Hill v Tax Practitioners Board

Case [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…

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Details
AGLC
Hill v Tax Practitioners Board [2020] AATA 678
Case
[2020] AATA 678
Decision Date

CaseChat Overview and Summary

This matter concerned an application by Mr Hill for review of decisions made by the Tax Practitioners Board (the Board). The Board had terminated Mr Hill's registration as a tax agent and determined that he would be ineligible to re-apply for registration for a period of five years. Mr Hill sought to have both the termination decision and the five-year ineligibility period set aside.

The primary legal issues before the Tribunal were whether Mr Hill was a fit and proper person to be a registered tax agent, and if not, what period of ineligibility to re-apply for registration was appropriate. The Board's decisions were based on Mr Hill's personal tax liabilities, outstanding tax liabilities of associated corporate entities, and his culpability for various lodgement and payment defaults, including superannuation guarantee charge and PAYG remission defaults, and an unpaid tax judgment debt.

The Tribunal considered the purpose of the *Tax Agent Services Act 2009* (TASA), which is to ensure tax agent services are provided to appropriate standards of professional and ethical conduct, and that a threshold eligibility requirement for registration is that an applicant be a fit and proper person. The Tribunal noted that the assessment of fitness and propriety is not limited to specific matters but must have regard to good fame, integrity, and character. While acknowledging the seriousness of the defaults and liabilities, the Tribunal found that the Board had overstated the total outstanding tax liabilities and had not adequately accounted for payments made. The Tribunal concluded that a five-year period of ineligibility was excessive and substituted a period of two years.

The Tribunal set aside the Board's decision to impose a five-year period of ineligibility and substituted a determination that Mr Hill would be ineligible to re-apply for registration as a tax agent for a period of two years from the date of the Board's original decision. The Tribunal affirmed the Board's decision to terminate Mr Hill's registration.

Orders

Orders of the court

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Background

Background to the litigation

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

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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 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.

Ratio Decidendi

Legal Principle Established

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 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. 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. 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). 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).