MIHAJLOVIC and Tax Practitioners Board - [2022] AATA 342

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
Respondent
DIRECTION
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, Member
Division: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.
......................[sgd]..................................................
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…

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: [2022] AATA 342
Decision Date: 25 February 2022

CaseChat Overview and Summary

This matter concerned an appeal by Mr Mihajlovic against a decision by the Tax Practitioners Board to terminate his registration as a tax agent and to preclude him from applying for registration for a period of 12 months. The dispute arose from Mr Mihajlovic's application for tax agent registration, where the Board initially determined he lacked the necessary relevant experience. The Board offered registration with a condition restricting his services to Business Activity Statement (BAS) agent services, which Mr Mihajlovic accepted. Subsequently, the Board found that Mr Mihajlovic had breached this condition by continuing to provide broader tax agent services, albeit under the supervision and sign-off of another registered tax agent.

The primary legal issues before the Tribunal were whether a valid condition had been imposed on Mr Mihajlovic's tax agent registration, whether he had breached that condition, and consequently, whether the Board's decision to terminate his registration and impose a 12-month preclusion period was justified. The Tribunal was required to assess the evidence presented, including correspondence and records of telephone conversations, to determine the clarity and enforceability of the condition, and Mr Mihajlovic's awareness and adherence to it.

The Tribunal reasoned that the condition restricting Mr Mihajlovic's services to BAS agent services was clearly communicated through the registration certificate and accompanying letter, and was further confirmed in a subsequent telephone conversation. It found that Mr Mihajlovic was aware of this restriction, having acknowledged it in his communications and during the telephone discussion. The Tribunal concluded that Mr Mihajlovic breached the condition by continuing to provide tax agent services beyond the scope of BAS agent services, even though he had arranged for another registered tax agent to review and sign off on these services. The Tribunal affirmed the Board's decision, finding that termination of registration and a 12-month preclusion period were appropriate in the circumstances.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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 …

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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.

ADMINISTRATIVE APPEALS TRIBUNAL	)
)	No: 2021/4829
TAXATION AND COMMERCIAL DIVISION	)