Graham and Tax Agents' Board of New South Wales

[2005] AATA 1125

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1125

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2005/623

GENERAL ADMINISTRATIVE  DIVISION		)
Re		JOHN GRAHAM

Applicant

And TAX AGENTS' BOARDS OF NEW SOUTH WALES

Respondent

DECISION

Tribunal Senior Member, Mrs Josephine Kelly

Date15 November 2005

PlaceSydney

Decision The reviewable decision made on 29 April 2005 by the Tax Agents’ Board of New South Wales is affirmed.

[sgd] Senior Member, Mrs Josephine Kelly

CATCHWORDS

TAX AGENTS’ BOARD – applicant sought to be registered as a tax agent – relevant employment criteria – accounting work not equivalent to substantial involvement in income tax matters – adequate supervision required for all relevant employment – Applicant working for his own accounting business is not equivalent relevant  employment – decision affirmed.

LEGISLATION

Income Tax Assessment Act1936 ss 251JA and 251BC(1)
Income Tax Regulations 1936 regulations 156(5) and 156(6)

CASELAW

Seymour v Tax Agents’ Board (Qld) AATA 5546
Tax Agents’ Board of Queensland and Seymour (1990) 21 FCR 357
Underwood v Tax Agents’ Board of QLD (1993) AATA 8878

REASONS FOR DECISION

15 November 2005 Senior Member, Mrs Josephine Kelly     

Introduction

1.      Mr John Graham (“Mr Graham”) wishes to be registered as a tax agent. He has not been registered before. The Tax Agents Board of New South Wales (“the Board”) refused his application in a letter dated 29 April 2005 (T2), because it was not satisfied that he had completed the relevant employment requirements prescribed in the Income Tax Regulations 1936 (“the Regulations”). That is, he had not demonstrated that he had been engaged in relevant employment on a full-time basis for not less than a total of 8 years in the preceding 10 years.

Issues

2. The issue in these proceedings is whether Mr Graham does fulfil the “relevant employment” criteria prescribed in the Regulations.

Legislation

3. Section 251JA of the Income Tax Assessment Act 1936 (“the Act”) provides relevantly that the Board “shall” register a natural person as a tax agent if that person satisfies the Board that he/she “is a fit and proper person to prepare income tax returns and transact business on behalf of tax payers in income tax matters”.

4.      Section 251BC(1)(b)(ii) provides relevantly that a person is not such a person  if “the person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed”.

5.      Regulation 156(5) prescribes the qualifications.  Relevantly, they are that the person:

(5)    A qualification is that a person:

(a)    has :

(i)    been engaged in relevant employment on a full-time basis for not less than a total of 8 years in the preceding 10 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); …

(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 or 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.

6. The above Regulations are current. They came into effect after the date of the reviewable decision, however the substance of the provisions relating to relevant employment is unchanged. The former Regulations are 156(1) (currently 156(5)) and 156(2) (currently 156(6)).

The Evidence

7.      Mr Graham’s case was that he had worked for three employers in the preceding ten years which would allow him to demonstrate that he has fulfilled the relevant employment requirement. Those employers are Stuart J. Hayward, ABS Development Pty Ltd (“ABS Development”) and Gratap Holdings Pty Ltd (“Gratap”).   There was also an argument raised that work he did for the business owned by him and his wife should be taken into account. That business is called Anything You Need Pty Limited (“Anything You Need”).

8.      There are four distinct periods of employment that have to be examined:

·Period 1 - Stuart J. Hayward -  October 1986 to March 1998;

·Period 2 - ABS Development - 1 July 1998 to 30 June 2001;

·Period 3 - Gratap between 1 July 2001 and March 2004;

·Period 4 - From March 2004 onwards.

The Evidence

Period 1

9.      The Statement of Relevant Employment (“SORE”) provided for Period 1 was not signed by Stuart J Hayward, the registered tax agent. It acknowledged that Mr Graham had worked full time with Stuart J. Hayward, from 1993 to 1998 (T7 p70).  Mr Hayward at T7 p75 states that he could not sign the declaration on the SORE form as he no longer had the records to verify the figures put forward by Mr Graham.  He also made certain allegations against Mr Graham. Information in the SORE was filled out by Mr or Mrs Graham. It was that Mr Graham spent 80% of his 40 hour a week full-time job dealing with income tax matters, including interviews with clients, liaising with ATO, provision of advice to tax payers and preparation of objections or private ruling “assisted under supervision of tax agent”. 

10.     The Board did concede that his employment with Mr Hayward during the years 1995, 1996 and 1997 was relevant employment despite Mr Hayward’s not signing the SORE. Those years fall within the ten year period preceding the hearing date. I accept that concession which I consider to be generous, and accordingly, find that Period 1 constitutes three years of relevant employment for Mr Graham.

Period 2

11.     During Period 2, the nominee tax agent for ABS Development was Mr Darren Tappouras (“Mr Tappouras”).  Mrs Graham gave evidence that ABS Development was a franchise accounting and book-keeping service with tax work and that Mr Graham was employed as a tax consultant. Contained in the SORE for this period (T5 p29) which was signed by Mr Tappouras, are Mr Graham’s employment details. It acknowledges that he worked part time for ABS Development on the basis of twenty hours a week.

12.     Mr Tappouras said during his oral evidence that when he was supervising Mr Graham he would attend the offices of the franchises of ABS Development on an ad hoc basis, as he was needed. He could give no definite answer as to how long he spent at each franchise. At one stage he had to attend ten offices in a week. He did agree that it approximately amounted to about half a day to a day at each of the offices including the office where Mr Graham was employed. Mr Tappouras’s supervision involved overseeing a number of issues and documents and making decisions about certain things and signing returns. At that time his office was at Kogarah and Mr Graham’s office was on the Central Coast.

13.     Mr Graham said that when Mr Tappouras attended the office, he would check the accounting work that had been done by Anything You Need. He also said that while he was working for ABS Development, Mr Tappouras was in the Grahams’ office the majority of the time and that he checked the tax returns and saw clients in the office.  

14.       Tax Returns and booklets were taken to Mr Tappouras’s Sydney office where he assumed Mr Tappouras checked them before lodgement.  In Exhibit A1 the supervision is described as making spot checks, checking financial reports and supervising relevant office work. Mr Graham believes that his accounting and tax work was supervised by Mr Tappouras.

15.     At T7 p 66 Mr Tappouras provided an explanatory note to the SORE document for this period. It confirms that the accounting and bookkeeping work relevant to the tax returns was done and invoiced by Anything You Need while Mr Graham was employed by ABS Development. He also said that the wages paid to Mr Graham did not reflect the hours he worked because the money was invested back into growing the business. In cross-examination, however, he agreed that Mr Graham worked 20 hours a week for ABS Development.

16.     During Period 2, when he was not working for ABS Development, Mr Graham spent his time working for his own business, Anything You Need which did accounting work, including the preparation of financial statements and GST returns. Mr Graham conceded that all of the work done for Anything You Need was accounting work and not tax work, but he insisted that the accounting work related to tax matters as the returns could not be completed without the financial statements he prepared. Therefore it was equivalent employment as it was necessary to be familiar with current tax laws in order to prepare the financial statements for use in tax returns. The work that was done for ABS Development and Gratap was the actual compilation of the returns and the submission of them to Mr Tappouras for lodgement.

Period 3

17.     During period Period 3, Mr Graham worked for Gratap. Mr Graham and Mr Tappouras were the shareholders and directors. Mr Tappouras was again the nominee tax agent, as he was for ABS Development. Neither could remember precisely when Gratap was wound up.  As in Period 2, Mr Graham spent the balance of his time working for Anything You Need.

18.     The SORE document at T5 states the Mr Graham was employed for 3 years and 4 months by Gratap, working on a part-time basis of twenty hours a week.  That is he worked for Gratap from 1 July 2001 until October 2004. However, in oral evidence Mr Graham stated that he stopped doing tax return work for Gratap in March 2004, although he said he could not be sure of the exact date without checking the files. On that basis he worked for Gratap for two years and nine months.

19.     Mr Tappouras could not remember when Mr Graham stopped doing tax work for Gratap. He thought that the company was wound up some time in 2004 but could not be more precise. I accept Mr Graham’s evidence that he completed working on tax returns for Gratap in March 2004.

20.     During this Period Mr Tappouras was in Sydney part of the week working for ABS Development and then he was on the Central Coast for the rest of the week working for Gratap. Mr Tappouras stated that he and Mr Graham were basically in the same office for half a week and he could supervise him.

21.      Mr Graham did not work for ABS Development during this period.

22.     During Period’s 2 and 3 Mrs Graham gave evidence that while Mr Graham was paid for working twenty hours a week for each of ABS Development and Gratap,  that did not reflect the hours he actually worked. He worked very long hours, sometimes until eight or nine o’clock at night. The suggestion was that in fact he was spending 40 hours a week on work for ABS Development and Gratap during those periods and the balance of his time on the Grahams’ own business. 

Period 4

23.     This is the period of employment from March 2004 onwards. Mr Graham gave oral evidence that he was employed once again by ABS Development but on a full time basis forty hours a week. He also said that his employment had changed recently from ABS Development to an entity called First Accounting. 

24.     Mr Tappouras has been a nominee tax agent of ABS Development continually since 1998. Mr Tappouras’s oral evidence was that since Gratap had been deregistered he no longer had a working relationship with Mr Graham. Mr Tappouras thought that Mr Graham was under the supervision of another nominee of ABS Development, Mr Bruce Slater (“Mr Slater”).

25.     Mr Tappouras also stated that ABS Development was deregistered in June 2005 and for some months after June 2005 he operated under his own licence. Mr Tappouras employed some people during this period but Mr Graham was not one of them. He and a Mr Slater have just established a new company that is called Accounting First Pty Limited (“Accounting First”) which was registered as a tax agent on 1 September 2005.  It may be that entity that now employs Mr Graham.

26.     Mr Graham produced a PAYG Payment Summary which he said showed that he had been working full time at ABS Development (Exhibit R1). The Payer’s Name on the document is B & M Accounting Services Pty Ltd (“B & M Accounting”), not ABS Development. The name of the authorised person is “Bruce Slater”.

27.     Mr Graham said that he had assumed that he was still working for ABS Development because the tax agent’s number that was being used on the tax returns that he was preparing was that of ABS Development. Mr Graham said that while Mr Slater was doing the physical supervision he had understood that Mr Tappouras was doing the supervision of the tax returns before they were lodged. 

28.     Mr Rowley the Secretary of the Board gave evidence that he had searched the Board’s public electronic register on the day of the hearing. Neither B & M Accounting nor any of its staff was registered as nominees. ABS Development’s registration had ceased on 28 June 2005. Accounting First had been registered on 1 September 2005 and Mr Slater and Mr Tappouras are its registered nominees.

Consideration

Periods 2 and 3

29.     Before the hearing, the Board accepted that Mr Graham had established 2 years and seven months “relevant employment” during his part-time employment with ABS Development and Gratap. That was because he was an employee of a registered tax agent and whose work had been certified on the basis of 20 hours per week. However, during the hearing the concession was implicitly withdrawn when the Board questioned the adequacy of the supervision during these periods. The “concession” would also be affected by the finding I make on the evidence set out above that the period of relevant employment with Gratap ended in March 2004, rather than November 2004, and also by the fact that the Board seems to have made an arithmetical error in determining the period of 2 years and seven months.

30.     I do not accept on the evidence that Mr Graham was effectively working full-time during these periods of employment for ABS Development and Gratap. He was involved in his own business and invoices were rendered by that business for the accounting work that was done that was used as the basis for the preparation of the income tax matters looked after by ABS Development and Gratap.  Further, there is no evidence of contemporaneous records of the hours he spent on the work for ABS Development and Gratap to support this argument.  

31.     There was less personal supervision during Period 2 than during Period 3, however, I accept Mr Graham’s evidence that Mr Tappouras did exercise supervision during Period 2 by reviewing the material Mr Graham provided to him in his Sydney office, as well as when he was personally present in the Grahams’ office. I accept on the evidence of Mr Graham and Mr Tappouras that there was adequate supervision in Periods 2 and 3. In coming to that conclusion, I have taken into account the importance of supervision as discussed by the Tribunal in Underwood v Tax Agents’ Board of QLD (1993) AATA 8878.

32.     I am therefore satisfied that Mr Graham’s part-time employment for ABS Development and Gratap during Periods 2 and 3 constitutes equivalent relevant employment  pursuant to Regulation 156(5)(a)(ii) for a period of 2 years and 10 and a half months. 

33.     I do not accept the argument put on behalf of Mr Graham that the work he did for his own business during these periods satisfies the requirements of the regulation. He did not have substantial involvement in income tax matters as set out in Regulation 156(6). Further, the work he did was not supervised by a registered tax agent and did not need to be. Finally, Anything You Need is not a company with a nominated tax agent. 

34.     Mrs Graham referred to Seymour v Tax Agents’ Board (Qld) AATA 5546 where the Tribunal held that self-employment involving the preparation of income tax returns was relevant employment. However, on appeal, Pincus J overturned that decision (Tax Agents’ Board of Queensland and Seymour (1990) 21 FCR 357). His Honour held that “it is my view that the word “employment” … is used in a sense which excludes those simply working alone in their own business – the so called self-employed.” His Honour held that employment must be under the supervision and control of an experienced person. This case supports my finding.

Period 4

35.     Mr Graham thought that he was working for ABS Development but I find on the basis of the PAYG Summary (Exhibit R1) tendered, that he was employed by     B & M Accounting from 1 July 2004 to 30 June 2005, and I am prepared to infer from his evidence, from March 2004. Mr Slater is the authorised person on the PAYG summary.    

36.     I accept Mr Rowley’s evidence about registration as tax agents. I find that Mr Slater was a tax agent at all relevant times but that he did not employ Mr Graham.   Further B & M Accounting, Mr Graham’s employer, was not registered as a tax agent and nor was Mr Slater registered as a nominee of that company.

37.      I infer that B & M Accounting does not hold itself out as providing the services of a tax agent, but carries on the business of accounting as its name suggests.  There is no evidence before the Tribunal of the job title that Mr Graham had and little evidence of the duties he performed while working for B & M Accounting, although he suggested that it was the same as when he worked for ABS Development. On the material before me, I am not persuaded that the work Mr Graham did was equivalent to relevant employment. He was not employed as required by the regulation, nor did he have substantial involvement in income tax matters.  

38.     There is also limited evidence before the Tribunal about the supervision that occurred at B & M Accounting. Mr Graham thought that his supervisor was Mr Tappouras, not Mr Slater, because the same tax agent number was used as when he worked by ABS Development. Any supervision that occurred was by Mr Slater and not by Mr Tappouras and related to accounting work. There was no evidence that Mr Tappouras saw Mr Graham during this period.  It was Mr Slater’s business, not Mr Tappouras’s.  

Conclusion

39.     Mr Graham has not fulfilled the “relevant employment” requirement for the reasons set out above. The total period of Mr Graham’s “relevant employment” is 5 years and 10 and a half months comprised of his full-time employment of 3 years in Period 1 and on my assessment, 2 years and 10 and a half months equivalent full-time employment in Periods 2 and 3. 

Decision

40.     The decision under review is affirmed.

I certify that the 40 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member, Mrs Josephine Kelly

Signed: Miss Sacha Keady
  Associate

Date/s of Hearing  20 September 2005
Date of Decision  15 November 2005
Applicant Representative         Mrs Graham (Wife)
Solicitor for the Respondent     Australian Government Solicitor