McGuid and Tax Practitioners Board
[2021] AATA 64
•28 January 2021
McGuid and Tax Practitioners Board [2021] AATA 64 (28 January 2021)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2020/2219
Re:Sarwat McGuid
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Ms G Lazanas, Senior Member
Date:28 January 2021
Place:Sydney
The application for a stay of the relevant decisions, decided on 20 February 2020 and notified to the Applicant on 4 March 2020, is refused.
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Ms G Lazanas, Senior Member
CATCHWORDS
PRACTICE AND PROCEDURE – application for stay of decision – termination of tax agent registration and imposition of three year ban – whether conditional stay should be granted pending decision on application for review – factors relevant to the granting of a stay – prospects of success – consequences if stay not granted – public interest – consequences for respondent in carrying out its functions depending upon whether a stay is granted or not – whether substantive application would be rendered nugatory if stay order were not granted – stay application refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth), s 41
Tax Agent Services Act 2009 (Cth) ss 20-5, 20-15, 40-5, 40-25
CASES
Evans and Tax Practitioners Board [2019] AATA 1408
G J Brown & Co Pty Ltd at Tax Practitioners Board [2016] AATA 740
Poidevin and Australian Securities and Investments Commission [2018] AATA 124
S & T Income Tax Aid Specialists Pty Ltd trading as Alpha Tax Aid and Tax Practitioners Board [2019] AATA 4099
S & T Income Tax Specialists Pty Ltd and Tax Practitioners Board; S & M Income Tax Aid Specialists Pty Ltd and Tax Practitioners Board [2020] AATA 3722Scott and Australian Securities and Investments Commissioner [2009] AATA 798
REASONS FOR DECISION
Ms G Lazanas, Senior Member
XX January 2021
INTRODUCTION
Mr Sarwat McGuid was first registered as a tax agent on 26 November 1976. He has carried on his business through two companies being S & T Income Tax Aid Specialists Pty Ltd (S & T) and S & M Income Tax Aid Specialists Pty Ltd (S & M). Mr McGuid is the sole director and principal shareholder of S & T and he is the sole director and the holder of one third of the issued shares of S & M. Neither of the other shareholders of the companies are registered tax agents.
On 4 March 2020, the Tax Practitioners Board (the Board) notified Mr McGuid that it had decided on 20 February 2020 to terminate his registration as a tax agent under s 40-5(1)(b) of the Tax Agent Services Act 2009 (Cth) (the TASA). The Board had determined Mr McGuid failed to meet the tax practitioner requirement under s 20-5(1)(a) of the TASA, of being a fit and proper person. The termination took effect from 8 April 2020. The Board also decided under s 40-25(1) of the TASA that Mr McGuid may not apply for registration under the TASA for a period of 3 years.
The sole issue for determination by the Tribunal is whether Mr McGuid should be granted a stay, pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (AAT Act), of the Board’s abovementioned decisions pending the hearing of the substantive review application. Mr McGuid applied for the stay at the same time as lodging his application for review of the decisions. The application was made on 13 April 2020. As noted above, the termination of Mr McGuid’s tax agent registration took effect from 8 April 2020. No earlier interim stay order was sought by Mr McGuid and none was made by the Tribunal.
I have decided that the stay order should not be made.
THE TRIBUNAL’S STAY POWER
The Tribunal’s power to grant a stay is set out in s 41(2) of the AAT Act which states as follows:
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.
The Tribunal’s power to grant a stay arises only in respect of the decision which is the subject of the review application referred to in s 41(1) of the AAT Act. The relevant decisions are the decisions to terminate Mr McGuid’s registration and to impose a 3-year period before he may apply for registration. No decision concerning the registration of S & T or S & M is within the scope of the present review application. As it happens, those entities have commenced separate proceedings in the Tribunal seeking review of the Board’s decisions to cancel their respective tax agent registrations, which are briefly mentioned below.
The power to grant a stay, under s 41(2) of the AAT Act, can be exercised only for the purpose of securing the effectiveness of the hearing and determination of the application for review. The Tribunal must be satisfied in every case that the stay is sought, and is granted, for the requisite purpose. In determining whether a stay is appropriate, the Tribunal may consider a range of matters including the prospects of success; the consequences for the applicant of the refusal of a stay; the public interest; the consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not; whether the application for review would be rendered nugatory if a stay were not granted; and other matters that are relevant: see Scott and Australian Securities and Investment Commission [2009] AATA 798.
Mr McGuid, as the party seeking the stay, bears the burden of establishing that a stay is warranted.
THE FACTUAL BACKGROUND
At all relevant times, Mr McGuid was and remains the sole director of S & T and S & M. Those companies were both registered company tax agents at the time of the Tribunal hearing in these proceedings, however, the Board had also made certain decisions in relation to those companies.
Before me, reference was made to a pending application before the Tribunal by S & T in relation to a decision by the Board on 11 July 2019 to terminate S & T’s tax agent registration referred to as Proceedings No 2019/5061. In that application S & T also applied for a stay order and, on 9 October 2019, Senior Member Poljak granted a stay on certain conditions: see S & T Income Tax Aid Specialists Pty Ltd trading as Alpha Tax Aid and Tax Practitioners Board [2019] AATA 4099. Relevantly, until further order S & T undertook to the Tribunal that it would not engage any new clients. Senior Member Poljak’s decision in relation to the substantive matters that were the subject of a hearing in relation to Proceedings No 2019/5061 is reserved. In the written outline of submissions on behalf of Mr McGuid, his counsel observed that where a determination is made in Proceeding No 2019/5061, it will be necessary for that to be drawn to my attention in these current proceedings, and appropriate reconsideration of the stay undertaken so far as that company is concerned.
It transpires that S & T also seeks review in the Tribunal of a separate decision made by the Board on 11 June 2020 to terminate its registration as a tax agent that is the subject of Proceedings No 2020/4299. Furthermore, the other company through which Mr McGuid provides tax agency services, S & M, additionally seeks review in the Tribunal of a decision also made by the Board on 11 June 2020 to terminate its registration as a tax agent which is the subject of Proceedings No 2020/4300. Both S & T and S & M also applied for stay orders in those respective review applications.
On 14 September 2020, Senior Member Cameron refused the requests for stay orders and ordered that earlier interim stay orders granted by Deputy President McCabe on 27 July 2020 be discharged with effect from 28 September 2020 in relation to Proceedings Nos 2020/4299 and 2020/4300: S & T Income Tax Aid Specialists Pty Ltd and Tax Practitioners Board; S & M Income Tax Aid Specialists Pty Ltd and Tax Practitioners Board [2020] AATA 3722.
The reviewable decision in the present proceeding concerns the decision made on 20 February 2020 by the Board that Mr McGuid ceased to meet the tax practitioner registration requirement under s 20-5(1)(a) of the TASA that he be “a fit and proper person”. The Board stated that that decision was and is supported by the following enumerated matters, as set out in the Tax Practitioners Board Operations Committee Minutes for a meeting that took place on 20 February 2020.[1]
[1] T4, 1811-1815.
First, Mr McGuid failed to ensure that a tax agent service that S & T provided, or that was provided on its behalf, was provided competently by preparing and lodging income tax returns on behalf of 8 clients for the financial year ended 30 June 2016:
(a)without taking adequate steps to ensure that the income tax returns contained accurate information that was supported by appropriate substantiation; and/or
(b)in circumstance where those income tax returns were subsequently audited by the ATO and the ATO issued notices of amended assessment of income tax to the 8 clients collecting a total tax shortfall of $30,288.19 and, additionally, issued notices of assessment of shortfall penalty to 6 of the clients collecting total penalties of $6,933.65.
Secondly, Mr McGuid failed to ensure that a tax agent service that S & T provided, or that was provided on its behalf, was provided competently by preparing and lodging income tax returns on behalf of 56 clients for the same financial year ended 30 June 2016:
(c)without taking adequate steps to ensure that the income tax returns contained accurate information that was supported by appropriate substantiation; and/or
(d)in circumstances where those 56 income tax returns were subsequently amended, in response to a prompter letter issued by the ATO, resulting in 56 amended assessments, an increased total amount of assessed tax payable of $106,168.43, and a total amount payable to the Commissioner of Taxation following the issue of the amended assessments of $125,418.52.
Thirdly, Mr McGuid failed to ensure that a tax agent service that S & T provided, or that was provided on its behalf, was provided competently by preparing and lodging income tax returns on behalf of 18 clients for the financial year ended 30 June 2018:
(a)without taking adequate steps to ensure that the income tax returns contained accurate information that was supported by appropriate substantiation; and/or
(b)in circumstances where those income tax returns were subsequently audited by the ATO and the ATO:
(i)issued notices of amended assessment of income tax to the 18 clients resulting in a total tax shortfall of $148,479.55; and
(ii)issued notices of assessment of shortfall penalty to 17 of the clients collecting total penalties of $68,050.46.
Fourthly, Mr McGuid failed to ensure that S & T did not engage any new clients as stipulated by the undertaking which Mr McGuid caused S & T to give to this Tribunal as a condition for the grant of stay by the Tribunal upon the termination of S & T’s registration. As set out in the Tribunal’s orders made on 9 October 2019, S & T undertook to the Tribunal that, until further order, “it will not engage any new clients”. Having obtained the benefit of that stay, Mr McGuid failed to ensure that S & T complied with its undertaking in that, contrary to the plain terms of the undertaking, S & T:
(a)added a new client to its tax agent portal on 11 November 2019 and that client’s income tax return for the year ended 30 June 2019 was lodged on 18 November 2019; and
(b)added another new client to its tax agent portal on 12 November 2019 and lodged that additional client’s income tax returns for the years ended 30 June 2018 and 30 June 2019 on 20 November 2019 and 19 November 2019, respectively.
Fifthly, Mr McGuid interacted with officers of the ATO and with the Board in a manner which was threatening, obstructive and unprofessional. Specifically:
(a)On 30 March 2015, Mr McGuid emailed an ATO officer to express his discontent with audit cases, writing “You left me no alternative but to defend my staff against your all evil plans and thoughts, you should commit Hara Kiri, we are in Australia”.
(b)On 2 March 2018, Mr McGuid emailed another ATO officer, writing “as if the ATO has nothing to do but kill, kill, kill” and “then you come and you blast the hell out of our clients as to encourage them to seek new frontier called hide and seek, catch me if you can, and I hate you” and then threatened to raise the matter with the Treasurer of the Commonwealth at his “next … personal meeting” with him.
(c)On 16 August 2019, Mr McGuid emailed the Board writing, in relation to the Board’s CEO, “Jesus Christ Mike, I feel pity for you. Don’t know that some coward is using you and your name to use the sword against 350 souls and rumours has it that you are using [a TPB employee], as front cover up in front of the canon. Don’t you know by using one sword against 350 souls you’ll get 350 swords back on you. Please Mike, we need you as our guide not as executioner, and slaughterman. That is by terminating the lives of 350, those 350 will work on tormenting your, you’ll affect their livelihood and say 3 kids each = 1050 children, it will bounce back to your 3 kids, different cultures, different attitudes. Evil begets evil, tell the coward using you, repent, otherwise every inch of your street will be cursed.”
Broadly, before me, Mr McGuid seeks a conditional stay order similar to that granted by Senior Member Poljak to S & T in Proceedings No 2019/5061, except that he proposed additional conditions with respect to S & M. Mr McGuid proposed the imposition of the following conditions:
(a)the operation of the determination of the Board of 4 March 2020 in respect of S & T which would otherwise preclude Mr McGuid from being a director of that company be stayed pending the determination of the present application;
(b)the operation of the determination of the Board of 4 March 2020 in respect of S & M which would otherwise preclude Mr McGuid from being a director of that company be stayed pending the determination of the present application upon the basis that:
(i)such stay shall not take effect unless and until Mr McGuid has sent a letter, approved by the Board to the current clients of S & M advising of the decision of the Board to terminate the registration of Mr McGuid as a tax agent and the ongoing appeal;
(ii)all tax agent services carried out by S & M are to be supervised by registered tax agents, Pei Fen Liu and Robert John Heinrich, who are engaged for that purpose by S & M;
(iii)until further order, Mr McGuid undertakes that he will take such steps as to ensure that S & M will not engage any new clients in respect of the provision of tax agent services.
Mr McGuid stated in his affidavit sworn 7 May 2020 that it is through S & T and S & M that he provides taxation agency services and, in the absence of him having an entitlement to practice as a tax agent, S & T and S & M would not be able to provide taxation agency services as it is only through a registered tax agent that it can do so and that person must also be a director of a company providing such services. He stated S & T and S & M employ 10 people, other than himself and that two employees (the same employees of both S & T and S & M) are registered tax agents.
S & T has approximately 600 clients comprising a mix of individual and business tax returns, as well as company tax returns. S & M has approximately 65 clients with a similar mix. He said if he is unable to obtain a stay, the employees will have no work leading to them being stood down and it would be necessary to refer each of the clients of S & T and S & M to another appropriately qualified tax agent.
Mr McGuid asserted that the Board’s decision regarding his tax agent registration did not involve any issue of misappropriation of monies by him and that it was directed at his conduct and method of communication. Mr McGuid maintained that in his extensive practice as a tax agent he “did not do any wrongdoing” although he accepted he may have misunderstood and misinterpreted the rules and regulations.
In relation to the alleged breaches of undertakings given by S & T to the Tribunal in Proceedings No 2019/5061 (see [17] above) by taking on new clients, Mr McGuid asserted that the two clients were spouses of current clients and he regarded them as being extensions of existing client work, rather than new clients. He said in the first case, the husband provided the wife’s group certificate and asked him to lodge her tax return and, in the second case, the wife who was the existing client had a rental property with her husband and asked S & T to complete the husband’s tax return as well.
The Board opposed the stay and argued the conditions sought by Mr McGuid are not appropriate. Specifically, it asserted the Tribunal’s power in these proceedings to stay the operation or implementation of the decisions the subject of this review application ought not constrain the Board from exercising its statutory powers in relation to entities which are not the subject of, and are not party to, the current proceedings, namely, S & T and S & M. Accordingly, the Tribunal lacks power to grant a conditional stay in respect of those companies.
The Board also argued Mr McGuid’s conduct raises serious concerns as to his competence as a tax agent. The Board contended Mr McGuid’s conduct involved unprofessional dealings with officers of the ATO and the Board and, additionally, Mr McGuid’s explanation as to the breach of the undertaking in Proceedings No 2019/5061 was inadequate.
The Board emphasised that Mr McGuid’s limited prospects of success on the substantive review applications and the public interest in the effective functioning of the tax agent profession weigh heavily against granting any stay, including a stay subject to conditions of the kind proposed by Mr McGuid.
SHOULD THE STAY BE GRANTED?
As extracted above, s 41(2) of the AAT Act states that for the Tribunal to make a stay order the Tribunal must be of the opinion that it is “desirable” to do so and consider that the order is appropriate “for the purpose of securing the effectiveness” of the
hearing and the determination of the relevant review application. Pursuant to s 41(6) of the AAT Act, a stay may also be made subject to conditions. As noted above, Mr McGuid urged the Tribunal to make a stay order on conditions similar to those granted in respect of S & T in Proceedings No 2019/5061.I turn now to a consideration of the matters which it is appropriate for the Tribunal to consider in determining whether to make a stay order.
Prospects of success
It is well established that it is not appropriate for the Tribunal to attempt an exhaustive evaluation of the merits of the case for the purposes of the present interlocutory application for a stay order: RePoidevin and Australian Securities and Investments Commission [2018] AATA 124, [39] – [40]. Nonetheless, Mr McGuid has failed to demonstrate that there is a sufficiently arguable case for the setting aside of the Board’s decisions. Mr McGuid did not point to the existence of any facts or the possibility of legal error in the Board’s decisions that may be argued at the substantive hearing which may lead to a different result.
Having regard to the nature of Mr McGuid’s various failures to adhere to appropriate standards of professional and competent conduct, as well as the period of time over which those failures have occurred, the number of taxpayer clients affected and the absence of insight shown by Mr McGuid regarding his own unacceptable conduct, the reality is that, even if the Tribunal were to accept the substance of his case at the final hearing - which was that he had not misappropriated monies or done any wrongdoing throughout his extensive tax practice - the prospect that the Tribunal would conclude that Mr McGuid should be immediately returned to the register of tax agents is, at best, remote. As Mr McGuid’s prospects of success are limited, this matter weighs strongly in favour of the Tribunal refusing the stay.
Consequences for Mr McGuid of refusing a stay
As noted above, the Board’s decision regarding the termination of Mr McGuid’s tax agent registration pursuant to s 40-5(1)(b) of the TASA came into effect on 8 April 2020. Since that date, Mr McGuid has not been a registered tax agent. It will be recalled that Mr McGuid does not provide tax agent services to any clients under his individual registration but through S & M and S & T. He is the sole director of those companies which, as also noted above, have separate disputes with the Board as to their tax agent registrations.
Additionally, by order of the Tribunal in Proceedings No 2019/5061, Mr McGuid is unable to supervise services provided to clients of S & T under its corporate tax agent registration. Further, the evidence of Mr McGuid is that S & M employs the same staff, including two supervising tax agents, as S & T.
I accept that Mr McGuid and others will likely suffer adverse consequences as asserted by him where the stay is refused pending the final determination of the substantive review application, even though no interim stay was sought or granted by the Tribunal. This is because the companies through which he conducts his taxation services will not be able to operate, with him as the sole director. Consequently, unless the companies are restructured, the clients of S & T and S & M will experience inconvenience and, furthermore, 10 employees would possibly be stood down and the businesses would lose goodwill. But these inevitable consequences are due to Mr McGuid’s own failures to adhere to the high standards of professionalism and competence which the community is entitled to expect from a registered tax agent and which the Board is responsible for regulating. Notwithstanding, these matters weigh to some extent in favour of the Tribunal granting a stay.
Public interest
The regulatory regime for tax practitioners is set out in the TASA. For an individual to be eligible to be a registered tax agent, the Board must be satisfied that the individual is a “fit and proper person”: s 20-5 of TASA. For a company, the Board must be satisfied that each director is a fit and proper person: s 20-5 of TASA. The Board has to have regard to specified criteria to determine whether an individual is a fit and proper person, most importantly, “whether the individual is of good fame, integrity and character”: s 20-15 of TASA.
Mr McGuid’s conduct involved repeated failures to provide competent services when acting on behalf of taxpayer clients. Mr McGuid’s failures involve some 82 clients, 26 of those clients have been audited by the ATO, and all of them together have been the subject of amended assessments to income tax totalling $284,936.17 and assessments to shortfall penalties totalling $74,984.11. Mr McGuid also engaged in unprofessional and threatening conduct towards officers of the ATO and the Board. Moreover, at no stage did Mr McGuid provide any explanations or apologies for his unprofessional and offensive comments.
Those failures were exacerbated by Mr McGuid’s acceptance of new clients contrary to the express undertaking given by S & T to the Tribunal in support of the stay granted by the Tribunal in Proceedings No 2019/5061. That, in turn, demonstrates that any conditional stay in the present case (even if it were able to be limited to Mr McGuid’s conduct and not extend to S & T and S & M) is unlikely to afford sufficient protection to the public.
I agree with the Board’s contentions that Mr McGuid’s repeated failure to uphold the requisite standards of professional and competent practice, his lack of contrition and his failure to appreciate the significance of his acts and omissions demonstrate a real risk of further non-compliance. In this regard, it is especially important that the public “is to be protected [against] the risk to the standing of the profession in the eyes of the public. The effective functioning of the tax agent profession is in the public interest …[P]reservation of the general community’s confidence in tax agents is of fundamental concern”: Re Evans and Tax Practitioners Board [2019] AAT 1408 at [131] (Senior Member Furnell), citing G J Brown & Co Pty Ltd at Tax Practitioners Board [2016] AATA 740 at [82] (Senior Member Cotter). The public interest in maintaining community confidence in registered tax agents, and in preserving the authority of the Tribunal, strongly point in favour of the Tribunal refusing a stay.
Consequences for the Board in carrying out its functions
I accept the Board’s contention that Mr McGuid’s failure to ensure compliance by S & T with the conditions imposed by the Tribunal upon the stay granted in favour of S & T gives rise to a greater compliance burden on the Board to monitor Mr McGuid’s observance of any stay conditions which the Tribunal might be minded to impose. Mr McGuid’s demonstrated treatment of a stay with conditions imposed on S & T weighs heavily against the Tribunal granting a stay with conditions in these proceedings.
Whether Mr McGuid’s applications for review would be rendered nugatory if a stay is not granted
A stay is not necessary or desirable in order to secure the effectiveness of the hearing and determination of Mr McGuid’s application for review, especially where the termination decision has already been in effect since 8 April 2020. If Mr McGuid were to succeed in the substantive reviews, the reviews would not be rendered nugatory as Mr McGuid could rebuild his tax agent services businesses even though there will have been disruption. Accordingly, this consideration weighs against the Tribunal granting a stay.
CONCLUSION
I am not persuaded that it is desirable to grant the stay, even on the conditions proposed by Mr McGuid. In particular, based on the materials before the Tribunal, I have serious reservations at to whether Mr McGuid has any prospects of success in his substantive review application. Additionally, the public interest in the integrity of the tax agent registration regime would also not be served by granting a stay in the present proceedings, particularly where Mr McGuid has failed to ensure compliance by S & T with conditions imposed by the Tribunal upon a stay granted in favour of S & T. In those circumstances and, having regard also to the matters that point to some extent in favour of the Tribunal granting a stay, including the adverse consequences for Mr McGuid, and the employees and clients of S & T and S & M (based on Mr McGuid being the sole director of those companies), I am not satisfied that the consideration of the matters on balance favour the grant of a stay. Consequently, Mr McGuid’s application for a stay of the relevant decisions is refused.
I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Ms G Lazanas, Senior Member
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Associate
Dated: 28 January 2021
Date(s) of hearing: 4 June 2020 Counsel for the Applicant:
Mr J T Johnson Solicitors for the Applicant: Auslex Law Group Counsel for the Respondent: Mr L Livingston Solicitors for the Respondent: Tax Practitioners Board Legal Unit
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