Figueroa and Tax Agents' Board of Victoria

[2008] AATA 1043

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 1043

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/2156

GENERAL ADMINISTRATIVE  DIVISION		)
Re		HUGO FIGUEROA

Applicant

And TAX AGENTS' BOARD OF VICTORIA

Respondent

DECISION

Tribunal Mr BH Pascoe, Senior Member  

Date20 November 2008

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(sgd) BH Pascoe

Senior Member

TAX AGENTS – relevant employment – registration refused – not employed by registered tax agent – breaches of s 251L and s 251N

Income Tax Assessment Act 1936

Income Tax Regulations 1936

Re Cartelli and Tax Agents’ Board of Victoria [2008] AATA 135

Re Zarac and Tax Agents’ Board (2004) 56 ATR 1026

Tax Agents’ Board of Queensland v Seymour (1990) 21 FCR 357

REASONS FOR DECISION

20 November 2008 Mr BH Pascoe, Senior Member   

1.      This is an application to review a decision of the respondent Tax Agents’ Board of Victoria (the Board) of 2 May 2008 which refused to register the applicant, Mr H Figueroa, as a tax agent.

2.      At the hearing Mr Figueroa was unrepresented.  The respondent was represented by Mr R Niall of counsel.  Evidence was given by Mr Figueroa and Mr G Coyle, a registered tax agent.

3.      Mr Figueroa applied for registration as a tax agent on 6 March 2008.  In its decision to refuse registration, the Board found that he did not meet the prescribed relevant employment requirements.  It was noted that he had been employed by a registered tax agent for only 13 months within the five years prior to his application.

4. Section 251JA(1) of the Income Tax Assessment Act 1936 (the Act) requires the Board to register an applicant if the applicant satisfies the Board that he is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.  Section 251BC provides that a person is not such a fit and proper person if, among other things, that person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed.  Regulation 156 of the Income Tax Regulations 1936 prescribes the qualifications for the purposes of s 251BC.  Given the academic qualifications of Mr Figueroa, the relevant qualifications are contained in subregulation 156(4) which provides:

(4)A qualification is that a person:

(a)…

(b)has:

(i)     been engaged in relevant employment on a full-time basis for not less than a total of 2 years in the preceding 5 years; or

(ii)     otherwise been engaged in relevant employment to an extent that the Board regards as equivalent to the employment mentioned in subparagraph (i); or

(iii)     been engaged in such other employment, and for such time, as the Board regards as equivalent to being engaged in the relevant employment mentioned in subparagraph (i); and

Subregulation 156(6) defines relevant employment in the following terms:

(6)In this regulation:

Relevant employment means employment by a person or a partnership, or as a member of a partnership, in the course of which there has been substantial involvement in income tax matters including:

(a)the preparation or examination of a broad range of income tax returns; and

(b)the preparation of examination of objections to assessments issued in respect of such returns; and

(c)the provision of advice in relation to income tax returns, assessments or objections.

5.      In this matter, the evidence was that Mr Figueroa was employed by Landmark Investments Accounting Services Pty Ltd (Landmark Accounting) from 10 August 2005 to 9 September 2006.  The sole shareholder and director of Landmark Accounting was Mr Coyle and the company was a registered tax agent.  The company had been established by Mr Coyle to provide tax agent services to the Landmark Investments Group of companies (Landmark Group) which was involved in the development and sale of real estate.  It was said that many of the clients of the group who purchased real estate negatively geared the purchase.  The Landmark Group, for a fee, offered these clients a package including conveyancing, arranging mortgages and the preparation of an income tax return for the first year after purchase.  Landmark Accounting prepared these returns and charged Landmark Group fees at an hourly rate.  Mr Coyle said that the volume of work grew to a stage where he needed to employ two further people, one of whom was Mr Figueroa.  He said that Mr Figueroa was particularly valuable being fluent in Spanish, as the Landmark Group had specifically targeted Spanish speaking clients.  Mr Coyle said that the Landmark Group started falling well behind in paying the fees and meeting their own tax obligations to the extent that Landmark Accounting was having difficulty in meeting its own obligations.  He said that, as a consequence, in September 2006, he transferred the two employees to a member company of the Landmark Group, Melbourne Property Investment Real Estate Pty Ltd (Melbourne Property).  It was said that the change of employer did not alter Mr Figueroa’s job description and work duties being under the control and supervision of Mr Coyle for the 80 per cent of his time spent on tax related matters.

6.      Mr Figueroa said that many of the clients who had their first year’s income tax return prepared under the arrangement with the Landmark Group had returned to him and Mr Coyle for preparation of their returns in subsequent years.  He was anxious to become registered as a tax agent as he believed that his future was in the accounting industry and he wished to keep serving the Spanish-speaking community.  He believed that the refusal to accept his employment with Melbourne Property as relevant employment was unjust.  He said that he would not have changed employment and the entity which issued his group certificate if he had been aware that this would prejudice his ability to become a registered tax agent.

7.      It was submitted for the respondent that the employment with Melbourne Property was not relevant employment as this company is not a registered tax agent.  Reliance was placed on the decision of Pincus J in Tax Agents’ Board of Queensland v Seymour (1990) 21 FCR 357 for the view that employment for the purpose of Regulation 156 means an employee in the ordinary sense and that employment must not involve working in a way which is specifically prohibited by the Act.  The respondent relied also on the decision of this Tribunal in Re Zarac and Tax Agents’ Board [2004] 56 ATR 1026 which denied registration where the experience was under the supervision and control of a person who was not, at the relevant time, a registered tax agent and in breach of s 251L of the Act. The decision of this Tribunal in Re Cartelli and Tax Agents’ Board of Victoria [2008] AATA 135 was said to have not taken into account the effect of s 251L and s 251N(1) of the Act in construing Regulation 156.

8.      Section 251L(1) relevantly provides: 

(1)Subject to this section, a person who is not a registered tax agent must not knowingly or recklessly demand or receive any fee for:

(a)preparing or lodging on behalf of a taxpayer a return, notice, statement, application or other document about the taxpayer’s liabilities under a taxation law; or

(b)giving advice about a taxation law on behalf of a taxpayer; or

(c)preparing or lodging on behalf of a taxpayer an objection under Part IVC of the Taxation Administration Act 1953 against an assessment, determination, notice or decision under a taxation law; or

(d)applying for a review of, or instituting an appeal against, a decision on such an objection; or

(e)on behalf of a taxpayer, dealing with the Commissioner or a person who is exercising powers or performing functions under a taxation law.

Section 251N(1) provides:

(1)A registered tax agent or a person exempted under section 251L shall not allow any person, not being his employee, a registered tax agent or, in the case of a partnership which is registered as a tax agent, a member of that partnership:

(a)to prepare on behalf, either directly or indirectly, his own or any other income tax return or objection; or

(b)to conduct on his behalf, either directly or indirectly, and business of himself or any other person relating to any income tax return or income tax matter.

However it should be noted that sub-sections (2B) and (2C) of s 251N provides:

(2B)A natural person who is registered as a tax agent must not allow any person to do anything specified in paragraph (1)(a) or (b).

(2C)Subsection (2B) does not apply to the extent that the person does the thing under the supervision and control of:

(a)the tax agent; or

(b)a registered nominee of the tax agent.

It is difficult to see the purpose of sub-sections (2B) and (2C) except to exclude a breach of sub-section (1) of s 251N where the person who prepares the returns is under the supervision and control of the tax agent who lodges those returns.

9.      In this case it was said that there was a breach of s 251L in that an entity within the Landmark Group, not being a registered tax agent, was the entity which received a fee from its clients for the preparation and lodgement of their income tax returns.  It was said, further, that s 251N had been breached from September 2006 by Mr Coyle allowing Mr Figueroa, not then being an employee of his, to prepare returns.

10.     From the evidence it seems clear that the Landmark Group charged a client a fee for, among other services, the preparation and lodgement of an income tax return for the first year of income after the purchase of real estate.  In turn the Landmark Group contracted with Mr Coyle initially through his company, Landmark Accounting, and subsequently in his own right, to provide that service for an hourly rate.  It would appear, under this arrangement, that there was a breach of s 251L by the Landmark Group in receiving a fee for the preparation of a return while not a registered tax agent.

11.     It would appear likely, also, that Mr Coyle may well have been in breach of s 251N.  In the matter of Re Cartelli (supra),  Ms Cartelli, while legally an employee of her own company, performed all her work in preparation of returns and associated matters in the office of the registered tax agent under his direct supervision and control, to the extent that it could be seen as a master-servant relationship.  In that case and having regard to s 251N(2C) there was no breach of s 251N.  In this matter, after September 2006, Mr Figueroa was employed by Melbourne Property and was both preparing returns for Mr Coyle to lodge and performing accounting duties for his employer.  From the evidence it would appear that Mr Figueroa was located in the offices of Melbourne Property while Mr Coyle was located in a different place; although he attended the Melbourne Property offices on some days of the week.  As such, I cannot be satisfied that Mr Figueroa was under the supervision and control of Mr Coyle at all times when performing the activities specified in s 251N(1).

12.     It was said in both Seymour’s case (supra) and in Re Zarac’s case (supra) that experiences obtained by a person working in a way prohibited by the Act should not be accepted as relevant employment for the purposes of Regulation 156.  Here, Mr Figueroa was involved in breaches of both s 251L during the whole of his period of employment and s 251N from September 2006.  As a consequence, I find that this was not relevant employment and he was not a fit and proper person for the purposes of s 251JA, particularly as he should be expected to be well aware of these sections if he seeks to practice as a tax agent. 

13.     For completeness it should be said that, in any event, there must be doubt as to whether Mr Figueroa’s employment provided a substantial involvement in the matters specified in subregulation 156(6).  A broad range of income tax returns is required.  Although not clear from the evidence it would appear that the returns which he prepared were primarily for purchasers of real estate under negative gearing arrangements and, therefore, not necessarily covering a broad range of tax payers.  While he was uncertain, Mr Figueroa thought that he may have been involved in two or three objections to assessments over his period of employment.  As such it is likely that he did not satisfy Regulation 156.

14.     For the foregoing reasons, the decision under review should be affirmed. 

I certify that the fourteen (14) preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B H Pascoe, Senior Member

Signed:         DM Eva

Clerk

Date of Hearing  27 October 2008
Date of Decision  20 November 2008
Applicant self-represented       Mr Hugo Figueroa

Counsel for the Respondent     Mr Richard Niall,

Australian Government Solicitor