Gylman and Tax Practitioners Board

[2015] AATA 1012

Gylman and Tax Practitioners Board [2015] AATA 1012 (23 December 2015)

Division	TAXATION & COMMERCIAL DIVISION
File Number(s)	2015/4917
Re	Lysa GYLMAN
APPLICANT
And	Tax Practitioners Board
RESPONDENT

Decision

Tribunal	Mr P W Taylor SC, Senior Member
Date	23 December 2015
Place	Sydney

The decision under review is affirmed.

………………………[sgd]……………………………

Mr P W Taylor SC, Senior Member

Catchwords

Tax Practitioners – tax practitioners board – registration as a tax agent – whether applicant is a fit and proper person – applicant trustee of a self-managed superannuation fund – improper release of superannuation benefits – applicant not a reliable witness – decision affirmed

Legislation

Superannuation Industry (Supervision) Act 1993 ss 17A, 34, 35A, 35B, 35C, 35D, 62, 126A

Tax Agents Services Act 2009 ss 2-10, 20-5, 20-25, 50-5, 90-5

Cases

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321

Hughes and Vale Pty Ltd v State of NSW (No 2) (1955) 93 CLR 127

Su v Tax Agents’ Board South Australia (1982) 61 FLR 1

REASONS FOR DECISION

Mr P W Taylor SC, Senior Member

23 December 2015

1. Ms Gylman was registered as a tax agent on 1 March 2010.  On 16 February 2015 she applied to the Tax Practitioners Board to renew her registration.  On 13 August 2015 the Board refused her application.  The Board was not satisfied that Ms Gylman met the “fit and proper” eligibility requirement in s 20-5(1)(a) of the Tax Agents Services Act 2009 (“TASA”). 

2. The Board’s dissatisfaction about Ms Gylman’s fitness derived from prior decisions of the Australian Taxation Office, and aspects of her conduct on which those decisions were based.

3. In October 2012 a delegate of the Commissioner of Taxation determined that Ms Gylman was a disqualified person for the purposes of Part 15 of the Superannuation Industry (Supervision) Act 1993 (the “SIS Act”). The grounds for that disqualification were (i) as a trustee of a self managed superannuation fund, Ms Gilman had contravened relevant provisions of the SIS Act, and (ii) was not a fit and proper person to be a “trustee, investment manager or custodian”: see SIS Act ss 126A(1)(a) & (3). On 17 May 2013, following an audit of Ms Gylman’s tax returns for the 2008 – 2010 financial years, the Commissioner determined that, arising from her conduct as a superannuation trustee, Ms Gylman had a cumulative tax shortfall of $377,814, and imposed penalties, on the basis of intentional disregard of taxation laws. Those penalties totalled $283,361.

4. The ATO’s October 2012 and May 2013 decisions were, to a substantial extent, based on the same underlying facts concerning a superannuation fund named “the Friendly Fund”.  Significant facts concerning the Fund (as reported in the ATO audit report of 17 May 2013) included the following propositions:

   (a)The Friendly Fund had no reported profit in any tax year from 2003 to 2008.

   (b)The Friendly Fund’s annual returns for 2008 and 2009 tax years disclosed “overseas residential real property” valued at $48,200, no other investment or asset, and did not disclose the year-end balances in the bank accounts Ms Gylman said related to the Fund.

   (c)Between July 2007 and November 2011 the Friendly Fund’s bank account disclosed a series of deposits (totalling $1.6 million) and withdrawals (totalling  $1.52 million), and related deposits (totalling $996,877) to Ms Gylman’s personal account.

5. The basic facts about the number and value of the various deposits to, and withdrawals from, the Friendly Fund’s bank account, and payments to and from Ms Gylman’s personal bank accounts, were not in contest in the present proceedings.  They are summarised in the following Table:

6. The ATO’s position in relation to Ms Gylman’s disqualification as a superannuation trustee was that she had operated the Friendly Fund to facilitate the improper early release of superannuation funds and had conducted “an artificial scheme … to undermine the legislation”. The ATO considered that this kind of activity contravened both the required standards of conduct of a superannuation trustee, and a trustee’s obligation to ensure that a superannuation fund was maintained solely for at least one of its core purposes (essentially, purposes of providing benefits relating to a member’s retirement or death – see SIS Act s 62.)

7. The ATO’s assessment decisions for the 2008, 2009 and 2010 tax years treated the net deposits to Ms Gylman’s personal bank accounts (including the “… 263” account referred to in the earlier Table) as part of her assessable income.  The assessment amounts subsequently crystallised (on 2 September 2014) into a Supreme Court judgment debt of $869,019.  Despite that judgment debt, Ms Gylman contended in the present proceedings that the assessments were wrong, and that none of the transfers from the Friendly Fund to her personal account represented her income.  According to her, all the withdrawals from the Friendly Fund were either (i) investments on behalf of the Fund or (ii) permissible compassionate returns of members funds.  In so far as the payments were investments, she said that they were made by way of cash payments to the Fund’s “investment manager”, and deposits to his bank account. 

8. The overall position in relation to the movements between the Friendly Fund bank account, Ms Gylman’s bank accounts, and the way there were taken up in the 2008, 2009 and 2010 assessments, are summarised in the following Table:

9. Significant aspects of the information summarised in the Table are:

   (a)Total withdrawals from the Friendly Fund bank account were $1.07m.

   (b)Only $0.134m was deposited to the “investment manager’s” bank account.

   (c)$772,000 of the money paid out cannot be directly traced to any bank account or payee.

   (d)The Table does not take into account other transfers that were made from the Friendly Fund bank account to

   (i)a personal loan account (a/c … 8299) that Ms Gylman had with the ANZ Bank

   (ii)a personal debit card account of Ms Gylman (a/c … 5117)

   (iii)other accounts that Ms Gylman was unable to identify or explain (a/c … 2383, ….5648, and ….9386).

   The Board’s decision & contentions

10. Based on the ATO decisions, and the matters they involved, the Board’s principal findings were that Ms Gylman (i) had breached her fiduciary duties as a trustee, in transferring nearly $1m of trust funds into her personal bank account, (ii) could not be regarded as fit and proper, having regard to her SIS Act disqualification and the circumstances underlying it.

11. In the present proceedings the Board relied on a number of further matters.  It is only necessary to refer to six of them.  These were as follows.

    (a)On Ms Gylman’s own admission, she had no meaningful records substantiating the fact, nature or value of the investments she said had been made with the moneys paid out from either the Friendly Fund bank account her “a/c … 263”.

    (b)Ms Gylman had not invested any superannuation funds in property in Lebanon and her claims to have done so reflected adversely on her fitness.

    (c)Ms Gylman had appointed herself as the Friendly Fund auditor and had submitted returns (for the 2008 and 2009 tax years) indicating that she had provided unqualified audit reports.

    (d)In the 2008 to 2010 tax years Ms Gylman had participated in the “rollover” into the Friendly Fund of superannuation entitlements for numerous people who were not members of the Fund, and contrary to the restrictions in the SIS Act on the permissible number of members of a self managed superannuation fund

    (e)Ms Gylman had facilitated the release of superannuation benefits to members, ostensibly on “compassionate” grounds, without any proper authority, and without any attempt to satisfy herself of the permissible criteria and procedures for such payments.

    (f)Ms Gylman had improperly conditioned her facilitation of at least one “compassionate” member fund release, on the payment to her of a substantial portion (40%) of the member’s fund benefit.

12. In relation to the extent of the “rollover” transactions, and the number, nature, amount and date of a significant number of “rollover” payments, there was ample evidence, and no controversy.  The basic details of those transactions are indicated in the following Table.  (The Table also includes, where relevant deposits can be readily identified, corresponding deposits into Ms Gylman’s personal “a/c … 263”.)

    Tax agent registration – legislative provisions

13. A person must be registered to be able to charge for providing “tax agent services”: see Tax Agents Services Act 2009 (“TASA”) ss 2-10 & 50-5.  (The expression “tax agent services” is broadly defined, and generally includes providing advice and representation services relating to Commonwealth taxation matters:  see TASA s 90-5.)  An applicant who satisfies the relevant eligibility requirements, must be registered:  TASA s 20-25. 

14. The registration eligibility criteria for an individual include appropriate qualifications, experience and professional indemnity insurance.  An individual registration applicant must also satisfy the Tax Practitioners Board that they are “fit and proper”:  see TASA s 20-5. 

    Superannuation – legislative provisions

15. It was common ground in the proceedings that the Friendly Fund was a self managed superannuation fund for the purposes of the SIS Act. Various obligations and restrictions apply to such a fund, and its trustee. As at July 2008 they included the following:

    (a)there must be fewer than five fund members:  SIS Act  17A(1)(a)

    (b)each fund member must be either a trustee or a director of the corporate trustee.  SIS Act  17A(1)(d)

    (c)trustees of every superannuation entity were obliged to “ensure that the prescribed operating standards … were complied with” and a reckless failure to do so constituted an offence:  SIS Act s 34

    (d)trustees of every superannuation entity “must ensure” that the funds accounting records correctly recorded and explained the funds transactions and financial position, permitted accounting statements and returns to be prepared, allowed those accounts, statements and returns to be “conveniently and properly audited”, and were kept for at least 5 years – and again failure to comply with these obligations constituted an offence:  SIS Act s 35A

    (e)trustees of a self managed superannuation fund must prepare annual statements of financial position and an operating statement, and retain those documents for at least 5 years – and again failure constituted an offence:  SIS Act s 35B

    (f)trustees of a self managed superannuation fund must appoint an approved auditor, and lodge an annual return with the Commissioner of Taxation – and again failure to comply with either requirement constituted an offence:  see SIS Act ss 35C & 35D.

    (g)each trustee must ensure that the fund was maintained solely for the purposes of the Act:  see SIS Act s 62.

    Ms Gylman’s contentions

16. Ms Gylman had no answer to the Board’s criticism that she was unable to produce the relevant Friendly Fund records.  She had an obligation to ensure that the records were maintained and retained.  Ms Gylman was able to point to the existence of the two bank accounts whose relevant entries I have summarised in the various Tables I have set out above.  However she failed to produce any other records at all, let alone to demonstrate that she had previously maintained records in the required manner.  Her only explanations for not producing the relevant records were that (i) computer records had been damaged and become irretrievable, and (ii) hard copy records had been thrown out by a removalist when she moved house.  She produced no evidence to corroborate either of these assertions.  In the absence of corroboration, I do not accept her evidence as reliable.  (My reasons for requiring corroboration of Ms Gylman’s evidence in relation to contentious matters, are set out in paragraph 24 below.)  I find that she did not keep the records required of her as a fund trustee.

17. Ms Gylman’s response to the Board’s criticism that she had appointed herself as the Fund auditor was that the legislative requirement to have an independent auditor did not apply at the relevant time.  She said she thought what she did was proper at the time.  She now agreed that it would not be proper for a fund trustee to also act as auditor of their own fund.  But she attributed that changed view to some relevant legislative change – a change she was not able to detail.  Ms Gylman was wrong to appoint herself as the Friendly Fund auditor.  And that view has nothing to do with any legislative changes between 2007 and the present time.  It is, and always was, fanciful to suggest that a trustee of a self managed superannuation fund could have complied with the audit obligation in SIS Act ss 35C by appointing themselves as the auditor.  The very fact that Ms Gylman misconceived the statutory obligation is a significant criticism of her knowledge and competence in relation to taxation and superannuation laws.

18. Ms Gylman sought to explain the use of the various accounts, and the numerous transfers between the Friendly Fund account, and her own “a/c …. 263” as a prudent decision to save money by reducing or avoiding the bank fees that she understood would otherwise apply to the use of the Friendly Fund’s “a/c …286”.  She had previously asserted to the ATO that this was an entirely regular and reasonable course of conduct.  That assertion was contained in the part of her 22 May 2012 letter to the ATO which I set out in paragraph 22 below.  As that extract indicates, Ms Gylman there asserted that the two bank accounts allowed the use of the client funds to be easily accounted for and traced.  She apparently also asserted (rather paradoxically) that it was desirable to have one account, instead of several, so that all clients money could be held in one place. 

19. Ms Gylman’s explanation that she used two accounts to save bank fees is both risible and inexcusable.  It is risible because (i) she never sought to demonstrate what the fees were or their materiality, (ii) examination of the bank statements shows that the consistent pattern was to deposit money into the Friendly Fund account and then withdraw it, as a matter of course, into her personal account. (Consequently, there is no readily demonstrable basis to predict (or conclude) that there would be (or were) relevantly lower costs associated with the use of her personal account).  It is an inexcusable explanation because, as even the most cursory examination of her personal “a/c … 263” bank statements show, it is impossible to differentiate meaningfully between trust and personal expenses.  (I have referred in paragraph 9(d) above to Ms Gylman’s inability to explain various accounts into which payments were made.)

20. As I have indicated, Ms Gylman does not dispute the fact of the various payments from the Friendly Fund bank account to her own “a/c …. 263”.  She does vigorously dispute that the payments are properly characterised as her own taxable “income”.  She asserted that this was not a case where she had personally taken other people’s money. 

21. Ms Gylman’s principal contention was that all of the fund withdrawals were either for investment or permissible compassionate purposes.  This was an explanation that comes partly from her 22 May 2012 letter to the ATO, and partly from a declaration she made on 27 September 2012.  In that declaration she stated that “all the rollover Friendly Fund superannuation money” was given to the “investment manager”.  The appearance also comes, although less clearly, from Ms Gylman’s claim that the Fund “investment manager” had acknowledged the use of trust funds for investment purposes in Lebanon.

22. The most explicit explanatory statement by Ms Gylman was contained in her 22 May 2012 letter to the ATO.  There she emphatically asserted the propriety of the fund rollovers and the use of the funds.  She said:

    The intention of rolling over these funds was completely legal and within the law, on temporary basis they were rolled over to the friendly fund account until it was invested. The Friendly found account is used as a medium account before investing into the property development, instead of opening several accounts, the friendly found account that holds all clients money can be easily accounted for and traced.  This account is purely a gateway account into investing the money for the property development.  Thus having the money in one account I can use an appropriate formulae for expenses and profit to allocate the money to each individual persons according to the amount invested.

    (The “investment manager” – SC) approached me about a major development project in Lebanon, which had the potential to boom in price over the upcoming years…  After strong discussion and decisions between (SC) and myself, it was believed, with best intentions for our clients that investing in the Lebanon market will help with a strong increase of our clients superannuation benefits. (SC) … was given the money to commence the new major development project.

23. However, when Ms Gylman wrote to the Board in January 2015 she provided quite a different explanation.  The presently material parts of her explanation were as follows:

    iv Funds were withdrawn by me and deposited into my private account and thereafter transferred to (SC’s) account on the same day for investment in property. 

    v The audit trail and information provided to the ATO clearly displays the manner in which the funds were transferred to (SC) and that I acted professionally and am a fit and proper person.

    vii On several occasions I had requested (SC) to provide me with a copy of the Solicitors settlement letter for the properties where deposits were paid – which was not done – and I was finally informed that the identified and purchased properties were sold, with the funds from the sales used to invest in property overseas (Lebanon).

    ix I subsequently requested (SC) to provide me with relevant documentation …

    x I informed (SC) that I did not agree to purchase properties outside of Australia, to immediately dispose of these units and return the funds to the bank account in Australia …

    k) I provided the funds to (SC) – trusting the funds would be invested as agreed, not knowing that SC would misappropriate the funds – there was no indication that he was investing funds overseas (Lebanon).

24. The inconsistency between these two explanations is striking.  At the commencement of the hearing I raised it with Ms Gylman.  In response she asserted that she had never approved any property purchase or investment in Lebanon.  That explanation simply highlighted the inconsistency in her previous explanation.  It caused me to doubt that I can attach any significance to Ms Gylman’s evidence in the absence of independent or objective corroboration.  Having reflected on the inconsistency, taken into account the risible explanation she gave for the use of multiple bank accounts, rejected her evidence in relation to the Lazar rollover, and having formed the view that the 2008 and 2009 tax returns she submitted on behalf of the Friendly Fund are contrived and unreliable, I am comfortably satisfied that Ms Gylman is not a reliable witness.  I find that I cannot accept anything she has said by way of factual assertions about her past conduct as a tax agent or as a superannuation trustee, wherever the matter is controversial and her account is not supported by objective or independent corroborative evidence. 

    The SMSF fund membership issue

25. As I indicated in paragraph 11(d) above, the Board’s submission was that Ms Gylman had improperly participated in facilitating the rollovers identified in the Table in paragraph 12 above. This impropriety resulted from the fact that the Friendly Fund membership was limited, by the relevant definition in the SIS Act, to a maximum of 5 members.

1. Ms Gylman had no meaningful answer to this point.  Indeed the explanation that she did give demanded a conclusion that she had deliberately and knowingly contravened the SIS legislation over at least a three year period.  That conclusion was demanded because she conceded that she knew the Friendly Fund membership was limited to a maximum of five.  She said that, because of the limitation, and before she had been involved in any of the roll over transactions, she had applied to APRA for a licence to conduct a regulated superannuation fund. She claimed that she was told to await the outcome of some legislative changes and that was why APRA had not processed the application to completion.  She claimed she would certainly have been given a licence. 

2. Again Ms Gylman produced nothing to substantiate this purported explanation.  And it is, to my mind, no explanation at all.  It indicates that Ms Gylman went ahead with her numerous roll over transactions knowing full well that she was no longer conducting a “self managed superannuation fund” that complied with the relevant SIS definition, and making no attempt to comply with the legislative requirements to which she was subject as a trustee.

3. The position is in my view compounded by the annual returns that Ms Gylman submitted for the Friendly Fund in 2008 and 2009.  I indicated (in paragraph 4 above) that those returns reported no profit, and disclosed only the value of a property in Lebanon.  They did not disclose the bank account balances – for either the Friendly Fund bank account or for the “a/c … 286” which she had said she used for the purposes of the Friendly Fund.  Neither did they include details to indicate that the people involved in the “rollovers” summarised in the Table in paragraph 12 above, had become members of the Fund. 

4. If the Friendly Fund’s 2008 and 2009 Tax returns had taken the bank account balances into account, and correctly disclosed the number of Fund Members indicated by the numerous rollover transactions, then the information they should have contained is set out in the following Table.  That Table also includes the same details that should have been included in the 2010 tax return, as well as the actual membership numbers disclosed in the returns.

2008	2009	2010
Friendly Fund – a/c …. 286	5,057	37,492	166,084
Gylman – a/c …. 263	15,177	37,185	1,349
Lebanon property (value)	48,200	48,200
Total Fund value	68,434	122,877	167,433
Members disclosed in returns	4	4	no return
Rollover members	13	16
Accumulated number of members	17	33	33

1. At the commencement of the hearing I asked Ms Gylman to explain why the 2008 and 2009 returns made no mention of the bank account balances, or the other “rollover” members of the Fund.  Later in the hearing I asked her to explain why the Lebanon property value stated in the 2009 tax return was the same as the 2008 return – notwithstanding that the known “rollover” transactions in the 2009 year approximated $340,000 – and, on her evidence, had been applied to property investment in Lebanon.  Ms Gylman’s first explanation, in relation to the bank accounts, was that she saw them relating to the “rollover” members alone, and that the Lebanon property related to the four Friendly Fund members nominated in the returns.  Ms Gylman’s second explanation, in relation to the postulated increase in the Lebanon property investments, was that she had to keep the interests of the eligible “SMSF” fund members separate from the “rollover” contributors.  The reason for this required separation was that she saw the “rollover” contributors as involved in the “fund” (or funds) that she had intended to set up, when she had originally applied to APRA some years previously.  She seemed to suggest that these “rollover” members were not really members of the Friendly Fund at all.

2. It is appropriate to remark that this explanation strains credulity.  There are two particular reasons.  The first is the obvious point that her claimed understanding, about keeping the “rollover” transactions separate, is contradicted by the fact that all the “rollover” payments were deposited to the Friendly Fund bank account.  The second point is that the 2008 and 2009 tax returns appear to be nothing more than contrivances. The members contributions in each year are identical, total $48,200, and exactly match the supposed value of the Lebanon property – which is itself identical in each return.  The inference of contrivance is readily available and, in my view, should be drawn.  The suggestion of contrivance was put specifically to Ms Gylman in relation to each of the tax returns.  She provided no explanation for their content.

3. In these circumstances there is another, and far more likely, explanation for the absence of any records substantiating the supposed investments in Lebanon.  It was, as the ATO disqualification decision of October 2012 found, Ms Gylman had immediately paid out the “rollover” contributors as part of “an artificial scheme … to undermine the legislation” by making improper returns of superannuation contributions.  And there were at least complaints from four of the rollover contributors, attesting to the fact that Ms Gylman had facilitated such payments.  (The names of those complainants are shaded in the Table in paragraph 12 above.)

4. Ms Gylman was cross examined about details of the Lazar rollover transaction.  It was put to her that she had (i) told Ms Lazar that she could have her superannuation contributions released if she did a “rollover” to the Friendly Fund, (ii) had never informed herself about, or followed, the relevant criteria permitting the compassionate release of member’s contributions, and (iii) that she had charged Ms Lazar 40% of the released contributions.  Ms Gylman did not explicitly accept the first point, but was totally unable to explain what conceivable advantage that Ms Lazar could have got by transferring to the Friendly Fund.  I find that Ms Gylman did tell Ms Lazar that transfer to the Friendly Fund was a necessary part of obtaining the release of her superannuation contributions.  This conduct was, at the very least, utter incompetence.  And in that context, Ms Gylman was ultimately driven to concede that she had no real knowledge of the relevant criteria governing compassionate payment. 

5. A more serious view of Ms Gylman’s conduct in relation to Ms Lazar is that she acted with self interested dishonesty. I make that finding, partly because it is scarcely conceivable that Ms Lazar had any motive to join the Friendly Fund (a non-performing SMSF which she should have been advised did not comply with the SIS Act requirements). I make that finding also because of the demonstrable unreliability of Ms Gylman’s denial that she charged Ms Lazar 40% of her member’s contribution. In support of her denial Ms Gylman identified various payments from her “a/c ….286” which she said represent the payments she had made that gave Ms Lazar her full entitlement. This explanation was nonsense. Careful examination of the bank account statements showed that three of the payments Ms Gylman said she made to Ms Lazar (and totalling $14,000) were actually transfers to her own ANZ bank loan account (a/c …8299). When confronted with this reality, Ms Gylman was unable to provide any explanation. In the absence of a credible explanation, I find that Ms Gylman did not pay Ms Lazar the full amount of her superannuation benefits, and that she withheld about 40% for her own benefit. I reject her evidence to the contrary.

6. The incredibility of Ms Gylman’s initial explanation for the content of the 2008 and 2009 Friendly Fund tax returns has to be viewed in the light of a number of other matters.  They are (i) the complaints from the four rollover members, (ii) the unreliability of her evidence concerning the payment to Ms Lazar, (iii) the implausibility of her explanation for operating the multiple bank accounts, (iv) the inconsistency in her evidence about the investment in Lebanon, and (vi) the absence of any substantiating records.  When I take all those matters into account I am led comfortably to the conclusion that Ms Gylman did indeed operate the improper scheme for which she was disqualified in October 2012.

7. In arriving at that conclusion I have not overlooked the fact that Ms Gylman provided a letter dated 11 June 2013 from SC, and an undated and unsigned statutory declaration which she claimed he had approved.  The letter stated that SC had “invested all Friendly Funds available funds in overseas property” but conceded he had no evidence of any such investment.  The unsigned statutory declaration stated that SC “had received all roll over Friendly Fund superannuation money to invest overseas.  The statement in the letter is exquisitely question begging, and in my view fatuous.  The statement in the statutory declaration is at least wrong (because of the evidence of the repayments to the four rollover complaints to whom I referred earlier) and is in any event incredible – having regard to the inconsistency in Ms Gylman’s previous explanations, and her disavowal at the hearing of the proposition that she ever approved of, or agreed to, property investment in Lebanon.  That incredibility is dramatically highlighted by reference back to the Tables in paragraphs 8 and 12 above.  Those Tables show that the amounts involved in “rollover” transactions was at least about $550,000, possibly as much as $1m, and that $772,000 of the payments made out of the Friendly Fund account have not been accounted for in any documented way.  Those amounts contrast very dramatically with the $48,200 value recorded in the 2008 and 2009 Friendly Fund tax returns which Ms Gylman says she audited. 

8. I am encouraged to the conclusion expressed in paragraph 33 by the realisation that the total Friendly Fund deposits indicated in the Table in paragraph 5 (ie about $1.6m) could not have come from personal contributions from Ms Gylman, and the “rollover” transactions listed in the Table in paragraph 12.  Those deposits explain at most about $700,000 of the total amount.  There had to be another $900,000 in contributions.  Ms Gylman conceded, when this was pointed out to her, that other “rollover” transactions had occurred.  There is nothing to explain where these monies went.  No sum remotely approximating them remained in any bank accounts – at least none produced in evidence.  Ms Gylman agreed that the thrust of her evidence is that the bulk (if not the entirely) of this money, representing members funds, had been invested in Lebanon.  However she was unable, even now, to give any details of the investment properties – other than that she believed they had been used in a development undertaken by the brother of “SC” (ie the Fund’s supposed “investment manager”). Despite that belief, Ms Gylman had not contacted the brother and had done nothing at all effective in attempting to determine the current status of the supposed investment or the prospect of a return of the superannuation contributions.  All of this strains credulity and, in my opinion, well beyond the breaking point where the finding I have made in paragraph 32 became appropriate.

9. The strong impression I have formed is that Ms Gylman lacks any real understanding of, or at least any real commitment to comply with, the law relating to superannuation and taxation.  That impression was begun by the incredibility to which I referred in the previous paragraph of these reasons.  It was partly confirmed by some of her explanations that she had not checked the relevant legislation and had simply relied on what “people” had told her.  It was more directly confirmed by evidence Ms Gylman gave in cross examination. 

10. In the course of her cross examination Ms Gylman disclosed the following matters:

    (a)the “investment manager” of the Friendly Fund was a person she had met in about 1999 when he was working as an electrician, and with whom she had subsequently formed a romantic relationship.

    (b)she had made “’salary sacrifice” contributions to the Friendly Fund, at the rate of about $1,000 per fortnight at the beginning of the 2008 tax year, and continued to make similar regular contributions.

    (c)she had adopted a practice of immediately withdrawing those contributions.

    (d)the withdrawals were made, at least for a substantial period, to pay mortgage commitments on a property which she had co-purchased (with another person she could not name).

    (e)she had purchased the other property in her own name because she understood that she could not (at that time, in any event) borrow on behalf of the Friendly Fund to acquire a fund investment property.

    (f)despite purchasing the property in her own name, and borrowing in her personal capacity, she had continued to meet the mortgage commitments by drawing from the Friendly Fund – “because it was an investment and you have to pay”.

    (g)she had subsequently borrowed further funds from the ANZ bank, in order to pay out the outstanding mortgage on the “investment” property.

    (h)she drew on the Friendly Fund to meet the repayment obligations to the ANZ bank in relation to the additional borrowing.

    (i)she later repaid a substantial part of the ANZ borrowing, by drawing on the funds in her personal “a/c … 263”.

11. This evidence has to be understood and evaluated in the light of Ms Gylman’s concession, at the commencement of the hearing, when she was first asked about the regular $1,000 deductions from the Friendly Fund account, that she was never in a “transition to retirement” status.  Understood against the background of that indication, Ms Gylman’s own evidence comfortably and clearly demonstrates that, for her own self interest, and clearly knowing that it was improper to do so, she simply resorted to her own superannuation contributions to meet her own investment desires and funding needs.  This conduct was unjustifiable and wrong.

    The meaning of fit and proper

12. Against the background of the findings I have made it is unnecessary to dwell upon or explore the nuances of the “fit and proper” criterion.  It is sufficient to refer only to two passages where the High Court has provided a relevant judicial exegesis.

13. In Hughes and Vale Pty Ltd v State of NSW (No 2) (1955) 93 CLR 127 at 156 the High Court said that the words “fit and proper” were traditionally used in relation to persons holding offices or vocations:

    “But their very purpose is to give the widest scope for judgment and indeed for rejection. ‘Fit’ (or ‘idoneus’) with respect to an office is said to involve three things, honesty, knowledge and ability: ‘honesty to execute it truly without malice, affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it’ – Coke.”

14. In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, Toohey and Gaudron JJ said this about the expression “fit and proper”:

    “The expression ‘fit and proper person, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of ‘fit and proper’ cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that in certain contexts, character (because it provides indication of likely future conduct) or reputation (because it provides indication of likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.”

15. Applying the “fit and proper” criterion to the specific question of taxation registration a former President of this Tribunal (Davies J) said (in Su v Tax Agents’ Board South Australia (1982) 61 FLR 1 at 4 – 5):

    “The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.”

16. In the case of Ms Gylman I am far from satisfied that she is a person who has a proper knowledge of relevant taxation laws, that she can be relied on to prepare taxation returns competently and accurately, or that she can be relied on to deal with client’s taxation affairs honestly and competently.  I am not satisfied about those matters because of (i) her self interested and improper past resort to her own superannuation funds, (ii) her conduct in participating in the “rollover” scheme found by the ATO, (iii) the likely contrivance, and at least the clear inaccuracy, in the tax returns she previously submitted on behalf of the Friendly Fund, (iv) the risible explanation she gave for the use of the multiple bank accounts, (v) her complete misunderstanding of the audit requirements in the SIS legislation (a misunderstanding which I regard as tending to demonstrate a misapprehension of basic and important concepts highly relevant to the competence of a taxation agent), and (vi) the unreliability of her evidence –  evidence which I explicitly reject – that all the rollover funds were used for property investments under the control of the Friendly Fund’s “investment manager” SC.

17. In my view Ms Gylman is definitely not a fit and proper person to be registered as a taxation agent.

18. In coming to that conclusion I have not overlooked Ms Gylman’s protestation that she did not personally benefit from any of the transfers from the Friendly Fund account, or at least that she did not misappropriate any funds.  The first of these points is demonstrably untrue.  Ms Gylman took moneys from the Friendly Fund as and when she needed them to fund her borrowing commitments.  She ultimately conceded as much.  The second point is of debatable accuracy – given the impossibility of properly reconciling the many transactions involved in the movements between the main bank accounts – and Ms Gylman’s inability to identify or explain the totality of the transactions (see paragraph 9 above).

19. Neither have I overlooked the various testimonials that Ms Gylman offered from three friends, at least one of whom had been her client.  Two of these testimonials were in almost identical wording, which Ms Gylman had herself assisted in framing.  Those two testimonials referred, euphemistically, to her “mishap” with SC “and the super fund incident”.  The third testimonial was even less informative, and simply claimed awareness of “the case between (SC, Ms Gylman) and the ATO”.  All three testimonials displayed no real knowledge or understanding of the misconduct in which I have held Ms Gylman was involved (the scheme found by the ATO in its 2012 disqualification decision).  They were also consequently weightless in contributing towards positive satisfaction that Ms Gylman was a fit and proper person to have her registration renewed as a taxation agent.

    Conclusion

20. The decision under review is affirmed.

I certify that the preceding 49 (forty -nine) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member

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

Associate

Dated 23 December 2015

Date(s) of hearing	24, 25 November 2015
Applicant	In person
Counsel for the Respondent	Mr D McLure SC
Solicitors for the Respondent	Tax Practitioners Board