McGuid and Tax Practitioners Board - [2021] AATA 64

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.
..............................[SGD]..........................................
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 3722
Scott 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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] AATA 64
Decision Date: 28 January 2021

CaseChat Overview and Summary

This matter concerned an application by Mr McGuid for a stay of a decision by the Tax Practitioners Board to terminate his registration as a tax agent and impose a three-year ban. The application was heard by Ms G Lazanas, Senior Member, of the Administrative Appeals Tribunal. The dispute arose from the Board's finding that Mr McGuid ceased to meet the requirement of being a fit and proper person to be a tax practitioner, based on his failure to ensure competent tax agent services were provided by his company, S & T. This failure involved the preparation and lodging of income tax returns for eight clients for the 2016 financial year without adequate substantiation, resulting in significant tax shortfalls and penalties.

The legal issues before the Tribunal were whether a conditional stay of the Board's decision should be granted pending the determination of Mr McGuid's application for review. In considering this, the Tribunal was required to assess various factors, including the prospects of success of the substantive application, the consequences if a stay were not granted, the public interest in the integrity of the tax agent registration regime, and the potential impact on the respondent in carrying out its functions. The Tribunal also had to consider whether the substantive application would be rendered nugatory if a stay order were not granted.

The Senior Member reasoned that Mr McGuid bore the burden of establishing that a stay was warranted. The Tribunal found that a stay was not necessary to secure the effectiveness of the hearing and determination of the review application, particularly as the termination decision had been in effect since April 2020. Furthermore, the Tribunal held serious reservations about Mr McGuid's prospects of success in the substantive review. The public interest in the integrity of the tax agent registration regime was also considered not to be served by granting a stay, especially given Mr McGuid's alleged failure to ensure compliance by S & T with previous Tribunal-imposed conditions. While acknowledging adverse consequences for Mr McGuid, his employees, and clients, the Tribunal concluded that these factors did not, on balance, favour the grant of a stay.

Consequently, the application for a stay of the Tax Practitioners Board's decision was refused.

Orders

Orders of the court

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Background

Background to the litigation

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.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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