GSXZ and Tax Practitioners Board - [2024] AATA 1303

GSXZ and Tax Practitioners Board [2024] AATA 1303 (30 May 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s):2023/2356, 2023/2357
Re:GSXZ
  SBJDAnd
APPLICANTS

AndTax Practitioners Board
RESPONDENT

REASONS FOR DECISION
Tribunal:Member Rob Reitano
Date:30 May 2024
Place:Sydney

I vary the decision of the Tax Practitioners Board to terminate the registration of the Applicant so that such termination will take effect from 27July 2024 and the Applicant may not apply for registration as a tax agent before 26 July 2025.
I vary the decision of the Tax Practitioners Board to terminate the registration of the Company so that such termination will take effect from 27 July 2024
............................[SGD].................................
Member Reitano
CATCHWORDS
TAX AGENT REGISTRATION – termination of registration as a tax agent – preclusion from registration for 12 months – failure to act honestly and with integrity – failure to comply with taxation laws – failure to respond to requests and directions of Tax Practitioners Board – fit and proper person to be a registered taxation agent – decision varied by consent as to date of effect of termination but otherwise affirmed
LEGISLATION
Tax Agents Services Act 2009 (Cth)
CASES
Deli v Tax Practitioners Board [2016] FCA 570
Kishan v Tax Practitioners Board [2017] AATA 271
Ridden v Tax Practitioners Board [2020] AATA 422
REASONS FOR DECISION
Member Rob Reitano
30 May 2024

At the centre of the scheme of regulation of tax agent services is registration under the Tax Agent Services Act 2009 (‘the Act’) because without registration a person is unable to provide tax agent services. The main object of the Act is to ensure that tax agent services are provided to the community in accordance with appropriate standards of professional and ethical conduct. That object is achieved by prescribing that only people who are considered fit and proper can be registered and by requiring adherence to standards of behaviour that are considered appropriate for tax agents.
This case is about what happens when a tax agent fails to conform to appropriate standards of professional and ethical conduct and in doing so demonstrates that he is not a fit and proper person to be a tax agent.
The matter involves applications for review of two decisions of the Tax Practitioners Board (‘the Board’) which were both made on 2 March 2023. Both decisions were the product of the Board’s finding that the standards of appropriate behaviour had not been adhered to and that it could no longer be satisfied that the tax agent was a fit and proper person.
The first decision concerned an individual tax agent who I will refer to as ‘the Applicant’. The Applicant seeks a review of the Board’s decision to terminate the Applicant’s registration as a tax agent under the Act because he ceased to meet the registration requirement in the Act that the Board be satisfied that he was a fit and proper person. That decision included a preclusion imposed on the Applicant, preventing him from…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2024] AATA 1303
Decision Date: 30 May 2024

CaseChat Overview and Summary

This matter concerned an application by GSXZ (the Applicant) and the Tax Practitioners Board (the Board) regarding the termination of the Applicant's registration as a tax agent and the registration of a company of which the Applicant was a director. The dispute arose from the Applicant's failure to act honestly and with integrity, failure to comply with taxation laws, and failure to respond to the Board's requests and directions, leading the Board to deem the Applicant not a fit and proper person to be a registered tax agent. The court was required to determine the appropriate sanctions for these failures, including the duration of any preclusion period for reapplication and the consequences for the company's registration.

The court considered whether the Applicant was a fit and proper person to be registered as a tax agent and whether the company, of which the Applicant was a director, should have its registration terminated due to the Applicant's unsuitability. The Applicant argued that the company, as a separate legal entity, should not suffer the consequences of his personal failings, and that his resignation as a director would mitigate any issues. The Applicant also contended that terminating the company's registration would disadvantage its clients and employees, suggesting a caution would be a more appropriate sanction.

Member Rob Reitano reasoned that the Applicant's conduct demonstrated a clear failure to meet the standards of honesty, integrity, and compliance expected of a registered tax agent. The court found that the Applicant's unsuitability as a director directly impacted the company's ability to satisfy registration requirements, as the scheme of the Act mandates that directors must be fit and proper persons. The court rejected the argument that the company was a separate entity that could be insulated from the Applicant's conduct, noting that the Applicant was a guiding mind of the company and its sole supervising tax agent until recently. The court determined that terminating the company's registration was necessary to uphold the integrity of the tax agent profession and to send a message to the community about the importance of having fit and proper individuals in control of corporate tax agents.

By consent, the court varied the Board's decision regarding the date of effect for the termination of both the Applicant's and the company's registration, setting it for 27 July 2024. The court also imposed a preclusion period, ordering that the Applicant may not apply for registration as a tax agent before 26 July 2025, thereby prohibiting reapplication for a period of one year. This sanction was considered appropriate to convey the seriousness of the Applicant's conduct and to deter similar behaviour within the tax agent community.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The parties agreed that if I decided to terminate the Applicant and the Company’s registration I should do so with effect from a date sixty days from the date of this decision. I will adopt that course.DECISION I vary the decision of the Tax Practitioners Board to terminate the registration of the Applicant so that such termination will take effect from 27 July 2024 and the Applicant may not apply for registration as tax agent before 26 July 2025. I vary the decision of the Tax Practitioners Board to terminate the registration of the Company so that such termination will take effect from 27 July 2024.

Ratio Decidendi

Legal Principle Established

In the circumstances, I consider that a prohibition on reapplication for registration for a period of one year is appropriate. In my view that sanction will send a significant message to both the Applicant and the tax agent community more generally about the need to avoid the kind of conduct that the Applicant has engaged in hereTHE COMPANY’S REGISTRATION As I recorded earlier, I may cancel the registration of the Company should it cease to satisfy the registration requirement that each director of the company be a fit and proper person. I have found that the Applicant, who is a director of the company, is not a fit and proper person and so the power is engaged. The only issue is whether I should exercise the discretion against taking that course for one reason or another. The Applicant suggested I should not visit on the Company the consequence of termination because it is a separate legal entity. That suggestion fails to grapple with the fact that the Applicant, who is not a fit and proper person, is at present one of the guiding minds of the Company. It also fails to engage with the scheme of the Act, which contemplates that directors must be fit and proper people to obtain registration. Next the Application suggested that he would resign if his registration were terminated so that the consequence for the Company of him not being director would not arise. He suggested that there is another person who is director and that she could satisfy the supervision requirements so far as the Company was concerned. Further, it was suggested that the consequence of termination would see the clients of the Company disadvantaged and they would lose the benefit of the Company dealing with their tax affairs. It would also see employees losing their employment and livelihoods. In that light it was suggested that a caution would be an appropriate sanction. I consider that the appropriate course is to terminate the registration of the Company mainly because it does not presently satisfy the registration requirements, as one of its directors is not a fit and proper person. There is no sound basis otherwise in circumstances where that director has, until very recently, been the only director of the Company and its sole supervising tax agent. There is no sound discretionary basis for effectively allowing a Company on the verge of termination of registration to adopt some other course that has the effect of skirting around the consequences that necessarily and ordinarily flow from a finding that one of its directors is not a fit and proper person. Terminating the Company’s registration will send a message generally to the tax agent community about the need to have people who are fit and proper persons in control of corporate tax agents. That interest outweighs any private interest of clients or employees, the effect on whom will be partly ameliorated by the date of effect of the termination of registration. I should add that the Board did not suggest there should be any preclusion period during which the Company could not apply for registration. The effect of that would be that the Company could apply for registration again and the Board will have the opportunity then to consider all relevant matters and determine the questions of eligibility for registration in an orderly and proper manner. DATE OF EFFECT