 25 February 2019, the Board notified Mr Elsawi that it had commenced an investigation on that date into Mr Elsawi’s conduct that may have breached the TASA. This notice identified three provisions of the Code of Professional Conduct that may have been breached, as well as the requirement in s 20-5(1)(a) that Mr Elsawi be a fit and proper person to be registered as a tax agent.

29. In a letter dated 27 August 2019, the Board informed Mr Elsawi that, following its investigation, the Board decided that he had breached ss 30-10(1) and (2) of the Code of Professional Conduct in the TASA. The basis for these findings were represented in the Board’s arguments before the Tribunal and are set out below. As a consequence of these findings, the Board notified Mr Elsawi that it was exercising its power under  s 60-125(2)(b)(i) to impose a sanction under Subdivision 30-B, specifically that the Board would terminate his registration pursuant to s 30-30 with effect from 27 September 2019. Further, the Board notified Mr Elsawi that it was exercising its power under s 40-25 to impose a prohibition period of four years.

30. While concerns were raised as to whether Mr Elsawi was a fit and proper person as required under s 20-5(1)(a) of the TASA, no decision was made on this matter.

    MR ELSAWI’S CONDUCT

31. Mr Elsawi’s impugned conduct arises in relation to four clients.

    N Pty Ltd

32. As has been noted, Mr Elsawi made some significant admissions in respect of his behaviour involving this client. In brief, Mr Elsawi conceded that he knowingly lodged false BASs for the purpose of generating GST refunds, which he then received and used for his own purposes. Notwithstanding that these funds have been repaid, this in itself constitutes a serious breach of the TASA. In particular, this conceded behaviour represents a clear breach of the requirement in s 30-10(1) that a tax agent must act honestly and with integrity.

33. It is also worth noting that the discovery of this conduct arose when one of the false BASs was reviewed by the ATO. When contacted by the ATO, the principal of the client stated that he was unaware of the refunds that had been generated from that BAS and subsequent BASs (totalling $19,405). This triggered a review of the subsequent BASs and Mr Elsawi being confronted by the client. Mr Elsawi admitted to his conduct and repaid the funds to the client (the Board confirmed the repayment with the client). N Pty Ltd continued to retain Mr Elsawi’s services until Mr Elsawi was prevented from doing so by virtue of the Board subsequently terminating his registration.

34. Mr Elsawi did not contest this version of events. In mitigation, Mr Elsawi submitted that he was under financial stress at the time, which prompted his behaviour. This situation emanated from Mr Elsawi’s first attempt at undertaking his own practice, which failed after the departure of his initial business partner (noting that this is Mr Elsawi’s account, although the practice was incorporated). These problems persisted with the second (and present) incarnation of Mr Elsawi’s practice, notwithstanding his efforts at financial management.

35. At some issue at the hearing, though, was the extent of Mr Elsawi’s wrongdoing in this regard, which also reflects on the contested allegations in respect of his other conduct. In particular, the degree to which the deception perpetrated towards the ATO in its dealings with Mr Elsawi was in dispute.

36. During cross-examination, Mr Elsawi denied preparing (or dictating) the content of an authority provided by N Pty Ltd dated 3 March 2016. Mr Elsawi’s attention was then drawn to a similar authority provided by another client (IT Pty Ltd, being one of the other clients involved in Mr Elsawi’s impugned behaviour) dated 11 January 2017. Both authorities were formatted in a very similar fashion and used very similar language. Notwithstanding these similarities, Mr Elsawi denied being involved in their preparation. Counsel for the Board put to Mr Elsawi that these authorities were prepared after the ATO had begun its investigation into Mr Elsawi’s behaviour and backdated accordingly, which Mr Elsawi denied.

37. Counsel for the Board then brought to Mr Elsawi’s attention the four receipts signed by N Pty Ltd’s principal (dated 29 November 2017, 14 December 2017, 11 January 2018 and 27 December 2018) receipting the repayment of the GST refunds obtained from the false lodgements. These receipts also used similar formatting and language as those of the authorities referred to above. Mr Elsawi denied writing these receipts (which were signed by N Pty Ltd’s principal).

38. In later cross-examination, four further receipts signed by the principal of another client (Mr R, described below) were highlighted, which also used virtually identical formatting and language to that of the receipts described above. At this point in the cross-examination, Mr Elsawi continued to deny being involved in their preparation.

39. Counsel for the Board queried Mr Elsawi’s version of events in light of the ATO’s record of its communications with him, including an interview and phone calls. It was noted that during this correspondence (which commenced in late November 2017), Mr Elsawi had represented that he had based the BASs as lodged on information provided by N Pty Ltd, which was now conceded to be false. Mr Elsawi also conceded that at the time of that communication (27 November 2017), he had been hopeful of being able to “get away with the fraud” (as phrased by the Board’s counsel).

40. In particular, it was noted that this (now conceded to be false) representation was made on 27 November 2017, yet the first receipt of repayment relating to N Pty Ltd was dated 29 November 2017.

41. When asked about the source of the funds from which Mr Elsawi repaid N Pty Ltd, Mr Elsawi explained that the repayment was made in cash using funds paid by other clients for services who also paid in cash. Mr Elsawi stated that he received cash payments from a number of clients for services provided and he also provided refunds owing to clients in cash, where that was the client’s preference. The cash receipts were recorded in a spreadsheet submitted in evidence and are discussed further below (no evidence was produced for the general practice of providing cash payments to clients).

42. Notwithstanding Mr Elsawi’s denials, it is difficult to be satisfied that Mr Elsawi did not have some involvement in the preparation of the authorities and receipts that he was questioned about during cross-examination. I also accept that Mr Elsawi did attempt to mislead the ATO during his initial communications. That being said, it was not in dispute that Mr Elsawi had repaid N Pty Ltd and, in that important respect, the receipts are legitimate. The prospect that the authorities were backdated is of some concern. However, there is no further evidence to indicate that backdating was a result of the ATO’s investigation.

1. Consequently, I conclude based on the evidence presented that Mr Elsawi was involved in the preparation of those documents and most likely prepared them himself. I am not satisfied that backdating occurred, nor was there a prolonged attempt to mislead the ATO beyond the initial communication. The initial attempt to mislead is an exacerbating factor, but I note that this was short-lived and Mr Elsawi has subsequently admitted to his conduct. Despite the finding that Mr Elsawi was involved in the preparation of the documents, in light of my finding that no backdating occurred, this in itself does not constitute a matter going directly to any sanction. However, it does affect my view of his subsequent evidence negatively, the credibility of which is assessed in this light.

   IT Pty Ltd and S Pty Ltd

2. As the complaints associated with these clients overlap, it is convenient to consider these aspects together.

3. As noted above, Mr Elsawi had obtained an authority to act for IT Pty Ltd dated 11 January 2017. During cross-examination, counsel for the Board noted that this predated IT Pty Ltd’s registration, which occurred on 12 January 2017.

4. When queried about the legitimacy of this authority in light of the timing mismatch, Mr Elsawi stated that he may receive authority to act on behalf of a company before the company has been registered. When asked about the frequency of such an occurrence, Mr Elsawi said that it may have occurred once or twice but he could not name any other clients for whom this had occurred.

5. This matter is not the basis for any of the Board’s findings and, as such, potentially goes only to Mr Elsawi’s credibility. In the absence of any other evidence to support a contention that this action in itself was illegitimate, I do not regard this matter as negatively affecting Mr Elsawi’s credibility. Whilst this may not be strictly best practice from a legal standpoint, I note that the authority predates registration by a single day. The client in question was clearly a small business, which are frequently operated with a degree of informality and it is perfectly conceivable that a client may have made a decision to incorporate, including deciding on an available name, at the time of providing an authority to a representative but had not attended to the formalities of registration at that moment, but did so shortly after. I view this matter as neutral when assessing the remainder of Mr Elsawi’s evidence.

6. In relation to the findings that Mr Elsawi had breached s 30-10(1) of the TASA, IT Pty Ltd and S Pty Ltd related to two of those findings. In brief, these findings were that Mr Elsawi knowingly lodged false BASs for these clients to generate GST refunds for his own purposes. Mr Elsawi then knowingly made false and misleading statements to the ATO to the effect that he had paid these refunds to the clients when this had not taken place.

7. Mr Elsawi’s denied his involvement in any fraudulent activity in respect of these clients. His position was that he relied on information provided by the clients and the lodgements accurately reflected this information. Mr Elsawi submitted that any refunds he had received had been passed onto the clients as cash payments.

8. The Board’s brief position was that Mr Elsawi was a knowing participant in lodging BASs that were false. Mr Elsawi’s basic defence to this was that he lodged the BASs (subsequently proven to be false) based on information provided to him by the common principal of these two clients and that he did not knowingly participate in any such fraud.

9. The background to these two clients was that Mr Elsawi registered both (again with the authority to act for one predating that company’s incorporation by a short period) and both involved the participation in various guises, including as directors at various points, of third parties who shall be referred to as Mr J and Mr R.

10. Based on the evidence elicited during cross-examination and in the documents submitted, Mr R appears to have been the primary driving force behind both companies and Mr J had some involvement. During a critical period analysed below, Mr J purportedly acted as a conduit when Mr Elsawi was unable to contact Mr R while Mr R was overseas.

11. During an important part of the cross-examination, counsel for the Board drew Mr Elsawi’s attention to a statutory declaration prepared and signed by Mr R dated 8 March 2018, which states that he was uncontactable during a period in which he was in India (no dates were specified in this statutory declaration) and had arranged for Mr J to provide information and receipts to Mr Elsawi for the purpose of preparing and lodging BASs on behalf of S Pty Ltd.

12. Consistent with this statutory declaration, two emails were in evidence sent from Mr J to Mr Elsawi dated 1 April 2017 and 2 July 2017 in which information was provided for the preparation of the March 2017 and June 2017 BASs respectively (the companies evidently being on a quarterly lodgement program, which was not in issue).

13. Counsel for the Board put to Mr Elsawi that this was evidence that Mr R was out of Melbourne and uncontactable on these two dates, since the emails had been sent by Mr J consistent with the arrangement described in the statutory declaration. Mr Elsawi refused to concede this point under cross-examination, noting that the statutory declaration did not specify any dates.

14. Counsel for the Board then brought to Mr Elsawi’s attention an undated handwritten note with figures headed being for GST for the period ending 31 March 2017 for IT Pty Ltd. It was not in issue that these figures were the basis for the preparation of the BAS for the March 2017 Quarter for IT Pty Ltd.

15. Critically, this BAS was lodged on 3 April 2017.

16. Mr Elsawi gave evidence that he received this handwritten note from Mr R in person. Mr Elsawi agreed that this must have occurred at some point between 31 March 2017 (the end of the relevant quarter and before which the figures in the note could not have been known) and 3 April 2017 (the date the BAS was lodged).

17. Counsel for the Board then brought Mr Elsawi’s attention back to the statutory declaration and the emails from Mr J, noting that the first email dated 1 April must be the earliest point at which Mr R was uncontactable for which evidence is available, if the statutory declaration is to be believed. This is inconsistent with Mr Elsawi’s oral evidence that he received the handwritten note personally from Mr R some time between 31 March and  3 April 2017.

18. I do note that it is theoretically possible that Mr R may have provided the note late on 31 March 2017 (presumably once figures for that quarter had been finalised) and departed for India some time prior to 3pm on 1 April 2017 (the time at which the email from Mr J was sent on that date). No such claim was made by Mr Elsawi in his oral evidence, nor is there any evidence to suggest this to be the case, nor was any such submission made by Mr Elsawi’s counsel to that effect. Any such claim, in the absence of incontrovertible documentary evidence, would in any event stretch the bounds of credibility.

19. The importance of this exchange is that this evidence severely undermines Mr Elsawi’s credibility as a witness. His answers to questions in cross-examination were not illuminating in any sense; whenever confronted by a proposition, Mr Elsawi’s position was either to deny the proposition outright or state “not necessarily”. The latter particularly occurred when asked that Mr R must have been uncontactable on 1 April 2017 and 2 July 2017 based on Mr J’s emails and the statutory declaration. This response was maintained even when the connection was made with the handwritten note and the inconsistency made explicit.

20. Such responses belie an approach under cross-examination to refuse to make any admissions of substance. Whilst this is not illegitimate in itself, refusals to concede and, in particular, provide non-responsive or evasive answers when confronted with a demonstrable inconsistency, seriously call into question the veracity of other answers provided where the evidence may be less unequivocal.

21. It is also pertinent that the subject matter of the emails and the handwritten note were the figures used in the relevant BASs subsequently found to be false. As such, Mr Elsawi’s credibility has not been undermined on a peripheral topic. Rather, the questions of credibility arise from an interrogation into one of the central matters in issue, being Mr Elsawi’s knowledge and/or involvement in the lodgement of false BASs.

22. The other highly relevant component of the cross-examination focused on the other of the Board’s findings in relation to these two clients, being that the GST refunds generated by these false BASs had not in fact been passed on (or repaid) to the clients by Mr Elsawi.

23. It is important to note that the Board’s contention is that Mr Elsawi, as a knowing participant in this false activity, was acting in concert with Mr R and Mr J (which, of course, Mr Elsawi has consistently denied).

24. The only documentary evidence directly supporting Mr Elsawi’s submission that the funds had been repaid to the clients are the receipts referred to previously (mentioned in respect of N Pty Ltd), and a stamped and attested document prepared in India signed by Mr R stating that he had received these funds (dated either 12 or 24 September 2019). It was common ground at the hearing that this last document was to be treated as the equivalent of a statutory declaration made in an Australian jurisdiction.

25. When asked under cross-examination how the payment to these clients was effected, Mr Elsawi submitted that he had paid in cash, which explained the absence of any other formal documentary evidence such as bank transfers. As was noted earlier, Mr Elsawi explained that he had a number of clients who preferred to pay him for his services in cash and other clients who preferred to receive their tax refunds in cash. As such, he often used the cash receipts to pay these refunds without the cash receipts first being deposited into any bank account under his control. Mr Elsawi did concede when asked that this was not best practice.

26. Mr Elsawi referred to a spreadsheet (the same spreadsheet briefly referred to earlier) in which he submitted he recorded cash receipts. This spreadsheet had also been used during ATO interviews in respect of these matters.

27. The cash transactions were noted on the spreadsheet (which was a comprehensive record of all funds received, regardless of form) with a handwritten dash. Based on Mr Elsawi’s witness statement, these dashes were made after the relevant interview with the ATO (thereby constituting the amendments referred to in the quote from the witness statement below). In his written witness statement, Mr Elsawi stated the following (emphasis added):

    [102] … There are some handwritten amendments/mark-ups to this spreadsheet for the period 1 January 2017 to 27 September 2017 – where there is a “dash” next to a client’s name, this means that they paid me in cash. The total of the amounts paid by these clients during this period exceeds the amount paid to Mr [R]. There are also some handwritten calculations which show the cash received and the amounts refunded to Mr [R] during this period. These show that the amounts paid to Mr [R] were less than the cash receipts during this period.

    [103] Perhaps what should have been clarified by me during the interview is that I do not deposit all cash payments received by me from clients into a bank account. Therefore my bank statements may not show the amount of cash being withdrawn to pay Mr [R].

    [104] This amended spreadsheet supports my claim and my position during the interview that I used cash to pay Mr [R] the GST refunds.

    [105] For this reason, I do not believe that what I said to the ATO on 6 March 2018 was false and misleading.

28. Counsel for the Board highlighted [104] of the witness statement as the basis for the contention put to Mr Elsawi that Mr Elsawi’s position was that the cash receipts from other clients were the sole source of funds for the refunds paid to Mr R in respect of IT Pty Ltd and S Pty Ltd as recorded on the receipts. Whilst not referred to in argument, [102] serves to remove much of any potential ambiguity in the statement made in [104].

29. The receipts in question for these refunds are dated 8 April 2017 and 7 July 2017 (two for each date). Whilst the receipts do not refer to a particular client, Mr Elsawi explained in cross-examination that each of the two clients received a refund on each date and the receipts itemised the refund attributable to the relevant client (this explanation was not contested).

30. Whilst the handwritten notations for the period 1 January 2017 to 27 September 2017 do indicate that the cash receipts were sufficient to pay the amounts recorded as refunded to Mr R, counsel for the Board noted that the last payment made to Mr R was on 7 July 2017 (as per the date on the receipt). Consequently, any cash received after 7 July 2017 could not have contributed to any cash payment made on 7 July 2017. Once the post   7 July 2017 receipts are removed from the calculation, the cash receipts are insufficient to cover the payments recorded as having been made on 7 July 2017 (after allowing for the payments made on 8 April 2017). A similar observation was made that insufficient cash receipts had been received by 8 April 2017 to have made the payments recorded as having been made on that date.

31. When confronted with these observations, Mr Elsawi stated that he had drawn on previous cash reserves to make up the shortfalls. Counsel for the Board highlighted that this was the first mention of the use of any cash reserves to make these payments.

32. Mr Elsawi denied not having mentioned other cash reserves previously and identified other documents in evidence being two letters from his associates (both dated   8 November 2019) stating that the signatories had lent funds to Mr Elsawi to assist him with his financial difficulties arising from his failed first practice. Counsel for the Board (accurately) noted that these loans were not referred to in Mr Elsawi’s witness statement as a source of funds for the payments to Mr R and that both letters referenced only Mr Elsawi’s financial difficulties arising from his failed first practice. Consequently, counsel for the Board submitted that it could not be sustained that these loans were the source of cash used to pay Mr R. Mr Elsawi did not submit an explanation for this inconsistency.

33. Consistent with his evidence in relation to the receipts for payments made to N Pty Ltd discussed above (and noting that it is not in issue that the payments to N Pty Ltd were actually made), Mr Elsawi denied being involved in the preparation of the receipts for the payments to Mr R.

34. In response to further questions, Mr Elsawi gave evidence that he received the receipts on or about the dates shown on the receipts and that these were provided in person by Mr R. Counsel for the Board then highlighted that the first pair of these receipts, dated 8 April 2017, was a date on which, based on Mr R’s statutory declaration of 8 March 2018 and the emails from Mr J discussed above, Mr R was apparently in India and uncontactable. Mr Elsawi did not provide an explanation for this inconsistency and denied that his evidence was false.

35. Counsel for the Board put the proposition to Mr Elsawi that he had prepared the receipts himself after having been notified of the ATO’s investigation, which Mr Elsawi denied. Mr Elsawi continued to deny that he had given false evidence but did not provide any explanation for the inconsistencies in his evidence as highlighted by the Board’s counsel.

36. Given the inconsistencies in the documentary evidence, particularly in respect of Mr Elsawi’s claim that he received at least two of the receipts in person from Mr R on a date that other evidence indicates that Mr R was out of Australia and uncontactable, it is difficult to accept Mr Elsawi’s evidence in respect of this matter. As noted, I am attributing little weight to Mr Elsawi’s oral evidence as I do not find him to be a credible witness given the consistent lack of explanation provided when confronted with contradictory evidence.

37. The spreadsheet purporting to document the cash receipts is also insufficient to prove positively that the refunds were paid to Mr R in the manner submitted by Mr Elsawi. Without corroborating documents, I view such a spreadsheet with a degree of scepticism, although I do note that it purports to cover a much greater period than that in question for the purposes of this matter and, therefore, is unlikely to have been prepared solely to fabricate evidence for the purpose of this review. That being said, though, it is difficult to rely on such a document in the absence of other supporting evidence. If nothing else, this demonstrates the inherent dangers of dealing to such a large degree in cash that does not go through a bank account (which would automatically produce such corroborating documentary evidence).

38. However, the reliance to be placed on this spreadsheet as an accurate record of the source of funds used to make the payments in issue is further undermined by observations made by the Board’s counsel that the cash receipts recorded were insufficient to make the purported payments on the dates that the receipts record them as having been made. Even if the spreadsheet is regarded as a reliable document of the cash received from clients, the fact that the cash received as recorded was insufficient to fund the relevant payments at least undermines the credibility of the receipts recording payments purportedly made to Mr R.

39. Mr Elsawi’s credibility as a witness is further undermined by his explanation of using cash reserves to make up any shortfall. Mr Elsawi took a definitive position in his witness statement that it was these cash receipts that funded the payments purportedly made to Mr R. Mr Elsawi’s submission of using cash reserves is unsupported by other evidence and does represent a change of evidence under cross-examination, given the inconsistency with his witness statement as highlighted above.

40. In light of the inconsistencies in Mr Elsawi’s evidence, and the overall lack of credibility and, hence, weight that I attribute to Mr Elsawi’s oral evidence, I find on balance that the evidence supports the Board’s initial findings in respect of these matters. I am satisfied on the evidence that Mr Elsawi knowingly participated in lodging false BASs and then made false and misleading statements to the ATO by representing that he had paid the relevant refunds to IT Pty Ltd and S Pty Ltd when he had not done so. I also find that these actions constitute a breach of s 30-10(1) of the TASA.

    A Pty Ltd

41. The Board made a further five findings against Mr Elsawi in respect of his conduct in relation to a fourth client, referred to here as A Pty Ltd.

42. Similar to the other three clients, the first of these findings was that Mr Elsawi had knowingly lodged false BASs in order to obtain GST refunds to be used for his own purposes. Four further specific findings were made that Mr Elsawi had made false and misleading statements to the ATO and provided false documents to the ATO in the course of making these statements.

43. I note that no finding (nor allegation) was made that Mr Elsawi had not passed on the sought after refunds, in contrast with the other three clients. This was not raised at the hearing, however, an examination of the T-documents lodged by the Board includes a record of ATO investigatory actions which note that a fraud determination was made in this matter and the relevant refund stopped as a result (see T4-176).

44. The principal behind A Pty Ltd was Mr M, although, as discussed below, there was some dispute as to Mr M’s true identity. A Pty Ltd and Mr M were introduced to Mr Elsawi by Mr R. Mr M was the sole director of A Pty Ltd.

45. Mr Elsawi submitted that he was introduced to Mr M by Mr R at his office in person. At this meeting, Mr Elsawi stated that he was provided with a copy of Mr M’s driver’s licence to confirm Mr M’s identity. Mr Elsawi submitted that the photograph on the driver’s licence resembled the person introduced to him as Mr M and, therefore, he did not have any reason to question that person’s identity.

1. Mr Elsawi’s authority to act was subsequently provided via email dated 12 April 2017 signed off by Mr M but the email address identified the sender as a Mr H. When asked whether an email coming from apparently one person and signed off by another was unusual to the extent that it should have put Mr Elsawi on notice that further inquiries should have been made into Mr M and A Pty Ltd, Mr Elsawi stated that it was not unusual to that extent. Mr Elsawi conceded that it was unusual, but that it did occur from time to time and, therefore, did not suggest to him that there was anything suspicious about Mr M’s conduct.

2. Counsel for the Board then identified three hand written notes that were the source for the BASs originally lodged relating to the September and December 2016 Quarters and the March 2017 Quarter. When asked who provided these notes to him, Mr Elsawi stated that he could not recall who provided the documents to him, that it was either Mr R or Mr M, but that it was probably Mr R. In Mr Elsawi’s witness statement at [115], Mr Elsawi unqualifiedly states that the documents were provided by Mr R. There was some interrogation as to whether this oral evidence contradicted the witness statement, however I place no weight on any prospective inconsistency in this particular regard.

3. Of greater concern is that the basis for two of the findings is that Mr Elsawi made false and misleading statements to the ATO (on 19 May 2017 and 18 January 2018) that Mr M had provided documents in person to Mr Elsawi. The 19 May 2017 statement is recorded in an ATO phone log provided on T4-164 and the 18 January 2018 statement in an ATO phone log on T4-173. This is in direct contradiction to Mr Elsawi’s witness statement and what I accept as his oral evidence that the information was provided by Mr R. I also note that this representation was made somewhat generally according to the record of interview between Mr Elsawi and the ATO on 18 March 2018 (see T4-89).

4. It was also borne out in cross-examination that Mr Elsawi was mindful that Mr R did not have any role in A Pty Ltd, yet Mr Elsawi submitted that Mr R was the party who provided this initial information. Counsel for the Board asked Mr Elsawi whether this alone should have put Mr Elsawi on notice that further queries should have been made to ascertain the accuracy of the figures provided, to which Mr Elsawi responded “not necessarily” with no further elaboration.

5. There was some cross-examination on the extent of the inquiries Mr Elsawi conducted to ascertain the accuracy of the figures provided. In brief, Mr Elsawi did not conduct much in the way of such inquiry. The one exception arising from cross-examination was a claim for a GST credit that was characterised in cross-examination as an asset write-off (resulting in an input tax credit of $56,000). The specific queries put to Mr Elsawi in cross-examination were not especially useful as the questions conflated income tax and GST concepts (for example, one proposition was put that, as Mr R was not an accountant, it was not appropriate for Mr Elsawi, an accountant and tax agent, to rely on figures provided by Mr R regarding asset write offs since this involved “complicated accounting concepts including depreciation”; depreciation has no role in the GST system yet it is very important in the income tax system). However, there was some utility in this line of questioning as Mr Elsawi did not identify this conflation, which supports the impression that many of his answers were automatic and not considered.

6. Notwithstanding the inaccuracies in some of the questions, the cross-examination was effective in establishing that Mr Elsawi made minimal inquiries as to the veracity of the figures provided. This information was, consequently, used to prepare the BASs almost completely without question. This was despite the figures being provided by a party (Mr R) whom Mr Elsawi knew not to have any active part in the client’s business or operation.

7. Mr Elsawi was notified on 19 May 2017 via email (following on from the phone conversation with the ATO on that date referred to above) that the ATO was conducting an investigation into A Pty Ltd’s BASs (that had been lodged on the basis of the information in the handwritten notes). Mr Elsawi gave evidence that he did not recall informing Mr R about this eventuality at that time (no evidence was led to suggest that he did). On 1 June 2017, Mr Elsawi received an email from Mr H’s email address signed off by Mr M instructing Mr Elsawi to amend the BASs to nil amounts (the history to this email indicates that Mr Elsawi had written to this email address on 25 May 2017 informing Mr M of the ATO review). Mr Elsawi gave further evidence that he did not find the instruction to amend to nil amounts to be alarming.

8. Evidence in the T-documents (not referred to in cross-examination) indicates that the ATO conducted an investigation into A Pty Ltd. The ATO found that the real Mr M registered as the director of A Pty Ltd had never had any contact with Mr Elsawi and that A Pty Ltd had never, to his knowledge, been registered for GST or been required to lodge BASs as the company had never traded (see T4-120 and T4-176).

9. It was apparent from this evidence that the individual who had been introduced to                    Mr Elsawi was not Mr M, or at least not the Mr M who was the registered director of A Pty Ltd.

10. The totality of the evidence on the matters relating to A Pty Ltd, on the balance of probabilities, supports Mr Elsawi’s contention that he had a good faith belief, no matter how misguided, that the individual he had been introduced to (by Mr R) was Mr M who had authority to act on behalf of A Pty Ltd and that the emails signed off by Mr M indeed came from that individual, notwithstanding the different name on the source email address. This may be regarded as extreme naivety, especially in light of the contemporaneous dealings with Mr R in respect of IT Pty Ltd and S Pty Ltd, and Mr Elsawi’s conceded knowledge that Mr R had no active role in A Pty Ltd. However, I am not satisfied that this rises to the level of knowledge necessary to sustain the relevant findings against Mr Elsawi. I comment further on this matter below.

11. In light of this evidence, I am not satisfied to the requisite standard that Mr Elsawi knowingly engaged in lodging false BASs in relation to A Pty Ltd.

12. Further, the finding that Mr Elsawi provided documents on 12 April 2017 (being the email authority and handwritten GST information) that he had received from Mr M when in fact he had not received them from Mr M does not incorporate a representation that Mr Elsawi had actually received those documents in person. Consequently, the evidence does not support the specific finding against Mr Elsawi relating to the alleged false and misleading statement made on 12 April 2017 and Mr Elsawi did not breach s 30-10(1) of the TASA in this regard.

13. For similar reasons, I am satisfied on the evidence that Mr Elsawi was under the (albeit naïve) impression that he was in communication with Mr M with the email exchanges at the email address attributed to Mr H. Consequently, I am satisfied on the balance of probabilities that Mr Elsawi’s subsequent attempts to contact Mr M via these means as described in his statement on 6 March 2018 were genuine and, therefore, do not support the adverse finding against Mr Elsawi regarding his statement on that date. As such, this conduct does not breach s 30-10(1) of the TASA.

14. The statements made on 19 May 2017 and 18 January 2018 do incorporate an element that Mr Elsawi had received the relevant documents in person from Mr M. The evidence does not support Mr Elsawi’s statement in this regard and, in fact, Mr Elsawi has effectively conceded these points in his witness statement and oral evidence where he stated that he received these documents from Mr R. As such, I am satisfied that the evidence supports the findings that Mr Elsawi made false and misleading statements to the ATO on those dates and that this conduct does constitute a breach of s 30-10(1) of the TASA.

15. As an aside to these findings, whilst I have found Mr Elsawi’s conduct in some respects does not rise to the level to support two of the adverse findings in relation to s 30-10(1) of the TASA, Mr Elsawi’s behaviour may have breached other provisions of the Code of Professional Conduct. In particular, s 30-10(9) requires that a tax agent take reasonable care to ascertain a client’s state of affairs.

16. One of the effects of the TASA is that tax agents, by adhering to a Code of Professional Conduct, are to be held to a high standard of behaviour. This reflects the practical reality that the proper functioning of the tax system is dependent to a large extent on tax agents performing their function to an appropriately high standard. There are clear parallels with other professions that are similarly regulated, such as the legal profession. This is also reflected in s 2-5 of the TASA, discussed above, that is the basis for the observation that the overarching purpose of the TASA is to protect the public.

17. Mr Elsawi’s conduct in relation to A Pty Ltd, as established on the evidence submitted, falls well short of what may be expected of a tax agent, particularly in relation to the requirement that a tax agent take reasonable care to ascertain the client’s state of affairs. Mr Elsawi was cross examined to a significant degree on his failure to undertake appropriate inquiries and it was established that Mr Elsawi in effect was acting as a mere conduit of information in that he relied almost entirely on the information provided by Mr R and Mr M in questionable circumstances, given Mr R’s acknowledged lack of involvement in A Pty Ltd’s (apparent) operations and the mismatch between Mr M and the email address used to communicate information to Mr Elsawi. There was no evidence to suggest, nor did Mr Elsawi make submissions, that he had made any attempt to establish who Mr H was and why Mr M was using that email address.

18. That being said, the Board did not investigate nor make any findings in relation to any possible breaches of s 30-10(9) of the TASA. Nor was any proposition put to Mr Elsawi at the hearing that his conduct amounted to a breach of that provision. Consequently, as a matter of natural justice, I do not regard it as open to me to make a finding that Mr Elsawi’s conduct breached s 30-10(9) since Mr Elsawi has not had an opportunity to respond and make submissions to such a specific allegation.

    PERSONAL TAX AFFAIRS

19. In addition to the above findings, the Board as part of its investigation inquired into and found that Mr Elsawi breached s 30-10(2) of the TASA, which requires tax agents to comply with tax laws in their personal affairs. Two breaches were identified.

20. The basis for these two findings was that the ATO had issued two notices to Mr Elsawi under s 8AAZN of the Taxation Administration Act 1953 requiring amounts to be paid to the Commissioner of Taxation and that these amounts had not been paid by the due date. The amounts in question related to the false GST refunds generated separately by IT Pty Ltd and S Pty Ltd.

21. The Board also made brief written submissions that subsequent conduct not forming part of the investigation supported a finding that s 30-10(2) of the TASA had been breached. These related to outstanding lodgements as at 20 November 2019 in the form of one BAS, two income tax returns and one unclaimed superannuation money statement that related to entities under Mr Elsawi’s control (i.e. not any of his clients). With the exception of one income tax return, all documents were less than one month overdue as at 20 November 2019 and that income tax return had been due on 11 June 2019 (i.e. less than six months overdue). No evidence was led by either party as to whether these lodgements had been made at the time of the hearing (18 and 19 December 2019).

22. I am not inclined to find that Mr Elsawi has breached s 30-10(2) of the TASA on the evidence before me. There was a very brief reference to these alleged breaches at the hearing and nothing that added to what is in the written submissions.

23. As was correctly identified in Mr Elsawi’s written submissions, the notices in question contemplated the prospect of Mr Elsawi entering into a payment plan to discharge the relevant debts. The notices did require the debt to be paid by 6 June 2018 (having been issued on 4 May 2018) and Mr Elsawi did not respond until 20 June 2018, indicating that he intended to lodge an objection, which was not forthcoming.

24. Subsequently, on 4 July 2018, the ATO agreed to a payment plan with Mr Elsawi and the debts were discharged by 11 October 2018. All of this is in the Board’s written submissions and is uncontested.

25. In light of Mr Elsawi having discharged the debt in accordance with a formal payment plan agreed to by the ATO, the minor delays identified do not derogate from the overall conclusion that Mr Elsawi has ultimately complied with the notices. I regard an alternative finding as being an overly strict application of s 30-10(2) of the TASA and the delays identified are more appropriately dealt with through the imposition of the general interest charge.

26. In respect of the submissions on Mr Elsawi’s outstanding lodgements, I am also not inclined to find these rise to the level of a breach of s 30-10(2) of the TASA. As noted, all outstanding lodgements but one were overdue by less than one month as at the date nominated in the Board’s written submission and the remaining outstanding lodgement was overdue by less than six months. This hardly rises to a level of non-compliance that would merit a finding that s 30-10(2) has been breached, which carries significant professional reputational consequences as well as formal sanctions provided for under the TASA. Mr Elsawi’s non-compliance in this regard exposes him to late lodgement penalties available under the Taxation Administration Act 1953, which is a more appropriate sanction given the relatively minor nature of the delay.

27. Therefore, I conclude that Mr Elsawi has not breached s 30-10(2) of the TASA.

28. In the alternative, if I am in error and should have found as a matter of law that any or all of the above conduct constitutes a breach of s 30-10(2), I would have exercised the power under s 30-15(2)(a) to issue a written caution to Mr Elsawi with no further sanction to be applied.

    FIT AND PROPER PERSON

29. As was noted earlier, the Board in its investigation considered whether Mr Elsawi’s conduct had breached the ongoing requirement in s 20-5(1)(a) of the TASA that a tax agent be a fit and proper person, but did not make any findings on this issue.

30. The Board made written submissions that Mr Elsawi’s conduct subsequent to the Board’s decisions following the investigation demonstrated that he was not a fit and proper person and invited the Tribunal to make a finding to that effect. This was in addition to the behaviour that was the subject of the Board’s investigation and considered at length in these reasons. The subsequent behaviour essentially can be summarised as irregularities in the transfer of clients to another tax agent and misleading representations relating to those transfers in that the clients were initially transferred to an entity that was, at that time, under Mr Elsawi’s control. This was subsequently rectified.

31. I propose to deal with this matter briefly as the outcome does not affect the sanction that I have decided to apply.

32. At the outset of the hearing, both counsel made well-reasoned and cogent arguments as to whether the Tribunal has jurisdiction to impose a sanction on material over and above that considered by the Board. Having reviewed the authorities cited, I find that the Tribunal, subject to procedural fairness requirements, does have jurisdiction to impose a sanction on this basis, however, in this case, I am not inclined to do so.

33. Little additional evidence was provided in relation to this subsequent conduct and it was not the subject of cross-examination. Based on the evidence cited in the Board’s written submissions, and in the absence of further evidence and argument, I am not inclined to regard Mr Elsawi’s subsequent conduct as a continuation of any dishonest conduct that would constitute him not satisfying the requirement of s 20-5(1)(a) of the TASA. Rather, I am inclined to view this as further evidence of Mr Elsawi’s unfortunate lax, but not necessarily dishonest, business practices typified by his conduct described above in relation to A Pty Ltd (and also his handling of cash receipts and payments vis-à-vis clients).

34. I am also disinclined to make a finding that s 20-5(1)(a) of the TASA has been breached based on the conduct that was the subject of the Board’s investigation. The Board explicitly considered s 20-5(1)(a) and declined to make a finding on that matter. I am not inclined to go further than the Board in this instance, especially when the Board had the opportunity to make such a finding.

35. A more appropriate treatment of this material, in these circumstances, is for the Board to consider it in light of the s 20-5(1)(a) requirement if and when Mr Elsawi should apply to become a tax agent upon the expiration of the prohibition period as part of the sanction I have applied.

    SANCTION

36. Having found that Mr Elsawi has breached s 30-10(1) of the TASA, the question arises as to the appropriate sanction to apply from those available under the TASA. These are identified in s 30-15 and elaborated upon in other provisions.

37. One of the concerns that Mr Elsawi’s counsel raised at the outset of the hearing was the lack of reasoning disclosed in the Board’s decision as to what sanction to impose. This is distinct from the findings that the TASA had been breached. Mr Elsawi’s counsel characterised the Board’s record of decision as leaping straight from a finding that the TASA had been breached to the sanction that was to be applied, without any elucidation of the considerations taken into account leading to the sanction identified. Without commenting either way on the Board’s decision record, my aim in the following paragraphs is to assuage Mr Elsawi’s concerns that insufficient thought has been given to this matter as part of this review.

38. Some significant time was dedicated at the hearing receiving arguments as to the appropriate sanction from both counsel. As with all other submissions made during the course of this matter, these submissions are very well reasoned with supporting authority and have assisted me greatly in reaching my decision.

39. Whilst not one of the authorities cited by either counsel, the relevant principles are usefully summarised by DP Frost in Kishore and Tax Practitioners Board [2017] AATA 271 at [19] and recently applied by DP McCabe in Ridden and Tax Practitioners Board [2020] AATA 422 at [23]:

    In deciding on the appropriate sanction, a decision-maker should take into account the following:

    ·the seriousness of the conduct warranting the sanction;

    ·the likelihood that the conduct will be repeated and the potential harm to the public if it is;

    ·the impact of a particular sanction on the individual (and especially where the sanction may inhibit or prevent the individual’s capacity to earn a living);

    ·the interest of the public in seeing appropriate sanctions applied;

    ·the extent to which the individual has acknowledged the breaches and the seriousness of them; and

    ·the extent to which the individual has demonstrated genuine contrition or remorse.

40. Consistent with DP McCabe, I agree with this approach (see Ridden at [24]).

41. The range of sanctions available under s 30-15 of the TASA covers written caution to termination. As noted earlier, where termination is applied, a period may be applied where the tax agent is prohibited from reapplying for registration under s 40-25.

42. As I noted at the outset of these reasons, Mr Elsawi’s conduct that he breached   s 30-10(1), as he conceded, is sufficiently serious as to merit termination on its own. Referring to the Kishore factors identified above, as well as the seriousness of the conduct warranting sanction itself, termination is appropriate considering the interest of the public in seeing appropriate sanctions applied. I also add to this that it is relevant that a public interest is served in indicating to other tax agents that may be inclined to engage in similar conduct (lodging deliberately false BASs for the purpose of generating refunds for the tax agent’s own purposes) the serious sanctions likely to be imposed. The public protection objective set out in s 2-5 is served by adopting this approach by providing a strong disincentive for tax agents to abuse their position of public trust in this manner.

1. Some submissions were made as to whether a period of suspension would be more appropriate than termination (with or without a prohibition period). I agree with the counsel for the Board’s submission that termination is, indeed, the more serious of these two alternatives. It may be argued (and I put this proposition to both counsel at the hearing) that a period of suspension may ultimately have a greater practical effect since the tax agent is unable to practice at all during that time, whereas termination without a prohibition period could, at least theoretically, see the tax agent successfully reapply for registration the day after the termination takes effect and be back practising sooner.

2. I do emphasise that this theoretical scenario is highly unlikely, as re-registration is within the Board’s power, who would need to be convinced that the tax agent then meets all the eligibility criteria for registration, which is an unlikely prospect in a short timeframe.

3. That being said, this observation is balanced against the legal position that once a period of suspension has been served, the tax agent automatically regains the ability to practice without the need to do anything further (subject, of course, to any further orders made in addition to the suspension). This is in contrast with the need to convince the Board in light of the circumstances that led to the termination that the tax agent meets the eligibility criteria for registration. While any decision by the Board not to grant registration is reviewable by the Tribunal, this does represent a significant hurdle for the tax agent to reacquire the ability to practice and is in sharp contrast with the position where that ability is reacquired after a finite period of time (as is the case with a suspension).

4. For that reason, I conclude that termination, with or without a prohibition period, is a more serious sanction than suspension.

5. Consistent with my earlier comments regarding Mr Elsawi’s conceded conduct representing one of the most serious forms of sanctionable conduct relevant to the practice of a tax agent, termination is the most appropriate sanction in these circumstances.

6. The remaining matter is to consider whether to apply a prohibition period. This was the subject of some dialogue between counsel and the Tribunal. In particular, I raised queries, specifically to the Board’s counsel, as to the purpose that a prohibition period would serve, especially in light of the Board’s ability to refuse to re-register Mr Elsawi once termination had taken effect.

7. The submissions made by the Board’s counsel were admirable, not for the least in that they may be colloquially regarded as questions without notice, but not particularly helpful for the exercise. Far from being a criticism of the Board’s counsel, I think this reflects the inherently subjective nature of this aspect of the sanction regime in the TASA.

8. The two points of substance that the Board’s counsel made were that any decision that the Board made not to re-register Mr Elsawi would be susceptible to Tribunal review and that the imposition of a prohibition period sends a stronger signal as to the serious nature of Mr Elsawi’s conduct breaching the TASA.

9. As much as I agree with and accept these points, they are not particularly helpful in the exercise at hand, being the determination of the specific period (including no period) for which Mr Elsawi is prohibited from re-applying for registration. To the first of these, I have already commented that notwithstanding an applicant’s review rights, this still represents a significant hurdle to a tax agent reacquiring their registration. The second is an accurate observation, but does not provide any objective guidance as to the appropriate period that should be applied.

10. The concerns that I raised at the hearing have been subsequently echoed in the recent decision of SM Taylor SC in Hill and Tax Practitioners Board [2020] AATA 678 at [154] to [167]. Of particular note for the purposes at hand, SM Taylor SC made the following observations in this passage:

    [157] Although the five year period is the maximum period of disqualification for re-application, it does not follow that the period imposed in any particular case must be determined by some impressionistic grading of the particular circumstances comparative to some “worst case”. TASA s 40-25(1) confers a general (that is, a not explicitly circumscribed) discretion. That discretion is to be exercised with regard to the particular circumstances of the individual case, and the overall TASA objective.

    …

    [161] A less immediately obvious justification for determining a disqualification period is to underscore (to the individual agent, tax agents generally, and the public) the importance of adherence to appropriate standards. That possibility arises because of the wording of the two differently expressed termination powers contained in TASA s 30-30 (which operates as a sanction for an agent’s failure to comply with the Code of Professional Conduct) and TASA s 40-5 (which operates where an agent either ceases to meet a registration requirement, or has breached a registration condition). It is arguable that the determination discretion is intended to operate as an additional sanction for misconduct of the kinds contemplated in those two provisions.

11. Mr Elsawi’s established contravening conduct does not rise to the level meriting the maximum five year period (see DP McCabe’s comments in Ridden at [37]). In particular, the contravening conduct is limited to a finite period of time, which, while not minor as it crossed at least two years and may be regarded as extending into a third with the subsequent false and misleading statements made to the ATO, the conduct does not represent a sustained period of contravening behaviour over a prolonged period.

12. However, the affirmation of some of the Board’s findings that Mr Elsawi had breached                 s 30-10(1) in addition to the conceded breaches does merit the application of a prohibition period. The question is how long such a period should be applied.

13. Including the conceded breaches, I have found that Mr Elsawi did knowingly lodge multiple false BASs in relation to multiple clients. While the amounts that Mr Elsawi received were ultimately paid back, this is a relatively minor matter in mitigation and does not exonerate him. A ready parallel in this regard is the approach taken by the courts to solicitors who apply client monies held on trust for their own purposes and repay these amounts even before the breach of trust is detected.

14. I also do note that I have not sustained some of the Board’s adverse findings that led to the Board’s decision to apply a four year prohibition period. Whilst not an exact science, this would merit some reduction in the prohibition period.

15. After considering all the circumstances, I have concluded that a three year prohibition period is appropriate. This will also provide Mr Elsawi with the opportunity to undertake appropriate remedial action to demonstrate to the Board that he satisfies the eligibility criteria should he subsequently elect to seek re-registration. It also has the effect of signalling the seriousness of these breaches in the Tribunal’s view, with the concomitant deterrent effect.

    CONCLUSION

16. The decision to terminate Mr Elsawi’s registration is affirmed, but the decision to prohibit him from applying for registration is varied so that he may seek registration after three years from the date of termination.

I certify that the preceding 145 (one hundred and forty five) paragraphs are a true copy of the reasons for the decision herein of Dr Keith Kendall, Member.

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

Associate

Dated:            29 April 2020

Dates of hearing:	18 and 19 December 2019
Counsel for the Applicant:	Mr Piotr Klank
Solicitors for the Applicant:	Mr Amir Awad Xary Lawyers
Counsel for the Respondent:	Mr Kane Loxley
Solicitors for the Respondent:	Ms Lisa Chen Tax Practitioners Board