Hill v Tax Practitioners Board

[2020] AATA 678

Hill and Tax Practitioner Board (Taxation) [2020] AATA 678 (26 March 2020)

Division:Taxation and Commercial Division 

File Number:2019/0448          

Re:Richard HILL

APPLICANT

AndTax Practitioners Board

RESPONDENT

Decision

Tribunal:Mr P W Taylor SC, Senior Member

Date:26 March 2020

Place:Sydney

The Board’s registration termination decision of 10 January 2019 is affirmed.

The Board’s five year determination of 10 January 2019 is set aside and in substitution for that determination, I determine that Mr Hill may not apply for registration for a period of two years from 10 January 2019.

…………………[sgd]…………………………….

Mr P W Taylor SC, Senior Member

Catchwords

TAX AGENTS – tax agent registration cancellation – Tax Practitioners Board – decision to prevent reapplying for tax agent registration for five years – conduct of personal affairs – whether applicant is a fit and proper person – non-disclosure of compliance defaults and overdue tax obligations – decision under review affirmed

TAX AGENTS – re-application determination – applicant ineligible to re-apply for registration for five year period – maximum ineligibility period – two years appropriate period for re-application determination – decision under review set aside and substituted   

Legislation

Corporations Act 2001 (Cth) – ss 206A – 206G, 920A, 920B, 920D

Superannuation Guarantee (Administration) Act 1992 (Cth) - s 16
Tax Agents Services Act 2009 (Cth) – ss 2-5, 90-5, 2-10, 20-15, 20-5, 20-15, 20-25, 20-45, 20-50, 30-5, 30-10,  30-15, 30-30, 30-35, 40-5, 50-5, 50-20, 50-30, 60-135, 70-10
Tax Agent Services Regulations 2009 (Cth) - regs 8, 12

Taxation Administration Act 1953 (Cth) – div 269, s 8K

Cases

A Solicitor v Law Society (NSW) (2004) 216 CLR 253

Ampol Petroleum Pty Ltd v Findlay Fullagar J, Supreme Court of Victoria, 30 October 1986
ASIC v Rich [2002] NSWSC 483; (2002) 42 ACSR 80
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Brewarrana v Commissioner of Highways (1973) 4 SASR 476
Burnett v Tax Practitioners Board [2014] AATA 687; (2014) 99 ATR 456
Carter and Tax Practitioners Board [2017] AATA 528
Chamberlain v Australian Capital Territory Law Society (1993) 118 ALR 54
Delis v Tax Practitioner’s Board [2015] AATA 820
Ex parte Tziniolis; Re the Medical Practitioners Act (1966) 67 SR (NSW) 448
Frost Taxation Pty Ltd and Tax Agents’ Board of South Australia [2005] AATA 393; (2005) 87 ALD 794
G J Brown & Co Pty Ltd and Tax Practitioners Board [2016] AATA 740
Grosfield v Tax Practitioner’s Board [2014] AATA 100         
Haig v Aitken [2000] 3 All ER 80
Harris and Tax Practitioners Board [2014] AATA 430
Hourani and Tax Practitioners Board [2012] AATA 518, (2012) 58 AAR 104
Hughes and Vale Pty Ltd v State of NSW (No 2) (1955) 93 CLR 127
Kolya and Tax Practitioners Board [2011] AATA 804
Law Society of South Australia v McKerlie [2008] SASC 222
Law Society of Upper Canada v Ontario (Attorney-General) (1995) 121 DLR (4th) 369
Legal Practitioners Conduct Board v Nicholson [2006] SASC 21
Li v Tax Practitioners Board [2014] AATA 299
McKay v Tax Agents Board Tasmania [1994] AATA 113; (1994) 94 ATC 2057
New South Wales Crime Commission v Murchie (2000) 49 NSWLR 465; [2000] NSWSC 591
Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254
Prothonotary v Del Castillo [2001] NSWCA 75
R. v Board of Trade, Ex p. St. Martins Preserving Co [1965] 1 Q.B. 603
Re Barker; ex parte Constable (1890), 25 Q.B.D. 285
Re Carbery and Associates Pty Ltd and Tax Agents' Board of Queensland [2001] AATA 107; (2001) 46 ATR 1106
Re Davis (1947) 75 CLR 409
Re Proh and Tax Agents’ Board of Victoria (2010) 78 ATR 663
Re GHI (a protected person) [2005] NSWSC 581
Re Kerin and Tax Agents’ Board (SA) [2009] AATA 764; (2009) 113 ALD 530
Re Phillip Same Accountants Pty Ltd and Tax Practitioners Board [2010] AATA 439
Sargent v Tax Agents Board of Victoria [2009] AATA 219; (2009) 75 ATR 495
Shmuel and Tax Practitioners Board [2019] AATA 2168
Stasos v Tax Agents’ Board of New South Wales [1990] AATA 346; (1990) 21 ALD 437
Su v Tax Agents’ Board South Australia [1982] AATA 127; (1982) 61 FLR 1
Three Wickets Pty Ltd and Tax Practitioners Board [2016] AATA 786
Toohey v Tax Agents’ Board of Victoria (No 2) [2008] FCA 1796; (2008) 106 ALD 506
Toohey v Tax Agents' Board of Victoria (No 3) [2010] FCA 356; (2010) 78 ATR 905
Trevaskis and the Tax Practitioners Board [2013] AATA 301; (2013) 135 ALD 200
Wyborn v Tax Agents Board of NSW [2007] AATA 1492
Young v Wicks (1986) 13 FCR 85; (1986) 79 ALR 448

Ziems v Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279

Secondary Materials

Explanatory Memorandum to the 2009 Tax Agent Services Bill

Explanatory Paper TP(EP) 01/2010 - Code of professional conduct
Explanatory Paper TPB(EP) 02/2010 – Fit and proper person

Information Sheet TPB(I) 34 / 2018 - Code of Professional Conduct - complying with taxation laws in the conduct of your personal affairs

REASONS FOR DECISION

Mr P W Taylor SC, Senior Member

26 March 2020

1. Mr Hill has practised as a chartered accountant since 1977, and as a tax agent since 1982. In about March 2010 he became a registered tax agent under the Tax Agents Services Act 2009 (Cth) (“TASA”). With periodic renewals, he retained that status until the decision that is the subject of these review proceedings. At the time of his first TASA registration Mr Hill’s practice had been carried on by Richard Hill & Associates Pty Ltd. In about 2005 Mr Hill became affiliated with the international accounting firm association DFK International. He subsequently operated his practice (involving a sequence of corporate entities and, until about July 2017, various administrative arrangements with other co-directors he described as “partners”) under the business name DFK Richard Hill. Three of those entities (Eleventh Floor Pty Ltd - until January 2014, DFK Richard Hill Pty Ltd – from July 2013 onwards, and Forte Financial Pty Ltd – from 31 December 2015) were also registered tax agents. Mr Hill became the sole director of Forte Financial Pty Ltd in June 2016, and the sole director of DFK Richard Hill Pty Ltd in October 2017.

2. Following an investigation it had initiated in September 2018, on 10 January 2019 the Tax Practitioner’s Board (which I will refer to hereafter simply as “the Board”) decided to terminate Mr Hill’s tax agent registration. The principal reason for the Board’s decision was its view that Mr Hill was not a “fit and proper” person. That view was itself primarily based on findings that Mr Hill had failed to comply with the TASA Code of Professional Conduct obligations to act honestly (see paragraph 37 below), and had failed to comply with taxation laws in the conduct of his personal affairs (see paragraph 18 below). The result of the Board’s view was that Mr Hill no longer met one of the statutory registration eligibility requirements, and that result enlivened the termination power conferred by TASA s 40-5(1)(b).

3. The Board notified Mr Hill of its decision on 24 January 2019, and informed him that the termination decision would take effect on 22 February 2019. The Board also determined that Mr Hill could not apply for re-registration within five years.

4. Mr Hill’s 25 January 2019 application invoked the review jurisdiction conferred on this Tribunal in relation to the Board’s termination decision:- see TASA s 70-10(e). An amendment to the application in April 2019 extended the review to the Board’s “five year” determination, in relation to which there is a separate review jurisdiction:- see TASA s 70-10(h).

   The TASA scheme - registration and regulation

5. The basic TASA purpose is to ensure that tax agent services are provided “in accordance with appropriate standards of professional and ethical conduct”:- see TASA s 2-5. (The term “tax agent services” includes the provision of advice and representation services relating to Commonwealth taxation matters:- see TASA s 90-5.) The TASA provisions establish the Board and endow it with registration, conduct investigation and disciplinary functions:- TASA ss 60-5, 60-15 & 60-95.

6. The registration regime is a fundamental means of effectuating TASA’s stated purpose. A person who is not a practising lawyer must be a registered tax agent to be able to charge for providing any services that are “tax agent services”:- see TASA ss 2-10 & 50-5. (Where the service involves the preparation or lodgement of taxation returns, the disqualification also extends (subject to limited exceptions) to work done by a practising lawyer:- TASA s 50-5(1)(e)(ii) & 50-5(3).) An unregistered person can be restrained from providing, or advertising their willingness to provide, tax agent services and from misrepresenting their registration status. They can also be subjected to significant civil penalties:- TASA ss 50-5, 50-10, 50-15, 50-25 & 70-5.

7. A threshold eligibility requirement for TASA registration is an applicant’s probity and good repute. An individual registration applicant must satisfy the Board they are a “fit and proper person”:- see TASA s 20-5(1)(a). A corporate applicant for tax agent registration must satisfy the Board that each of its directors is a “fit and proper person”:- TASA s 20-5(3)(a).

8. Subject to any more specific eligibility requirements, an individual applicant (and any director of a corporate applicant) will likely satisfy the Board they are “fit and proper” if they can adequately demonstrate their “good fame, integrity and character”:- TASA s 20-15(a). There are no prescriptive limits on the considerations that may inform such an assessment:- see TASA s 20-15(b); Toohey v Tax Agents’ Board of Victoria (No 2) [2008] FCA 1796; (2008) 106 ALD 506 at [3]. The assessment must have regard to, but is neither limited to nor explicitly determined by, whether in the preceding five years, the person has:-

   (a)served, or has been sentenced to, a term of imprisonment:- TASA ss 20-15(b)(i) & 20-45(f); 20-15(b)(iii),

   (b)had the status of an undischarged bankrupt:- TASA ss 20-15(b)(ii) & 20-45(e),

   (c)been convicted of any offences involving fraud or dishonesty:- TASA ss 20-15(b)(i) & 20-45(b), or

   (d)been convicted of, or otherwise sanctioned for, a “serious taxation offence” or certain other kinds of tax related misconduct:- TASA ss 20-15(b)(i) & 20-45(a), (c) & (d).

9. The more specific registration eligibility criteria for an individual tax agent include appropriate qualifications, experience and professional indemnity insurance:- TASA s 20-5(1)(b) & (c); Tax Agent Services Regulations 2009 (Cth) reg 8. The similar eligibility criteria for an incorporated tax agent entity include (i) not having incurred a conviction for fraud, dishonesty or a “serious taxation offence” within the preceding five years, (ii) having sufficient registered individual tax agents to provide (and supervise the provision of) competent tax agent services and, (iii) having requisite professional indemnity insurance:- TASA s 20-5(3).

10. An applicant who satisfies the relevant eligibility requirements must be registered (for a minimum period of three years):- TASA s 20-25. Their registration may be subject to conditions relating to the subject matter of the tax agent services they can provide:- TASA s 20-25(5) & (6). Registration is renewable in response to a timely (or otherwise permitted) application:- TASA s 20-50(1). Where an agent has submitted a timely renewal application, their registration is taken to continue until the Board determines the application:- TASA s 20-50(2). The Board must maintain a publicly accessible, internet based, register setting out details of each tax agent’s registration:- TASA s 60-135.

11. As a registered person, a tax agent is subject to various obligations. They include:-

    (a)compliance with any registration conditions imposed by the Board:- TASA s 20-25(5),

    (b)compliance with the Code of Professional Conduct:- TASA ss 30-5 & 30-10,

    (c)notifying the Board “whenever” they cease to meet any registration requirements:- TASA s 30-35(1)(a), and

    (d)notifying the Board if they have (amongst other things) been convicted of a “serious taxation offence”, convicted of any other offence involving fraud or dishonesty, or sentenced to imprisonment:- TASA ss 30-35(1)(b) & 20-45(a), (b) & (f).

12. The mandatory Code of Professional Conduct complements the TASA registration provisions. The Code sets out explicit requirements of honesty, competence, lawfulness, and conduct in the best interests of clients. In addition to the Code provisions, there are additional “civil penalty” provisions that apply where a registered agent makes false or misleading statements, permits an entity to make such statements, uses an unregistered person or provides taxpayer related declarations that have been prepared by third parties:- TASA ss 50-20 to 50-30.

13. The Board can terminate a tax agent’s registration in various circumstances. They include situations where the tax agent has:

    (a)ceased to meet a registration requirement:- TASA s 40-5(1)(b),

    (b)breached a registration condition:- TASA s 40-5(1)(c),

    (c)been convicted of a “serious taxation offence” (or a dishonesty offence):- TASA ss 40-5(1)(a) & 20-45(a)&(b),

    (d)become bankrupt:- TASA ss 40-5(1)(a) & 20-45(e), or

    (e)been sentenced to imprisonment:- TASA ss 40-5(1)(a) & 20-45(f).

14. Where the Board has conducted an investigation into an agent’s conduct, and concluded the agent has failed to comply with the Code of Professional Conduct, it has a range of available powers. They are powers to (i) issue a written caution, (ii) impose a requirement for supervision of the agent, (iii) require the agent to undergo training or education, (iv) suspend the agent’s registration and, (v) terminate the registration:- TASA ss 30-15(2), 30-20(1), 30-25(1) & 30-30. Details of any suspension or termination sanction must be recorded in the Board’s register:- TASA s 60-135 & Tax Agent Services Regulations 2009 (Cth) reg 12.

15. When the Board terminates a tax agent’s registration (for reasons other than the agent’s insolvency) it may also preclude the agent from applying for re-registration, for a period of up to 5 years:- TASA s 40-25(1) & (2).

16. The preceding summary reveals that probity (both as to character and repute), competence, and lawful conduct (particularly in relation to Commonwealth taxation laws) are intended to be pre-conditions to a tax agent’s continuing registration status, and thus to any ability to provide remunerated “tax agent services”. Conversely, a person who satisfies the applicable eligibility requirements is ordinarily entitled to registration. There are therefore two aspects of “public interest” intended to be served by the TASA scheme. One aspect is that of establishing a supervised regime for ensuring compliance with appropriate standards. The other aspect is that of facilitating the general availability of the services of persons who satisfy the TASA registration and conduct requirements.

17. Various kinds of Board decisions are reviewable by this Tribunal. Those decisions include (i) rejection of registration applications, (ii) refusal to abridge the time for a renewal application, (iii) termination of registration and (iv) the determination of a period of registration ineligibility:- TASA s 70-10(a), (d), (e) & (h).

    The taxation lodgement and Liability defaults underlying the Board’s decision

18. The Board’s 10 January 2019 decision and determination, as well as its submissions in the review proceedings, were substantially based on the significance of a number of income tax return / business activity statement lodgement defaults and various payment defaults. More specifically stated, the Board’s findings involved the following matters:-

    (a)lodgement defaults:- Mr Hill (in his role as a director or tax agent) had been personally culpable for the failure of various entities to lodge income tax returns and business activity statements within the times required by taxation laws, and some of those entities had outstanding lodgement obligations.

    (b)superannuation guarantee charge defaults:- Mr Hill (again in his role as a director[1] and tax agent) had been personally culpable for the non-remission of (and non-payment relating to) superannuation guarantee charge payments and liabilities by the following entities[2]:-

    (i)23 Martin Place Pty Ltd[3]:- relating to the period from April to September 2012 - two amounts totalling about $26,000 - resulting in an unpaid Director Penalty Notice dated 27 March 2018,

    (ii)Richard Hill & Associates Pty Ltd[4]:- for the period from July to December 2016, two amounts totalling about $33,500 – resulting in an unpaid Director Penalty Notice dated 18 June 2018, and

    (iii)RHA Associates Pty Ltd[5]:- for the period from January to December 2017 – four amounts totalling about $71,000 - resulting in an unpaid Director Penalty Notice dated 31 May 2018.

    (c)PAYG remission defaults by RHA Associates Pty Ltd:- Mr Hill had been personally culpable (again in his role as a director and tax agent) in the non-remission of PAYG instalments for the period from March 2017 to May 2018 (involving 13 amounts totalling about $162,570 that resulted in a 10 August 2018 unpaid Director Penalty Notice.

    (d)unpaid tax judgment debt:- Mr Hill had failed to pay to the Commissioner of Taxation a 13 August 2013 default judgment debt of $319,737.

    [1]Division 269 (and specifically ss 269-5 & 269-15) of Schedule 1 to the Taxation Administration Act 1953 (Cth) imposes on directors an obligation to ensure / cause a company’s compliance with the withholding and payment obligations (relating to PAYG instalments and superannuation guarantee payments) arising under Subdivision 16-B and Division 268 of that Schedule and Part 3 of the Superannuation Guarantee (Administration) Act 1992 (Cth). Where the company fails to make the required payments, individual directors are liable to a penalty corresponding to the amount unpaid by the company, unless (amongst other things) they took all reasonable steps to cause the company to comply:- see Taxation Administration Act 1953 (Cth) Schedule 1 ss 269-20 & 269-35. The penalty is a tax related liability that constitutes a debt recoverable by the Commissioner:- see Taxation Administration Act 1953 (Cth) Schedule 1 ss 255-1 & 255-5. However the absence of any instalment arrangement, and the issue of a “Director Penalty Notice”, are both preconditions to the Commissioner’s ability to recover the penalty amount:- see Taxation Administration Act 1953 (Cth) Schedule 1 ss 269-15 & 269-25.

    [2]The Board was aware of, but did not explicitly base its decision on, superannuation guarantee charge defaults by DFK Richard Hill Pty Ltd. I discuss that matter later in these reasons:- see paragraphs 31 to 34 below.

    [3]Mr Hill and one of his practice “partners” were the only directors of this company after its July 2010 incorporation.

    [4]           Mr Hill and his wife had been the only directors of this company since June 2001.

    [5]This company had been incorporated in January 2015 as “DFK Richard Hill Audit Pty Ltd”. At all times Mr Hill had been its only director.

19. The basic facts of the various lodgement and payment defaults specifically relied on by the Board at the time of its January 2019 decision, though generally not contentious, were ultimately subject to some clarification and corrections. They arose primarily from recent searches of ATO records, and were substantially reflected in a detailed supplementary schedule the Board provided as part of its review proceedings submissions. That Schedule attempted to differentiate between income tax debts, and additional liabilities that had been imposed on Mr Hill because of his director status. It addressed the position at each of the dates that had been considered by the Board, and included two other dates in April and June 2019.

20. The most significant correction and clarification related to the liability underlying the August 2013 judgment debt. The correction was that, although the liability was the subject of a default judgment dated 13 August 2013, it had in fact been fully paid some few days earlier. The clarification disclosed that the liability arose from the failure of 23 Martin Place Pty Ltd to pay PAYG amounts it had withheld (under Subdivision 16-B in Schedule 1 of the Taxation Administration Act 1953 (Cth)) for the period from October 2011 to September 2012. Whilst the Board accepted the fact of the 2013 payment, it relied on the underlying PAYG default, given Mr Hill’s director status, as contributing to dissatisfaction about his contemporary fitness.

1. In relation to other clarifications I have relied on the Board’s submission tables as the basis for the information in the three Schedules to these reasons. In so doing I have attempted to reconcile that information back to the details reflected in the material addressed by the Board at the time of its decision in January 2019, and with the results of the Board’s subsequent ATO search results. (I have, for example, adjusted the information in the Board’s submission to reflect the superannuation guarantee charge and PAYG defaults:  indicated in paragraphs 18(b) & 18(c) above.) In a small number of instances, I have not been satisfied of the accuracy of some entries in the submission tables. In those instances I have preferred to accept either the details in the summary tables in the submission material that was before the Board, my interpretation of the subsequent search results, or (specifically in the case of the outstanding debt obligations as at June 2019) information provided by Mr Hill about the payment plans he entered into in June 2019.

2. I summarise each of the Schedules to these reasons in the following paragraphs.

3. Schedule 1 – overview of lodgements and debts:- This Schedule lists the various defaulting entities, and groups them according to the nature of Mr Hill’s status with each entity. The Schedule then indicates each entity’s debt status, and the fact and nature of its lodgement defaults at the time of Mr Hill’s 2016 renewal application and at the time of each of the subsequent annual declarations he made to the Board.[6] The Schedule also includes the state of affairs at three later dates remarked on in the evidence. They are 20 November 2018 (the date of the information the Board relied on in making its decision), 1 April 2019 (prior to the stay hearing in the present proceedings) and 10 June 2019 (shortly before the hearing of the review application).

   [6]I have omitted from this Schedule (and from Schedules 2 & 3) any reference to two other companies of which Mr Hill was (or had been) a director, and which were referred to in the November 2018 submission to the Board;- Pacwealth Capital Pty Ltd (from 4 November 2016 – 1 of 2 directors) 7 Steel Distribution Pty Ltd (29 May 2008 to 30 June 2009). Pacwealth Capital had a trivial outstanding tax debt in May 2018. At the time of its October 2010 liquidation, 7 Steel Distribution had a total tax debt exceeding $3m. However, it had no tax debt until 22 June 2009, and the preponderance of its tax debts relate to periods after Mr Hill ceased his directorship of the company. I have regarded the non-disclosure of Pacwealth’s tax debt as immaterial. I have noted that the Board made no adverse finding in relation to 7 Steel Distribution, and consider the limited material relating to that company insufficient to justify any adverse finding.

4. The propositions that emerge from Schedule 1, when it is understood in the context of the detailed information from which it has been drawn, are to the following effect:-

   (a)From at least March 2016 onwards Mr Hill had a significant (ie., > $40,000) personal income tax debt, but no outstanding personal lodgement defaults, at each of the indicated dates:- see Schedule 1 row 11,

   (b)The two corporate entities associated with Mr Hill’s former accounting practice had both significant tax debts and lodgement defaults, including liabilities related to non-remission of superannuation guarantee charge amounts, at most of the indicated dates:- see Schedule 1 rows 18 & 19,

   (c)The three corporate entities associated with Mr Hill’s current accounting practice also had both significant tax debts, and lodgement defaults, including liabilities related to non-remission of superannuation guarantee charge amounts, at most of the indicated dates:- see Schedule 1 rows 22 -24, and

   (d)Four other corporate entities, of which Mr Hill was a director, and in which he had a relevant financial interest, also had lodgement defaults and outstanding tax debts at most of the indicated dates:-  see Schedule 1 rows 27 to 32.

5. Schedule 2 - Outstanding lodgements:- This Schedule provides more detail of the nature and timing of Mr Hill’s status as a director of each of the corporate entities listed in Schedule 1. The Schedule then indicates the number and nature of the various income tax returns (“ITR”) and business activity statements (“BAS”) that were outstanding at the dates of each of the various applications or Annual Declarations that the Board had regarded as misleading.[7] The Schedule also includes the state of affairs as at both April 2019 and 10 June 2019.

   [7]This information has, in the main, been taken from the November 2018 submission to the Board, and the Tables provided with the Board’s review submissions. Where the November 2018 submission recorded a lodgement default, I have assumed the accuracy of that statement. Where that submission noted a lodgement date, I have ignored dates that are patently wrong (eg., where the stated lodgement date precedes the period to which it purportedly relates) but otherwise assumed their accuracy.

6. The information summarised in Schedule 2 needs to be understood against the background of the details (set out in the information provided to the Board) recording the “due” and “actual” lodgement dates for the various income tax returns and business activity statements. So understood, Schedule 2 admits of the following propositions:-

   (a)At none of the indicated dates did any lodgement default involve Mr Hill’s individual tax return obligations:- see Schedule 2 row 11.[8]

   (b)The two corporate entities associated with Mr Hill’s former accounting practice were delayed (to varying extents) in both income tax return and business activity statement lodgements relating to periods after early 2015, apparently cathartically remedied most of those defaults at various times in 2017 and 2018, and had no outstanding lodgements by April 2019:- see Schedule 2 rows 15 & 16.

   (c)The three corporate entities associated with Mr Hill’s accountancy practice after about the beginning of the 2017 tax year were typically tardy in meeting their various lodgement obligations (sometimes for periods of up to six months). They had cathartically remedied their various defaults, but still had some lodgement defaults (varying between three and six months) at some of the indicated dates, including August and October 2018:- see Schedule 2 rows 19 - 21.

   (d)In relation to three of the four other corporate entities of which Mr Hill and / or his wife are apparently the only directors and shareholders, one entity (Dalua Pty Ltd) cathartically complied with its lodgement requirements, but had been almost a year late in submitting some business activity statements, and was 5 months late in lodging its 2017 income tax return. Another company (Roslyn Pastoral Pty Ltd) had some defaults but had been comparatively more timely in meeting its lodgement obligations. A third entity (Forte Financial Pty Ltd) had been significantly tardy in lodging both its 2015 and 2016 income tax returns. It had also been tardy in lodging its business activity statements after September 2017:- see Schedule 2 rows 24, 25 & 29.

   (e)The fourth of the corporate entities in which Mr Hill had both a status as director and some degree of financial interest was Forte Private Wealth Pty Ltd. There had been a longstanding lodgement default by Forte Private Wealth Pty Ltd, in relation to both its income tax returns (for the 2014 and 2015 tax years) and business activity statements (after the end of the 2017 tax year). Some of those defaults either occurred (or went unremedied) after 11 April 2016. In the 20 months prior to that date Mr Hill and his son had been the only directors of the company. In the subsequent five month period before the company’s September 2016 winding up, Mr Hill had been the sole director of the company:- see Schedule 2 row 28. I address the circumstances of this company, and Mr Hill’s activities in relation to it, later in these reasons:- see paragraph 29 below.

   [8]Mr Hill had in fact been late in lodging his income tax returns for each of the 2013, 2014, 2015, 2016 and 2017 tax years:- see Exhibit 5A.

7. Schedule 3 - Unpaid taxation liabilities:- This Schedule repeats the entity grouping, and director status information, shown in Schedules 1 & 2. It then indicates each entity’s total taxation related liability at the dates used in Schedule 1 (the dates of the various registration applications or Annual Declarations that the Board regarded as misleading). In relation to Mr Hill’s personal liabilities, it includes the amounts in the four Director Penalty Notices that were given to Mr Hill between March and August 2018. Schedule 3 then indicates the total indebtedness of each listed taxpayer entity as at November 2018, 1 April 2019 and 10 June 2019.

8. The propositions that can be extracted from Schedule 3 (and the information to which it relates) are as follows:-

   (a)Mr Hill had outstanding personal taxation liabilities (ie., liabilities recoverable from him personally) throughout the whole period from March 2016 onwards. In November 2018 those liabilities gave rise to a total debt approximating $320,000. That debt included amounts that were the subject of various Director Penalty Notices that had been issued during 2018. Notwithstanding the apparent magnitude of the debt, it had been (almost entirely) paid by the beginning of April 2019:-  see paragraphs 18(b)&(c) above, and Schedule 3 Rows 13 to 17.

   (b)The two corporate entities that had been associated with Mr Hill’s former accounting practice had outstanding tax liabilities throughout most of the period from March 2016 onwards. They principally related to (comparatively modest) amounts of unpaid superannuation guarantee charges:- see Schedule 3 rows 21 & 22.

   (c)The three corporate entities actively associated with Mr Hill’s current accountancy practice had substantial unpaid tax liabilities throughout the 32 month period from March 2016 to November 2018. By May 2018 the total debt approximated $470,000. It had grown to almost $600,000 by November 2018. A very substantial proportion of the total debt related to unpaid superannuation guarantee charge amounts. However, most of the total debt had been paid prior to April 2019:- see Schedule 3 rows 26 to 28.

   (d)Leaving aside the entities directly associated with his accountancy practices, Mr Hill and three of the four corporate entities in which he appears to have had a relevant interest, had combined unpaid tax liabilities totalling in the vicinity of $100,000 for most of that period from March 2016 until November 2018. Even after April 2019, two of those corporate entities had outstanding tax liabilities totalling more than $80,000:- see Schedule 3 rows 13, 32, 33 & 39.

   (e)For the whole period from March 2016 until October 2018 the total outstanding tax liabilities of Mr Hill and entities associated with him appears (leaving aside any duplicated liabilities associated with director penalty notices) to have been in the vicinity of about $600,000. By November 2018 it approximated $720,000[9]:- see Schedule 3 row 41. That amount had been significantly reduced by April 2019 (principally as a result of satisfying the tax debt of RHA Associates Pty Ltd) but there was still a total unpaid liability approximating $320,000 as at June 2019:- see Schedule 3 row 41.

   [9]The Board apparently proceeded on the basis that the total outstanding tax liability exceeded $1m. However, that total included both the Forte Private Wealth Pty Ltd debt (which the Board’s submissions disavowed reliance on after September 2016), apparently “double counted” Mr Hill’s “director” liabilities, and did not account for some payments (or adjustments) that had in fact been made.

   Some further background on two of Mr Hill’s corporate entities

9. It is necessary to provide some further background information about two particular companies – Forte Private Wealth Pty Ltd and DFK Richard Hill Pty Ltd.

10. Forte Private Wealth Pty Ltd:- Throughout the period from about May 2013, until July 2014 Mr Hill had attempted, ultimately successfully, to make a payment arrangement with the ATO. His 16 May 2013 letter to the ATO indicated that the company conducted a financial planning business. Its outstanding tax debt, which then approximated $170,000, was said to have arisen from failure to lodge business activity statements (presumably for a substantial period after its September 2010 incorporation). Mr Hill’s later letters to the ATO in June 2014 indicated the company had transferred part of its goodwill, and would be able to use part of the consideration for that transaction to fund instalment payments (approximating $20,000 per month) to the ATO. Although some of those payments were apparently made, it appears that, from about August or September 2015 onwards, the company incurred further tax liabilities. They were the result of business activity statement lodgement defaults and failures to remit superannuation guarantee charge amounts. Nevertheless, in March 2016 Mr Hill succeeded in negotiating a further payment arrangement for the company. It involved a substantial initial payment (exceeding $50,000) to the ATO, and ongoing monthly payments of $11,000. Whilst some of the agreed payments were apparently made, in August 2015 the Commissioner of Taxation successfully petitioned to have the company wound up.

11. DFK Richard Hill Pty Ltd:- Although I have included DFK Richard Hill Pty Ltd as an entity associated with Mr Hill’s current practice (primarily because of his status as the sole director after October 2017) that likely oversimplifies the actual situation. After its September 2012 incorporation, the company had apparently employed the accountancy practice staff. Prior to that date it seems that 23 Martin Place Pty Ltd (as a result of an August 2011 name change) had been named DFK Richard Hill Pty Ltd and had been involved (with Eleventh Floor Pty Ltd) in the conduct of the accountancy practice. After 1 July 2014 Mr Hill and his co-director / partners apparently adopted some other employment arrangement for the practice staff, although DFK Richard Hill Pty Ltd retained its tax agent registration status and presumably continued to operate to some extent (despite Mr Hill’s assertion to the contrary:- see paragraph 60 below).

12. The DFK Richard Hill Pty Ltd Schedule 3 debt (as it existed in May 2017) appears to have arisen substantially from an ATO audit that addressed irregularities in the company’s superannuation guarantee payments in the period from October 2012 (i.e., immediately after the company’s incorporation) to the end of the 2014 tax year. In August 2016 the ATO notified Mr Hill it had completed the audit and would issue assessment notices reflecting the extent of the company’s shortfall (and an associated penalty assessment) in meeting its obligations under the Superannuation Guarantee (Administration) Act 1992 (Cth).

13. The total amount of the liability that arose from the August 2016 audit related decision is not entirely clear, and has apparently been a matter of significant, but tardily pursued, contention with the ATO. The principal contention involves the proposition that the August 2016 audit largely duplicated a prior audit in May 2014, and substantially overstated the amount properly due. That belatedly pursued contention had not been resolved by the time of the review hearing in the present proceedings. However it may ultimately be resolved, as a 29 September 2016 statement of account issued by the ATO indicated that the debt then approximated $103,000. By March 2017 the total debt of about $155,000 included a superannuation guarantee charge approximating $110,000 and a business activity statement related liability of $45,000.[10] By the beginning of July 2017, three weeks before Mr Hill submitted the company’s Annual Declaration to the Board, the tax debt was in the vicinity of $112,000.

    [10]The $155,000 amount is substantially less than the company’s total recorded tax related liability at 31 March 2016 as noted in Schedule 3 (see row 26, column G). It is significantly more than all of the liability amounts recorded at the later dates shown in Schedule 3. The evidence did not make clear what, if any, payments had actually been made. In the absence of specific information, I have assumed the accuracy of the total liabilities recorded in the Schedule.

14. In August 2018 DFK Richard Hill Pty Ltd lodged (in a letter dated 27 April 2018) an objection to the audit related assessment.[11] That objection letter described the October 2012 to 2014 audit period as one in which the accountancy practice had experienced difficulty, including an approximate 25% revenue decline. It also outlined events that had affected the conduct of the accounting practice and the company’s ability to comply with its taxation obligations. These events included the following:-

    (a)A period of financial stress from April 2012 to October 2014.

    (b)The departure of one of the co-director / accounting practice “partners” in May 2015, and a consequential period of disruption.

    (c)The severe illness (involving ongoing medical treatment and reduced work capacity) of the accounting practice’s office manager after late 2015.

    (d)The illness of the other co-director / accounting practice “partner” (“DaShp”) in late 2016 and his subsequent departure from the practice and the company at the end of the 2017 tax year.

    (e)The personal difficulties Mr Hill had encountered in transitioning the accounting practice from a three partner operation to one in which he was the sole person responsible for the practice management and administration.

    [11]The material addressed by the Board characterised this objection as relating only to the penalty assessment. There may in fact have been an earlier objection (in May 2018) that was regarded as only relating to penalty. However that may be, careful reading of the August / April 2018 Objection letter discloses that it complained both about the primary assessment and the penalty. The objection to the primary assessment was made on the basis that the company had previously paid in full a default assessment for the period from October 2012 to March 2014, and that the only outstanding amount was $32,591 relating to the quarter ended June 2014. The objection to the penalty decision was (apparently) on the basis of the significant financial and personal difficulties the company and its officers had experienced throughout the period up until late 2017.

15. The objection letter may have been drafted by DaShp (Mr Hill’s former co-director) but it was mainly written in the first person plural and, in one place, used the first person singular in referring to Mr Hill as now being the “sole Partner” in the accountancy practice. In his oral evidence Mr Hill referred to the letter as his, rather than DaShp’s. Because of those matters it is appropriate to infer that Mr Hill was aware of the substance of the information contained in the letter. Significantly, the letter implicitly acknowledged that the company had failed to remit the superannuation guarantee charge amounts, apparently as a result of a deliberate decision to attempt to weather the company’s financial difficulties without reducing the number of its employees. The letter asserted that neither DaShp nor Mr Hill had intended to deprive employees of their superannuation entitlements, and explicitly acknowledged that the directors of the company “knew as Directors we are personally liable for superannuation”.

16. It is obvious from the content of the objection letter that the company had defaulted, for an apparently substantial period from October 2012 to June 2014, in meeting its superannuation guarantee charge obligations. Similar defaults by other corporate entity employers of Mr Hill’s accountancy practice staff had occurred both before October 2012 and again after June 2014. Those other defaults had been relied on by the Board in making its January 2019 decision (see paragraph 18(b) above), but without explicit reference to the conduct of this particular company, and despite its status as a registered tax agent since 17 July 2013 (i.e., during part of the period that was the subject of the ATO audit).

    The disclosure related defaults underlying the Board’s decision

1. The Board’s January 2019 decision also involved findings that Mr Hill had made false and misleading statements to the Board in each of the following documents:-

   (a)his 31 March 2016 registration renewal application,

   (b)his 11 May 2017 and 8 May 2018 Annual Declarations,

   (c)Annual Declarations by DFK Richard Hill Pty Ltd on 24 July 2017, and 1 August 2018, and

   (d)The 5 October 2018 Annual Declaration by Forte Financial Pty Ltd.

2. The principal basis for each of these findings was the non-disclosure of the various compliance defaults and overdue tax obligations summarised in Schedules 1 to 3. It is necessary to outline the precise nature of the alleged inaccuracy in relation to each of the documents. That outline is contained in the following paragraphs.

3. The 31 March 2016 renewal application:- A question asked whether there were any matters or events that might adversely affect his “good fame, integrity and character”. The question specifically included outstanding “personal” tax lodgement or debt obligations as examples and, in the event of an affirmative answer, directed the provision of details, “including the year the event occurred”. Mr Hill’s affirmative answer to the tax obligations question alluded to his previously disclosed 2015 twelve month suspension as a company auditor. It did not disclose either the fact or the amount of his income tax debt. Neither did it disclose anything relating to the other contemporaneous taxation lodgement defaults or liabilities indicated in the Schedules to these reasons:- see Schedule 1 column H, Schedule 2 column I & Schedule 3 column G.

4. The Annual Declarations of May 2017 and 2018:- The standard form of Annual Declaration contained a number of questions about matters affecting a tax agent’s “good fame, integrity and character”. The matters primarily addressed were of the kinds referred to in TASA ss 20-15 & 20-45 (see paragraph 8 above). One question enquired about “any other matters” and referred to disciplinary actions but, unlike the similar question in the previous renewal application, it did not itself specifically enquire about outstanding tax obligations. The substantive effect of Mr Hill’s response to that “any other matters” component of the “fitness” question in each of the 2017 and 2018 Declarations was the same as that contained in his March 2016 renewal application.

5. An additional standard question in the Annual Declaration form appeared under a separate “Tax Obligations” heading, and followed specific statements to the effect that an agent was required to meet all lodgement and payment obligations in a timely fashion. The payment obligation was qualified by the alternative of payment in accordance with an agreed payment plan. After those statements the standard form question specifically enquired whether the tax agent had any “overdue personal tax obligations”. An affirmative answer was required to be detailed with information about the “type and period of overdue lodgements”, the “type and amount of debt” that was not subject to an approved ATO payment plan, and superannuation guarantee lodgement or debt obligations. Any affirmative answer was to be accompanied by an explanation as to why the disclosed matter would not adversely affect the agent’s registration status.

6. In both of his 2017 and 2018 Annual Declaration responses Mr Hill stated “all returns lodged … payment plan currently (being) applied for”. In his May 2018 response, Mr Hill added that the (unquantified) “outstanding amount” would be settled in the next three months, and was not sufficiently material to impact on “eligibility”.

7. In neither of his responses in the 2017 and 2018 Annual Declarations did Mr Hill disclose the contemporaneous taxation lodgement defaults or liabilities indicated in the Schedules to these reasons:- see Schedule 1 columns I & K, Schedule 2 columns J & L, Schedule 3 columns H & J.

8. DFK Richard Hill Pty Ltd and Forte Financial Pty Ltd’s 2017 and 2018 Annual Declarations:- Each standard form of Annual Declaration for corporate tax agents asked substantially the same “fitness” questions as those posed in the form of Annual Declaration required of individually registered tax agents, but extended to the circumstances of “any company director”. Mr Hill answered that question in each of these Declarations in substantially the same way as he had answered the corresponding questions in his own personal Annual Declarations, and disclosed (or alluded to) his 2015 suspension as an auditor.

9. The forms of Annual Declaration for corporate tax agents also included questions under a separate “Tax obligations” heading. Under this heading the form contained essentially the same statements about compliance with lodgement and payment obligations as those outlined above:- see paragraph 41. The specific question about compliance was simply whether “the company, or any of the company’s directors, have any overdue tax obligations”.[12] The question was neither limited to “personal” obligations, nor excluded payment obligations that were subject to payment plans. The 2017 version of the Annual Declaration form, unlike the corresponding enquiry in the Annual Declaration for individual agents, and in the 2018 version of the corporate tax agent’s Annual Declaration, did not expressly require disclosure of details of the outstanding obligations.

   [12]The point to note is that the question in the application form for an incorporated tax agent did not refer to “personal” tax obligations.

10. Mr Hill’s answers to each of the taxation obligation questions were as follows:-

    (a)24 July 2017:- DFK Richard Hill Pty Ltd:- “no” – and made no reference to any of the matters outlined in the Schedules:- Schedule 1 column J, Schedule 2 column K & Schedule 3 column I.

    (b)1 August 2018:- DFK Richard Hill Pty Ltd:- “Richard Hill … Nil (overdue lodgements) … personal income tax debt, approx $30k payment arrangement being requested. … Director penalty notice issued … in relation to other entities (not DFK Richard Hill). Entities in discussion with ATO for repayment schedule. In these circumstances, the director penalty notice will fall away. Quantum of debt is such that there will be no adverse effect on the company’s eligibility to be registered”.

    (c)This answer was clearly inaccurate both in asserting the company’s lodgement compliance and in failing to acknowledge the company’s own outstanding tax debt. That debt included obligations relating to the superannuation guarantee charge:- see Schedule 1 column L, Schedule 2 column M[13] & Schedule 3 column K.

    (d)5 October 2018 (Forte Financial Pty Ltd):- The content of Mr Hill’s answer to this question was identical to that contained in the 1 August 2018 Annual Declaration.

    (e)This answer was clearly inaccurate both in asserting the company’s lodgement compliance and in failing to acknowledge the company’s own outstanding tax debt:- see Schedule 1 column M, Schedule 2 column N & Schedule 3 column L.

    [13]I have relied on the (partly legible) “screenshot” information in Ms Rai’s 11 June 2019 affidavit (Annexure JR-2) to establish that the debt amount as at 1 August 2018 was at least the amount noted by the Board as at 20 November 2018.

11. Each of the contentious Annual Declarations, and the March 2016 renewal application, concluded with a standard form of declaration that was specifically acknowledged by Mr Hill when he submitted each document. The presently material parts of the required declarations were to the effect that:

    (a)all questions had been answered “to the best of my knowledge, information and belief”,

    (b)(in the March 2016 renewal application) all necessary information had been provided,

    (c)(in the Annual Declarations mandating provision of specified details of outstanding tax obligations) all answers were “true and correct in every particular”,

    (d)Mr Hill was aware of the offence (created by s 8K of the Taxation Administration Act 1953 (Cth)) of making statements to a “taxation officer” that are “false or misleading in a material particular”, including whether they are misleading because of the omission of material information, and

    (e)the person providing the declaration had “read, understood and agree with” its contents.

    Mr Hill’s response to the Board’s principal “personal liability” disclosure findings

12. Mr Hill made a number of concessions about the objective inaccuracies in the contents of his various applications and Annual Declarations. They were as follows:-

    (a)31 March 2016 personal renewal application:- the non-disclosure of the fact and amount of his individual tax debt,

    (b)11 May 2017 & 8 May 2018 personal Annual Declaration:- the non-disclosure of the amount of his individual tax debt,

    (c)24 July 2017 and 1 August 2018 Annual Declarations for DFK Richard Hill Pty Ltd:- the non-disclosure of any tax debt in the 2017 document, the non-disclosure of the actual amount of his own personal tax debt in the 2018 document, and the non-disclosure of the company tax debt in either document, and

    (d)5 October 2018 Annual Declaration for Forte Financial Pty Ltd:- the non-disclosure of the fact of the lodgement defaults by Forte Financial Pty Ltd, and the amount of its tax debt

13. These concessions about the objective inaccuracies in the contentious documents were unavoidable, given the information summarised in the Schedules. Nevertheless, in his affidavit evidence Mr Hill asserted an honest belief in the correctness of “each of the Declarations”. That assertion means that Mr Hill should not be taken to have conceded any contemporaneous awareness of the inaccuracies indicated in the Schedules. However, the credibility of the assertion needs to be weighed against the objective evidence in determining whether Mr Hill should be found to have had such an awareness at the time he provided to the Board the information contained in the various Annual Declarations and in his March 2016 renewal application.

14. Mr Hill’s affidavit concession about the non-disclosure of either the fact or the amount of his own income tax debt in the March 2016 renewal application was unqualified and unexplained. The taciturn content of that concession, viewed against the specificity of the question and declaration in the form (see paragraphs 39 & 47 above) encourages the view that the non-disclosure was intentional. That encouragement is the greater because the evidence disclosed that Mr Hill’s income tax debt had existed from at least July 2014 (when it stood at $19,000). By May 2015, as a result of late lodgement penalties and assessments for the 2013 and 2014 tax years, the debt had increased to approximately $50,000. In his cross examination evidence Mr Hill conceded his contemporaneous awareness of the amount of the debt, its duration, his non-payment and, although rather reluctantly, the potential for such an unpaid taxation liability to adversely affect assessment of his fitness for registration. Nevertheless, Mr Hill sought to explain his “ASIC - previously advised” answer, and the non-disclosure of anything relating to his own taxation debt, as a mistaken but honest understanding that the request for details “including the year the event occurred” enquired only about the timing of his ASIC disqualification. That belatedly made assertion, is not credible and I do not accept it. The question in the renewal application form specifically identified outstanding personal tax obligations as a matter relevant to assessment of fitness. In part of his cross examination evidence Mr Hill conceded he understood that was the enquiry. His answer to the enquiry was neither “true and correct in every particular” nor had he provided “all necessary information”. There is, as Mr Hill also conceded, no objective or contextual justification for his asserted understanding that the request for details “including the year the event occurred” related only to the “disciplinary action” component of the examples listed in the fitness question. Mr Hill’s “ASIC – previously advised” answer, effectively denied, rather than acknowledged or detailed, the existence of his long standing tax debt. Mr Hill’s firmly established contemporaneous knowledge of his tax debt, the specificity of the question, his belatedly articulated explanation for the content of his response, and the incredibility of that explanation, lead to my satisfaction, despite the gravity of such a finding, that Mr Hill’s response to the Board in the March 2016 application was knowingly misleading, because of its omission of the fact and amount of his income tax debt.

15. Mr Hill’s affidavit concession about the non-disclosure of the amount of his own income tax debt in each of his own May 2017 and 2018 Annual Declarations, despite being qualified by reference to disclosure of the fact of such a debt, was similarly taciturn. Importantly, neither in his affidavit nor his oral evidence did Mr Hill address the reason for his failure to disclose the type and amount of his taxation debt, despite the specific direction in the form – to provide details of the “type and amount of the debt” and explain why it did not adversely affect assessment of his registration eligibility.

16. Similarly, Mr Hill’s affidavit concession did not address the apparent inaccuracy of his statement to the Board that “payment plan currently (being) applied for”. There is no objective evidence to establish that Mr Hill had even made any payment plan application at the time of either of the Annual Declarations. At one point in his oral evidence Mr Hill said he had made no attempt to locate any evidence of such a payment plan application. At another point, relating specifically to a similar response in his 8 May 2018 Annual Declaration, he reported that he had fruitlessly searched his files for evidence of such an application. The objective evidence established that there were no current payment plans as at February 2019. By June 2019 the only payment plans related to various corporate entities – Forte Private Wealth Pty Ltd (2014 to 2016 – see paragraph 30 above), Dalua Pty Ltd (in June 2019), RHA Associates Pty Ltd (June 2019), Roslyn Pastoral Company Pty Ltd (June 2019) and (perhaps) 23 Martin Place Pty Ltd (see paragraph 64 below).

17. In the absence of any objective records, Mr Hill relied on a general claim of having had ongoing discussions with the ATO about the obligations of various entities, but he also conceded having no recollection of any specific discussions about his own obligations. In the context of the absence of any contemporaneous records, and the generality of Mr Hill’s asserted recollection, it is relevant to note that just two weeks after Mr Hill submitted the May 2017 Declaration, the ATO issued a further payment demand for the full amount of the debt:- see paragraph 56 below.

18. The significance of these matters, given Mr Hill’s affidavit assertion that he honestly believed in the correctness of each of his Annual Declarations, needs to be evaluated against the background of the evidence disclosing that (i) on 31 March 2017 Mr Hill had received a statement of account requiring the immediate payment of $48,058 as the overdue component of his tax debt, (ii) as at May 2017, following assessments for the 2015, 2016 and 2017 tax years, and a late lodgement penalty for the 2016 tax year, Mr Hill’s income tax debt approximated $50,000, (iii) on 15 December 2017 Mr Hill had received a statement of account requiring the immediate payment of $42,057 as the overdue component of his tax debt, (iv) as at May 2018 his tax debt approximated $47,000, (v) between July 2014 and January 2019 the only payment Mr Hill is known to have made was an $8,000 payment on 4 July 2017.

19. Those matters combine to encourage the view, and I find, that Mr Hill certainly knew the approximate amount of his outstanding tax debt, understood the fact of the debt was material, and incorrectly claimed that a payment plan was “currently applied for”. Furthermore, in relation to the May 2018 Annual Declaration, I find that Mr Hill was not only aware of the $26,050 liability that had been the subject of the director penalty notice given to him on 27 March 2018 but also understood, as the notice plainly stated, that he was “personally liable” for that amount. I do not accept the assertion Mr Hill made in his oral evidence, that he did not regard himself as having a personal liability under the director penalty notice because he thought it would only come into play if the debtor company did not pay. The director penalty liability arose, and was thereafter relevantly unconditional, as Mr Hill ultimately agreed, once the company had not made a timely payment. Consistent with that view, the April 2018 objection letter, with its explicit acknowledgement of awareness of a “personal liability” as a director of DFK Richard Hill Pty Ltd in relation to its superannuation guarantee charge debt, had been written a few weeks after receiving the March 2018 director penalty notice:- see paragraph 35 above.[14] Similarly, in later Annual Declarations Mr Hill did disclose (implicitly as personal obligations) the fact that he had been given director penalty notices:- see paragraph 45 above. Those considerations, when viewed against the specificity of the “Tax obligations” question, and the form of the final declaration, in the Annual Declarations, conduce to my satisfaction, again despite the seriousness of such a finding, that Mr Hill’s response to the Board in each of the May 2017 and May 2018 Annual Declarations was knowingly misleading – because of its omission of the amount his income tax debt, the incorrect statements about payment plans, and in the case of the May 2018 Annual Declaration, because of the omission of any reference to his personal penalty liability relating to the superannuation guarantee charge debt of 23 Martin Place Pty Ltd:- see Superannuation Guarantee (Administration) Act 1992 (Cth) s 16 & footnote 2 above.

    [14]Irrespective of Mr Hill’s direct involvement in the drafting of the April 2018 letter, and specific awareness of the acknowledgement it contained, he ultimately (but somewhat reluctantly) accepted in his oral evidence, that a company director had obligations to take reasonable steps to ensure that the company complied with its tax obligations relating to PAYG withholding and superannuation guarantee charge amounts:- Transcript pages 29-30. Given his past receipt of director penalty notices (in 2013 and in March 2018) he must be taken to have fully understood that a director’s failure to discharge that obligation would result in a personal taxation liability.

20. Mr Hill’s affidavit concession about the non-disclosure of his personal income tax debt in the DFK Richard Hill Pty Ltd Annual Declaration of 24 July 2017 was also unqualified and unexplained. Again the taciturn content of that acknowledgement (which was not elaborated upon in his oral evidence) itself encourages the view that the non-disclosure was intentional and knowingly misleading. That conclusion seems particularly apt when his simple and unambiguous “no” response to the specific question in the Annual Declaration (whether the company or any of its directors had any overdue tax obligations) is evaluated against the background of what he actually knew. His knowledge included (i) the longstanding and accumulating nature of his own income tax debt, (ii) the 31 March 2017 payment demand and, (iii) the 4 July 2017 $8,000 payment he had made in reduction of his (then approximately $50,000) tax liability:- see paragraphs 50 & 51 above. It is additionally significant that, in between the March 2017 demand and the $8,000 payment, on 1 June 2017 Mr Hill had received a further demand for payment of $50,057. Given the implicit disclosure of the fact of his income tax debt in the 11 May 2018 Annual Declaration (see paragraph 55 above), there is an evidentiary basis for concluding that Mr Hill knew his own debt was a potentially material consideration in the assessment of his ongoing fitness and eligibility for registration. Finally, there is the circumstance that on 6 July 2017 Mr Hill had received a statement of account disclosing DFK Richard Hill Pty Ltd’s $112,000 superannuation guarantee liability, and requesting its payment. Accordingly, I record my satisfaction that Mr Hill’s response to the Board was knowingly misleading, because of its omission of the fact and amount of his income tax debt. I am also satisfied that it was knowingly misleading in failing to disclose the DFK Richard Hill Pty Ltd debt (see paragraph 60 below). His response was not true and correct in every particular, and had not been answered to the best of his “knowledge, information and belief”.

1. I make a similar finding that Mr Hill’s response in the 1 August 2018 Annual Declaration by DFK Richard Hill Pty Ltd was knowingly misleading in a material particular. This was because of its omission, despite the specific content of the question in the Annual Declaration, of the amount of Mr Hill’s income tax debt, and details of his director penalty liabilities. The Declaration did disclose the fact Mr Hill had an income tax debt, his receipt of (unspecified) director penalty notices and (implicitly) the fact no payment arrangements were in place. But his response mis-stated the amount of his income tax debt, disclosed nothing about the amount and type of the debts involved in the director penalty notices, and asserted that payment arrangements were “being requested” or “in discussion”. The income tax debt in fact exceeded $50,000 and there is no objective evidence to substantiate the assertion of any payment arrangement request in relation to either the income tax liability or the penalty obligations. The amount of the income tax debt was a fact Mr Hill must have well known – given (i) the fact that he had made no payments since 4 July 2017, (ii) the payment demand he had received in December 2017 and, (iii) the June 2018 assessment of his belatedly lodged 2017 tax return. Mr Hill conceded as much in his oral evidence, and could offer no explanation for his use of the $30,000 amount. He also knew the penalty liability amounts, given that in May and June 2018 he had received two further Director Penalty Notices, relating to the superannuation guarantee obligations of Richard Hill & Associates Pty Ltd and RHA Associates Pty Ltd. Those notices (with the earlier March 2018 notice) conveyed the information that his total outstanding personal penalty liability exceeded $130,000, and related to superannuation guarantee charge payment obligations – see Schedule 3, column K, rows 13 - 16. The contents of the April 2018 letter indicated that Mr Hill well understood the nature of his personal liability for penalties of that kind. And, as I indicated earlier (see paragraph 55 above) I do not accept the proposition that Mr Hill laboured under any misapprehension as to whether or not the director penalty notices gave rise to a personal taxation liability. Those matters conduce to satisfaction that, to his knowledge, Mr Hill’s answers to the specific questions were not true and correct in every particular and neither had they been answered to the best of his knowledge, information and belief.

2. I make a similar finding, for substantially the same reasons, that the contents of the 5 October 2018 Annual Declaration by Forte Financial Pty Ltd were knowingly misleading. I have set out the substance of his response earlier in these reasons:- see paragraph 45 above. The response was knowingly misleading in a material particular, because of the omission of the amount of Mr Hill’s income tax debt (which then exceeded $51,000). The contents were also misleading by failing to disclose either the fact or the amount of Forte Financial Pty Ltd’s own debt. In his affidavit evidence Mr Hill asserted that the response disclosed the fact (although not the amount) of the company’s outstanding tax debt. I do not accept that assertion. It is a self-interested, and objectively unjustifiable, misreading of the affirmative response to the taxation obligation question in the Annual Declaration. That response to the outstanding tax obligations question was wholly detailed by reference to Mr Hill’s income tax debt (and the penalty liabilities that were the subject of director penalty notices relating to other companies). It contained nothing to reveal the fact that Forte Financial Pty Ltd itself had any tax debt, or lodgement default. The objectively accurate interpretation of Mr Hill’s response was that it disclosed neither the fact nor the amount of the company’s tax debt.

3. Against that background, Mr Hill offered no explanation for the non-disclosure of either the accurate amount of his income tax debt, or the fact and amount of the company’s own debt. Yet all three were matters that Mr Hill must have well known. (I have already addressed the basis for concluding he was aware of the amount of his own income tax debt:- see paragraph 51 above.) In relation to the company debt, in March 2018, nearly two years after he had become the company’s sole director, Mr Hill had received a collection action warning letter from the ATO, informing him that the company had a tax debt exceeding $30,000. In April 2018 the ATO informed him that it had issued a garnishee notice to the National Australia Bank to recover the debt amount.

4. Mr Hill contested the view that his responses in DFK Richard Hill Pty Ltd’s July 2017 and August 2018 Annual Declarations, by failing to disclose the company’s own taxation debt, were knowingly erroneous or misleading. Mr Hill’s contest was based on his assertion that the company had become dormant as a result of the departure of his former co-director “partners” (respectively in May 2015, and about June 2017:- see paragraph 34 above). He asserted having made an arrangement with his then other co-director “partner” (“DaShp”) to apportion the company’s outstanding liabilities (totalling $1.7m and including tax obligations approximating $590,000). This arrangement was said to have culminated in a November 2015 agreement and involved Mr Hill taking responsibility for 75%, and DaShp the remaining 25%, of the company’s liabilities. Mr Hill sought to characterise this arrangement as one in which DaShp agreed to accept liability “for the substantial portion” of the company’s tax debt, as it existed on 11 May 2017. In his affidavit, he expressly asserted (not entirely consistently) beliefs that at the time of each Annual Declaration, (a) DaShp had finalised the company’s outstanding tax issues, and, (b) his responses to the Board were correct because of DaShp’s acceptance of liability to pay the outstanding tax debt.

5. Regard to the details underlying the arrangement asserted by Mr Hill in his affidavit evidence readily reveal that he has tended to conflate the legal personalities of three corporations - 23 Martin Place Pty Ltd, Eleventh Floor Pty Ltd and DFK Richard Hill Pty Ltd. The explanation for that tendency may come from the fact that the name DFK Richard Hill Pty Ltd had been in use both before and after that entity’s September 2012 incorporation. Between August 2011 and September 2012, that had been the name of 23 Martin Place Pty Ltd. It seems likely to have also been the name of Eleventh Floor Pty Ltd prior to August 2011. Although the full details of that company’s name history were not recorded in the evidence, it did change its name in August 2011, on the same day that 23 Martin Place Pty Ltd changed its name to DFK Richard Hill Pty Ltd. Furthermore, in his affidavit Mr Hill referred to Eleventh Floor Pty Ltd as the entity originally associated with the use of the name DFK Richard Hill Pty Ltd.

6. Irrespective of the accuracy of that explanation for Mr Hill’s apparent conflation of the identity and activities of the three companies, the November 2015 correspondence between Mr Hill and DaShp readily reveals that it actually related to the liabilities, as at 31 May 2013, of 23 Martin Place Pty Ltd and Eleventh Floor Pty Ltd. More specifically, it included their respective PAYG and Superannuation Guarantee Charge obligations at that date. Those liabilities approximated $537,000 (in the case of 23 Martin Place Pty Ltd) and $174,000 (in the case of Eleventh Floor Pty Ltd).

7. Against that background, Mr Hill’s explanation about the significance of the November 2015 arrangement to the DFK Richard Hill Pty Ltd Annual Declarations is at least unacceptably simplistic and, in reality, objectively inaccurate. First of all, the outstanding debts addressed in the November 2015 correspondence were not those of DFK Richard Hill Pty Ltd. Second, despite the assertion in Mr Hill’s affidavit, it is difficult to accept (and there is no objective evidence to establish) that the tax debts outlined in the correspondence were ever “transferred” to that company. Third, both Mr Hill’s 19 November 2015 letter, and the “Debt Summary Schedule” attached to it, characterised the arrangement as one in which DaShp was indebted to Mr Hill for the balance of his proportion of the total outstanding debts. Indeed the unpaid balance of DaShp’s proportion of those debts ($149,854) was explicitly identified in the Debt Summary Schedule as an amount that DaShp owed to Mr Hill. Furthermore, DFK Richard Hill Pty Ltd’s outstanding tax debt as at May 2017 appears to have arisen from the 2016 tax audit, and the assessments issued in August 2016:- see paragraphs 31 to 34 above. That was well after the November 2015 arrangement referred to by Mr Hill, and difficult to regard as being part of it.

8. The difficulties with Mr Hill’s explanation relying on the November 2015 arrangement are increased by the contents of subsequent emails from DaShp on 2 August 2016 and 26 April 2018. In the August 2016 document DaShp did acknowledge that the outstanding superannuation guarantee charge liabilities of both 23 Martin Place Pty Ltd and Eleventh Floor Pty Ltd were his “sole responsibility and liability”. However, DaShp specifically disavowed acceptance of any such responsibility for the similar liability of DFK Richard Hill Pty Ltd, and emphasised that it was quite separate from the previous agreement involving the other two companies. The April 2018 document disclosed four things (i) an assertion (contradicted by the details in Schedule 3) that the outstanding debt of Eleventh Floor Pty Ltd had been fully paid, (ii) an explicit statement that 23 Martin Place Pty Ltd still had an outstanding debt approximating $31,000, of which Mr Hill’s share was about $20,000, (iii) an oblique indication that the $31,000 debt may have been the subject of a payment plan with the ATO and, (iv) emphasis that the superannuation liabilities of DFK Richard Hill Pty Ltd (arising from the August 2016 audit and assessment) were not part of the November 2015 arrangement, and were to be borne equally between the two of them.

9. Against this background, some of the assertions contained in Mr Hill’s affidavit about the significance of the November 2015 arrangement, and about the content of DaShp’s subsequent emails, are quite wrong. Contrary to Mr Hill’s assertion DaShp had never accepted, let alone confirmed, his acceptance of liability to pay the ATO debt of DFK Richard Hill Pty Ltd. Second, at no stage had DaShp confirmed to Mr Hill that he had “finalised the outstanding tax issues and debts” for the company. Third, nothing in the correspondence from DaShp provided any objective justification for Mr Hill’s assertion that the correspondence showed his liability to the ATO was “less than $10,000”. (On the contrary, the correspondence showed that his share of the various outstanding liabilities was $20,000, plus whatever was the final outcome of the August 2016 assessment.)

10. The improbability that the correspondence with DaShp in 2015, 2016 and 2018 provided any justification for Mr Hill’s asserted belief that DaShp had indeed “finalised the outstanding tax issues and debts” of the company does not exclude the possibility that Mr Hill nevertheless did indeed hold that mistaken belief at the time of each of the May 2017 and May 2018 Annual Declarations. But it tends to contradict that likelihood. The 2 August 2016 email from DaShp was perfectly clear in foreshadowing an ultimate company tax debt approximating $30,000 that was an amount “we owe equally”. The later email of April 2018 was equally specific in stating that the debt was to be shared equally between them. There is therefore in the contemporaneous correspondence a comfortable basis for concluding that Mr Hill was indeed well aware of both the fact and the amount of DFK Richard Hill Pty Ltd’s tax debt at all times after August 2016. That conclusion is made the more appropriate by regard to the penalty objection letter of 27 April 2018. I have referred to the contents of that letter earlier in these reasons:- see paragraph 34 above. That letter explicitly acknowledged that (i) the company had not paid its superannuation guarantee charge liability for the quarter ended June 2014, (ii) Mr Hill and DaShp accepted joint responsibility for the debt and, (iii) each of them was aware of their personal liability for the tax debt. That letter was provided to the ATO on 9 August 2018 and in his oral evidence Mr Hill conceded his contemporaneous knowledge of that debt.

11. Against this background, the objective and contemporaneous information points strongly to the conclusion, and I find, that Mr Hill was very well aware of the company’s outstanding tax debt at all times after August 2016 (at the latest) and specifically at the time of each of the July 2017 and August 2018 Annual Declarations. (Indeed, in his oral evidence Mr Hill conceded he knew the company’s debt had not been paid.) Having made that finding, the specificity of the question and declarations in the July 2017 Annual Declaration, conduces to satisfaction that Mr Hill’s “no” answer to the taxation obligation question in that document was knowingly misleading, in failing to disclose anything about the company’s tax debt. The specificity of the corresponding questions and declarations in the August 2018 document conduce to satisfaction that his different, but relevantly uninformative, answer to the tax obligations question in that document was also knowingly misleading, for essentially the same reason.

    Mr Hill’s opposition to the Board’s other “personal liability” disclosure Findings

12. Mr Hill disputed that any of the contentious Annual Declarations, or his March 2016 renewal application, could properly be characterised as false or misleading because they omitted reference to the tax debts or lodgement defaults of any of the other (non tax agent) entities listed in the Schedules. The principal basis for his contention was that the tax obligation questions in each of the documents relating to his own registration expressly enquired about overdue or outstanding “personal tax obligations”. Mr Hill’s contention involves the proposition that the question was directed at the Code obligation in TASA s 30-10(2) mandating compliance with “taxation laws in the conduct of your personal affairs”. He asserted a belief that (at least at the time of each relevant disclosure document) he understood the “personal affairs” obligation related only to his own individual activities and obligations and did not extend to include those of any company.[15]

    [15]It may be observed that Mr Hill’s asserted belief would appear to be relevant only to the content of his responses in the documents relating to his own registration. The tax obligation question in the Annual Declarations relating to DFK Richard Hill Pty Ltd and Forte Financial Pty Ltd, did not use the word “personal” and simply enquired whether “the company, or any of its directors” had any overdue tax obligations.

13. Mr Hill’s submissions pointed out that the term “personal affairs'” is not defined in the TASA provisions. It was further said that, in the absence of some relevant inclusive definition, the term “personal affairs” could not be regarded as merely differentiating from “client affairs” (the contention advanced by the Board in the present proceedings). Rather it should be construed as intended to distinguish between, on the one hand, an agent’s obligations as an individual taxpayer and, on the other, taxation law obligations “of any company”. That construction would likely exclude from the compliance obligation relating to the conduct of their “personal affairs” taxation obligations a person might incur because of their role as an officer of a corporate taxpayer.

14. Mr Hill said that this view about the limited scope of the concept of “personal affairs” is at least consistent with (i) the conventionally accepted recognition of corporate entities having a distinct legal personality from their office holders and shareholders, (ii) the Board’s own guidance (namely, the Explanatory Paper published by the Board – at paragraphs [33] to [38]) and, (iii) the Explanatory Memorandum to the 2009 Tax Agent Services Bill.[16]

    [16]I note that the relevant paragraphs of the Explanatory Memorandum (paragraphs 3.28 and 3.29) are reflected, with immaterially wording differences) in paragraphs 33 and 35 of the Board’s Explanatory Paper. Given the similar content of the two documents, and despite their different status, It is neither useful nor necessary to separately consider the content of the Explanatory Memorandum.

15. The material paragraphs of the Board’s Explanatory Paper[17] are as follows:-

    [17]The Paper – TPB 01/2010 Code of Professional Conduct – has the status of a legislative instrument:- see TASA s 60-15.

    What does “personal affairs” mean

    33. The term “personal affairs” refers to a registered tax practitioners personal taxation obligations, including timely lodgement of personal income tax returns and activity statements, payment of superannuation guarantee contributions and PAYG withholding and instalment payments.

    34 In the case of a company or partnership registered tax practitioner, the taxation obligations of a company or partnership mean the personal affairs of the company or partnership registered tax practitioner.

    35 “Personal affairs” also includes the affairs of the registered tax practitioner’s practice, for example, the registered tax practitioner’s duties and obligations with regard to maintaining registered tax practitioner registration.

    …

    When is a registered tax practitioner complying with taxation laws, in the conduct of their personal affairs?

    38 Some of the factors that may be considered in deciding whether a registered tax practitioner has complied with the taxation laws in their personal affairs are:

    ·whether the registered tax practitioner has properly complied with their personal taxation obligations, including the timely lodgement of the practitioner’s personal income tax returns and activity statements

    ·whether the registered tax practitioner properly complied with the taxation obligations of the registered tax practitioner practice. This requires that the practitioner ensures timely performance of the practitioner’s obligations concerning the maintenance of tax agent, BAS agent or tax (financial) adviser registration and communications with the TPB.

    ·Whether the registered tax practitioner has taken reasonable care in interpreting the law as it applies to their personal tax affairs.

    (emphasis in original)

16. The meaning intended to be conveyed by paragraph [35] of the Board’s Explanatory Paper is somewhat elusive. The difficulty arguably turns on the ambiguity of the expression “tax practitioners practice”. On one view, the combined effect of paragraphs [34] to [35] is to (i) recognise that a tax agent may be an individual, partnership or a corporation, and (ii) distinguish between, on the one hand, the specific income and employment related taxation obligations of any such agent (ie., their “personal affairs” in the narrow sense) and, on the other, the competence and service performance standards they must satisfy to maintain their registration (ie., “personal affairs” in a wider, but still confined sense). On another view, the expression “tax practitioners practice” is not confined to the specific conduct of the particular agent, but primarily connotes the business structure within which the tax agent operates. On that view, paragraph [35] extends the concept of an agent’s “personal obligations” to include any taxation obligations that the registered agent has a responsibility to cause to be discharged, irrespective of the precise nature of the “practice” structure under which they operate.

17. Mr Hill’s oral evidence about his understanding of the “personal affairs” concept, though not based on paragraph [35] itself, was consistent with its first alternative meaning, rather than the second. On that view, because his “practice” had been conducted under the structure of a corporate entity, its separate legal personality meant its taxation obligations and liabilities did not arise in the conduct of his “personal affairs”.  Mr Hill contended that the reasonableness of his understanding of “personal affairs” (and hence the actuality of his asserted belief at the time of providing the contentious disclosure documents) was substantiated by the contents of the Board’s Information Sheet TPB(I) 34 / 2018. This Information Sheet, which the Board issued on 11 December 2018, provided an exegetical comment on the content of the Code obligation in TASA s 30-10(2). The relevant content of the Information Sheet is set out below.

    What does “personal affairs” mean?

    7. The term “personal affairs”

    ·refers to a registered tax practitioners personal taxation obligations, including the accurate and timely lodgement of personal income tax returns, activity statements, instalment payments and employer obligations, such as payment of superannuation guarantee contributions and PAYG withholding; and

    ·includes a tax practitioner’s practice, the affairs of all associated entities of a registered tax practitioner and any entity that the registered tax practitioner has direct or indirect control over. This includes associated companies, trusts (including corporate trustees of the trusts), a self managed superannuation fund that the tax practitioner is trustee of and/or partnerships.

    8. In the case of a company or partnership registered tax practitioner (including a company as trustee of a trust), the taxation obligations of the company or partnership mean the tax affairs of the company or partnership registered tax practitioner

    11. A registered tax practitioner will have complied with taxation laws in the conduct of their personal affairs, and therefore Code item 2 if they have

    ·complied with their personal taxation obligations, including the lodgement of their personal income tax returns and activity statements by the due date

    ·complied with the taxation obligations of the registered tax practitioner practice, including meeting their employer obligations such as superannuation guarantee and PAYG withholding

    ·paid their tax debts by the due date or have entered into, and are complying with a formal payment arrangement with the ATO to pay the tax debt by instalments

    ·complied with the tax obligations of associated entities

    ·provided a full and complete disclosure of outstanding personal tax obligations to the TPB (including in any application for registration or renewal or as part of the TPB’s annual declaration requirement)

    ·notified the TPB of any changes in circumstances, including that they no longer meet a registration requirement or there is a change in the composition of the tax practice, within a certain period of time

    12. In determining whether a registered tax practitioner is complying with taxation laws in the conduct of their personal affairs, the TPB will also consider whether any monies owed relate to a liability to the Commonwealth of Australia or are public monies, such as a liability arising from employer obligations. The TPB recognises that failing to meet these employer obligations will have a direct impact on taxpayer’s retirement and other benefits. While the TPB is concerned about all outstanding personal tax obligations failed obligations that relate to public monies will be viewed by the TPB more seriously.

    (emphasis added)

1. Those decisions have typically noted that whilst the Board’s satisfaction about fitness is an essential precondition to the grant or renewal of registration, that satisfaction is not necessarily precluded by an adverse assessment of a person’s “good fame, integrity and character” (having regard to the “have regard to” wording of TASA s 20-15). Furthermore, absence of satisfaction about an agent’s fitness (having regard to the “may” discretion in TASA s 40-5) does not mandate termination of an existing registration. However, the TASA objective makes it difficult to contemplate the circumstances in which dissatisfaction with a person’s “good fame, integrity and character” could be contemporaneous with satisfaction of their fitness. It is similarly difficult to contemplate the appropriateness of forbearance from termination of registration where the Board was no longer satisfied of an agent’s fitness. It may be, although it is unnecessary to decide, that the discretion has a limited application – e.g., to situations involving partnership and corporate entities, where the fitness dissatisfaction arises from the conduct of only some of the individual partners or directors.

   Current compliance

2. Mr Hill’s affidavit claim that all his taxation affairs were “up to date” was incorrect, as Mr Hill later conceded in his oral evidence. There were, for example, no approved plans in place in May 2019, and even in June 2019 there was no plan in place relating to DFK Richard Hill Pty Ltd.) He had also been wrong to assert (principally in his January 2019 submission to the Board) that DaShp had assumed full responsibility for the taxation debts of DFK Richard Hill Pty Ltd, and that the debt had been fully paid:- see also paragraphs 60 to 66 above.

3. Those inaccuracies, taken on their own, might have little significance, given the significant steps that Mr Hill has in fact taken to regularise his taxation affairs. But, in the context of the totality of the matters involved, they tend to add force to the Board’s “minimalist” submission – that Mr Hill lacked an appropriate commitment to care and accuracy. That lack of commitment was also evident in the non-disclosure of lodgement defaults in the August and October 2018 Annual Declarations. Despite the other respects in which I have found Mr Hill’s disclosures to the Board were knowingly misleading, I have refrained from making specific findings about the non-disclosure of those lodgement defaults. I have similarly refrained from finding that the August 2018 Annual Declaration was knowingly misleading because of the non-disclosure of the then balance of the DFK Richard Hill Pty Ltd debt. In so doing I have accepted the likelihood, as Mr Hill asserted, that he had no specific information about those matters at the time of each of those declarations. By the same token, however, Mr Hill could not recall having made any contemporaneous enquiry about lodgement compliance. Nevertheless, in the apparent absence of enquiry and information, he had made positive assertions to the Board that DFK Richard Hill Pty Ltd and Forte Financial Pty Ltd had no lodgement defaults and no debt.

4. Mr Hill’s submissions at least imply that the past shortcoming identified by the Board had been partly the result of inadvertence or misunderstanding. But it will be apparent from what I have written earlier that Mr Hill’s asserted interpretation of the concept of “personal affairs” was an inadequate explanation of the content of the various disclosure documents he provided to the Board. The findings I have made earlier in these reasons indicate that Mr Hill’s misconduct in relation to the contents of the disclosure documents he provided to the Board cannot be accurately characterised as matters of inadvertence or misunderstanding. They were intentionally misleading. And, as I have remarked earlier in these reasons, Mr Hill has provided no adequate explanation for them. More particularly his affidavit claim, that he had contemporaneously believed the contents of his responses in each of the contentious disclosure documents were correct, strains credulity and, in any event, rather tends to corroborate the view that Mr Hill does not appreciate the nature and extent of his misconduct. That view is suggested by the submission advanced on his behalf, that at least in some respects his disclosure responses to the Board were appropriate, because he indicated his willingness to provide further information if required. I specifically reject that submission later in these reasons:- see paragraph 147 below.

5. Similarly, the multiple and sustained outstanding taxation payment obligations of the various entities listed in Schedule 3, and the fact that significant components of those debts relate to PAYG withholding and superannuation guarantee obligations, cannot be regarded as inadvertent and unintentional irregularities. So far as appears, the non-payment for which Mr Hill was responsible was considerably sustained. It first occurred in the period of his earlier practice arrangements (up to about September 2012), continued following the incorporation of DFK Richard Hill Pty Ltd (in the period from October 2012 to June 2014) and occurred again after the various practice arrangements he put in place from July 2016 onwards.

   Financial difficulties as the genesis of Mr Hill’s compliance issues

6. Mr Hill expanded on the circumstances involved in the financial difficulties that he regarded as providing material background information in evaluating the significance of his various taxation law irregularities. Those circumstances included:

   (a)A 2009 purchase (via a company of which he was apparently a director and shareholder) of an interest in an agricultural joint venture project with the Papua New Guinea Government, and the asserted payment difficulties that subsequently arose because of some (again obliquely explained) failure by that Government to fulfil its obligations under the agreement,

   (b)The 2010 liquidation of 7 Steel Distribution Pty Ltd – a company he described as a 25 year client that had previously provided about 40% of the accountancy practice revenue, but ended up owing $600,000 for unpaid fees, including work done over a period of up to 18 months after the company’s liquidation,

   (c)The August 2011 acquisition of a financial planning business by Forte Private Wealth Pty Ltd – Mr Hill provided documents disclosing that the acquisition involved progressive payments, exceeding $650,000, over a 30 month period, and obliquely explained that, despite some change in the circumstances underlying the transaction, he had been required to provide $200,000 to fund some of the acquisition payments. By some time in about 2013 the company’s business had apparently failed, and

   (d)The “reconstruction” of his accountancy practice (which the evidence imprecisely suggested occurred sometime in 2013 or 2014) assertedly associated with declining practice revenues, and related financial difficulties.

7. In relation to the last point, Mr Hill said that in late 2013 he had sold two investment properties and applied the $1.7m proceeds to reduce the level of his borrowings. In late 2014 he sold his then family home, and obtained a $1m loan facility, apparently to fund his remaining debts. Subsequently, the details in the 27 April 2018 letter (see paragraph 34 above) suggests that Mr Hill’s financial and administrative difficulties were further contributed to by the subsequent departure (in May 2015), and the personal difficulties and illness (mainly in 2016), of his two former co-director / partners in the accountancy practice.

8. The fact that Mr Hill encountered some kind of financial difficulties during the period to which his many taxation obligation defaults relate was not significantly challenged in the course of the review proceedings. By the same token, the precise nature and dimensions of those difficulties, and how they relevantly contributed to those defaults, rested mainly on assertion and generality, and was never made clear. The obscurity of the mechanism and extent of their impact is relevant to consider in evaluating the submission, advanced on Mr Hill’s behalf, that his financial circumstances have improved, and the consequential likelihood of his future compliance is established by that improvement, as well as the salutary effect of the Board’s decision and the impact of the review proceedings.

9. The principal matters said to indicate the improvement in Mr Hill’s financial circumstances were said to be (i) the significant increase in the revenue and profitability of the accountancy practice (operated by RHA Associates Pty Ltd after October 2016), (ii) the February 2019 debt refinancing (which, it may be inferred, was likely involved in the contemporaneous tax debt reductions reflected in Schedule 3) and an anticipated reduction in the practice rent expense. In articulating the significance of his improved circumstances Mr Hill drew attention to the financial performance of RHA Associates Pty Ltd, as evidenced by its financial statements for the 2017 and 2018 years. The following Table presents an abbreviated summary of the company’s trading statement for those years.

RHA Associates Pty Ltd	2017	2018
Revenue	1,519,629	2,341,528
Expenses
Interest paid	18,330	20,165
Management Fee	900,000	0
Rent	31,698	118,328
Wages & Superannuation & Training and Welfare	361,273	847,006
All other expenses	53,700	295,845
Total expenses	1,365,000	1,281,343
Profit before tax	154,629	1,060,184

1. That abbreviated summary suggests the practice had significant revenue, no significant interest expenses, and rental expenses that approximated 10% of its total expenses in the 2018 year. The practice operated profitably in both years, and in fact generated a profit of more than $1m in the 2018 year. This appearance of profitability is derived from financial statements prepared on an accruals basis and does not, of course, negate the existence of “cash shortages”, which Mr Hill suggested did occur. The company’s balance sheet disclosed minimal cash on hand at the end of both years. But it also disclosed that in the 2018 tax year (i) that “trade and other receivables” increased by only $140,000, despite an $800,000 increase in revenue, (ii) a significant increase in unsecured loan assets, and a significant decrease in current loan liabilities. Again, those “end of year” details are not necessarily inconsistent with periodic cash flow difficulties during the course of the year.

2. The point to be made about the reported financial performance of RHA Associates Pty Ltd is that its reported trading growth and profitability seems to contrast with the fact of the superannuation guarantee charge and PAYG defaults that occurred in the period from January 2017 to May 2018:- see paragraph 18 above. Conversely, if the difficulties that contributed to those defaults related to the company’s “cash shortages”, rather than its trading profitability, the financial statements proffered provide a merely problematic basis for confidence that similar “cash shortages” will not continue to occur.

3. Because of the obscurity of the link between Mr Hill’s extensive past taxation non-compliance and his asserted financial difficulties, and the problematic nature of the evidence he has proffered to corroborate his assertions of reliable future compliance, I am not satisfied that there is no significant risk of future default in his taxation obligation compliance. The candid position is that in the past, perhaps because of liquidity difficulties, Mr Hill has decided that he would defer compliance with his tax obligations. He asserted a belief that this deferment strategy was “in the best interest of the practice and its staff” – implicitly because the only perceived alternative courses of action were either some degree of staff retrenchment or a total trading cessation. As the Tribunal observed in Re Adamec and Tax Agents’ Board of Victoria (2005) 60 ATR 1243 (at [70]) fluctuating workloads and financial stressors are part of the spectrum of circumstances encountered in daily life. Adherence to appropriate professional standards would be “impossibly compromised” if those standards were regarded as significantly fluctuating in response to personal and financial exigencies of the kind not uncommonly encountered in the reality of professional practice.

4. Nor do I accept the submissions made on Mr Hill’s behalf that the inadequacies in his disclosure statements have a lesser significance because of the indication, in the declaration at the end of each document, that Mr Hill would provide any additional further information that might be required by the Board. The point to be emphasised is that the Board’s information request was already contained in the standard form of the disclosure document. It was Mr Hill’s obligation to answer the Board’s various requests to the best of his knowledge information and belief. He consistently and significantly failed to discharge that obligation.

   Conclusion on the registration decision

5. Mr Hill has been a registered tax agent for almost 40 years. In that role, and as a chartered accountant, he has acted as a company director and / or secretary for various publicly listed companies, provided advice relating to the public listing of companies on the Australian Stock Exchange and on the Port Moresby Stock Exchange, and provided a wide range of taxation and accounting services. He has made an uncontradicted claim to have never been the subject of either any material client complaint or any professional misconduct finding.[23] He also made a similarly uncontradicted claim to provide pro bono services to non-profit entities, including the Mater Misericordiae Hospital at Crows Nest, the Gordon Rugby Club and a charitable institution known as Empower Golf. These are matters that significantly favour Mr Hill’s continued registration, having regard to one aspect of the public interest sought to be served by the TASA scheme:- see paragraph 16 above. Its potential significance is why I have drawn attention to previous matters in which an agent’s personal taxation defaults have been regarded as inconsistent with fitness, despite the absence of client related misconduct:- see paragraphs 119 to 121 & 122 to 128 above.

   [23]That claim needs some, although limited, qualification in the light of the 9 December 2014 decision of the Companies Auditors and Liquidators Disciplinary Board suspending his registration as a company auditor for 12 months. The circumstances of that decision were not disclosed in the evidence, but they were apparently known to the Board and not regarded as a material to the renewal of his registration in March 2016.

6. In relation to the question of Mr Hill’s likely future conduct, I recognise the salutary effect of the Board’s January 2019 decision, and its continued operation, following the rejection of Mr Hill’s stay application. I also accept the generality that Mr Hill regarded himself as beset by a range of financial difficulties that apparently first came most sharply into focus in the period from about October 2011 to June 2014 (see paragraphs 18(b)(i), 18(d), 20 & 32 above). However, I am unable to accept that those, vaguely described, financial difficulties provide either a persuasive or a reasonable explanation for the significant and sustained taxation compliance defaults (particularly the taxation related payment defaults) indicated in the Schedules to these reasons (and largely agreed to by Mr Hill).

7. I do not minimise the anxiety likely associated with the kinds of management decisions that perceived financial difficulty may require to be made. That is particularly so where those decisions likely involve terminating the employment of loyal and competent staff members. But the inescapable reality is that those kinds of difficulties have to be faced, and the questions they pose answered, in a lawful and appropriate way. The repeated non-payment of unarguable taxation liabilities, and especially not the repeated non-payment of PAYG withholding obligations and superannuation guarantee charge obligations, is neither lawful, nor appropriate nor consistent with fitness for tax agent registration.

8. Notwithstanding the emphasis Mr Hill placed on the long period in which he has been engaged in providing tax agent services, and apparently without ever having been subject to any material client complaint, I am not satisfied that Mr Hill is currently a fit and proper person. I have made several findings about the respects in which the contents of his various disclosure documents to the Board were knowingly misleading in material particulars. Allied to that are the conceded facts that he had a longstanding personal tax debt and, for something approximating five years he made only one (comparatively small) payment in reduction of that debt. In addition, for a similar period of several years, entities in which he was a controlling director, and in particular entities closely associated with the conduct of his accountancy practice, were regularly and significantly in default in relation to both their lodgement and payment obligations. Significantly, the payment obligations of entities involved in the conduct or administration of his accountancy practice had (over a number of years) defaults in failing to meet their PAYG and superannuation guarantee charge obligations. Failures of the latter kind occurred through the period from January 2017 to May 2018, and the director payment obligations to which those various defaults gave rise had accumulated to a total of about $290,000 by October 2018. By that time, Mr Hill had accumulated personal taxation payment obligations of about $344,000, entities associated with the conduct of his current accounting practice had accumulated tax debts of almost $600,000, and the overall taxation related debts of himself and entities associated with him had, as a result of years of non-payment, accumulated to a total that likely exceeded $700,000.

9. The deficiencies in the contents of Mr Hill’s various disclosure documents to the Board significantly detract from confidence in his fitness. That is so for the reasons discussed in the decisions in Su, Burnett, Bond, and Carbery – and articulated earlier in these reasons:- see paragraphs 97, 99, 103, 104, 106 & 112 above. The nature and extent of the lodgement and payment defaults indicated in the Schedules to these reasons, underscore the justification for that lack of confidence. Finally there is the consideration that the payment obligation defaults relating to superannuation guarantee charge obligations and PAYG remittances, appear to have been (on Mr Hill’s assertion) his response to challenging financial circumstances and his deliberate decision to weather those challenges by knowingly failing to ensure that his practice company (and here I am referring principally to RHA Associates Pty Ltd) fully and promptly discharged those obligations. When these three considerations are combined they lead comfortably to the conclusion that Mr Hill is not currently of good fame, integrity and character and is not a fit and proper person so as to be eligible for registration.

10. TASA s 20-25 permits registration to be subject to certain types of conditions. It was submitted on Mr Hill’s behalf that his eligibility should be assessed in the light of the conditions that might be imposed on his registration. Two related conditions were proposed. The first was the implementation of the “quality control” procedure to which I previously alluded. The second was that his declaration documents, and the compliance they asserted, should be audited by an independent accounting firm. I doubt whether those kinds of conditions would fall within the scope of TASA s 20-25 but even if they could properly be imposed, I not consider that either of them would really address the essential problem revealed by the findings I have made. Those findings were that Mr Hill knowingly failed to disclose, and relevantly misrepresented, matters of which he was well aware. Conditions of the kind proposed would only be appropriate if I were otherwise satisfied of Mr Hill’s reliable honesty and integrity, and confident that the Board, the Commissioner and the public could reliably have a similar perception about his future conduct. In the light of the findings I have made, I am not so satisfied.

    The re-application determination

1. Mr Hill challenged the Board’s five year determination, principally on the basis that it was the maximum permissible period of re-registration ineligibility that TASA s 40-25 authorised the Board to impose. The contention was that, in the comparative scale of circumstances where registration termination might be appropriate, his conduct was not so culpable as to merit imposing the maximum ineligibility period. The five year period was also said to be excessive because of his general competence and experience, and because he could (in the light of the impact of the Board’s decision, the present proceedings, and his altered practice circumstances) confidently be relied on not to be involved in any future conduct transgressions.

2. The TASA provisions either apply, or effectively contemplate, a five year embargo on registration eligibility in a number of situations. They include situations where the tax agent (or applicant for registration) has:-

   (a)had the status of an undischarged bankrupt:- TASA ss 20-15(b)(ii) & 20-45(e),

   (b)served, or has been sentenced to, a term of imprisonment:- TASA ss 20-15(b)(i) & 20-45(f); 20-15(b)(iii),

   (c)been convicted of any offences involving fraud or dishonesty:- TASA ss 20-15(b)(i) & 20-45(b), or

   (d)been convicted of, or otherwise sanctioned for, a “serious taxation offence” (relevantly, a taxation offence punishable by either imprisonment or a fine exceeding 40 penalty units) or certain other kinds of tax related misconduct:- TASA ss 20-15(b)(i) & 20-45(a), (c) & (d).

3. In the case of corporate tax agents or corporate tax agent partners, convictions for fraud, dishonesty or a “serious taxation offence” within the previous five years are complete barriers to registration eligibility. In the case of individual tax agents / applicants for registration, the recent (ie., within 5 years) occurrence of any of the matters listed in the preceding paragraph is a potential, but not an automatic, eligibility disqualification.

4. 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.

5. On one view it is not easy to see how the statutory discretion fits into the objective of ensuring the provision of tax agent services in accords with appropriate professional and ethical standards. That view is prompted by the recognition that the ability for entities (other than practising lawyers) to provide tax agent services lawfully depends on registration, and registration itself depends on the Board’s positive satisfaction that a person satisfies all of the eligibility requirements. Without registration status, a person can be both restrained from providing tax agent services, and financially sanctioned for so doing:- see paragraphs 6 & 12 above. A disqualification period on re-application should, therefore, have no direct impact on the provision of tax agent services.

6. In addition, it is relevant to note that TASA s 40-25(1) is the only provision that contemplates the imposition of a period of application ineligibility. The Board has no similar discretion where an entity simply has their registration application / renewal application refused. Neither can the Board impose a period of ineligibility where an agent has surrendered their registration, or where their registration has been terminated because of their bankruptcy, or because they have had an external administrator appointed:- TASA s 40-25(2).

7. The most obvious justification for imposing a re-application ineligibility period after the termination of an agent’s registration is where the termination decision was based on a time limited ground of registration ineligibility (such as a conviction within the preceding five years) and that ground will continue to apply until the time limit has passed:- see TASA s 20-5(2) & 20-5(3). Another justification may exist where the termination decision was based on competence, qualification, experience or staffing deficiencies that have not been remedied, and appear incapable of being remedied within a reasonably predictable future period. In these situations, one purpose of the TASA s 40-25(1) discretion appears to be to permit the Board to preclude re-registration applications that are not likely (because of their closeness in time to the events or circumstances underlying the termination decision) to have insufficient prospects of success to warrant consideration.

8. 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.

9. In Li v Tax Practitioners Board [2014] AATA 299 DP Redfern proceeded on the basis that exercise of the TASA s 40-25 discretion could be informed by the principles and practices that had been applied in the exercise of the “banning order” discretions contained in the Corporations Act 2001 (Cth) (“Corporations Act”), and principally the discretions relating to the disqualification of persons from participating in the management of corporations:- see ASIC v Rich [2002] NSWSC 483; (2002) 42 ACSR 80:- see Corporations Act ss 206A – 206G. Those particular statutory discretions relate to conduct that typically does not require any prior qualifications, official approval or licence. The banning order itself is the condition precedent to any ability to sanction a person for misconduct in failing to comply with the order. In addition, there are statutory provisions that permit the practical modification of a banning order, by allowing the affected person to make an application (at any time) for leave to do anything that would otherwise be contrary to the banning order:- see Corporations Act ss 206GAB & 206G. Those characteristics of the management banning provisions in the Corporations Act contrast markedly with both the position of unregistered persons under the TASA scheme, and the apparent inflexibility of a registration application ineligibility period. That contrast provides a reason to question the extent to which there is an appropriate analogy with the exercise of the determination period discretion in TASA s 40-25.

10. The Corporations Act contains other “banning order” provisions that relate to the regulation of financial services:- see Corporations Act ss 920A & 920B. Those provisions authorise “banning orders” to be made in a wide range of matters related to the provision of financial services. They include orders in relation to activities that would require either a relevant statutorily authorised licence or a written authorisation from such a licence holder, and authorise orders to be made against licence holders, authorised persons and other entities. The fact that, at least in some instances, the “banned” activities could not lawfully be undertaken without a statutory licence, provides a closer analogy with the TASA registration regime. The analogy is not complete however. This is partly because the discretion potentially relates to entities and activities that would not require a statutory licence. It is also partly because the order may be limited so as to authorise some activities that would otherwise be prohibited. Another point of difference is that any such order may be varied or cancelled, and there is no restriction on the time when the person affected can make an application for either purpose:- see Corporations Act s 920D.

11. Against this background, whilst the nature, extent, duration and financial consequences of a tax agent’s past misconduct must be relevant to the exercise of the determination discretion, some hesitation should be involved before regarding such a period as justified or required by either perceptions of the risk of future misconduct (assuming the person would otherwise succeed in obtaining registration) or characterisation of such a period as relevantly protective. Part of the reason for suggesting hesitation is the apparent inflexibility of the determination period, and the unpredictable extent to which circumstances may change.

12. Without expressing any criticism of either party, I record that, apart from the submission about the comparative seriousness of Mr Hill’s conduct (adverted to in paragraph 154 above) and reference to the Li decision - the submissions did not explore to any significant extent the nature of the determination period discretion, or the factors that could / should properly influence its exercise. My own limited researches have revealed an apparently wide range of determination periods – varying from 1 to 5 years. The circumstances of those matters have included (i) a 1 year determination where the termination decision had been substantially based on the agent’s misleading disclosures to the Board:- see Shmuel and Tax Practitioners Board [2019] AATA 2168; (ii) a similar 1 year period where the agent had significant conflicting interests in his dealings with clients, had threatened to withhold payment from a client unless they withdrew their complaint to the Board and had failed to account to clients for their tax refund dealt with clients:- see Carter and Tax Practitioners Board [2017] AATA 528; and (iii) three year determination periods in the case of two agents who had, as a result of their own lack of care, been misled into filing false tax returns for large numbers of “clients”:- see Li v Tax Practitioners Board [2014] AATA 299; Su and Tax Practitioners Board [2014] AATA 644.

13. Given the variability of the circumstances likely to exist, and confound informed comparison with decisions made in other matters, the determination period discretion should be exercised with particular attention to the circumstances of the agent under consideration. In the present matter, I have found Mr Hill not to be a fit and proper person because of his misleading responses to the Board in the disclosure documents. I have also found he failed to comply with the Code of Professional Conduct, in relation to the conduct of his personal taxation affairs. However, Mr Hill has largely remedied or regularised his taxation affairs. There is also no complaint or criticism about his past competence in dealing with client’s affairs. That is a significant consideration, given the length of time over which he has been engaged in providing tax agent services. Finally, there is the assertion that his circumstances have changed, and the likelihood of future contravention has been removed both by that change, and the effect of the present proceedings.

14. Given the seriousness of Mr Hill’s misleading responses to the Board, and the nature and extent of his taxation defaults, and my current lack of confidence in the asserted unlikelihood of future misconduct, I am of the view that it is appropriate to impose a determination period. That will operate both as an additional sanction for his past misconduct (an approach taken in Carter and Tax Practitioners Board [2017] AATA 528) and obviate the need to address any re-registration application that (as it presently appears) would likely have little realistic chance of success (this reflects the approach of Hill J in Stasos:- see the last passage set out in paragraph 104 above). The appropriate period I have determined is two years from the date of the Board’s 10 January 2019 decision. That period will allow sufficient time to (i) review the taxation compliance history of Mr Hill and his associated entities, (ii) consider the circumstances of his accountancy practice, and test the reality of the financial improvement asserted likely to operate as a catalyst to his future compliant conduct. It will also not preclude the prospect of Mr Hill’s earlier return to the provision of competent tax agent services (consistent with the objectives of the TASA scheme) if he is able to satisfy of the Board, after January 2021, of his then fitness for registration.

    Decisions

15. For the reasons set out above:-

    (a)The Board’s registration termination decision of 10 January 2019 is affirmed.

    (b)The Board’s five year determination of 10 January 2019 is set aside and in substitution for that determination, I determine that Mr Hill may not apply for registration for a period of two years from 10 January 2019.

I certify that the preceding 168 (one hundred and sixty-eight) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member

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

Associate

Dated: 26 March 2020

Date(s) of hearing:	24, 25 & 26 June 2019
Date final submissions received:	27 June 2019
Counsel for the Applicant:	Mr R White
Counsel for the Respondent:	Mr L Livingston