Kelly and Tax Practitioners Board
[2015] AATA 712
•15 September 2015
Kelly and Tax Practitioners Board [2015] AATA 712 (15 September 2015)
Division
TAXATION & COMMERCIAL DIVISION
File Number(s)
2015/0247
Re
Adrian Kelly
APPLICANT
And
Tax Practitioners Board
RESPONDENT
DECISION
Tribunal Professor R Deutsch, Deputy President
Date 15 September 2015 Place Sydney The decision under review is affirmed.
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Professor R Deutsch, Deputy President
CATCHWORDS
TAXATION AND REVENUE – registration as a tax agent - whether applicant is a fit and proper person to be registered as a tax agent – failure to lodge tax returns – decision affirmed
LEGISLATION
Tax Agent Services Act 2009 (Cth) ss 20-5, 30-10, 40-5
CASES
Re Adamec and Tax Agent’s Board of Victoria [2005] AATA 913
Re Proh v Tax Agent’s Board (Vic) (2010) 115 ALD 68
Re QT94/289-291 and Commissioner of Taxation (1996) 33 ATR 1005; [1996] AATA 694Re Toohey and Tax Agents’ Board of Victoria [2009] AATA 603
Secondary
REASONS FOR DECISION
Professor R Deutsch, Deputy President
15 SEPTEMBER 2015
INTRODUCTION
Mr Adrian Kelly (the Applicant) has applied for review of a decision of the Tax Practitioners Board (the Respondent).
The decision in question was made 10 December 2014 and the decision was to terminate the Applicant’s tax agent registration pursuant to s 40-5(1) of the Tax Agent Services Act 2009 (Cth) (TASA) on the basis that the Applicant has ceased to be a fit and proper person under s 20-5(1)(a) of the TASA.
NON – COMPLIANCE WITH THE BOARD’S ORDERS
On 4 June 2014, the Respondent found that the Applicant had breached s 30-10(2) of the Code of Professional Conduct (the Code) in the TASA and decided to impose essentially two orders (the Orders) which required the Applicant to:
·Complete and pass a course of education or training approved by the Board in relation to the Code in the TASA (the Course); and
·Comply with his undertaking to lodge his and his associated entities outstanding income tax returns for the years ended 30 June 2006 to 30 June 2013 by 30 September 2014 (subject to any formal arrangements that may be entered into with the Australian Taxation Office (ATO)).
The Applicant was also required to notify the Board in writing when the relevant returns had been lodged. (T3- 21 to 25.)
Some six months later, on 10 December 2014, the Respondent found that the Applicant had failed to comply with the Orders as:
·he had not lodged any of the tax returns; and
·he had not completed and passed the Course. Indeed he had not even begun the Course.
In relation to the lodgement requirement, there was also no formal arrangement with the ATO to extend the time for lodgement.
Given the Applicant’s failure to comply with the Orders, the Respondent determined that the Applicant had ceased to meet the tax practitioner registration requirement to be a fit and proper person under s 20-5(1)(a) of the TASA and terminated the Applicant’s tax agent registration pursuant to s 40-5(1)(b) of the TASA. (T3 – 58 to 60.)
On 10 August 2015 the Applicant caused to be lodged almost all of the outstanding tax returns. There are still outstanding two tax returns for superannuation funds associated with the Applicant relating to the tax years ending 30 June 2013 and 2014.
This amounted to the lodgement of 42 overdue tax returns on the day before the hearing relating to the termination of the Applicant’s registration as a tax agent.
The Applicant has also now indicated that he has enrolled in an appropriate tax course as required.
EVIDENCE
The Applicant relied essentially on three written statements as follows:
(a)A Group of four undated and unsigned Notes (Applicant’s Undated Statement) attached to a bundle delivered to the Tribunal on 7 July 2015 sequentially headed:
·Work in Progress on the Preparation and Lodgement of my Family Group’s Tax Returns;
·Relevant Professional Tax Practice Matters;
·Training on Tax Agent Services Act 2009; and
·My Debilitating Illness.
(b)Statement signed by the Applicant and dated 19 April 2015 (Applicant’s Statement of 19 April 2015); and
(c)Further Statement signed by the Applicant and dated 9 August 2015 (Applicant’s Statement of 9 August 2015.)
Certain documents were tendered and marked at the commencement of the hearing as follows:
·Validation Report (two pages) dated 10 August showing a total of 42 ITRs accepted by the ATO Exhibit A1
·Prescription Medication scripts for the Applicant (6 pages) Exhibit A2
·T Documents Exhibit R1
·Letter: Respondent to the Applicant dated 20 March 2014 Exhibit R2
·Supplementary Documents filed by the Respondent Exhibit R3
·Letter: Australian Tax Office to the Applicant dated 28 July 2015 Exhibit R4
In addition, the Applicant was called as a witness and gave evidence and was cross-examined by Mr McClure, Counsel for the Respondent.
CONSIDERATION
The Applicant seems to accept that the relevant tax returns were lodged out of time but essentially asserts that:
(a)The reason they were lodged out of time was because of a series of errors that the Australian Taxation Office (ATO) had made in relation to the tax returns that were lodged in respect of the 2004 and 2005 income years; and
(b)In any event, he had been granted an extension of time to lodge the relevant returns.
I will now consider both these matters as well as two other relevant issues.
Has it been shown that the reason for the non-lodgement of the tax returns within the time required was the fault of the ATO?
The Applicant claims that his failure to lodge the relevant returns was due almost in its entirety to certain disputed assessments for the years ended 30 June 2004 and 30 June 2005. (Applicant’s Statement of 19 April 2015 and 9 August 2015.)
Curiously however, the Applicant has provided evidence of neither a single objection lodged with the ATO nor any Administrative Appeals Tribunal (AAT) proceedings commenced under Part IVC of the Taxation Administration Act 1953 (Cth) in relation to any of these matters of dispute.
One would expect that over the very lengthy period of time in question, at least some attempt would have been made to bring these alleged matters to a head by initiating some formal legal steps of the kind suggested in the preceding paragraph.
Leaving that to one side for the moment, the Applicant has not explained through his evidence either in his written statements or in his verbal testimony, what is the exact link between the alleged errors made by the ATO in relation to the 2004 and 2005 returns and the inability of the Applicant to lodge his returns (and those of his associated entities) for the 2006 to 2014 years until as late as 10 August 2015.
In other words, even if one accepts that the ATO made such errors (a matter which has not been proven one way or the other), it has not been demonstrated how those errors prevented the Applicant from lodging subsequent returns.
In short, I am not persuaded that the alleged errors by the ATO were actually made but even if I were so persuaded nothing that has been put forward by the Applicant has demonstrated that the errors if they existed were such as to explain or justify the failure to lodge the 2006 to 2014 tax returns.
Finally in this context, I also note that the returns in question were lodged on 10 August 2015 but it is not entirely clear from the evidence that the issues relating to the 2004 and 2005 years have now been fully resolved in any event.
Accordingly, the suggestion that the lack of lodgement on a timely basis is the fault of the ATO is rejected.
Was the failure to lodge Tax Returns the result of an Extension of Time that had been granted by the ATO?
The Applicant consistently asserts that he had been granted an extension of time to lodge the relevant returns.
The grounds for claiming the existence of such an extension seem very tenuous. Essentially the Applicant suggests that the extension came into existence for two reasons.
First, the notes of a conversation between an ATO officer and the Applicant indicated that the officer advised the Applicant to the effect that “if penalties or general interest charges are applied, you could seek remission”. (Exhibit R4.)
The Applicant suggests that because the ATO officer used the word “if” rather than “when” this somehow implied that it was not certain that such penalties or interest would arise and that therefore an extension had been granted.
Secondly, the Applicant indicates that he was told in verbal discussions by an officer of the ATO that “there would be no pressure for the lodgements” (of the outstanding tax returns). (T3-49.)
It is difficult to fathom how a tax practitioner with so many years of experience could seriously contend that the use of the word “if” in the context referred to above somehow is enough to convey the message that an extension has been granted. I have no reason to doubt the veracity of the Applicant in asserting that such a statement was made indeed it is confirmed by the notes kept of the conversation. However, to read into that statement the consequence that an extension of time has thereby been granted is, in my view, completely unwarranted.
Further, even if the ATO officer in question had indicated there would be “no pressure”, again I would suggest that the Applicant can hardly rely on that very limited verbal statement to suggest that it amounts to a global extension in respect of all outstanding returns even those that are some six or seven years overdue.
The fact is that the Applicant has provided no objective evidence of the granting of an extension of time in respect of the lodgement of the returns in question and there was no reasonable basis for the Applicant to assume that such an extension had been granted. The verbal statements do not amount, even on the Applicant’s construction of what was said, to anything like an assurance that extensions of time to lodge returns had been granted.
To the contrary, the ATO records disclose no extension of time being granted to the Applicant for lodgement of the returns. By letter dated 28 July 2015 from the ATO to the Applicant, the ATO confirmed that no lodgement extension had been granted. (Exhibit R4.)
I also note that on 5 June 2014 the Respondent wrote to the Applicant enclosing an order under s 30-20 of TASA requiring lodgement of all the relevant tax returns by 30 September 2014, a date which the Applicant himself had nominated as being appropriate. (T3-24.)
The Applicant responded by way of letter dated 22 July 2014 (T3-30) in which the Applicant made a number of statements but no statement or even indication suggesting that an extension of time for the lodgement of returns had been granted by the ATO . This was followed by a further letter dated 28 September 2014 from the Applicant to the Respondent which again made numerous statements but no reference to any extensions granted by the ATO.
One would expect that the existence of an extension of time for lodgement of returns being a matter of critical relevance would have been raised by the Applicant in these crucial communications if the Applicant believed that such an extension had been granted.
Furthermore, the Applicant, being a tax practitioner of some years standing, would be well aware that extensions of time for lodgement of tax returns are serious matters which the ATO would as part of its normal practice only confirm by way of written communication with the taxpayer concerned.
Accordingly, the suggestion that the tax returns were not lodged on a timely basis because the Applicant had the benefit of an Extension of Time granted by the ATO is rejected.
Does the lack of timely lodgement of tax returns give rise to the conclusion that the Applicant is not a fit and proper person?
The Tribunal has consistently referred to an agent’s non-compliance with the taxation laws as reflecting adversely on their fitness and propriety. Examples include:
In Re Toohey and Tax Agents’ Board of Victoria [2009] AATA 603 at [36], DP McDonald noted that:
As a tax agent, the applicant should hold himself up to a higher standard than the general public. He has an intricate knowledge of tax laws and it is reasonable to assume that he knows the importance of lodging tax returns on time. His clients, as well as the general public, should be able to entrust their taxation affairs to him and have confidence that he is able to lead by example and file his tax returns on time as required by the law.
In ReAdamec and Tax Agent’s Board of Victoria [2005] AATA 913 at [78], Dr Hughes found that:
The repeated failure of the applicant to lodge his own income taxation returns likewise calls into account his fitness to practise as a tax agent. It is insufficient for the applicant to state that he disregarded his own obligations because he was giving priority to his clients. While this explanation may be true, it evinces either severe personal disorganisation (which in turn is likely to impact adversely on his professional duties) or a severe lack of regard for the very legal framework within which he practises his profession. Either way, this places the applicant's clients at risk.
In Re Proh v Tax Agent’s Board (Vic) (2010) 115 ALD 68 the Tribunal stated at [15]:
… 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.
These important commentaries are all very relevant in the context of this case.
First, a reasonable member of the general public would be concerned to learn that a tax return due sometime in early 2007 had not been lodged by the end of 2014. This behaviour is hardly one that suggests that the Applicant is leading by example in the way suggested in Toohey.
Secondly, the Applicant in this case has also suggested that he gave some priority to his client’s affairs. As suggested in Adamec, prioritising in this fashion is not to be viewed favourably in the context of a tax practitioner who has his own tax returns outstanding. Rather, it evinces either severe personal disorganisation or a severe lack of regard for the legal framework within which the practitioner practices.
Furthermore, though not specifically referred to in the cases above, it is relevant that in this case there are not merely one or two tax returns that are overdue one or two years. Here, I am considering over 40 tax returns which in many cases are overdue by four, five, six and even seven years. It might in appropriate circumstances be possible to give the Applicant some leeway where one or two returns are overdue one or two years but it is difficult to do so in the current circumstances where both the volume of overdue returns and the time frame are so substantial.
Consequently, I conclude that the lack of timely lodgement of tax returns supports the conclusion that the Applicant is not a fit and proper person.
Does the lack of further training give rise to the conclusion that the Applicant is not a fit and proper person?
The Applicant initially told the Respondent that further training would be a “waste [of] time”. (T3 – 30.) At the hearing, he described the requirement to undergo further training as “childish”.
Later, he explained his failure to comply with the Orders by asserting that
…the work I have done on tax information, commitments to client, other professional and charitable obligations and wider training indicates the difficulty I have had in finding time for the ordered training. (Applicant’s Undated Statement under the heading “Training on Tax Agent Services Act 2009”.)
While on one level such statements of irritation from the Applicant, being a practitioner of some years standing, are understandable, they reflect a level of complacency which fails to take into account the seriousness of the matters that the Applicant is confronting. It also ignores the fact that the Applicant is working within a profession which is regulated and that the Respondent is in essence the entity charged with responsibility for administering and enforcing that regulatory function.
In other words, one cannot operate in a regulated profession and flippantly dismiss the requirements imposed by the regulator as being “a waste of time” and “childish” without suffering serious consequences.
Consequently, I conclude that the lack of further training supports the conclusion that the Applicant is not a fit and proper person.
Does the uncontradicted evidence of the Applicant’s health alter the situation?
The Applicant provided to the Tribunal two medical certificates, the first dated 30 October 1996 and the second 23 July 2015.
Having regard to those two statements and the prescription medication scripts found at Exhibit A2, I accept that the Applicant has suffered from and continues to suffer from various serious diagnosed medical conditions which require on-going periodic treatment. Nothing has been said to suggest that that is not the case and I fully accept the evidence of the existence of these conditions.
The critical question for me is to determine the extent to which that condition has contributed to or caused the failings on the part of the Applicant which I have outlined above.
The problem for the Applicant in this case is that part of his evidence has specifically indicated that he was too busy dealing with the complex affairs of his clients to turn his mind to the course he had been asked to complete and pass.
Quite clearly, if he could turn his mind to organising what he describes as the complex affairs of his clients, there can be no reason to assume that his medical situation was such as to prevent him from completing the course and attending to the completion and lodgement of his long overdue tax returns.
The whole saga is explicable only on the basis that the Applicant quite consciously chose to attend to his clients affairs and largely to ignore the requirement to lodge tax returns and to complete and pass the required course at least until such time as the hearing in this matter was upon him.
The Applicant drew my attention to the decision of Senior Member Beddoe in Re QT94/289-291 and Commissioner of Taxation (1996) 33 ATR 1005 at [18]; [1996] AATA 694 at [18], a case concerning the imposition of late lodgement penalties. The senior member there said:
I have come to this conclusion because I am satisfied that the applicant did not refuse to lodge the returns and because I am also satisfied that the applicant failed to lodge the income tax returns because of the state of his health. His health was such as to make it impossible for him to lodge or supervise the lodgement of his returns. (Emphasis added.)
It is clear from this statement and particularly the highlighted words that the conclusion reached by the Senior Member was based on the causal link, such that the health situation was the direct cause of the failure to lodge the returns. I have specifically found that not to be the case in the current situation.
Thus having regard to all the evidence, I cannot conclude in this case that the Applicant’s medical situation was the cause of his failing to complete his tax returns on a timely basis or to complete and pass the course as required.
CONCLUSIONS
In my view having regard to the Applicant’s extended failure to comply with the Orders and his lack of appreciation of the statutory obligations of a registered tax agent and the role of the Board in enforcing those obligations demonstrate that he is not a fit and proper person to be registered as a tax agent under the TASA.
DECISION
The decision under review, being the decision of 10 December 2014, is affirmed.
I certify that the preceding 62 (sixty-two) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President
...........................[sgd].............................................
Associate
Dated 15 September 2015
Date(s) of hearing 11 August 2015 Applicant In person Counsel for the Respondent Mr D McLure, Counsel Solicitors for the Respondent In house
Key Legal Topics
Areas of Law
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Administrative Law
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Tax Law
Legal Concepts
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Judicial Review
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Procedural Fairness
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Standing
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Statutory Construction
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