John Cleary and Tax Practitioners Board
[2014] AATA 260
[2014] AATA 260
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/3064
Re
John Cleary
APPLICANT
And
Tax Practitioners Board
RESPONDENT
DECISION
Tribunal Ms A F Cunningham (Senior Member)
Date 2 May 2014 Place Hobart The decision under review be varied as follows:
· the period of suspension of the Applicant’s tax agent registration under section 30-25 of the TAS Act be for a period of 12 months with effect from 17 April 2014.
· the decision under review is otherwise confirmed.
........................................................................
Ms A F Cunningham (Senior Member)
CATCHWORDS
Tax Agent - Registration - Suspension - serious breaches of Code of Professional Conduct - lack of contrition and appreciation of seriousness of breaches - decision under review varied to increase period of suspension
LEGISLATION
Tax Agent Services Act 2009
Administrative Appeals Tribunal Act 1975
Superannuation Guarantee Charge Act 1992.
CASES
Phillip Same Accountants Proprietary Limited v Tax Practitioner’s Board
Proh v Tax Agent’s Board (Vic)
Stasos v Tax Board of New South Wales
REASONS FOR DECISION
Ms A F Cunningham (Senior Member)
The applicant, John Cleary has applied for the review of a decision made by the Tax Practitioners Board (the Board) dated 28 May 2013 which pursuant to subdivision 30B of the Tax Agent Services Act 2009 imposed the following sanctions: firstly, a written caution and secondly, a suspension of Mr Cleary’s tax agent registration for a period of three months. The suspension was to take effect from 26 June 2013 until 26 September 2013.
On 1 July 2013 Deputy President Groom granted Mr Cleary’s application for an order that the implementation of the respondent’s decision to suspend his tax agent registration for a period of three months be stayed until the decision of the Tribunal on the application for review comes into operation or until further order of the Tribunal. That order was revoked by me at the conclusion of the hearing of Mr Cleary’s application for review of the decision of the Tax Practitioners Board.
Mr Cleary’s application for a confidentiality order pursuant to section 35 of the Administrative Appeals Tribunal Act 1975 had been refused by order of the Tribunal prior to the hearing.
Mr Cleary appeared on his own behalf at the appeal hearing and gave oral evidence. The Tax Practitioners Board was represented by David Brown of Counsel and assisted by Julia Randall Smith. Three volumes of T documents were tendered in evidence pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 on behalf of the respondent.
Mr Cleary did not dispute the details of the alleged Code of Professional Conduct breaches being as follows:
(a)failing to lodge his personal income taxation returns for the financial years 2009, 2010 and 2011 by the respective due dates;
(b)failing to lodge his business activity statements (BAS) for the period covering 1 July 2011 to 30 September 2012 by the respective due dates;
(c)failing to lodge the partnership ITR’s for the 2009, 2010 and 2011 financial years by the due dates;
(d)failing to lodge the Partnership’s BAS for the quarters ending 1 July 2011 to 30 September 2012 (inclusive) by the due dates;
(e)failing to pay by the respective due dates, his personal income tax debt of $17,447; his client account centre debt of $60,465.06; and the partnership CAC debt of $716;
(f) failing to pay employer contribution to his employee superannuation funds during the 2007, 2010 and 2012 financial years pursuant to the Superannuation Guarantee Charge Act 1992.
Mr Brown informed the Tribunal that the breaches with respect to the Superannuation Guarantee Charge Act should date from 2001 which is supported by relevant documentation contained in the T documents.
Mr Cleary claimed that the reasons for his non-compliance were related to issues and costs arising from his wife’s three spinal surgery treatments, lack of available finances and insufficient time to attend to his personal affairs due to his professional workload. Mr Cleary argued that the three-month suspension would be deleterious to his business and harmful to his professional reputation, and would result in a reduction in income making it difficult for him to repay his taxation debts.
Mr Cleary claims that he has since lodged taxation returns for the years 2009 and 2010. Further, he disputes the non-payment of superannuation guarantee contributions for two of his employees. Mr Cleary acknowledged his responsibilities to pay superannuation guarantee contributions as assessed for his other employees.
LEGISLATION
The relevant legislation is the Tax Agent Services Act 2009 (the TAS Act) which states in division 2 at 2-5 “The object of this Act is to ensure that Tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct…”Part 3 prescribes the Code of Professional Conduct that applies to registered tax agents and sets out the professional and ethical standards with which registered tax agents are required to comply. The Code of Professional Conduct is contained at subsection 30-10 subsection 2 of which states “You must comply with the taxation laws in the conduct of your personal affairs”.
Section 30-15 provides that if the Board is satisfied, after conducting an investigation under subdivision 60-E, that the tax agent has failed to comply with the Code of Professional Conduct then the Board may do one or more of the following:
(a) give the agent a written caution;
(b) give the agent an order under section 30-20;
(c) suspend the agent’s registration under section 30-25;
(d) terminate the agent’s registration under section 30-30.
Section 30-25 provides that the Board may suspend a tax agent’s registration by notice in writing for a period determined by the Board. This section goes on to provide that during the period of suspension the tax agent must not provide tax agent services. The provisions with respect to investigations by the Board are contained in subdivision 60-E.
Included in the T documents at T28 was the Explanatory Paper TPB 01/2010 - Code of Professional Conduct which expands upon the obligations under subsection 30-10(2) of the TAS Act to “comply with the taxation laws in the conduct of your personal affairs.” Paragraphs 33-34 provide that “taxation laws” include acts and regulations concerning income tax, indirect taxes such as GST, superannuation and the administration and collection of taxes.
Paragraph 35 provides that “personal affairs” refers interalia to a tax agent’s or BAS agent’s 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.
CONTENTIONS
As stated above, Mr Cleary did not dispute the details of the alleged Code of Professional Conduct breaches but argued that he had already served a period of self-imposed suspension and that any further suspension would be deleterious to his business and his ability to satisfy his taxation liability.
It was submitted by the respondent that Mr Cleary’s failure to comply with the taxation laws in the conduct of his personal affairs has occurred over a period of more than 10 years. Mr Cleary is clearly in breach of the Code of Professional Conduct. He has significant and increasing outstanding liabilities which to date he has failed to address either by payment or entering into a payment arrangement. Of particular concern is Mr Cleary’s ongoing failure to meet his legal obligations to his staff by failing to pay their superannuation guarantee contributions despite being aware of these obligations since at least August 2007.
In closing submissions Mr Brown contended that on the basis of the evidence given by Mr Cleary during the appeal hearing, there is no indication that Mr Cleary understands his obligations to adhere to the Code of Conduct. Nor did Mr Cleary demonstrate any contrition with respect to his failures to meet his obligations or appear to appreciate the significance of his conduct. Mr Brown contended that there is no basis upon which the Tribunal could be satisfied that Mr Cleary would not continue to disregard the tax laws in the conduct of his business as a tax agent. It was submitted that the public are entitled to confidence in the registration of tax agents and accordingly the Tribunal should consider a suspension for a period of at least 12 months.
CONSIDERATION AND FINDINGS
The registration of a person as a tax agent is a holding out by the Tax Practitioner’s Board to the public that the person is a fit and proper person, of good character and qualified to practice as a tax agent. Once registered as a tax agent a person is expected to comply with several requirements and in particular the Code of Professional Conduct as set out in Part 3 of the TAS Act. These provisions in the Act provide a mechanism to ensure ongoing monitoring of a tax agent’s conduct and the means by which the general public can be assured of the honesty, integrity, competence and other responsibilities of the tax agent. The TAS Act includes sanctions for demonstrated non-compliance.
Mr Cleary’s non-compliance with the identified provisions of the Code is not in issue and has been accepted by him. However Mr Cleary’s reasons for his non-compliance are contradictory and far from satisfactory. His ongoing failure to comply with the taxation laws is of considerable concern particularly in light of Mr Cleary’s knowledge and acceptance of his responsibilities. Mr Cleary is well aware of his outstanding taxation debt and has made no effort to either repay the debt or enter into a repayment arrangement.
Mr Cleary’s failure to meet his obligations constitutes not only breaches of the law but a failure to uphold the confidence and trust that the public are entitled to expect in the services offered by a registered tax agent.
I was referred to a decision of Deputy President McDonald in Phillip Same Accountants Proprietary Limited v Tax Practitioner’s Board [2010] AATA439 who determined to affirm the Board’s decision that the applicant was not a fit and proper person to be reregistered as a tax agent. The decision was made in light of Mr Same’s consistent failure of personal compliance over nearly a 10 year period. There was however evidence that Mr Same had since taken steps to modify his practices in an effort to avoid ongoing breaches of his liabilities. Despite the Tribunal’s acceptance of Mr Same’s acknowledgment of the unsatisfactory nature of his past omissions and his strong desire that they not be repeated, the Tribunal stated at paragraph 24:
“…. a balance must be reached between the failures of the past with the actions taken to correct them plus proposals that conduct will be modified in the future. The only way in which this can be done is for the decision maker to have regard to the past performance or lack of it. In this case the failures are extensive and Mr Same has had the use of money which ought to have been paid to the ATO. The public can expect those such as Mr Same, who as the result of registration as tax agents, to lead by example by meeting their obligations to file required returns and to pay tax owing on time. It is clearly a breach of trust for money, which should be set aside for the ATO, to be diverted for other purposes. That breach of trust occurs in circumstances when the clients are unaware that money, they have paid for remission to the ATO as GST, has been diverted for use by Mr Same until such time as he chooses to pay it or indeed, as in the case of JMN, if it is ever paid.”
In the present case Mr Cleary’s failures are also extensive and have taken place over a lengthy period of time. Mr Cleary has similarly had the use of money which ought to have been paid to the ATO. In contrast to the Same case, there is no evidence that Mr Cleary has taken any steps to either modify or attend to his ongoing breaches. Indeed it was his evidence that he is still not paying superannuation guarantee contributions to his current employees. Nor did Mr Cleary demonstrate any contrition or remorse for his actions or appear to appreciate the seriousness of his breaches of the tax laws. In his closing submissions Mr Cleary said that he was surprised at Mr Brown’s suggestion that he failed to understand his obligations as a Tax agent. He said that this statement was an indictment on his character and an insult.
Of relevance is the following statement of Deputy President McDonald in re Proh v Tax Agent’s Board (Vic) [2010] 115 ALD 68 at paragraph 15:
“The purpose of cancellation or suspension of a Tax agent’s registration is not to punish the person concerned, although it may have that effect but to protect taxpayers from agents who are not conforming to the legislative requirements attaching to their registration as agents. It is generally accepted, and the Tribunal accepts, that a failure of an agent to attend to his/her own taxation affairs demonstrates a lack of suitability, rendering the agent unfit to handle the affairs of those who may seek to utilise his/her services.”
Deputy President McDonald had earlier referred to the decision of Hill J in Stasos vTax Board of New South Wales (1990) 21 ATR 974 where he said at page 985:
“however, a person who has been shown to be other than a fit and proper person to be registered must satisfy the Tribunal considering his re-registration or cancellation of his registration as the case may be, that he appreciates the significance of his wrongdoing, that he regrets it and that he has rehabilitated himself such that it is truly unlikely that there will be any lapse in the future of the standards which are required of him. The more serious his dereliction from duty the longer may be the time necessary to show this. It will not be sufficient for him to merely express his contrition. The Tribunal must be satisfied on the balance of probabilities that not only is that contrition actually felt, but that he will not again deviate from the high standards required of him as a registered Tax agent.”
Deputy President McDonald similarly found that Mr Trevaskis refused to accept the gravity of his conduct. At paragraph 18 President McDonald stated that he had “no confidence that Mr Trevaskis would not again deviate from the high standards required of him as a registered tax agent.” In the circumstances Deputy President McDonald determined that the conduct demonstrated by Mr Trevaskis warranted the termination of his registration and found that the period of two years imposed by the Board was in the circumstances not excessive.
In the present case I was urged to impose a 12 month period of suspension in light of the evidence that was forthcoming at the appeal hearing. I have no hesitation in imposing a 12 month period of suspension and indeed considered the option of termination of registration under section 30-30 of the TAS Act. In light of Mr Cleary‘s failure to acknowledge the seriousness of his ongoing breaches, I have little confidence that Mr Cleary has any intention of voluntarily repaying his outstanding taxation liabilities or fulfilling his legal obligations to comply with the taxation laws of this country. In light of the evidence presented at the hearing, Mr Brown agreed that termination was a sanction that could be considered by the Tribunal. Mr Brown advised however that the Board did not pursue this option as the case had not proceeded on this basis.
In the circumstances the Tribunal determines that the decision under review be varied by the imposition of a suspension of Mr Cleary’s registration under section 30-25 of the TAS Act for a period of 12 months with effect from 17 April 2014.
The decision under review is otherwise confirmed.
I certify that the preceding 27 (twenty seven) paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Senior Member) ........................................................................
Administrative Assistant
Dated
Date(s) of hearing 3 April 2014 Applicant In person Counsel for the Respondent Mr D Brown Solicitors for the Respondent Ms J Randall-Smith, Australian Government Solicitor
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