MIHAJLOVIC and Tax Practitioners Board
[2022] AATA 342
•25 February 2022
MIHAJLOVIC and Tax Practitioners Board [2022] AATA 342 (25 February 2022)
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL ) ) No: 2021/4829 TAXATION AND COMMERCIAL DIVISION ) Re: Peter Mihajlovic
Applicant
And: Tax Practitioners Board
RespondentDIRECTION
TRIBUNAL: Mr Robert Reitano, Member
DATE OF CORRIGENDUM: 9 March 2022
PLACE: Sydney
The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application such that:
- the paragraph numbered ‘104’ is replaced with ‘55’ and all subsequent paragraph numbers are amended accordingly; and
- the wording in the signature paragraph on page 26 certifying the preceding number of paragraphs in the decision is changed from ‘142 (one hundred and forty-two)’ to ‘93 (ninety-three)’.
......................[sgd].............................................
Mr Robert Reitano, MemberDivision:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2021/4829
Re:Peter MIHAJLOVIC
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Mr Robert Reitano, Member
Date:25 February 2022
Place:Sydney
I affirm the Board’s decision to terminate Mr Mihajlovic’s registration and to prohibit him from applying for registration for 12 months from the date of termination.
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Mr Robert Reitano, Member
CATCHWORDS
TAX AGENT REGISTRATION – cancellation of registration as a tax agent – preclusion from registration for 12 months - condition applied to registration limiting services – was there a valid condition on the registration – was the condition breached – should the registration be terminated - should a preclusion period be applied to reapplying for registration – decision affirmed.
LEGISLATION
Tax Agent Services Act 2009 (Cth), s 20.5, 20.20, 20.25, 40.5, 40.25, 60.5, 60.15, 90.5, 90.10
Tax Agent Services Regulations 2009 (Cth) r 8, Item 206, 207
REASONS FOR DECISION
Mr Robert Reitano, Member
25 February 2022
The system of regulation of tax agent services established by the Tax Agent Services Act 2009 (Cth) (Act) confers privileged status on tax agents who are registered by permitting them to provide tax agent services to the exclusion of others. In return for that privilege, registered tax agents are bound by standards of behaviour prescribed by the Act.
Those standards include being and remaining to the satisfaction of the Tax Practitioners Board (Board), a fit and proper person, to by abide the terms of a Code of Professional Conduct (Code) and to conform to any conditions imposed upon their registration.
It is the last of those standards with which this decision is concerned. It was the failure to conform to the conditions of registration that led the Board to decide to terminate Mr Mihajlovic’s registration and to preclude him from applying for registration again for 12 months.
Mr Mihajlovic has asked the Tribunal to review the Board’s decision. I have reviewed the Board’s decision and have decided to affirm it. My reasons for doing so follow.
THE REGULATORY FRAMEWORK
Section 60.5 of the Act puts at the centrepiece of the regulatory regime the establishment of the Board.
Section 60.15 of the Act confers upon the Board the functions of administering the system of regulation established by the Act and Tax Agent Services Regulations 2009 (Regulations). The Board’s authority is foundational to the scheme of registration established by the Act.
Section 20.25 gives the Board the function of registering tax agents upon the Board’s satisfaction that a tax agent is eligible for registration.
Section 20.25(5) gives the Board power ‘if it considers it appropriate to do so’ to ‘impose one or more conditions to which your registration is subject’.
Section 20.25(6) qualifies the power to impose conditions so that a condition must relate to ‘the subject area in respect of which you may provide tax agent services’: The phrase ‘subject area’ is not defined, but the phrase ‘subject area’ is an ordinary English phrase which in context means a particular topic or area concerned with taxation generally. The effect is that a person’s registration may, if the Board considers it appropriate, be confined to an area or areas which may have regard to a person’s particular area of expertise, experience or qualifications. There may be other bases for the Board imposing a condition that confines a tax agent to a ‘subject area’.
Section 25.25(7) provides that, where the Board prescribes a condition, the Board must have regard to the requirements prescribed by regulations under paragraph 20.5(1)(b) which concerns the educational and experience necessary to be registered. The subsection confirms that s.25.25(6) is concerned with topics or areas in which a person has relevant knowledge or experience.
Section 90-5 of the Act defines the phrase ‘tax agent service’ as:
(1)A tax agent service is any service:
(a)that relates to:
(i) ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise, under a * taxation law; or
(ii) advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a taxation law; or
(iii) representing an entity in their dealings with the Commissioner; and
(b)that is provided in circumstances where the entity can reasonably be expected to rely on the service for either or both of the following purposes:
(i) to satisfy liabilities or obligations that arise, or could arise, under a taxation law;
(ii) to claim entitlements that arise, or could arise, under a taxation law.
(2)A service specified in the regulations for the purposes of this subsection is not a tax agent service.
Section 90-10 of the Act defines the phrase ‘BAS service’ as:
(1)A BAS service is a * tax agent service:
(a)that relates to:
(i) ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise, under a * BAS provision; or
(ii) advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a BAS provision; or
(iii) representing an entity in their dealings with the Commissioner in relation to a BAS provision; and
(b)that is provided in circumstances where the entity can reasonably be expected to rely on the service for either or both of the following purposes:
(i) to satisfy liabilities or obligations that arise, or could arise, under a BAS provision;
(ii) to claim entitlements that arise, or could arise, under a BAS provision.
(1A) The Board may, by legislative instrument, specify that another service is a BAS service.
(2)A service specified in the regulations for the purposes of this subsection is not a BAS service.
The definitions in s.90 inform areas of qualification or experience, or areas of particular knowledge, that a person may have. A person may have knowledge about all tax services, or they may have knowledge about only a part of tax services that is ‘BAS services’. That category of ‘subject area’ is reflected by the definitions of tax agent services provided for by the Act. A ‘BAS service’ is reasonably viewed a component of tax agent services. This subject area distinction is also well reflected in the scheme of qualifications and experience in the Regulations: different qualifications and experience are needed to be a ‘tax agent’ and a ‘BAS agent’ although they form part of the general definition of tax services.
Next, the Act it is necessary to refer to the consequence of non-compliance with a condition imposed on registration.
Section 40.5(1)(c) provides:
Termination of registration--individuals
(3)If you are a * registered tax agent, BAS agent or tax (financial) adviser and an individual, the Board may terminate your registration if:
(a)an event affecting your continued registration, as described in section 20-45, occurs; or
(b)you cease to meet one of the * tax practitioner registration requirements; or
(c)you breach a condition of your registration.
Note: The Board may also terminate your registration for breach of the Code of Professional Conduct: see Subdivision 30-B.
(4)The Board must terminate your registration if:
(a)you surrender your registration by notice in writing to the Board; or
(b)you die.
(5)Despite paragraph (2)(a), the Board need not terminate your registration if:
(a)you surrender your registration by notice in writing to the Board; and
(b)either:
(i) the Board considers that, due to a current investigation or the outcome of an investigation, it would be inappropriate to terminate your registration; or
(ii) the Board, within 30 days after receiving your surrender notice, decides to investigate you and considers that it would be inappropriate to terminate your registration.
Section 40.25 provides that the Board can impose a mandatory period, not exceeding five years, during which a person who has had their registration terminated is precluded from applying again for registration. The purpose of the provision is to act as a specific and general deterrent against conduct that justifies termination, which in turn operates to protect the public, by excluding a person altogether from prospective registration for a period of time.
It is necessary to refer briefly to parts of the Regulations because they were referred to by Mr Mihajlovic in the course of both his correspondence with the Board and during the hearing. Both concern the qualifications and experience that the Board must be satisfied a person to have before registering them as tax agent. Item 206 of Schedule 2 to the Regulation provides:
206 A requirement is that:
(c)the individual is a voting member of a recognised tax agent association; and
(d)the individual has been engaged in the equivalent of 8 years of full-time, relevant experience in the preceding 10 years.
Item 207 of Schedule 2 informs what ‘relevant experience’ is for the purpose of Item 206. It provides:
207 For Division 1, relevant experience means work by an individual:
(e)as a tax agent registered under the Act; or
(f)as a tax agent registered under Part VIIA of the Income Tax Assessment Act 1936 ; or
(g)under the supervision and control of a tax agent registered under the Act; or
(h)under the supervision and control of a tax agent registered under the previous regulatory regime contained in Part VIIA of the Income Tax Assessment Act 1936 ; or
(i)as an Australian legal practitioner; or
(j)of another kind approved by the Board;
in the course of which the individual's work has included substantial involvement in 1 or more of the types of tax agent services described in section 90- 5 of the Act, or substantial involvement in a particular area of taxation law to which 1 or more of those types of tax agent services relate.
THE FACTS
On 28 November 2013 Mr Mihajlovic made an application under s.20.20 of the Act for registration as a tax agent on the basis that he considered that the Board should be satisfied that he met the requirements of Regulation 8 of the Regulations and, in particular, the requirements referred to in Item 206 of Division 1, Part 2, Schedule 2 of the Regulations.
On 14 February 2014, Mr Mihajlovic was contacted by telephone by a representative of the Board and was told that the Board did not consider that he had the necessary experience to be registered under Item 206. Mr Mihajlovic requested the information be provided to him in written form. Mr Mihajlovic said that in the call he expressed ‘surprise’ that such information was passed on by telephone and that is why he asked for it in writing. It is worth noting that that attitude was later departed from by Mr Mihajlovic in his dealings with the Board which was a little odd given that what was later put in writing was as, if not more, important than what was discussed on the telephone that day.
On 17 February 2014 the information requested was provided to Mr Mihajlovic in written form in an email which outlined the Board’s position about what was required by Item 206. The email explained that the Board’s considered that Mr Mihajlovic had not provided independent verification of his experience. It is important that very early on in the piece the Board highlighted the need for ‘independent verification’ of ‘relevant experience’. ‘Relevant experience’ meant a relevant period of work under ‘the supervision and control’ of a registered tax agent. The email contained the following:
If the Board is willing to grant you a registration but only with a condition imposed restricting the types of tax agent services you can provide to BAS agent services would you accept it?
Mr Mihajlovic replied to the email the same day and said, amongst other things, that further evidence would be provided. The reply is also noteworthy because it expressly said:
Obviously if registration as a BAS Agent is required as a precedent to Tax Agent registration I would accept. In similar vein [sic], I am prepared to complete tertiary education to acquire eligibility under, say, Regulation 203 or 205 …
The reference to Regulation 203 or 205 were probably intended to be references to Item 203 of Division 1, Part 2, Schedule 2 which provides for an alternate basis of registration as a tax agent that does not require the kind of experience-related qualification laid down by Item 206 (which was taken later to be as requiring 13,440 hours of ‘relevant experience’ in the last 10 years). The statement in the email about a condition restricted to BAS services was reasonably clear in its effect: ‘I will accept your condition and undertake study toward unconditional registration’. Mr Mihajlovic explained during the hearing that he used the word ‘precedent’ in his email as meaning a step along the way towards registration as a tax agent.
On 3 March 2014 Mr Mihajlovic sent an email to the Board with the further evidence he had promised a few weeks earlier. That email went on to say:
…I am also prepared to accept registration as a Tax Agent with a condition imposed that I achieve a current scholastic certificate considered appropriate by TPB prior to renewal date of my registration.
The use of the word ‘also’ is important, because it conveyed either that it was in addition to, or as an alternative to, what had been proposed - namely a condition that restricted him to ‘BAS agent services.’ The email went on to make some probably unnecessary comments about not wanting to experience ‘the same run around as I did last year’ and then said ‘If the TPB desires such a scholastic certificate then please provide me with a list of appropriate units to choose from’.
Perhaps unsurprisingly, there was no response to the 3 March 2014 email because, in one respect at least, it did not require a response having indicated the condition Mr Mihajlovic was prepared to accept in order to obtain registration. The condition precedent to acceptance was contained in the phrase ‘If the TPB desires…’. If there was no offer of the condition by the Board that Mr Mihajlovic indicated he would accept, and if there was no indication of the ‘desire’ on the part of the Board for a ‘scholastic certificate’, there was nothing more to be said, although perhaps courtesy might have expected some response.
On 2 May 2014, the Board issued a registration letter and certificate to Mr Mihajlovic. Relevantly, the registration letter stated:
Dear Mr Mihajlovic
You have been registered as an individual tax agent under the Tax Agent Services Act (TASA) subject to the following conditions:
BAS Preparers
You may only provide a service that is a tax agent service as defined under section 90-5 of the Tax Agent Services Act 2009 that specifically relates to:
a Goods and Services Tax (GST) law as defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 and associated legislation;
Pay As You Go (PAYG) withholding or instalments governed by Part 2-5 of Part 2-10 in Schedule 1 to the Taxation Administration Act 1953;
collection and recovery of fringe benefits tax governed by Part VII of the Fringe Benefits Tax Assessment Act 1986;
a fuel tax law as defined in section 110-5 of the Fuel Tax Act 2006;
a wine tax law as defined in section 33-1 of the A New Tax System (Wine Equalisation Tax) Act 1999; and
a luxury car tax law as defined in section 27-1 of the A New Tax System (Luxury Car Tax) Act 1999),
or under any amendment or replacement if these provisions as these amendments or replacements relate to the area of service, subject to the legislation as referenced above.
You are reminded that if you breach one or more of the conditions listed above the Board may terminate your registration.
Please see attached Certificate of Registration.
…..
Right of review
The decision to impose a condition on your registration may be reviewed by the Administrative Appeals Tribunal. If your interests are affected by this decision, you may apply, subject to the Administrative appeals Tribunal Act 1975, to the Tribunal for a review. Applications for a review should be made within 28 days. Please refer to the enclosed ‘Notice of Rights of Review’ document for further information.
The certificate that issued with the letter also contained the words ‘CONDITIONS APPLY TO THIS REGISTRATION’ and ‘Conditions set by the Board are in relation to the provision of Business Activity Statement Services’.
There does not seem to be anything much ambiguous about either the importance of the documents, that is the letter and the certificate, or the condition that was imposed. These were documents evidencing the fact of registration. At face value, they were obviously more important than a telephone call or letter advising about why registration requirements were not met. They were the documents that evidenced what was being sought, namely registration. For someone in the field of taxation, the condition about ‘Business Activity Statement Services’ and the references to the particular legislative provisions relevant to those services left very little to doubt. Mr Mihajlovic did not suggest that they did.
On 7 May 2014 Mr Mihajlovic had a telephone conversation with Tracy from the Board who had returned his call from the previous day. It is a little curious that Mr Mihajlovic, who had earlier been surprised that matters like this one were being deal with by telephone rather than in writing, chose to do things over the telephone. Nonetheless Mr Mihajlovic was astute enough to make a ‘personal memo’ of the conversation that recorded its substance, and in some cases, the actual words that were said to have been spoken.
During the conversation Mr Mihajlovic inquired about the restrictions on the ‘Tax Agent Registration’ he had received. The ‘personal memo’ confirms, if confirmation is needed, that Mr Mihajlovic had read and was aware of the condition because that contained ‘the restrictions’ to which he referred during the telephone call. The ‘personal memo’ went on to say that Tracy explained that the Board decided that Mr Mihajlovic did not have enough relevant experience and so approved him as a ‘Tax Agent BAS Preparer only’. Again, if nothing else was clear, by now Mr Mihajlovic knew in writing from the letter and the certificate and in conversation with Tracy about the existence of the condition.
After some discussion Mr Mihajlovic says he told Tracy that he ‘would look into obtaining scholastic qualifications required under Regulation 203 via ‘the Tax Institute’ of which I am a member’. There was no surprise about that given Mr Mihajlovic had raised that possibility as an ‘alternative’ in his earlier email. Mr Mihajlovic went on to say that ‘in between time, I will continue to do as I have been doing since at least 1990 and that is to complete tax agent services but have Ian Napier check and sign off and submit under his registration’. It is important that Mr Mihajlovic told Tracy that he would do what he had been doing ‘since 1990’ which was to undertake tax agent services but have Mr Napier ‘check’, ‘sign off’ and ‘submit under his registration’. The memo records that Tracy said ‘that would be good because it would count toward [my] experience hours…’ The memo goes on to record Mr Mihajlovic’s complaint which was in effect that if such experience had not counted in the past, he did not understand why it would count in the future. There is nothing in the memo that would allow a conclusion that the condition confining Mr Mihajlovic to only providing Business Activity Statement Services was removed from Mr Mihajlovic’s registration as a result of the telephone call even if it were possible for that to have occurred.
Mr Mihajlovic said, at least up until he was asked some questions in the course of the hearing, that he, in effect, believed that his conversation with Tracy rendered ineffective the condition that had been imposed on his registration. His understanding was that so long as he worked under the supervision of a registered tax agent, he would be permitted to lodge tax returns using his own tax agent registration number because Tracy had told him as much. When confronted with the fact that the memo said that he had told Tracy ‘Mr Napier would check and sign off and submit under his registration’, Mr Mihajlovic changed what he had said until then to suggest that it was Mr Napier who had told Mr Mihajlovic that he could lodge returns under his, Mr Mihajlovic’s, own registration number. Mr Napier was not the Board’s representative as Mr Mihajlovic well knew.
Mr Mihajlovic’s changed evidence about who had told him he could lodge under his own registration number casts much doubt upon other aspects of his evidence, in particular about whether Mr Napier or Mr Wong (who was later the person Mr Mihajlovic suggested was supervising his work) in fact did or said anything. Mr Napier was not called to give evidence, and none was provided in any form that confirmed what Mr Mihajlovic said Mr Napier had told him. Given the importance of any such statement that Mr Napier is to have made and the doubts I have about Mr Mihajlovic’s evidence about what was said, I am not prepared to accept that Mr Napier said any such thing. The fact that Mr Mihajlovic told Tracy one thing - that he would have Mr Napier ‘check and sign off and submit under his registration’- and that something different happened in Mr Mihajlovic’s version of events, namely that Mr Wong did the ‘check and sign off’ and that returns were submitted under Mr Mihajlovic’s own tax agent registration number rather than someone else’s, also casts considerable doubt over Mr Mihajlovic’s version of events.
It should not be forgotten that the whole of the conversation with Tracy was in the context that Mr Mihajlovic had been claiming to have had ‘relevant experience’ which was something the Board did not accept. The reason for the discussion with Tracy was whether Mr Mihajlovic had the period of supervised or controlled work under a registered tax agent. He did not need to be registered to do work that constituted relevant experience. Thus, when Mr Mihajlovic said, in effect, he would continue doing things as he had done until then by having Mr Napier check his work and lodge returns under his registration number, he could not reasonably have believed that that was a condition on his registration at all because he was required, to have done all of that when he was not registered at all and had been doing all those things, on his evidence, for some time.
I reject Mr Mihajlovic’s evidence that anyone from the Board did or said anything at all to bring about any change to the condition on his registration. Quite apart from anything else, Mr Napier was not a representative of the Board and Tracy, even if she could have affected some change (which it is very unlikely she could have), did not say or do anything that would suggest she did so or was even attempting to do so.
From the end of August 2014 Mr Mihajlovic commenced lodging tax returns under his tax agent number. I will deal with the number of tax returns that were lodged later; it is only necessary to note for now that the numbers of tax returns that were lodged were substantial.
On 7 March 2017 Mr Mihajlovic lodged a renewal application in respect of his registration. The application was slow to be processed but the Board told Mr Mihajlovic that there was no problem as his then registration would remain in force until the renewal was processed.
On 18 January 2018 Mr Mihajlovic received a call from someone from the Board named Jason Ewart.[1] Mr Mihajlovic says Mr Ewart told him that he was eligible for a ‘clear registration’ and ‘so why not do so’. Mr Ewart suggested Mr Mihajlovic lodge a request to vary a condition for registration. Mr Mihajlovic said that Mr Ewart suggested he obtain registration for his company Petnad Pty Ltd (Petnad) which would be used to provide ‘ACN protection’ for any client that asked for it. Petnad’s application for registration was filed that day. In telling Mr Mihajlovic that he should lodge a request to vary a condition, one thing was certain - Mr Mihajlovic was from then on notice that there was a formal process for removing conditions whatever they might be from his registration.
[1] Mr Mihajlovic initially believed the Board representative to be named “Jason Hewitt”, which he used as reference in correspondence to the Board and in material before the Tribunal, but it was later determined that he spoke to Mr Ewart.
On 23 January 2018 Mr Mihajlovic lodged a request to vary a condition of registration. That application contained the words:
I wish you to remove the condition to allow me to offer a full Tax Agent Service without supervision and/or any restriction.
Mr Mihajlovic asked Mr Wong of KMN, who on Mr Mihajlovic’s version of events had taken the place of Mr Napier, to forward a letter to Mr Ewart ‘confirming details of supervision from inception to now’.
On 31 January 2018 Mr Wong apparently wrote to the Board saying that he had ‘reviewed Income Tax Returns prepared by Mr Peter Mihajlovic and also advised him on Tax and Accounting matters since 2014’. The letter went to say that ‘an average of 3 to 4 hours per month is spent on the above matters’, that something like 227 returns had been prepared by Mr Mihajlovic and that the ‘work done by Mr Mihajlovic is of a high standard accurate and thorough’. The reason I say ‘apparently wrote’ is because the letter is unsigned. The letter was not subsequently signed or verified or in any way confirmed by Mr Wong as being authentic. Mr Wong did not provide a statement or give evidence at the hearing.
In any event, even if the letter were accepted as authentic the terms of the letter are unhelpful if they are intended to establish that Mr Wong supervised and controlled Mr Mihajlovic’s work or even less relevantly if it were intended to show that Mr Wong checked his work. For one thing it says no such thing, simply referring as it does to the fact that Mr Wong ‘reviewed Income Tax Returns’ without identifying which ones, how, how many, why and in what circumstances, and that Mr Wong gave advice to Mr Mihajlovic again without any reference to anything that might be connected to supervising or controlling or checking Mr Mihajlovic’s work. Mr Wong does not even attest to the conclusion or opinion that he exercised supervision or control over the work Mr Mihajlovic was doing so far as the tax returns were concerned. Nor is there any explanation for why the tax returns that had been lodged were not lodged under his tax agent registration number rather than Mr Mihajlovic’s, which would be consistent with him checking them and supervising Mr Mihajlovic’s work.
On 14 February 2018 Mr Mihajlovic said that Mr Ewart telephoned Mr Mihajlovic to tell him that what he had previously told him about being eligible for ‘clear registration’ was wrong and Mr Mihajlovic should withdraw his application to vary the condition. Mr Ewart, according to Mr Mihajlovic, told Mr Mihajlovic that by the time Mr Mihajlovic lodged his next renewal application he would be eligible for ‘clear registration’. On that basis Mr Mihajlovic wrote to the Board withdrawing his application to vary the condition. Again, it must be noted that having taken that step, one thing Mr Mihajlovic must have known was that the condition remained on his registration.
From about this time Mr Mihajlovic no longer, according to him, worked under any supervision. This is because, he says in a later email dated 15 June 2020, Mr Ewart had said that ‘the restriction would be gone by the next renewal I did not bother maintaining any further supervision so I cannot get someone else to sign the SRE…’. I will return to this later, but it is sufficient to observe here that there was nothing at all that Mr Ewart had said or done that could reasonably have led Mr Mihajlovic to believe that the condition so far as BAS statement services was concerned, or any other condition for that matter, had been removed or that that Mr Mihajlovic could work as a tax agent without any restrictions at all. Mr Ewart’s conduct could only have confirmed that nothing had changed, regardless of his earlier wrong advice about Mr Mihajlovic’s capacity to change his tax agent status. Being informed that ‘the restriction would be gone by the next renewal’ was something that was to happen in the future, even if that was said, and was not a reasonable basis for not abandoning any condition. In simple terms, the end result of these dealings was very obviously that nothing had changed.
On 8 March 2018 the Board sent a renewal letter and certificate to Mr Mihajlovic. They were in the following terms:
Your application for renewal as a tax agent under the Tax Agents Services Act 2009 (TASA) was granted on 1 March 2018 subject to the condition(s) of Business Activity Statement Services.
You are reminded that if you breach one or more of the conditions listed above the Board may terminate your registration.
Please see attached certificate of Registration and the Condition of Registration.
Your registration will expire on 1 May 2020.
Right of review
The decision to impose a condition on your registration may be reviewed by the Administrative Appeals Tribunal. If your interests are affected by this decision, you may apply, subject to the Administrative Appeals Tribunal Act 1975 to the Tribunal for a review. Applications for review should be made within 28 days
The Condition of Registration stated:
Tax agent: Peter Mihajlovic
Registration number: 24706668
Date of Registration: 15 April 2014
The Board has decided to impose condition(s) on your registration limiting the areas of the Taxation laws in which you may practice.
Business Activity Statement Services
You may only provide s tax agent service that is a BAS agent service defined under section 90-10 of the Tax Agent Services Act 2009 that specifically relates to preparing and lodging BAS, considering one or more of the BAS provisions relating to fringe benefits tax (FBT), goods and services tax (GST), wine equalisation tax, luxury car tax, fuel tax and Pay As You Go (PAYG) withholding or instalments, including variations.
Mr Mihajlovic said that he had no record of the letter of 8 March 2018, but he had a document that was, in its terms, much the same as the certificate I have referred to.
On 27 April 2020 Mr Mihajlovic lodged a renewal application. He answered ‘no’ to the question ‘Would you like to limit the tax services to a particular area or type?’ because he considered by then that he had the 13,440 hours that he understood to be the barrier to ‘full registration’.
On 8 May 2020 Mr Mihajlovic was told by email by Ms Naidu of the Board that he needed to lodge a request to vary a condition of registration. He tried to do so on 12 May 2020 but could not, and instead sent the request as an attachment to an email to Ms Naidu.
On 11 June 2020 the Board made some further enquiries of Mr Mihajlovic about varying the condition on his registration.
On 14 June 2020 Mr Mihajlovic provided details in answer to the Boards enquiries which included the number of tax returns he had completed under his registration number between 2014 and 2020, and also evidence that he had completed seven of 14 units for his Diploma of Accounting. There was some further correspondence, including a letter from the Board dated 30 June 2020 which set out what it considered to be the history of the matter, and which referred to the ‘BAS condition’ and its continued existence.
On 6 July 2020 Mr Mihajlovic’s wrote to the Board saying:
It is painfully obvious from the renewal of my registration in 2017/2018 that I have been and continue to provide Tax Agent Services for fee or reward.
On 6 August 2020 the Board wrote to Mihajlovic in the following terms:
Dear Mr Mihajlovic,
In your email dated 6 July 2020 you requested that we refer to ATO systems to verify the lodgements you have made since May 2014. We have since reviewed such data as associated with your tax agent number (24706668), which provides the following lodgements per income year per client type:
55.
56. 2014/15
57. 2015/16
58. 2016/17
59. 2017/18
60. 2018/19
61. Total
62. Individuals
63. 44
64. 52
65. 60
66. 68
67. 60
68. 284
69. Partnership
70. 0
71. 0
72. 1
73. 2
74. 1
75. 4
76. Trust
77. 3
78. 3
79. 4
80. 3
81. 3
82. 16
83. Company
84. 11
85. 10
86. 11
87. 12
88. 10
89. 54
90. Superfund
91. 5
92. 3
93. 3
94. 3
95. 1
96. 15
97. Total
98. 63
99. 68
100. 79
101. 88
102. 75
103. 373
.....
Looking at the data above, please provide a response to the following:
1. Can you confirm if these lodgements made to the Commissioner of Taxation were through your Tax Agent Portal using your personal tax agent number (24706668)?
2. The ATO system recorded these lodgements as income tax, is this correct? If not, please clarify.
3. Does anyone else use your Tax Agent Portal?
4. Did anyone else assist you to prepare these returns for lodgement?
5. Explain how your response to questions 1 to 4 fits in with your condition of registration, ‘Business activity statement services’.
...
On 9 August 2020, Mr Mihajlovic responded to Board’s letter of 6 August 2020 email dated 6 August 2020. Mr Mihajlovic referred to the fact that he had lodged Income Tax Returns with the Australian Tax Office (ATO) and that he had provided ‘Tax Agent Services’ that went beyond Business Activity Statement Services. The specific answers to the questions that were asked in the Board’s letter of 6 August 2020 were:
1/ I hereby confirm that all lodgements that I have ever made since I obtained my Agent Number for anything but Income Tax Returns have been made using the Tax Agent Portal under my personal agent number 24706668. All income tax returns (bar for a minor number of paper returns for clients that came to me with extremely old not yet lodged Income Tax Returns that the current MYOB software could not cope with and which I mailed into the ATO) have been lodged using MYOB AO Lodgement Manager. Everything else (IAS, BAS, Annual GST and PAYGI Returns) have all been lodged by my logging on the ATO Portal via the internet and keying them in manually...
2/ ... My tally of all Income Tax returns lodged is 414 and your numbers tally 373....
3/ To my knowledge nobody else has used by TAN....
4/ .... I have from time to time discussed tax matters with my peers in local area but other than that I have completed all the returns myself. When I was under supervision my then mentor KMN Taxation Services would double check my work and preparations before returns were lodged.
5/ You say “Business Activity Statement Services” but I say “Tax Agent Services” that I provide and all of the above plus more verify same. For example I again attach an item titled “TPB Examples of Tax Agent Services made by Mihajlovic RAN 24706668” wherein I have placed handwritten crosses on all but three of the Tax Agent Services as described by TPB and can say that I have now provided all but one of those services because I have now “Prepared an objection” and “Lodged said objection” recently. The fact that I provide 12 out of a possible 13 “Tax Agent” services allows me to say without doubt that I provide “Tax Agent” services and not just “Business Activity Statement Services”.... (emphasis added).
On 2 March 2021, the Board wrote again to Mr Mihajlovic. The letter said:
Dear Mr Mihajlovic
POTENTIAL LEGAL ACTION – Breaches of the Tax Agent Services Act 2009
...
You are a registered tax agent with a condition of Business Activity Statements (BAS) services.... A condition on a registration limits the scope of tax agent services a tax practitioner can provide or limits their services to a particular area of taxation law.
...
As the letter issued to you on 8 March 2018 stated, a BAS agent service is defined under section 90-10 of the Tax Agent Services Act 2009 that specifically relates to preparing and lodging BAS, considering one or more of the BAS provisions relating to fringe benefits tax (FBT), goods and services tax (GST), wine equalisation tax, luxury car tax, fuel tax and Pay As You Go (PAYG) withholding or instalments including variations.
The Board is aware that you are engaging in conduct prohibited by the TASA and is particularly concerned that you are preparing and lodging income tax returns when you are a registered tax practitioner with a condition of BAS services. These services are outside of the scope of your BAS condition and you are not working under the supervision and control of a registered tax practitioner.
…
What you must do
You must immediately stop any conduct referred to above. If you are providing tax agent services, you must also cease such activity whilst you have a condition of BAS.
We expect written confirmation of the above by 17 March 2021. Alternatively, you must provide reasons as to why you think your conduct is not a breach of the TASA....We may terminate your registration where you have breached a condition of your registration. Breaching a condition of your registration may also constitute a breach of the Code of Professional Conduct.
…
The penultimate paragraph of the letter was hardly ambiguous about what was required: Mr Mihajlovic was to stop engaging in the conduct that has been identified earlier in the letter. That conduct involved:
…preparing and lodging income tax returns when you are a registered tax practitioner with a condition of BAS services. These services are outside of the scope of your BAS condition and you are not working under the supervision and control of a registered tax practitioner.
Mr Mihajlovic read the last paragraph of the letter as providing him with an alternative course to stop engaging in the conduct. It said no such thing: it required confirmation that he had stopped engaging in that conduct or his reasons for why he did not consider what he was doing was a breach of the Act. The alternative proffered in the letter was an alternative to providing written confirmation of having ceased the conduct, not an alternative to ceasing the conduct. It was not reasonable to read it any other way.
On 7 March 2021, Mr Mihajlovic responded to the Board’s letter. In that letter Mr Mihajlovic referred to his conversations with Tracy in 2014 and to his conversation with Mr Ewart in 2018, and in particular the mistake that Mr Ewart had made. The letter said that Mr Ewart had told Mr Mihajlovic that ‘by the time my next review in two years is due [you] will have achieved unrestricted status’. The letter went on and said:
By December 2018 I have achieved the required 13,440 hours required for TASR Item 206 which is even sooner than achieving TAST Item 203 as advised by the TPB Board representative, so I dispensed with supervision. (Underling added)
I have referred earlier to the fact that the various conversations with Mr Ewart and others squarely placed Mr Mihajlovic on notice about the process that was necessary for the removal of conditions (even if there was a condition about supervision which there was not) and yet he appears to have considered that it was acceptable for him to take matters into his own hands. Nowhere did Mr Ewart, or anyone for that matter, say that the condition on his registration had been removed because of any application to the Board or, in fact, by anything that the Board had done or said.
The letter is important for another reason, which is that it makes tolerably clear that Mr Mihajlovic provided tax agent services over and above the restriction limiting him to BAS statement services imposed by the condition on his registration at the very least after December 2018 without any suggestion at all from him that he was under the supervision and control of a registered tax agent.
On 27 April 2021 Mr Mihajlovic sought to renew his registration, and on 12 May 2021 Mr Mihajlovic sought to lodge a request to vary a condition on registration.
Between 3 March 2021 and 15 July 2021 Mr Mihajlovic lodged 28 income tax returns with the ATO. This period is after Mr Mihajlovic was issued with the Board’s letter directing him to stop preparing and lodging income tax returns outside the condition of his registration.
On 15 July 2021, the Board informed Mr Mihajlovic that his registration would be terminated with effect from 19 August 2021. Mr Mihajlovic lodged 32 tax returns in the period between 15 July 2021 and 19 August 2021.
On 19 August 2021 the Tribunal stayed the decision to terminate Mr Mihajlovic’s registration as a tax agent on the condition that he restrict his work to BAS statement services.
THE ISSUES
There are four issues that need to be addressed:
(a)Was there a condition on Mr Mihajlovic’s registration during the period that he was registered, and what was that condition;
(b)Did Mr Mihajlovic breach that condition;
(c)Should Mr Mihajlovic’s registration be terminated; and
(d)If the registration is terminated, should there be a period in which Mr Mihajlovic should be precluded from applying for registration.
WAS THERE A CONDITION ON REGISTRATION?
I have set out earlier the particular words found on the certificates of registration issued, respectively on 2 May 2014 and 8 March 2018 to Mr Mihajlovic. Both certificates contain words that could only reasonably be read as containing a condition of registration.
The first certificate of registration referred to the fact that the registration was ‘subject to conditions’, had a heading ‘BAS Preparers’ and set out specifically the aspects of tax services that related to areas covered by preparing BAS statements. The covering letter with the first certificate of registration confirmed the condition that had been applied to the registration. The certificate of registration could not reasonably be read any way that suggested that it was anything but subject to a condition. The condition on the certificate was discussed in the telephone call with Tracy. Mr Mihajlovic must have been aware of it.
Similarly, the second certificate of registration, although a little briefer, again specifically referred to a condition that said ‘Business Activity Statement Services’. The fact that the second certificate of registration referred to 15 April 2014 as the date of registration and not 14 April 2014 neither invalidated the certificate or the condition placed on the registration. Nor did the fact that Mr Mihajlovic says he received the certificate in a different form alter anything about the substance of what was contained in the certificate. Both forms of the certificate contained exactly the same condition, and nothing was changed by any inaccuracy in the initial date of registration or the form in which the certificate was presented.
In the case of both certificates, there was no evidence that is capable of resulting in the conclusion that either condition was ever removed or varied at all. The telephone calls Mr Mihajlovic had with employees of the Board that were referred to were, at no time, expressed in terms that permitted a conclusion that any conditions were in any way taken out of play. Th telephone call with Tracy on 7 May 2014 the details of which are recorded in the ‘personal memo’ make clear that the condition relating to BAS statement services always remained. The fact that on at least two occasions, on 23 January 2018 and on 12 May 2020, that Mr Mihajlovic lodged or attempted to lodge a request to vary a condition of registration, demonstrates that Mr Mihajlovic was on notice that any changes to the conditions were subject to processes that required, at the very least, something in written form and, in all likelihood, completion of a particular form.
Nor does it affect matters that Mr Mihajlovic could have been registered under the Act or under some other Item in the Regulations as a BAS Agent: he was registered as a tax agent, and as a result the Board was entitled to restrict the work he did as a registered tax agent to the subject area or areas with which BAS statement services are concerned. The first certificate of registration precisely laid down the services by reference to various legislative prescriptions. The second certificate of registration achieved much the same by identifying them as ‘BAS statement services’. Those were conditions that the Board was entitled to place on Mr Mihajlovic’s registration under s.20.25(5) of the Act.
The effect of the condition was clear: Mr Mihajlovic was to restrict his work to the subject areas associated with BAS statements - that is goods and services tax, pay as you go withholding or instalments, collection and recovery of fringe benefits tax, fuel tax laws, wine tax laws and luxury tax laws, and the completion of BAS statements. In particular, the condition did not permit the preparation and lodgement of income tax returns for clients.
WAS THE CONDITION BREACHED?
Mr Mihajlovic prepared and lodged tax returns on behalf of clients in the period from about August 2014 until August 2021. That was admitted by Mr Mihajlovic and is evident from the use of his taxation agent number to lodge tax returns for clients over the period. This was inimical to the condition that restricted him to BAS statement services. Preparing and lodging tax returns was in breach of that condition.
So far as the period from January 2018 until August 2021 is concerned, there is no question or issue that Mr Mihajlovic was preparing and lodging tax returns. He was not doing so under the supervision and control of a registered tax agent such that he might be permitted to do so as ‘relevant experience’ under the Regulation. Mr Mihajlovic said that because he was told in January 2018 the restriction would be gone by the next renewal he did ‘not bother maintaining supervision’. He also said that after December 2018 he relinquished any supervision because he considered by then that he had enough experience. The inconsistency in the two dates is immaterial for present purposes because on either view for a considerable time after each date Mr Mihajlovic cannot possibly suggest his work was under supervision and control of someone else such that it was permitted by the Regulations. In preparing and lodging tax returns after January 2018 or after December 2018, Mr Mihajlovic was in breach of the condition on his registration because he was not restricting himself to BAS statement services.
From August 2014 to January 2018 Mr Mihajlovic appears to have had two possible answers to the apparent breach of the condition that followed from him having lodged tax returns using his tax registration number. The first was that he misunderstood the condition and considered that it was a condition about him being required to work only under supervision. The other answer is that he was lodging tax returns for clients under supervision and control before January 2018, even though he was using his own tax agent’s number to lodge them. Both ‘answers’ can be dealt with together. In what follows I will use the word supervise or supervision as respectively including the separate requirement of control that accompanies supervision in the relevant parts of the Regulation.
First, there was no evidence from any supervisor to the effect that they provided supervision. The letter from Mr Wong was unsigned so it is not possible to give it any weight. Even then as I have noted earlier the unsigned letter counts against that proposition so far as it says what he was doing which was ‘reviewing tax returns’ and giving tax advice. Neither of those things amount to supervision and control. Mr Mihajlovic’s evidence about supervision and control is self-serving and almost entirely conclusory. He provided no particulars or detail concerning any supervision or control that anyone exerted over him, other than to say that someone checked his returns before they were lodged before December 2018.
Second, the fact that since August 2014 the tax returns that were lodged were lodged under Mr Mihajlovic’s tax agent number is inconsistent with the exertion of supervision by someone else who is a registered tax agent having their own registration number. Related to this is what Mr Mihajlovic told Tracy, namely that he that he would have Ian Napier ‘sign off and submit under his registration’. That did not happen. Mr Mihajlovic instead lodged returns under his own tax agent number. It needs to be remembered that Mr Mihajlovic originally said it was Tracy who had told him he could lodge returns under his own number. It was only when he was questioned about the inconsistency between his ‘personal memo’ and what he was saying during his questioning in the hearing that his position changed. Having had the inconsistency pointed out to him, he suggested it was Mr Napier who had told him he could lodge tax returns under his own number. The problem is that if Mr Napier (or another registered tax agent such as Mr Wong) was to check and lodge the returns, presumably because that person was supervising the work, what reason would there be for that arrangement to change so far as the registration number under which returns were lodged. One fairly obvious explanation is that the work was not supervised at all.
There is also much doubt about Mr Mihajlovic’s evidence concerning the issue that, in the absence of corroboration, documentary or oral testimony from Mr Wong or Mr Napier or both of them, I am not able to accept his evidence about the matter. There is a complete absence of evidence, even a signed letter or document such as a statement of relevant experience (a simple document used by the Board for such matters which Mr Mihajlovic was aware of) from Mr Wong, Mr Napier or anyone else. There is nothing from anyone to say that they supervised and controlled Mr Mihajlovic’s work before January 2018. That evidence would not have been difficult to obtain if it existed. Its absence means there is no independent corroboration, or independent verification in the words of the Board, to confirm Mr Mihajlovic’s evidence, which I have noted is self-serving, lacking in detail, in some respects inconsistent and about which I have significant doubts.
Further, it should be borne in mind that if there was any doubt about the Board’s position, it should have been dispelled by the letter of 3 March 2021 which spelt out that Board considered that Mr Mihajlovic was working in breach of the condition on his registration and told him in certain terms to stop what he was doing. That letter invited Mr Mihajlovic to confirm in writing that he had ceased providing general tax agent services that were in breach of the condition on his registration or to explain his conduct. It did so in circumstances where it explained very clearly the matters that the Board considered were in breach of the condition, namely lodging tax returns when the condition limited Mr Mihajlovic to BAS statement services and in circumstances where it directed Mr Mihajlovic cease that conduct. Even then having had matters squarely explained, Mr Mihajlovic continued breaching the condition on his registration.
In the end, the real difficulty that confronts Mr Mihajlovic over the entire period of his registration is that the condition on his registration was clear and simple, and despite that condition he provided tax agent services that went beyond what the condition permitted him to do. The work in question did not satisfy the definition of ‘relevant experience’, because in lodging tax returns using his own tax agent number the inference is that he was doing the work on his own accord and without supervision and control. There is no evidence that would permit a finding that he was supervised and controlled in doing that work at any time and as I have said, in any event, after January 2018 for a period of three years he undertook work in breach of the condition on his registration.
I am satisfied that since August 2014 until 19 August 2021 Mr Mihajlovic breached the condition on his registration that confined him to provide BAS statement services by providing tax agents services which involved the preparation and lodgement of income tax returns.
SHOULD THE REGISTRATION BE TERMINATED?
I am satisfied that there has been a breach of a condition of registration. I am also satisfied that the registration should be terminated as result of that breach. There are several reasons for this.
First, the condition imposed in this case was not a complex one and was clear in what work Mr Mihajlovic could complete under his registration. Both certificates of registration marked out the boundaries of the services that could be provided. The condition was serious enough that the Board spelt it out in written form. A reasonable person would pay heed to what was in writing in a formal certificate of registration that was issued by a statutory regulatory authority such as the Board.
Second, the breach of the condition continued out over a long period of time, seven years. Even if it could be accepted that some of the work was done under supervision and control by a registered, and I do not consider that can be accepted, that stopped in early 2018. For over three years, there is no doubt that Mr Mihajlovic worked completely in breach of the condition. There was no basis for him doing so and nothing Mr Ewart or anyone else said could have led him to the view that he was permitted to do so.
Third, I am not satisfied that Mr Mihajlovic has sufficient relevant experience to be registered as a tax agent even if that were relevant to the questions that I am required to determine. I do not consider it relevant because I am dealing with a case in which a condition that restricted work to BAS statement services has been breached and not a question concerning the removal of a condition or an application for registration. I have found that Mr Mihajlovic did not undertake work since August 2014 under supervision and control such that would count as relevant experience for the purpose of the Regulations.
Fourth, since 3 March 2021, in the face of clear statements from the Board that it regarded Mr Mihajlovic’s conduct in breach of the condition, Mr Mihajlovic eschewed the Board’s authority and continued to engage in like conduct. Even if he did not agree with the Board’s position on the situation, it is remarkable that he did not adopt a less aggressive stance in face of the Board’s explanation to him of exactly what it was that he was doing that was considered by the Board to be wrong.
Fifth, the imposition of condition upon registration is a serious matter especially having regard to their purpose, namely confining tax agents to subject areas which are considered by the Board to be appropriate. The imposition of conditions plays an important part in the scheme of registration of tax agents under the Act. The disregard of those conditions undermines that scheme and undermines the authority of the Board.
It follows that I consider the appropriate regulatory response in all the circumstances is one that means that Mr Mihajlovic’s registration should be terminated.
SHOULD THERE BE A PRECLUSION PERIOD?
The question then arises as to whether there should be a period in which Mr Mihajlovic should be precluded from reapplying for registration. The purpose of the power to determine a preclusion period is to protect the public by deterring a tax agent whose registration is terminated from engaging in future misconduct and deterring other tax agents from doing likewise. In this case the determination of any such period will reinforce to tax agents more generally, and tax agents with conditions on their registration specifically, the importance of observing conditions that are attached to their registration.
This case involves a serious departure, over a long period of time - even on the most conservative approach about three and a half years - from conditions that were laid down and that applied to the privilege given to a tax agent to provide tax agent services, even if those services were of a limited kind. The conduct undermines the confidence that the public should be able to have that tax agents who provide tax agent services are qualified and experienced to do so.
There is no doubt that the period of preclusion will adversely affect Mr Mihajlovic’s ability to generate a livelihood, although it is clear from his evidence that he has other skills and interests that will allow him to do so. His age and circumstances are matters that are relevant to the period from which he should be precluded from applying for registration.
In all the circumstances although I consider it to be at the lower end of the available range of such periods, I consider that 12 months is an appropriate period in which Mr Mihajlovic should be precluded from applying for registration again.
DECISION
I affirm the Board’s decision to terminate Mr Mihajlovic’s registration and to prohibit him from applying for registration for 12 months.
I certify that the preceding 142 (one hundred and forty-two) paragraphs are a true copy of the reasons for the decision herein of Mr Robert Reitano, Member.
............................[sgd]............................................
Associate
Dated: 25 February 2022
Date(s) of hearing: 13 December 2021 Applicant: Self-represented Counsel for the Respondent: Ms E. Kovacs Solicitors for the Respondent: Tax Practitioners Board
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