Mahathevan and Tax Practitioners Board (Taxation)
[2020] AATA 3381
•3 September 2020
Mahathevan and Tax Practitioners Board (Taxation) [2020] AATA 3381 (3 September 2020)
sDivision: TAXATION AND COMMERCIAL DIVISION
File Number: 2020/4061
Re:Mahinthan Mahathevan
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Senior Member R Olding
Date:3 September 2020
Place:Sydney
1. The implementation of the decisions under review is stayed until determination of the application for review or further order of the Tribunal.
2. Order 1 is subject to the Applicant during the operation of the Order:
a. not undertaking any tax agent services for new clients;
b. notifying each existing client, in writing, before undertaking any new or continuing tax agent services for the client that:
i.his tax agent registration has been terminated;
ii.he has applied to the Tribunal for review of the termination decision;
iii.the Tribunal has stayed the implementation of the termination decision until the determination of the application for review;
and providing the client with a copy of, or link to, these reasons;
c. not providing clients with any further explanation about the stays without the prior written consent of an officer of the Board;
d. complying with all lodgement and payment obligations for the Applicant and his associated entities arising under taxation laws after the date of these orders;
e. complying with any directions that may be made by the Tribunal in connection with the application for review.
3. The Applicant’s request for a confidentiality order is refused.
...........[sgd].............................................................
Senior Member R Olding
CATCHWORDS
PRACTICE AND PROCEDURE – STAY APPLICATION – termination of tax agent registration – where tax agent failed to comply with personal taxation and continuing professional education obligations – where allegations of fraudulent behaviour – prospects of success in application for review – stay granted subject to conditions
PRACTICE AND PROCEDURE – CONFIDENTIALITY ORDERS – where tax agent sought confidentiality orders pending determination of application for review – where tax agent largely admitted to failures to comply – confidentiality orders refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth), ss 35, 41
Tax Agents Services Act 2009 (Cth), ss 2-5, 30-10, 40-25, 60-125, 70-10
CASES
Birdseye v Tax Practitioners Board [2020] AATA 1250
Birdseye v Tax Practitioners Board [2020] FCA 1235
Le’Sam Accounting Pty Ltd and Tax Practitioners Board [2020] AATA 890Scott and Australian Securities and Investments Commission [2009] AATA 798
REASONS FOR DECISION
Senior Member R J Olding
3 September 2020
The applicant, Mr Mahathevan, has applied to the Tribunal for review of the decisions of the Tax Practitioners Board (“the Board”) to terminate his registration as a tax agent and that he may not apply for registration for a period of five years (collectively, the “termination decision”).
These reasons concern Mr Mahathevan’s applications for:
(a)a stay of the termination decision pending the outcome of the review of the termination decision; and
(b)confidentiality orders.
Particularly so far as there are allegations of denial of procedural fairness by the Board, this matter raises some issues that are canvassed in a recent decision of the Federal Court in Birdseye v Tax Practitioners Board.[1] Logan J dismissed the tax agent’s application for judicial review in that case on 24 July 2020, before these applications were heard on 31 July, but his Honour’s reasons were not published until 26 August 2020.
[1] [2020] FCA 1235.
I have considered whether the parties should be given an opportunity to provide further submissions following the publication of the Birdseye decision. However, since the Court essentially endorsed the approach taken by the Tribunal in that case,[2] I have concluded it is not necessary to further delay resolution of the current applications.
APPLICATION FOR STAY
The statutory framework and applicable principles
[2] Birdseye v Tax Practitioners Board [2020] AATA 1250.
The tax agent disciplinary regime
The regulatory regime for tax practitioners is found in the Tax Agents Services Act 2009 (Cth) (“the TASA”). The object of the Act is:
to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct.[3]
[3] TASA, s 2-5.
The object is achieved through a system of registration of tax agents administered by the Board. In addition to relevant qualifications, experience, professional indemnity insurance and, for renewals, continuing professional education, for an individual to be eligible to be a registered tax agent, the Board must be satisfied the individual is a “fit and proper person”. Whether an individual is a fit and proper person requires the Board to have regard to specified criteria, particularly “whether the individual is of good fame, integrity and character”.[4]
[4] TASA, s 20-15.
Code of Conduct
The system of registration of tax agents is supported by a Code of Conduct (“the Code”) and disciplinary sanctions. The Code is found in subdivision 30-A of the TASA. Obligations under the Code include that a registered tax agent must:
(a)“act honestly and with integrity”;[5] and
(b)“comply with taxation laws in the conduct of your personal affairs”.[6]
[5] TASA, s 30-10(1).
[6] TASA, s 30-10(2).
The expression “personal affairs” is not defined in the TASA. The Board takes the view that it includes associated entities of the tax agent, such as companies, partnerships and trusts, over which the tax agent has direct or indirect control.
Sanctions
On completion of an investigation, the Board must make a decision to take no further action or to impose a sanction under the TASA, subdivision 30-B, for breach of the Code of Conduct; terminate the entity’s registration under subdivision 40-A; and/or apply to the Federal Court for an order for payment of a pecuniary penalty and/or an injunction.[7]
[7] TASA, s 60-125(2).
The range of sanctions under subdivision 30-B for failing to comply with the Code of Conduct include:
(a)a written caution;
(b)an order requiring completion of a course of education or training;
(c)an order limiting the tax agent services the tax agent is permitted to provide or requiring services to be provided under supervision;
(d)suspension of the tax agent’s registration;
(e)termination of the tax agent’s registration.
An individual tax agent’s registration may be terminated under subdivision 40-A if, amongst other events, the individual ceases to meet one of the tax practitioner registration requirements which, it will be recalled, includes that the tax agent is a “fit and proper person”.
Where the Board terminates a tax agent’s registration following an investigation, the Board may also determine a period of not more than five years in which the tax agent may not re-apply for registration.[8]
[8] TASA, s 40-25.
Staying decisions
The making of an application to the Tribunal to review a decision does not, in itself, affect the operation of a decision.[9] However, a party to a proceeding before the Tribunal, subject to exceptions that do not arise in this case, may apply for a stay of a decision under subsection 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the “AAT Act”), which states:
The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
(Emphases added.)
[9] AAT Act, s 41(1).
The considerations to which I consider it is appropriate for the Tribunal to have regard in determining whether to make a stay order are:
(a)The prospects of success of the application for review;
(b)The consequence for the applicant of refusing a stay;
(c)The public interest;
(d)The consequences for the respondent in carrying out its functions depending on whether a stay is granted;
(e)Whether the application for review would be rendered nugatory if a stay where not granted; and
(f)Other relevant matters.[10]
[10] Scott and Australian Securities and Investments Commission [2009] AATA 798, 4.
Consistent with the inclusion of “other relevant matters” at subparagraph (f) above, and as Logan J emphasised in Birdseye, these considerations are neither prescriptive nor exhaustive of the matters that I may take into consideration. The statutory task required of the Tribunal is to form an opinion whether it is desirable to grant the stay or related relief as it considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
As Logan J stated in Birdseye at [23]:
…an applicant for a stay is in no way required to demonstrate that he, she or it, as the case may be, must succeed on an application for review on the merits of the decision. At most, all that one must show is that there is a basis in the material before the Tribunal for forming the opinion that it is “desirable”, in order to preserve the effectiveness of the review, to grant a stay. . .”[11]
[11] [2020] FCA 1235, 23.
In approaching that task, I must bear in mind that, the Tribunal’s role being administrative in nature and in the absence of any statutory imposition, there is no formal onus upon an applicant to prove the case for a stay. Nevertheless, “there must be some material before the Tribunal which is reasonably capable of engendering the requisite opinion”[12] as to the desirability of granting a stay. Such material may be found in the material before the Board or in additional evidence introduced on behalf of Mr Mahathevan or which “at least can be shown to be reasonably in prospect of being introduced”.[13]
[12] Birdseye v Tax Practitioners Board [2020] FCA 1235, 25.
[13] Birdseye v Tax Practitioners Board [2020] FCA 1235, 24.
Relevance of denial of procedural fairness
Mr Mahathevan submitted that the Board denied him procedural fairness.
I may have regard to the extent to which Mr Mahathevan had an opportunity to present his evidence and submissions before the Board in the context of considering whether, with the opportunity afforded by merits review in the Tribunal, he might achieve a different result in the substantive application for review. However, Logan J emphatically confirmed in Birdseye that denial of procedural fairness by the Board, even if established in the hearing of the application for review, could not be a basis for setting aside the Board’s decision.[14]
[14] Birdseye v Tax Practitioners Board [2020] FCA 1235, 27.
The Board’s findings and Mr Mahathevan’s responses
The Board’s findings, which fall into six broad categories, are summarised below, along with Mr Mahathevan’s responses so far as they are able to be gleaned from the affidavit evidence filed and submissions made on his behalf.
For reasons that were not explained, Mr Mahathevan did not provide an affidavit in support of the stay application. However, his solicitor, Mr Vasilios Fragos, filed five affidavits which he deposed he was authorised to make on behalf of Mr Mahathevan. One of those affidavits exhibited a copy of Mr Mahathevan’s submissions to the Board before it made the termination decision.
(a) Assisting eight clients to make loan applications to the Australia & New Zealand Banking Corporation supported by false notices of assessment of income tax (the “ANZ allegations”).
Mr Mahathevan’s submissions to the Board deny this allegation. He does not seem to deny that false notices of assessment were provided to the bank but says any falsification was undertaken without his knowledge or approval.
It is neither possible nor appropriate to reach a firm conclusion at this time on whether this allegation is made out. However, based on the materials before the Tribunal, which Mr O’Mahoney, who appeared for the Board, confirmed represent all relevant materials on this issue,[15] it is true to say that there is no direct evidence of Mr Mahathevan’s involvement in the falsification of the notices.
[15] Transcript, page 23, lines 9-10.
The Board was only able to speak to one of the eight clients. The record of the telephone call suggests that the relevant documents were provided to Mr Mahathevan by the client.[16] That is one of the bases on which the Board accepted the allegation. Two responses to formal information notices were received, each denying Mr Mahathevan assisted with the mortgage application, but their probative value may be in some doubt due to the apparently identical handwriting on each response.[17]
[16] T5, pages 595-596.
[17] T5, pages 597-8.
Obviously, the fate of these allegations will depend upon the written and oral evidence, including the foreshadowed cross-examination of Mr Mahathevan, in the hearing of the application for review. On the material currently before the Tribunal that was drawn to my attention, I accept there is a reasonable prospect the Tribunal will not be satisfied these serious allegations are made out.
(b) Failing to meet various taxation lodgement and payment obligations.
Failure to meet individual lodgement obligations
So far as they relate to his own lodgement obligations as an individual, the uncontested allegations are that Mr Mahathevan:
(a)failed to lodge PAYG Payment Summary Annual Returns (“PSARs”) for the 2016 and 2017 income years; and
(b)failed to lodge, by their respective due dates, activity statements for the periods ending:
i.March 2012 to December 2013;
ii.June and December 2014;
iii.June 2015;
iv.June 2017;
v.June 2018; and
vi.December 2018.
Based on affidavit evidence from Mr Fragos attaching copies of Australian Taxation Office (“ATO”) entries, these personal obligations are now up to date. The Board did not suggest otherwise.
Failure to meet lodgement obligations for associated entities
Mr Mahathevan failed to ensure income tax returns for seven associated entities were lodged by their respective due dates, involving failure to lodge almost 30 returns as required.
Additionally, Mr Mahathevan failed to ensure that activity statements were lodged by nine associated entities by their respective due dates, involving a large number of individual instances of non-compliance.
In one case, an incorrectly prepared activity statement resulted in a claimed refund being reduced by $63,714.
Mr Mahathevan accepts these instances of non-compliance occurred but notes that four of the companies were either dormant at the relevant time or not carrying on business. Little or no explanation or context was provided for the other non-compliance. These lodgements are now also up to date.
Failure to meet payment obligations of associated entities
Mr Mahathevan failed to ensure that three associated entities paid integrated client account debts to the ATO – in the amounts of $239,250.62, $36,350.27 and $27,323.37 respectively – as they fell due. In relation to the second of these debts, the ATO issued a garnishee to the entity’s financial institution.
Affidavit evidence of Mr Fragos indicates that the first entity continues to have a debt in excess of $200,000 but has a payment plan in place with the ATO.
Mr Mahathevan also argues that there is some uncertainty regarding the scope of the requirement to comply with taxation obligations in relation to a tax agent’s “personal affairs” so far as associated entities are concerned. However, even if not covered by the Code of Conduct, failure to ensure that associated entities for which the tax agent is the sole director or trustee comply with their taxation obligations is relevant to whether a person is a fit and proper person to be a tax agent.
(c) Failing to respond to the Board’s requests for information
Mr Mahathevan accepts that he failed on two occasions in January and March 2020 to respond to information requests from the Board.
He advised that at the time of the first letter dated 7 January 2020 he was in Sri Lanka for the funeral of his grandmother who had raised him as a child and to whom he had been very attached, and was in a heightened emotional state when the information requests were received.
Mr Mahathevan went on in his submissions to the Board to say that he was disappointed in himself and to apologise unreservedly for this conduct.
(d) Failing to comply with continuing professional education (“CPE”) requirements.
Mr Mahathevan accepts that he failed to comply with the annual CPE requirements for the years ended 30 June 2017, 2018 and 2019. The only completed CPE mentioned in his material appears to be attending the Tax Institute’s “Tax Summit” in March 2019 and March 2020. Mr Fragos says Mr Mahathevan is undertaking the Tax Institute’s educational requirements for “Certified Tax Advisor” status which I take to mean the requirements for designation as a Chartered Tax Advisor.
(e) Making false statements in annual declarations and applications for renewal of tax agent registration lodged with the Board.
The Board alleged Mr Mahathevan made false statements in Annual Declarations and renewal applications lodged in each of the following years by answering “No” to whether he had overdue personal taxation obligations:
(a)2016 – when his PSAR for the 2016 income year was outstanding;
(b)2017 – PSARs for 2016 and 2017 outstanding;
(c)2018 – PSARs for 2016 and 2017 outstanding;
(d)2019 – PSARs for 2016 and 2017 outstanding and an integrated client account debt of $13,245 outstanding and no payment arrangement in place.
The Board also found Mr Mahathevan had falsely answered “Yes” to the question in his 2017, 2018 and 2019 Annual Declarations regarding whether he had completed required CPE when he had not done so.
Mr Mahathevan accepts these responses were incorrect. He maintains that he incorrectly thought that his membership of the Tax Institute and the National Tax & Accountants’ Association was sufficient to satisfy CPE requirements. There is no explanation of how, if that is so, Mr Mahathevan came to be of that misunderstanding; the CPE requirements are quite specific.
(f) Lack of competence - failing to respond to ATO information requests and incorrect input tax credit claim.
Information requests
Mr Mahathevan accepts that these six breaches occurred, but says that most information requests for these matters were dealt with on time and that he has now engaged an experienced former ATO employee to oversee the management of his practice.
Input tax credit claim
The input tax credit claim was in the amount of $63,714. The Board’s submissions described this matter in these terms:
failing to correctly declare label 1B in the October - December 2018 BAS for [his] client Tiny-Tots Learning Pty Ltd, resulting in a reduction in their refund of $63,714.[18]
[18] Respondent’s written submissions, paragraph 10.3.
Mr Mahathevan’s submission to the Board asserts that this non-compliance was not part of an attempt to avoid tax obligations, stating:
The miscommunications that occurred involved my staff and, once rectified, resulted in a refund in favour of the company.[19]
[19] Applicant’s submissions to Board, page 22, paragraph 4.
Neither statement provides a complete picture. However, reference to the relevant ATO audit report indicates the input tax credit was disallowed for this entity but allowed for another entity which made the relevant acquisition. The ATO did not impose a penalty. It is not a case where an overall benefit was sought to be obtained, but rather the credit was claimed in the activity statement for the wrong entity.[20]
Should a stay be granted?
[20] T5, pages 411-415.
The parties’ submissions in summary
Mr Mahathevan submits that:
(a)In the time taken, the Board could not have properly considered his detailed submissions.
(b)There is a lack of evidence of wrongdoing on his part in relation to the ANZ allegations and a lack of evidence of dishonesty or lack of integrity in his Code of Conduct breaches.
(c)The Board created a legitimate expectation that he would be given a further opportunity to make submissions on sanction if the Board concluded that the breaches were established, but this was not provided.
(d)He does not hide from his shortcomings. Rather, he admits them but denies acting with dishonesty or lack of integrity.
(e)On the merits, the Board should not have terminated his registration.
Additionally, Mr Mahathevan notes his otherwise “clean” record over his 12 years of practice as a tax agent.
The Board refers to Mr Mahathevan consistently failing to lodge returns in a timely way; failing to maintain CPE requirements; making multiple false statements to the Board over several years; failing to respond to multiple information requests from both the ATO and the Board; and other alleged breaches as outlined above, along with the serious findings relating to the ANZ allegations and submits that there is an overwhelming public interest in refusing a stay.
It is convenient to deal first with procedural fairness issues encapsulated in points (a) and (c) of Mr Mahathevan’s submissions as summarised above.
Procedural fairness issues
Mr Mahathevan’s submission tracks the time between lodgement of his submissions and the Board’s decision and concludes that because it was less than three days, the submissions could not have been properly considered. Although the submissions run to some 37 pages, they are, with respect, well-organised and clear. I do not accept that the relatively short time between their lodgement and the Board’s decision indicates they were not properly considered.
I also reject the submission that the Board created a legitimate expectation that Mr Mahathevan would be given an opportunity to make further submissions on sanction. It is, with respect, not supported by the Board’s letter of 15 May 2020 cited by Mr Mahathevan.
The 15 May 2020 letter attached a submission to be made to the Board and invited a response for the Board’s consideration. It also advised that a sanction of termination would be recommended to the Board and advised that if Mr Mahathevan wished to address what sanction should be imposed he should do so in a separate response which would be provided to the Board after it determined whether Mr Mahathevan failed to comply with the TASA.
The letter went on to state:
If you provide a single response addressing both the allegations and the sanction, you bear the risk of having sanction related matters before the Board when it determines whether you have failed to comply with the TASA.
It may be debatable whether it is best practice to seek submissions on sanction in advance of the tax agent knowing what findings the Board had made on non-compliance. However, it is tolerably clear that the letter invited Mr Mahathevan to make such submissions at the same time as any submissions on non-compliance albeit in a separate response to be provided to the Board after it made its decision on non-compliance.
In any case, as already observed, any want of procedural fairness will be able to be corrected in the application for review. It could not be a basis for setting aside the termination decision.
The prospects of success of the application for review
Arguably the most serious allegation is that Mr Mahathevan caused falsified notices of assessment to be provided to the ANZ Bank. Obviously, the fate of those allegations will depend upon the evidence before the Tribunal on the hearing of the application for review, including Mr Mahathevan’s responses to cross examination. For the reasons already given, I consider, on the basis of the material currently before the Tribunal, there is a reasonable basis on which the Tribunal might conclude that it is not satisfied the allegations are made out.
The other primary findings that underpin the Board’s conclusions are largely uncontested. However, whether inferences of deliberate dishonesty should be drawn is contested.
What I am left with in relation to these findings, even taking the most favourable view, is this:
(a)Mr Mahathevan failed to lodge by the due date, as required by law, several PSARs and activity statements and failed to cause almost 30 income tax returns for seven of his entities and a significant number of activity statements for nine of his entities to be lodged by the due date.
(b)The degree of culpability relating to this non-compliance is mitigated, but only to this limited extent, by the fact that four of the companies were not carrying on business.
(c)Several of Mr Mahathevan’s entities have had not insubstantial outstanding tax liabilities with one entity still owing in excess of $200,000 albeit with a payment plan in place.
(d)Other than as indicated at (b), no explanation was provided for these numerous instances of non-compliance with taxation laws.
(e)Mr Mahathevan failed to comply with six ATO information requests relating to his clients, again offering no explanation for the failure.
(f)Mr Mahathevan has not complied with mandatory CPE requirements for several years. His recent undertaking of CPE appears to have been in response to inquiries by the Board. There is no evidence that he has now achieved compliance.
(g)Mr Mahathevan’s incorrect answers to the questions about non-compliance with CPE requirements indicate, at best, lack of due care in determining one of the fundamental requirements of tax registration, and at worst deliberately dishonest responses.
(h)Mr Mahathevan failed to comply with information requests by the Board. However, his explanation of the circumstances in which this occurred may be accepted as providing relevant mitigating context.
(i)An associated entity for which Mr Mahathevan was the tax agent at the relevant time wrongly claimed a substantial input tax credit of $63,714 with no explanation offered other than “miscommunication”. However, because the credit was claimed in the wrong entity, it is not a case where the wrongful claim would have resulted in a net overall detriment to the revenue.
Taken together, these amount to serious non-compliance with the requirements of a tax agent which would ordinarily lead to a conclusion that an applicant would have limited prospects of success.
Against that, though, there are several countervailing factors:
(a)There is no evidence drawn to my attention suggesting Mr Mahathevan has been found to have committed any other breaches of tax agent regulatory requirements during the 12 years in which he has undertaken the practice of a tax agent.
(b)There is no evidence drawn to my attention of Mr Mahathevan seeking to obtain a benefit by, for example, under-reporting of taxation liabilities.
(c)Aside from the failure to respond to ATO information requests, and a single error in an activity statement, the Board does not point to any evidence of failures in providing services to clients that cast doubt on Mr Mahathevan’s competence.
(d)There is evidence that may be accepted on the hearing of the application for review that Mr Mahathevan has now brought the taxation compliance for himself and his entities up to date, other than in respect of the outstanding debt for which a payment arrangement is in place.
(e)Based on the affidavit evidence of Mr Fragos, there is a reasonable prospect of evidence being introduced to establish that Mr Mahathevan has taken steps to rectify the shortcomings in his CPE.
(f)Based on the affidavit evidence of Mr Fragos, there is a reasonable prospect of evidence being introduced to establish that Mr Mahathevan has engaged an experienced employee to oversee his tax agent practice.
(g)Despite the Board’s submissions to the contrary, there is evidence that Mr Mahathevan takes responsibility for his failure to comply with regulatory requirements.
Having regard to the range of non-compliance over several years, but balanced against the mitigating considerations noted above, once again I find myself in a similar position to the Tribunal in Le’Sam Accounting Pty Ltd and Tax Practitioners Board.[21] I cannot say that Mr Mahathevan has good prospects of success, but nor could I say his case is hopeless.
[21] [2020] AATA 890, 17.
The Board’s findings are of a serious nature. On the other hand, Mr Mahathevan has been in practice for an extended period without evidence of serious shortcomings in maintaining the standards expected of a tax agent in the period prior to the events particularised in the allegations. The Tribunal on review may also be persuaded that there was no deliberate dishonesty by Mr Mahathevan. Further, that he accepts his shortcomings and has taken steps to put his house in order, so to speak.
In those circumstances, the Tribunal may be persuaded that a different sanction is appropriate. Much may depend on the Tribunal’s conclusions in relation to the ANZ Bank issue.
Overall, I accept that Mr Mahathevan has an arguable case for a lesser sanction which weighs in favour of granting a stay.
The consequences for the applicant of refusing a stay
The main consequences for Mr Mahathevan of refusing a stay would be those which follow from any termination decision, relating to the inability to continue to provide tax agent services with consequent adverse financial impact.
The Board submits that Mr Mahathevan could arrange for another tax agent to service his clients pending determination of the review and any appeal. Whether it would be practicable to embark upon that course is not clear to me.
I accept that there would be disruption to the business and financial loss as an inevitable consequence of the termination decision if it is not stayed. However, persons who enjoy the benefits of regulated occupations but repeatedly fail to observe the requirements of registration do so at their peril.
Further, Mr Mahathevan has other business interests. The tax agent business is a significant but not his sole source of income.
Overall, I consider that this factor weighs in favour of granting a stay, although not strongly so.
The public interest
I accept that there is a strong public interest in protecting the public from practitioners who have demonstrated a lack of commitment to complying with basic requirements for tax agent registration, such as complying with CPE requirements and attending to their own taxation obligations. A practitioner who has demonstrated a lack of commitment to compliance with taxation laws presents a risk of failing to ensure that the tax agent’s clients are compliant. The tax system is substantially dependent upon not only the integrity of tax agents but also their encouragement of voluntary compliance by their clients.
Mr Mahathevan’s past conduct has not demonstrated an acceptance of the importance of compliance with taxation laws. While he is now generally up to date with his taxation affairs, he has come to this position belatedly after some years of non-compliance. On the other hand, this is not a case where there are repeated examples of incompetence or intention to obtain benefits not consistent with the taxation laws.
Overall, while not at the extreme end of non-compliant behaviour, this factor weighs against a stay.
The consequences for the respondent in carrying out its functions
In Birdseye, Logan J accepted, as an appropriate way with which to deal with the subject of consequences for the Board, the following observations of the Tribunal:
“I do not accept that granting stays would entirely impede the Board in carrying out its functions. The mere fact that it has terminated the registrations sends a strong message to the tax agent community . . .”[22]
[22] Birdseye v Tax Practitioners Board [2020] FCA 1235, 38.
Those comments apply with equal force in this matter. I consider this factor to be neutral in the particular context of this matter, where there are only limited indicators of concern about the competence of the tax agent.
Whether the application for review would be rendered nugatory if a stay were not granted
The Tribunal in Birdseye said at [110]-[111]:
If the Applicants were to succeed in the substantive reviews in having the terminations set aside or the five-year prohibition period shortened, the reviews would not be rendered nugatory. They could recommence and rebuild the tax agent services practice.
Nevertheless, it is self-evident that there would be a substantial adverse effect upon the Applicants in dislocation of their business and consequent lost income and reputation that a successful outcome in the substantive reviews would not remedy. Many clients forced to go elsewhere may not return to the Applicants even if the decisions were to be set aside in the substantive reviews. Again, these are inevitable consequences of termination of which tax agents who repeatedly fail to comply with registration requirements place themselves in jeopardy.[23]
[23] Birdseye v Tax Practitioners Board [2020] AATA 1250, 110-111.
Those comments, which were not criticised by the Federal Court on appeal, also apply with equal force in this case. This factor weighs, to an extent, in favour of a stay.
Other relevant matters
Since refusing a stay may result in no further tax agent services being provided before the Tribunal’s decision on the application for review, the three current staff and the proposed additional person to oversee the practice would be in jeopardy of losing their employment. This weighs to some extent in favour of granting a stay, although it is again an inevitable risk if a practitioner repeatedly breaches registration requirements.
Similarly, refusing a stay would be disruptive to the approximately 3000 clients many of whom, having regard to upcoming lodgement obligations, may find it necessary to engage another tax agent before the Tribunal decides the application for review.
On the other hand, granting a stay exposes clients to the risk of dealing with a practitioner whose past conduct has not demonstrated respect for the requirements of taxation laws and the tax agent regulatory regime. This factor is more acute in the current circumstances where tax agents have a key role to play in guiding their clients through COVID-19 relief measures.
Conclusion on whether a stay should be granted and, if so, on what conditions?
I consider this matter to be finely balanced. On the one hand, there is a multitude of examples of non-compliance by the tax agent with the requirements of taxation laws in respect of himself and entities that he controls. There are also materials that might support findings of dishonesty and even fraudulent behaviour but for the reasons indicated earlier, such findings may or may not be accepted by the Tribunal in the substantive review depending on the evidence ultimately before the Tribunal. There is little doubt that refusing the stay would be highly disruptive and that Mr Mahathevan would suffer irreparable damage from the loss of income and, likely, loss of clients. Additionally, there is material on which the Tribunal might conclude that Mr Mahathevan has taken steps to remedy the shortcomings identified by the Board.
Taking into account these matters and those referred to in the discussion earlier, on balance I am of the opinion that granting the stay,[24] but subject to conditions, is desirable for the purpose of securing the effectiveness of the hearing and determination of the application for review. To the extent there is a risk to the community in allowing Mr Mahathevan to continue to practise as a tax agent, that can be mitigated by conditions requiring he ensure that future taxation law obligations are complied with and that make the continued operation of the stay and associated orders conditional upon compliance with directions the Tribunal may make for the expeditious preparation for the hearing of the application for review.
[24] Mr Mahathevan sought various other specific orders, such as staying the Board from notifying the decision in the Gazette. However, each of these is encapsulated in the stay of the implementation of the termination decision.
I do not accept the submissions made on Mr Mahathevan’s behalf that conditions of the kind imposed by the Tribunal in other cases, such as requiring notification of clients of the termination and stay, are inappropriate. If there is harm to Mr Mahathevan’s reputation as a result, that is largely of his own making - a consequence of his uncontested failure to comply with basic requirements for registration as a tax agent. Clients who choose to continue to engage Mr Mahathevan are entitled to do so with their eyes open.
APPLICATION FOR CONFIDENTIALITY ORDERS
Mr Mahathevan sought orders under section 35 of the AAT Act designed to maintain confidentiality in relation to the termination of his registration pending the outcome of the application for review. The Board does not dispute that the Tribunal is empowered to make such orders in an appropriate case but submits that they should not be made in this case.
I accept, as Mr Bersten who appeared for Mr Mahathevan submitted, that publication of the termination decision may have an adverse impact on Mr Mahathevan’s reputation with consequent and potentially significant financial impacts. However, apart from the ANZ Bank allegations and inferences that might be drawn from, for example, answers given to questions in the annual declaration and renewal processes, this is generally not a case of contested allegations, the airing of which may cause damage that would not be rectified if the termination decision is set aside. Most of the allegations are accepted by Mr Mahathevan.
Accordingly, I am not persuaded that the Tribunal should depart from the normal position informed by the virtues of open justice that its deliberations and decision-making are conducted in public.[25]
[25] Mr Bersten did not submit that if I were to come to this view any interim orders should be made to protect confidentiality pending any application for judicial review of my decision that might be filed.
I certify that the preceding 85 (eighty -five) paragraphs are a true copy of the reasons for the decision herein of Senior Member R Olding.
..........[sgd].............................................................
Associate
Dated: 3 September 2020
Date of hearing:
31 July 2020
Applicant’s counsel:
M Bersten
Applicant’s solicitors:
Landerer & Company
Respondent’s counsel:
G O’Mahoney
Respondent’s instructors:
In-house legal representatives of the Tax Practitioners Board
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