JSP Partners Pty Ltd and Tax Agents' Board of Victoria

[2008] AATA 131

Administrative Appeals Tribunal

PRELIMINARY DECISION AND REASONS FOR PRELIMINARY DECISION [2008] AATA 131

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/0098

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		JSP PARTNERS PTY LTD

Applicant

And TAX AGENTS’ BOARD OF VICTORIA  

Respondent

PRELIMINARY DECISION

Tribunal Mr Egon Fice, Member  

Date20 February 2008

PlaceMelbourne

Decision The Tribunal refuses to exercise its discretion to refer the question of law arising in this proceeding to the Federal Court. 

(sgd) Egon Fice

Member

PRELIMINARY DECISION – statutory interpretation – question of law ‑ discretion ‑ whether to refer a question of law to the Federal Court on request of a party – request denied.

Federal Commissioner of Taxation v Salenger [1988] 81 ALR 25

Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166

Re Hassell; Ex parte Pride and Commonwealth (1984) 58 ALR 219

Tax Agents’ Board of Queensland v Seymour (1990) 21 FCR 357

Administrative Appeals Tribunal Act 1975

Income Tax Assessment Act 1936

Repatriation Act 1920

REASONS FOR PRELIMINARY DECISION

20 February 2008 Mr Egon Fice, Member       

1.      JSP Partners Pty Ltd (JSP Partners) is a firm of chartered accountants with an extensive tax practice.  It had been granted registration as a tax agent and, in about May 2007, its existing registration was to expire.  JSP Partners applied for re‑registration which was refused by the Tax Agents’ Board of Victoria (the Board).  JSP Partners was permitted to continue with its practice as a registered tax agent while negotiations for re-registration proceeded until finally, by notice dated 14 December 2007, the Board notified JSP Partners that its current registration would cease on 11 January 2008.  Its application for re-registration as a tax agent was denied.  JSP Partners applied to the Tribunal for a Stay of the decision to cancel its registration as a tax agent with effect from 11 January 2008, and also for a review of the decision to do so.

2.      At a Telephone Directions Hearing held on 1 February 2008, the Board consented to a Stay of the decision not to grant any further extension of time to JSP Partners’ tax agent registration.  Mr B. Raynor, who appeared on behalf of the Board, requested that a question of law be referred to the Federal Court of Australia, prior to the Tribunal proceeding to hear this matter.

3. The question of law which Mr Raynor sought to have referred to the Federal Court was stated, in broad terms, to be the interpretation of s 251N of the Income Tax Assessment Act 1936 (Assessment Act).  As I understand the problem, it is that although JSP Partners is the registered tax agent and responsible for billing clients of the practice for taxation work, the staff employed to perform tax-related work are employees of JSP Administrative Service Pty Ltd (the Service Company). Although both corporate entities have common directors, and those directors supervise the employed staff members who complete tax-related work, it is the Board’s view that such an arrangement does not comply with s 251N.

4. Section 251N of the Assessment Act provides:

251N  Preparation of returns etc. on behalf of registered tax agents

(1)       A registered tax agent or a person exempted under section 251L shall not allow any person, not being his employee, a registered tax agent or, in the case of a partnership which is registered as a tax agent, a member of that partnership:

(a)to prepare on his behalf, either directly or indirectly, his own or any other income tax return or objection; or

(b)to conduct on his behalf, either directly or indirectly, any business of himself or any other person relating to any income tax return or income tax matter.

Penalty:10 penalty units.

(2)       A partnership or company which is registered as a tax agent shall not allow any person to do anything specified in paragraph (1)(a) or (b).

Penalty:10 penalty units.

(2A)     Subsection (2) does not apply to the extent that the person does the thing under the supervision and control of a registered nominee of the partnership or company.

Note:A defendant bears an evidential burden in relation to the matters in subsection (2A), see subsection 13.3(3) of the Criminal Code.

(2B)     A natural person who is registered as a tax agent must not allow any person to do anything specified in paragraph (1)(a) or (b).

Penalty:10 penalty units.

(2C)     Subsection (2B) does not apply to the extent that the person does the thing under the supervision and control of:

(a)the tax agent; or

(b)a registered nominee of the tax agent.

Note:A defendant bears an evidential burden in relation to the matters in subsection (2C), see subsection 13.3(3) of the Criminal Code.

(3)       Nothing in this section shall be construed as prohibiting the employment by a registered tax agent or person exempted under section 251L of solicitor or counsel to act in the course of his profession in the preparation of any objection or in any litigation or proceedings before a board, the Tribunal or a court, or in an advisory capacity either in connexion with the preparation of any such return or the conduct of any such business.

5.      Mr Raynor submitted that this is a question of some importance as there are a number of large accounting practices which have adopted a similar structure, where their employees are employed by a service company which is not the registered tax agent. 

6. The Tribunal is empowered by s 45 of the Administrative Appeals Tribunal Act 1975 (the AAT Act) to refer matters of its own motion, or at the request of a party, to the Federal Court. Relevantly, it provides:

45  Reference of questions of law to Federal Court of Australia

(1)       The Tribunal may, of its own motion or at the request of a party, refer a question of law arising in a proceeding before the Tribunal to the Federal Court of Australia for decision but:

(a)a question must not be so referred without the concurrence of the President; and

(c)in respect of a proceeding before the Small Taxation Claims Tribunal—in so referring a question, the interests of the applicant seeking review of a relevant taxation decision must be taken into account…

7.      The first issue which I must address is whether the Tribunal, upon the request of a party, is bound to refer a question of law to the Federal Court despite the use of the word may in the enabling provision.  When dealing with a similar provision in the Repatriation Act 1920 (the Repatriation Act), Toohey J in Re Hassell; Ex parte Pride and Commonwealth (1984) 58 ALR 219 at 223, decided that the context in which the word appears determines whether the word is a word of permission or obligation. In His Honour’s view, the relevant section of the Repatriation Act contained a machinery provision designed to enable the Tribunal, if so minded, to obtain from the Federal Court an answer to a question of law arising in a proceeding before the Tribunal. In my opinion, that case is good authority for the proposition that I am not bound to refer a question of law to the Federal Court on the request of a party pursuant to s 45 of the AAT Act. I am, however, required to consider whether I should exercise my discretion to do so. If I decide that it is appropriate to exercise the discretion conferred by s 45, the question of law cannot be referred to the Federal Court without the concurrence of the President of the Tribunal. That second step should only be taken following my decision whether to exercise the discretion vested in the Tribunal by s 45.

8.      I have no doubt that in this case a question of law arises in the proceeding before the Tribunal.  Although that question of law has only been stated in general terms, it is reasonably clear that the Tribunal will need to determine whether the employees of a service company, which is not itself a registered tax agent, are nevertheless lawfully permitted to prepare, on behalf of a registered nominee of the tax agent, income tax returns or objections to the Commissioner’s assessment; or to conduct any business relating to any income tax return or income tax matter. 

9. Although Mr Raynor indicated the significance of determining the correct interpretation of s 251N, my searches have revealed that its construction, insofar as it is relevant to this matter, has been dealt with by Pincus J of the Federal Court of Australia in Tax Agents’ Board of Queensland v Seymour (1990) 21 FCR 357. His Honour discussed at some length the construction that should be given s 251N; and in particular to the meaning of the expression an employee of a registered tax agent (at 360). Therefore, it cannot be said that this Tribunal does not have authority to which it can refer, regarding the interpretation of s 251N.

10.     There can be no question that this Tribunal is bound to follow relevant judicial pronouncements (see Federal Commissioner of Taxation v Salenger [1988] 81 ALR 25 at 35; and Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166 at 177).

11. Accordingly, this Tribunal is bound by the construction given to s 251N by Pincus J in Seymour’s case. Although I accept that Seymour’s case dealt with an employee of a partnership rather than a corporate entity, the principles remain the same. Therefore, despite the significance which Mr Raynor submitted attaches to the outcome of this case, it does not appear to be an appropriate case to refer to the Federal Court.

12.     Having declined to exercise the Tribunal’s discretion to refer the question of law arising in this proceeding to the Federal Court, there is no need for me to refer this matter to the President of the Tribunal.  

I certify that the twelve [12] preceding paragraphs are a true copy of the reasons for the preliminary decision herein of:

Mr Egon Fice, Member

sgd: Olympia Sarrinikolaou

Clerk

Date of Hearing:  1 February 2008
Date of Preliminary Decision:       20 February 2008
Advocate for the Applicant:         Mr B. Payne, JSP Partners Pty Ltd
Advocate for the Respondent:      Mr B. Rayner, Australian Government Solicitor