Modini and Tax Practitioners Board
[2012] AATA 772
•6 November 2012
[2012] AATA 772
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/2113
Re
Denise Modini
APPLICANT
And
Tax Practitioners Board
RESPONDENT
DECISION
Tribunal Deputy President R P Handley
Date 6 November 2012 Place Sydney Decision Summary The decision under review is affirmed.
............[sgd]................................
Deputy President R P Handley
CATCHWORDS
TAX AGENTS – Application for registration as individual tax agent – Applicant for registration as individual tax agent rejected – Whether Applicant satisfies ‘fit and proper person’ requirements under the Tax Agent Services Act 2009 to be registered as an individual tax agent – Whether Applicant satisfies relevant experience requirement under the Tax Agent Services Act 2009 – Decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1936 (Cth)
Tax Agent Services Act 2009 (Cth)
Tax Agent Services Regulations 2009 (Cth)
CASES
Australian Broadcasting Tribunal v Bond(1990) 170 CLR 321
Hughes & Vale Pty Ltd v New South Wales (No 2)(1955) 93 CLR 127
Kolya Tax Practitioners Board [2012] FCA 215
Modini and Tax Agents’ Board of Queensland [2004] AATA 427
Modini and Tax Agents’ Board of Queensland (2005) 89 ALD 496
Modini and Tax Agents’ Board of Queensland (2007) 98 ALD 466
Re Su and Tax Agents Board of South Australia (1982) 61 FLR 1
Stasos v Tax Agents Board of NSW (1990) 21 ALD 437
SECONDARY MATERIALS
Tax Agents Services Bill 2008 – Explanatory Memorandum
Tax Agent Services Regulations – Explanatory Statement
REASONS FOR DECISION
Deputy President R P Handley
Denise Modini (the Applicant) has applied for the review of a decision of the Tax Practitioners Board (the Board) (the Respondent) to reject her application for registration as an individual tax agent under the Tax Agent Services Act 2009 (Cth) (the TAS Act).
BACKGROUND
On 5 March 2012, Ms Modini applied to the Board for registration as a tax agent and provided documentation supporting her application. At a meeting on 4 April 2012, the Board decided to reject Ms Modini’s application. On 4 May 2012, the Board wrote to Ms Modini, notifying her that she was not eligible for registration as a tax agent, and that her application had been rejected. The stated reasons were that the Board was not satisfied, first, that Ms Modini met “the prescribed requirements relating to qualifications and relevant experience for registration as a tax agent under the Tax Agent Services Regulations 2009” (the TAS Regulations) and, second, that Ms Modini was a fit and proper person within the meaning of the TAS Act “to meet the eligibility requirements for registration as a tax agent under paragraph 20-5(1)(a)” of that Act. On 25 May 2012, Ms Modini applied to the Tribunal for a review of the Board’s decision.
Ms Modini has previously lodged five separate applications for registration as a tax agent with the former Tax Agents’ Board of Queensland (the former Board), under the now repealed s 251JA of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). These applications were rejected. The most recent decision by the former Board, made on 12 March 2007, was the subject of a review by the Tribunal. On 2 November 2007, Deputy President Hack decided to affirm the decision under review: Modini and Tax Agents’ Board of Queensland (2007) 98 ALD 466.
LEGISLATION
The relevant legislation is the TAS Act, which in Part 2, provides for the registration of tax agents. Section 20.5(1) states that an individual is eligible for registration as a registered tax agent if the Board is satisfied that:
(a) the individual is a fit and proper person; and
(b) the individual meets the requirements prescribed by the regulations (including, but not limited to, requirements relating to qualifications and experience) in respect of registration as a registered tax agent ...
Section 20.15 states:
In deciding whether it is satisfied that an individual is a fit and proper person, the Board must have regard to:
(a) whether the individual is of good fame, integrity and character; and
(b) without limiting paragraph (a):
(i) whether an event described in section 20-45 has occurred during the previous 5 years; and
(ii) whether the individual had the status of an undischarged bankrupt at any time during the previous 5 years; and
(iii) whether the individual served a term of imprisonment, in whole or in part, at any time during the previous 5 years.
None of the matters referred to in paragraph (b) is relevant here.
Section 20.20 provides for applications for registration as a registered tax agent to be made to the Board on an approved form with any documents that are required by the Board and the prescribed fee. Section 20.25(1) requires the Board to grant an application if the applicant is eligible for registration, but otherwise to reject the application.
Regulation 8 of the TAS Regulations states:
For paragraph 20-5 (1) (b) of the Act:
(a) the requirements set out in Part 2 of Schedule 2 are prescribed; and
(b) an individual is required to comply only with a requirement prescribed in 1 of the items in that Schedule.
Item 201 of Schedule 2 of the TAS Regulations states the following requirements for tax agents:
Tertiary qualifications in accountancy
201 A requirement is that:
(a) the individual has been awarded:
(i) a degree or a post-graduate award from an Australian tertiary institution in the discipline of accountancy; or
(ii) a degree or award that is approved by the Board from an equivalent institution in the discipline of accountancy; and
(b) the individual has successfully completed a course in commercial law that is approved by the Board; and
(c) the individual has successfully completed a course in Australian taxation law that is approved by the Board; and
(d) the individual has been engaged in the equivalent of 12 months of full-time, relevant experience in the preceding 5 years.
Item 207 states:
For Division 1, relevant experience means work by an individual:
(a) as a tax agent registered under the Act; or
(b) as a tax agent registered under Part VIIA of the Income Tax Assessment Act 1936 ; or
(c) under the supervision and control of a tax agent registered under the Act; or
(d) 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
(e) as an Australian legal practitioner; or
(f) 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.
Section 90.5 of the TAS Act states:
(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 .
(Original emphasis)
ISSUES
The Board accepts that Ms Modini has successfully completed a course in Commercial Law that is approved by the Board. However, it contends that:
(1) Ms Modini has not demonstrated that she is a fit and proper person as required by s 20.5(1)(a) of the TAS Act; and
(2) she has not demonstrated that she has the “relevant experience” required by Item 207 of Schedule 2 of the TAS Regulations, because:
(a) there is no evidence that she has worked under the supervision and control of a registered tax agent; and
(b) her work on a self-employed basis is not “work of another kind” approved by the Board,
in the course of which her work has included substantial involvement in 1 or more of the types of tax agent services described in section 90-5 of the TAS Act, or substantial involvement in a particular area of taxation law to which 1 or more of those types of tax agent services relate.
Deputy President Hack gave two reasons for affirming the Tax Agents Board of Queensland’s decision. The first reason was that Ms Modini did not have the relevant experience - in so far as there was insufficient evidence of substantial involvement in income tax matters - to satisfy him that she was competent to undertake the work of a tax agent. The second reason for Deputy President Hack’s decision was that Ms Modini was not a fit and proper person as required by the legislation. I include a fuller reference to Deputy President Hack’s second reason here because Ms Modini was critical of this and commented on it on a number of occasions both in the written documentation she provided and also in the course of the hearing. Moreover, this second reason and Ms Modini’s comments were also the subject of submissions by the Respondent.
Deputy President Hack stated:
45 …. In the course of the hearing, Ms Modini engaged in an almost endless pattern of denigration of those whose views differed from hers. She spoke of being “less than impressed” by the standards of some sole practitioners for whom she had worked. Of one of her employers she said, “people were phoning there all the time complaining about [him]”. Of another, she said, “personnel agents in Townsville avoid him”. A third “should not have been registered”. A former employee of the Board was, “running his own little secret society”. Her contempt for tax agents whose qualifications she regarded as being less than hers was manifest throughout the hearing. Her written material referred, for example, to the Board “constantly passing applications from people with no professional qualifications and other incompetent people”. She referred to the “gross incompetence” of two members of the Tribunal who had affirmed decisions refusing her earlier applications for registration.
46. It is not necessary for me to reach any conclusions about the subject matter of Ms Modini’s complaints and I do not suggest, for a moment, that anyone, including members of the Tribunal, is, or should be, immune to criticism. However, whether Ms Modini is right or wrong in her views, her criticisms are irrational, unreasonable, and go far beyond the bounds of what might be regarded as being proper or appropriate. The notion of respectful disagreement is entirely foreign to Ms Modini. No criticism of her is warranted (in her view) and when made it is responded to in an abusive and hectoring manner. That pattern appears frequently in the material in the case.
47. Part of the task of a registered tax agent is to deal with officers of the Commissioner of Taxation, often in the context of a disagreement regarding the revenue consequences of a client’s transactions or business. A tax agent is not expected to be deferential to officers, but the dealings between officers and tax agents need to be professional, civil, and rational. Ms Modini’s evidence satisfies me she is not capable of conducting a professional and reasoned dialogue with an officer (or others) with whom she had a disagreement.
EVIDENCE
Ms Modini has a Bachelor of Arts degree from the University of Sydney and a Bachelor of Commerce degree from James Cook University, the latter awarded on 15 May 1993. She was admitted as a Certified Practising Accountant (CPA) on 23 June 1997 and was granted a Public Practice Certificate in 2001. Ms Modini said that apart from her experience as an accountant, she has also been a registered teacher for 40 years (for example, undertaking casual ‘relief’ teaching), and has considerable administrative experience (for example, working for the Australian Electoral Commission and Queensland Electoral Commission managing polling stations at election time). She is not currently doing any relief teaching because she has moved house and is too far away from one school where she used to teach, and the other school is no longer using the relief teachers they used to employ. In 2008 and 2009, she was relief teaching two or three days a week.
Ms Modini said that her work as an accountant, over almost 20 years, has involved liaising with the Australian Taxation Office (ATO), with whom she has always been competent and business-like, as Mrs Petske, a business client of Ms Modini’s who provided evidence on her behalf during the hearing, would confirm. She maintained that her conduct in such work cannot be faulted. Her background is without reproach. Related to her accounting work is her experience in business and in liaising/negotiating with government agencies (for example, with Centrelink on behalf of Mr Petske), banks and finance companies.
Ms Modini described the TAS Act as “flawed legislation” with substantial and systemic problems. She said there is no objective way of establishing the honesty and integrity of a tax agent. The system is “an absolute mess” because it relies on subjective assessments; it is this that has prevented her being registered. She sees what goes on at first hand with registered tax agents, many of whom do not have tertiary qualifications and who are not trained adequately. She has seen the sort of mistakes such people make. She gets upset and frustrated with the system when people with such poor qualifications and experience are registered but her own competency is questioned.
Ms Modini spoke of her experience of working for different people, a number of whom, she said, were bad employers. Some had only completed a one year TAFE course, had not undertaken a broad range of tax work and did not know what they were doing. Ms Modini said her tax work had been criticised by one such employer. In 2003, she had two particularly bad employers about whom she complained to the CPA. She even obtained an independent report about one of them but said the CPA did not access it.
In her Statement of Facts and Contentions (SOFC), Ms Modini referred at some length to her treatment by AAT members in previous decisions. She said of the first Tribunal decision made by Ms Cowdroy, Member, in Modini and Tax Agents’ Board of Queensland [2004] AATA 427, that, “It was obvious she had no understanding of this area of tax agents registration”, and, “The Decision was of a very low standard and … It was quite obvious that she had not made any proper enquiries”. She said of the second decision, by Dr Levy in Modini and Tax Agents’ Board of Queensland (2005) 89 ALD 496:
It was so obvious that Dr Levy had no idea what he was doing but that did not stop him as he appeared to try to bluff his way through the Decision (sic) at my expense by defaming me and cunning enough to write up the decision to pretend he knew what he was doing.. (sic)
The Ombudesman’s (sic) Office in Canberra, (sic) were appalled at the Decision (sic) and urged me to take it to the Federal Court. (an unofficial comment) (sic) I initially tried this , (sic) but as I could not afford legal counsel, I found that I was out of my depth and could not continue …
The standard I have had to endure in these two cases is quite unacceptable …
Ms Modini said that during the course of a telephone directions hearing in 2007, Senior Member McCabe commented “on how badly the whole case was handled by K Levy” (Transcript 22 August 2012, p 19).[1] She also referred to others who had criticised Member Levy’s decision.
[1] Hereafter, all references to the Transcript are references to the Transcript dated 22 August 2012.
Among her comments about Deputy President Hack’s decision in Modini and Tax Agents’ Board of Queensland (2007) 98 ALD 466, Ms Modini said in her Statement of Facts and Contentions:
26. In 2007 I gave facts to Deputy President P. Hack in regard to the ‘coal face’ situation and the creditability problems of some tax agents.. (sic) Yet his comments about me were subjective, emotive and lacked substantiation. for (sic) instance, I have been dealing with ATO officers for over 20 years and have a very good business relationship with them.
27. I wish to emphasise that various people can make non factual (sic) derogatory comments about me yet when I give FACTS about other people (only in order to defend myself) , (sic) then I am labelled negative and abusive. I find this very upsetting and frustrating.
(Original emphasis)
Ms Modini also stated that Deputy President Hack made a 180 degree turnaround from the hearing and that she was “quite unprepared for the unwarranted and unsubstantiated personal and professional abuse”. She said she was assisted by QPILCH, the Queensland Public Interest Law Clearing House (a non-profit community based legal service) in preparing an appeal against Deputy President Hack’s decision to the Federal Court, but she decided not to proceed because the President of the Tribunal is also a Federal Court judge and because of the risk of costs.
Ms Modini further stated in her SOFC that in May 2008, “after two bad AAT decisions”, she was forced to appear before a Disciplinary Committee of the CPA. Even though she was represented by a QPILCH lawyer at the hearing, she “was still suspended for three years”. (In fact, the penalty applied by the CPA Disciplinary Committee, at a hearing on 19 May 2008, was forfeiture of her membership for three years. The Committee found Ms Modini guilty of three breaches of the CPA’s Constitution: (1) that she was the subject of an adverse finding by the Tax Agents’ Board – that she was “not a fit and proper person to prepare income tax returns”, a finding that was affirmed by the AAT; (2) failure to provide a copy of her professional indemnity insurance certificate; and (3) failure to undertake and complete a quality assurance review.)
Ms Modini said her State MP contacted the CPA on her behalf and the CPA now realise that the Disciplinary Committee’s decision should not have happened and “they are now doing their best to put things right”. In her reply to the Respondent’s Statement of Facts and Contentions, she said:
10. CPA Australia has now waived all former penalties and has waived all membership fees and QA [quality assurance] fees for me to re-join the organization (sic). People have commented that CPA Australia now realize (sic) the injustice to which I was subjected and this is one way of trying to atone for the suffering and injustice they caused to me.
Ms Modini said she is in the process of obtaining written permission from clients to enable the CPA to undertake its quality assurance assessment (Transcript, p 21).
Ms Modini said she has the relevant experience to satisfy Item 207(f) of Schedule 2 of the TAS Regulations. In earlier hearings, she established that she had completed the required hours for registration. She has worked between three and four years for tax agents – some very good, who were chartered accountants and spoke very highly of her, but others who had major problems and would not speak properly of her. The Tax Practitioners Board failed to take into account the information she provided to mitigate their comments.
Ms Modini said she has a broad range of experience which has involved substantial involvement in the types of services offered by tax agents. However, she has particularly significant experience working with small business clients which should be treated as an area of specialist work (Transcript, p 24). In the past, she has also worked in small businesses, including working as the financial controller of a medical centre and of a Christian Brothers school in Ipswich. Working for such organisations, she was often asked for financial advice by staff, for example, in relation to Fringe Benefits Tax, Capital Gains Tax, and superannuation.
Ms Modini said she experienced medical problems sitting at a computer all day, and continued with her casual teaching because she was on her feet a lot more (Transcript, p 23). Further, with the way she felt about the tax agents for whom she worked and with her medical problems, she wanted to get away from working for such agents. However, while she was casual teaching, she kept going with her personal clients.
Ms Modini provided evidence about nine small business clients for whom she has undertaken work. She tells clients, which include a real estate agency involving two trusts, a grazing property, a stud, a farm machinery company, sole traders and a P and C (Parents and Citizens) association, that she can do their accounting work but cannot do their tax returns. She undertakes accounting and bookkeeping work for these clients and also liaison work with the ATO, banks, and finance companies. However, she does not charge for tax work she does for her clients, for example preparing BAS statements (Business Activity Statements) and Income Tax Returns, because she is not a tax agent and is therefore not permitted to charge for this work. The approach she adopts is to prepare the necessary documentation which the client then submits in the client’s own name. Ms Modini submitted that in the period from 2007 (approximately 5½ years), she has worked for approximately 5,300 hours undertaking such work. She said that in 2009, she completed nine individual tax returns for submission by clients.
Ms Modini said in 2009 (finishing in February 2010) she did six months in-house accounting contract work (29 hours per week) for a farm machinery company under a Centrelink sponsorship. She set up the company’s accounting systems and prepared its accounts, although the BAS statements and tax returns were done by an accounting firm. When the sponsorship ended, the principal said he could not afford to keep her on. Her work was commended by the accounting firm which took it on. Ms Modini said she found the data entry work tedious. In the course of her work for this company, she discovered some serious fraud involving $40,000 having been taken.
Ms Modini said she does accounting work for the real estate agency owned and operated by Mrs Petske. There are two trusts involved, with a corporate trustee, and Mr and Mrs Petske are beneficiaries of the trusts. Ms Modini prepares the accounts and BAS statements for the business which are lodged by the business and prepares income tax returns for Mr and Mrs Petske which they lodge personally. Ms Modini does not charge for preparing the BAS Statements or tax returns. Some of this work Ms Modini does from her office at home. She visits Mrs Petske’s office about once every three months to check the accounts and prepare the BAS Statements which takes her about two or three hours (Transcript, p 34). She also makes sure entries have been made in the right accounts and prepares a year to date statement so that Mrs Petske can see how the business is going. For the end of year tax returns, Ms Modini prepares the ‘financials’ and calculates the depreciation, for which she can charge Mrs Petske, but she does not charge for preparing a paper tax return which Mrs Petske submits in her own name. Some of this work Ms Modini does at home.
Like her other clients, Ms Modini said she also gives Mrs Petske tax advice and has liaised with banks, finance companies and Centrelink on her behalf. Ms Modini said she charges Mrs Petske $110 per hour for the chargeable work she does, totalling between $2,500 and $3,000 per year (Transcript, p 36 – 7). In supporting documents provided to the Respondent concerning her application for registration, Ms Modini estimated that she had spent about 300 hours per year working for Mrs Petske since 2007. (However, in cross-examination about this, Ms Modini was, in my view, unable to explain satisfactorily how she was only charging Mrs Petske between $2,500 and $3,000 per year for this number of hours, even taking into account the hours for which she does not charge in preparing BAS statements and tax returns and for travelling time. I put to Mrs Petske that 300 hours is equivalent to just under nine weeks of work at about 35 hours a week (Transcript, p 41 – 2). Even if one were to allow for Ms Modini not charging for 50% of her time, these figures still do not come close to adding up.) Ms Modini said she charged Mrs Petske what she considered “would be fair and reasonable” (Transcript, p 62).
Ms Modini said that in 2009, she completed nine individual tax returns, one partnership return, three company returns and three trust returns (Transcript, p 55 – 6). She completed the returns for her clients who submitted them personally. In addition to the BAS statements for Mrs Petske’s business, she also prepared BAS statements for other clients’ businesses which were submitted by those clients.
Ms Modini was cross-examined about the time she claimed to have spent undertaking her clients’ accounting over the period from 2007. She said that if she had exaggerated this it would only have been exaggerated by about 10% (Transcript, p 70). Ms Modini was asked whether she told clients that she could not charge them for their tax returns or BAS statements. She said she would tell them she could not charge for such tax work and that “I have been mucked up by the Federal Government in relation to this” (Transcript, p 71).
Ms Modini was asked about her letter and documentation sent to the Tax Practitioners Board on 5 March 2012, in which she claimed that allegations of incompetency and of her not being a fit and proper person “were fabricated by the solicitors for the Respondent”. Ms Modini responded that she felt the solicitors were picking up on things that were blatantly wrong and so she felt there had been fabrication (Transcript, p 71). She was also asked about her criticisms of Deputy President Hack and her claim (made in March 2012) that he had deliberately twisted the facts to cover up previous AAT decisions. Ms Modini said she felt while she could not prove this, “there’s a lot of truth in it” (Transcript, p 74).
Mrs Petske
Mrs Petske has provided a number of letters in support of Ms Modini’s application for registration as a tax agent. In her most recent letter dated 27 July 2012, Mrs Petske, who is a director of Lockyer Valley Real Estate, said she has engaged Ms Modini as her accountant for a number of years and has requested that Ms Modini liaise with the ATO on her behalf and on behalf of her business. Mrs Petske said that, at various times, Ms Modini has called the ATO from her office and she has found Ms Modini “to be [a] (sic) very pleasant and business like whilst discussing any of my affairs”.
Mrs Petske gave evidence by conference telephone at the hearing. She said Ms Modini has been doing her accounting work for about seven years. Mrs Petske said she had been in business for about two and a half years when she first starting employing Ms Modini. At that time, she (Mrs Petske) “was paying huge amounts of tax because my accounting wasn’t being done properly”. She described Ms Modini as “a blessing” (Transcript, p 47). The business has grown from about 25 to 30 rentals then to about 160 to 170 rentals now. Ms Modini does a lot of things for her, more than any accountant would normally do, including assisting her with Centrelink in obtaining a part pension for her husband. When Ms Modini has been working at Ms Petske’s office, Mrs Petske has always found Ms Modini to be very pleasant in her dealings with others.
Mrs Petske said the time spent by Ms Modini at her office varies: she might only come to the office every five or six weeks but they would speak on the phone in the interim (Transcript, p 48). While at Mrs Petske’s office, Ms Modini sometimes stays for a seven hour day if, for example, Ms Modini has the BAS statement to prepare and a quick profit and loss statement “to let me know how I’m going” (Transcript, p 48). Ms Modini also checks with Mrs Petske’s daughter, who is the office manager, to ensure the accounting data entries are in the right place. However, some of the work Ms Modini does for Mrs Petske she does at home.
Mrs Petske said she could not recall what she pays Ms Modini for her work: probably a “few thousand dollars. Far, far less than what I really should be paying her” (Transcript p 49). Ms Modini prepares the BAS returns for the business and income tax returns for the business and trusts and Mr and Mrs Petske. Ms Modini usually sends Mrs Petske an invoice when she does work for her such as preparing the BAS Statements – the invoices are for about $200 to $250 (Transcript, p 50). Sometimes Ms Modini tells Mrs Petske that “I’m not charging you for this work” but Ms Modini does not elaborate and “I will never question her because she has only ever done the right thing by me and my business” (Transcript, p 51).
RESPONDENT’S SUBMISSIONS
Mr Hodge provided written submissions dated 28 August 2012 and made oral submissions at the resumed hearing on 9 October 2012. He said the question for determination is whether Ms Modini satisfies the requirements for registration under the tax legislation. This raises two issues: first, whether she is a fit and proper person and, second, whether she has been engaged in the equivalent of 12 months of full-time relevant experience in the preceding five years.
With regard to whether Ms Modini is a ‘fit and proper person’, Mr Hodge submitted that Ms Modini’s evidence supports the conclusion that her response to those that disagree with her is irrational and unreasonable: for example, she continues to maintain allegations of ‘fabrication’, and that Deputy President Hack made a decision for the purposes of covering up previous decisions of the Tribunal. She has a professional communication problem and appears not to be capable of engaging in a rational discussion with those who disagree with her, instead attributing that disagreement to intentional bad faith by the other person. Mr Hodge said that it was this issue that lead to Deputy President Hack’s conclusion. The concern is, for example, what happens if someone from the ATO disagrees with her.
Mr Hodge referred to four matters arising from the oral evidence. First, that Ms Modini appears to have dramatically exaggerated the number of hours of relevant experience claimed. Her evidence about the number of hours claimed was unbelievable. Second, Ms Modini seems to have misrepresented the nature of much of the work she has claimed as relevant experience, which her evidence reveals was not providing tax agent services. Third, Ms Modini was unaware until earlier this year that she was required to be registered as a BAS agent in order to provide BAS services. This is indicative of her lack of knowledge of the legislative requirements. Fourth, she has not been frank with her clients that the reason she is unable to lodge their tax returns for them or to charge for providing tax agent services is because she is not a registered tax agent. Her explanation is that she told clients that she cannot charge them for such work as a result of her being “mucked up” by the system.
Mr Hodge referred the Tribunal to Re Su and Tax Agents Board of South Australia (1982) 61 FLR 1, at 4 – 5, where Davies J, referring to the Applicant in that matter, Mr Su, said the following:
The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
Referring to the four matters he had identified arising from the oral evidence, Mr Hodge said, “In light of these matters, it is simply not possible to be satisfied that the applicant is a person of such competence and integrity that others may entrust their taxation affairs to her care”.
With regard to ‘relevant experience’, Mr Hodge submitted that the ‘relevant experience’ claimed by Ms Modini to be “of another kind approved by the Board” (Item 207(f)) is not work experience equivalent to that obtained under Item 207(a) to (e). Mr Hodge referred to the Explanatory Statement for the TAS Regulations. Referring to the definition of ‘relevant experience’ for tax agents in Item 207, the Explanatory Statement (at p 13) states, referring to paragraphs (a) to (f):
The individual’s work experience must have included substantial involvement in one 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 one or more of those types of tax agent services relate. …
Giving the Board a further discretion to determine what constitutes ‘relevant experience’ gives the registration framework some flexibility to recognise experience which has provided the individual with a robust and thorough understanding of the requirements of the taxation law, though it has not been obtained either as a registered tax agent or under the supervision and control of a tax agent.
The issue might arise, for example, where an applicant has been employed in a corporate tax department or financial services organisation which has been providing tax agent services to clients of the corporate entity. It may also be relevant to certain specialist tax agent service providers who, though required to be registered under the new regime, may not necessarily have obtained experience as a registered tax agent or under the supervision and control of one.
Mr Hodge said there are three reasons why Ms Modini’s experience was inadequate, noting that it is only the last five years’ work that may be considered. First, the work Ms Modini has been carrying out is plainly work that Parliament envisaged would be carried out under the supervision of a registered tax agent, which is a matter of real concern especially in view of the evidence that she is not being frank with clients. Second, Ms Modini’s experience of undertaking tax agent services in the last five years is not, in any sense, substantial. On her evidence, she only prepared a few returns each year. And, third, it is not possible to be satisfied that Ms Modini has worked the equivalent of 12 months of full-time, relevant experience. Mr Hodge contended that Ms Modini has “dramatically exaggerated” the amount of work she has performed that might be described as tax agent services. Her evidence indicates that she has performed work for less than 10 small businesses and a significant proportion of that work did not involve tax agent services.
APPLICANT’S SUBMISSIONS
Ms Modini provided written submissions on 25 September 2012, a copy of a letter from CPA Australia on 27 September 2012, and finally, on 16 October 2010, further written submissions concerning her recent contact with CPA Australia. Ms Modini also made oral submissions at the resumed hearings on 28 August 2012 and 9 October 2010.
Ms Modini said she was “expelled” from CPA Australia in 2008, not because of anything she had done wrong, but because of the 2005 and 2007 adverse AAT decisions. While the notice of the outcome of the Disciplinary Committee proceedings, dated 18 June 2008, also refers to two other breaches of CPA By-Laws (failure to produce the certificate for her public indemnity insurance and failure to undertake and complete a quality assurance review), the adverse findings in 2007 by the Tax Agents Board and, on a review, by the AAT, that she was not a fit and proper person, was the principal charge.
At the resumed hearing on 28 August 2012, Ms Modini said the legislation is flawed, as a result of which registration as a tax agent is not based on merit, competency, knowledge or integrity: the legislation does not ensure that an applicant for registration has completed one tax return. Further, the majority of registered tax agents do not have acceptable qualifications. She said she has worked for people who have only completed a one year TAFE course and who are unable to undertake even basic work. There is a cycle of negligence and incompetence and the legislation “is administered by bureaucrats who don’t know what happens at the coalface”. By contrast, Ms Modini said she is a very competent, organised and efficient accountant.
In her written submissions filed on 25 September 2012, Ms Modini again referred to her previous submissions on the “flawed nature and practical unworkability” of the legislation and “in relation to the very marked negligence and defective administration to which she was subjected for ten years and so was prevented from earning a living income, serious defamation and major health problems”. She said:
The fact that I have not been registered has nothing whatsoever to do with my tax work or character but everything to do with systems breakdowns involving systemic problems and extremely defective administration.
Ms Modini said that her professional qualifications, exemplary character, accounting and tax work performed, professional background in other areas, and “the fact that my experience and qualifications are above the majority of tax agents (who often have major problems of competency, creditability, honesty as well as management and/or psychological problems”, should satisfy the Tribunal that she is a fit and proper person. Referring to the “very low standards and relative serious incompetence of many tax agents”, Ms Modini said she is “at the ‘coalface’ of tax agent practice in small business” and constantly sees “many of these problems”.
Ms Modini said she has always discussed things rationally with those with whom she has disagreed in her professional career: “In my previous AAT cases I gave FACTS about situations to the decision maker and I have not made a relevant statement which cannot be substantiated.” She referred to there being “a problem with some AAT members” and to Deputy President Hack’s “derogatory and unsubstantiated comments” about her character: “His unsubstantiated criticism of me (when he was given FACTS) was quite unacceptable”. (Original emphasis)
With regard to relevant experience, Ms Modini said she has not exaggerated the number of hours of work she has done, which satisfy the requirement for 12 months of full-time relevant experience in the past five years:
… in order to determine the tax liability of a business client, then accounting in relation to their business affairs needs to be completed initially and as such accounting and financial statements are an integral part of tax work. In addition to advise (sic) clients on the best way to structure their business(es) for legal taxation purposes, then accounting must be done to produce financial statements. This is an (sic) major part of public accounting and tax work.
Ms Modini said with regard to Item 207(7) of the TAS Regulations, she has almost 20 years’ experience in small business including “periods working as financial controller as well as three to four years working for tax agents”. In relation to Mr Hodge’s expression of concern that she has been providing tax agent services without supervision, Ms Modini commented:
… the pertinent question must be asked as how can a professionally unqualified, relatively technically incompetent and managerially incompetent tax agent could provide adequate supervision to someone at my level … in this area it is only a minority who are properly qualified at a professional level. In addition those that are qualified sometimes have major managerial and/or psychological problems, try to blame their problems on their staff and hence have a loss of creditability exemplified with high staff turnover …
Ms Modini said “what needs to be examined for my application is not the very limited warped cross examination by the Respondent but the empirical verifiable evidence of my professional qualifications and experience”. With her varied and broad experience over a 20 year period, much greater than most other tax agents, she should be registered as a tax agent: “I cannot be victimized (sic) for all the systemic problems which have been exposed.” Ms Modini said:
(g) there is no proper objective assessment of applicants and their work, all that takes place is some short subjective statements from tax agents who themselves often have no creditability whatsoever. The negligent incompetent bureaucrats just blindly believe the tax agent, make no proper enquiries and just give often grossly erroneous recommendations to the Tax Practitioners’ Board…
…
(j) the legislation does not allow for applicants who are treated in a nasty manner by tax agents or mature people who, on account of age discrimination, have no choice but to accept employment with tax agents who have major problems.
(k) tax agents who are not only unqualified and incompetent but also appear to be quite deranged and crazy …
Therefore any reasonable person can se (sic) the legislation(then and now) (sic) is unworkable and I am the one who has suffered adversely from it. This is a self evident FACT.
Ms Modini said in her case “the level of negligence and defective administration has been beyond belief”. Moreover, she “gave DP Hack FACTS about my (sic) myself as well as the unworkable legislation and the defective administration over ten years”. She “could not believe the unsubstantiated comments in the 2007 Decision”. Therefore, she has claimed monetary compensation under the CDDA (Compensation for Detriment caused by Defective Administration) Scheme and for an Act of Grace compensation payment. Ms Modini says she is entitled to compensation from the Federal Government and she should also be registered as a tax agent. Ms Modini attached to her written submission a letter to the Commissioner of Taxation dated 23 July 2004 from the Federal Member for Blair, Cameron Thompson, stating that the system seems to have failed Ms Modini, that “Personal tirades do not matter – all that matters is that she is qualified to do the job”, and requesting that she be registered as a tax agent as soon as possible.
In oral submissions at the resumed hearing on 9 October 2012, Ms Modini drew attention to the comments made in her written submissions, referred to above. She also commented that she should not be in the position of having to pursue her case before the Tribunal, and should be able to earn a comfortable living from her own practice. Instead, her health is at breaking point, she is receiving Centrelink benefits and last week went to St Vincent de Paul who provided a food voucher and provided assistance with paying for her medication. Ms Modini said she would not have been appointed to undertake Australian Electoral Commission work if she was not a fit and proper person. Moreover, she has been a registered teacher for 40 years. She is an innocent but very competent person who has been damaged by a flawed system and is entitled to compensation for the adverse effect it has had on her. She said that because of her financial situation, compensation is now more important to her than tax agent registration and requested that the Tribunal make a recommendation that compensation be paid.
Ms Modini provided the Tribunal with a letter from the Chief Operating Officer of CPA Australia, Jeff Hughes, dated 27 September 2012. The letter confirmed a teleconference with Ms Modini on 26 March 2012 in which the CPA agreed to waive a fine imposed at the time of her suspension from membership, and also explained that in order to be readmitted as a member, Ms Modini would need to undertake and pass a quality assurance review. (Ms Modini said she has been in contact with CPA Australia about the quality assurance review and has made the necessary arrangements for the review to take place.) The letter dated 27 September 2012 also states that Ms Modini would need to satisfy other admission criteria including demonstrating that she is a fit and proper person, paying membership fees, and demonstrating 40 hours of continuing professional development in the 12 months prior to readmission. Ms Modini was concerned that the letter did not accurately reflect what was discussed at the teleconference and the Tribunal allowed time for her to follow this up with CPA Australia.
In a further submission dated 16 October 2012, Ms Modini said she had spoken with Mr Hughes who had confirmed that her initial annual membership fee would be waived. She said Mr Hughes told her that the fit and proper person requirement refers to the absence of a criminal record and bankruptcy which obviously do not affect her. Ms Modini said she told Mr Hughes how upset she was about the CPA Disciplinary Committee relying on comments made in the AAT decisions which she said “have been shown to lack substance”. She said Mr Hughes told her it appeared that she was put before the Disciplinary Committee “for the wrong reasons” and he has agreed to meet with her when he is next in Brisbane.
DISCUSSION
The issue for the Tribunal is whether the Board’s decision to reject Ms Modini’s application for registration as a tax agent was the correct or preferable decision. The Respondent submits she is not eligible for registration because she is not a fit and proper person and has not demonstrated that she has the required relevant experience. Ms Modini refutes this.
A Fit and Proper Person?
Section 20.15 sets out matters to which the Board must have regard in deciding whether an individual is a fit and proper person, relevantly, “whether the individual is of good fame, integrity and character”.
The meaning of the phrase ‘fit and proper person’ was discussed by the High Court in Hughes & Vale Pty Ltd v New South Wales (No 2)(1955) 93 CLR 127, at [9], where Dixon CJ, McTiernan and Webb JJ found the word ‘fit’, in relation to an office, to involve honesty, knowledge and ability. The meaning of the phrase ‘fit and proper person’ was also discussed in Australian Broadcasting Tribunal v Bond(1990) 170 CLR 321, where Toohey and Gaudron JJ said, at 380:
The expression ‘fit and proper person’, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities.
As their Honours recognised, at 388, whether a person is a fit and proper person involves a value judgement to be made in the context of the particular activity to be licensed.
There was also a ‘fit and proper person’ test in the now repealed provisions of Part VIIA of the ITAA 1936 (s 251BC(1)(d)) requiring that an applicant not be a person who is not of ‘good fame, integrity and character’ (ie a double negative). In Kolya Tax Practitioners Board [2012] FCA 215, at [31-32], Flick J noted that the meaning of the phrase ‘a fit and proper person’ in the TAS Act has remained “relatively unchanged”:
31. Prior to the implementation of the amendments on 1 March 2010, many decisions of both the Administrative Appeals Tribunal and this Court thus canvassed the requirement that a tax agent be a “fit and proper person” and a person of “good fame, integrity and character”: e.g., Toohey v Tax Agents’ Board of Victoria [2007] FCA 431, 171 FCR 291; Pleno v Tax Practitioners Board [2010] FCA 1196, 80 ATR 689. The phrase “a fit and proper person” is, of course, a phrase not confined to the registration of tax agents. It is a phrase commonly employed in relation to persons holding offices or vocations: Hughes and Vale Proprietary Limited v State of New South Wales (No 2) (1955) 93 CLR 127 at 156. Dixon CJ, McTiernan and Webb JJ there observed:
... The expression “fit and proper person” is of course familiar enough as traditional words when used with reference to offices and perhaps vocations. But their very purpose is to give the widest scope for judgment and indeed for rejection. “Fit” (or “idoneus”) with respect to an office is said to involve three things, honesty knowledge and ability: “honesty to execute it truly, without malice affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it”—Coke.
In the context of the registration of tax agents, the requirement serves a number of purposes. Those purposes include ensuring that those who entrust their affairs to a tax agent can be assured of an agent’s competence and integrity and to also provide the Taxation Department with an assurance that it can “proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently”: Re Su and Tax Agents’ Board (SA) (1982) 82 ATC 4284 at 4286 per Davies J. See also: Stasos v Tax Agents’ Board (1990) 21 ALD 437 at 443 to 444 per Hill J.
32. The content of the phrase “a fit and proper person” has relevantly remained unchanged. The importance of the requirement transcends the legislative amendments.
Of the decisions to which Flick J referred, in Re Su and Tax Agents Board (SA) (1982) 61 FLR 1, at 4-5), Davies J stated:
The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
In Stasos v Tax Agents Board of NSW (1990) 21 ALD 437, at [47] – [48], Hill J stated:
47. The legislature has chosen in s 251L of the Act to confer upon registered tax agents a virtual monopoly in the preparation for reward of income tax returns and objections and in relation to the transaction of any business on behalf of a taxpayer in income tax matters for reward. Thus, subject to the rights which are preserved to solicitors or barristers by s 251L(4), which rights extend only to acting in their professional capacity in preparing objections, or in any litigation or proceedings before the Administrative Appeals Tribunal, the Relief Board or the Tax Agent's Board or a court, or acting in an advisory capacity in connection with the preparation of returns or with any income tax matter, which rights do not extend to the preparation of returns as such, a registered tax agent will be the sole person entitled for a fee to represent and advise a taxpayer in his dealings with the Australian Taxation Office.
48. The conferral of this privilege upon registered tax agents carries with it a consequent set of obligations and responsibilities. A person is required, before being registered as a tax agent to demonstrate that he is a fit and proper person to prepare income tax returns and transact business on behalf of clients in tax matters and, inter alia, that as at the date of application he is of good fame, integrity and character. Accordingly it is necessary that he demonstrate that he has the necessary knowledge and experience to equip himself to perform these tasks (cf. The Tax Agents' Board of Queensland v Seymour (1990) 90 ATC 4262; Re Crowley and Tax Agents' Board (NSW) (1990) 90 ATC 2005; and Re Culmer and Tax Agents' Board (1990) 90 ATC 2018).
Thus, in deciding whether Ms Modini is a fit and proper person to conduct the work of a tax agent, the Tribunal, standing in the shoes of the Board, must have regard to her “good fame, integrity and character” but also to her knowledge and experience and whether she is a person of such competence and integrity that others would entrust their taxation affairs to her care, and that officers of the ATO could rely on her competency and honesty in their dealings with her.
In my summary of Ms Modini’s submissions, above, I have quoted her to show the nature of some of the comments she has repeatedly made in the course of these proceedings: for example, her criticism of the relevant legislation and of the tax agent registration system, which she says is flawed and unworkable, her many references to the “serious incompetence” of many tax agents whom, she says, often have technical, managerial and psychological problems, and her references to the “very marked negligence and defective administration” to which she has been subject and of which she has been the innocent victim. By contrast, Ms Modini maintains that her qualifications and wide experience over a 20 year period are superior to those of the majority of tax agents and that her character is exemplary. She criticises the Respondent’s “fabrications” and erroneous assumptions about her character and the amount of tax work she has done.
Ms Modini is also scathing about her treatment by a number of members of the AAT, noting of Member Cowdroy (a 2003 decision) that “It was obvious that she had no understanding of this area of tax agents registration” (Applicant’s SFOC, paragraph 7), and that Member Dr Levy (2005 decision) attempted “to bluff his way through” her case (Applicant’s SOFC, paragraph 12). Of Deputy President Hack (2007 decision), Ms Modini said, “I was quite unprepared for the unwarranted and unsubstantiated personal and professional abuse” (Applicant’s SOFC, paragraph 15). In a letter dated 9 March 2012 addressed to the Chief Executive Officer of CPA Australia, included in the Tribunal documents, Ms Modini stated:
In 2007 the new Deputy President did a 180 degree back flip from the hearing and proceeded to go on a completely unsolicited and completely unsubstantiated tirade of emotive fabrication and defamation against me.
Whether or not Ms Modini’s comments are well-founded, the immoderate way in which they are expressed is a matter of real concern. Ms Modini appears to have an absolute faith in the rightness of her views, to the exclusion of others, on occasion elevating her views to statements of “FACT” when they are actually statements of opinion: for example, in her written closing submissions, (paragraph 4(g)), she states:
I gave irrefutable FACTS about unworkable legislation and defective administration … and yet these have been warped and twisted by the respondent to discredit my character.
Further at paragraph 8, she refers to Deputy President Hack’s “unsubstantiated criticism of me (when he was given FACTS)”.
In the light of the comments made by Deputy President Hack in his written decision, quoted at paragraph 13 above, one might have expected that Ms Modini might have moderated her comments about others. However, in both her written and oral evidence and submissions she goes beyond what, in my view, a reasonable person would find appropriate from a professional person. The language she has used in criticising others, the tax agent registration system, and her approach in conducting these proceedings has not assisted her case. This has led me to the view that the concerns Deputy President Hack expressed about Ms Modini’s capacity for entering into a professional and reasoned dialogue with others in the case of disagreement are not without substance. I am, nevertheless, hesitant to draw any absolute conclusions from this in light of the fact that she has not been legally represented in these proceedings and my intuition that, had she been represented, her representative would have adopted a different approach in presenting her case, particularly given the comments made by Deputy President Hack in his 2007 decision.
It is appropriate, therefore, to look for other evidence as to whether Ms Modini is a fit and proper person to be registered as a tax agent. The only witness Ms Modini called to give evidence on her behalf was Mrs Petske, who provided a number of letters of support and spoke highly of Ms Modini and of the work Ms Modini has undertaken for her. Mrs Petske described Ms Modini’s dealings with the ATO in discussing her affairs as “very pleasant and business-like”. Mrs Petske said Ms Modini prepares the BAS returns for her real estate business, and the income tax returns for the business, for two trusts and for her and her husband. These returns appear to be submitted by the business, trusts and Mr and Mrs Petske as individuals and not by Ms Modini on their behalf. Mrs Petske said that Ms Modini often tells her that she cannot charge for this type of work but does not elaborate, and Mrs Petske does not question her further “because she has only ever done the right thing by me and my business” (Transcript, p 51).
Included in the Tribunal documents are references/letters from other clients of Ms Modini’s:
·from the Chairman of the Glamorgan Vale Water Board dated 24 June 2008, outlining the nature of the work undertaken by Ms Modini for the Board, including general accounting work, “BAS reporting, PAYG and end of Financial year returns”;
·from the Manager of Birchgrove Park Stud and Spelling Complex, dated 1 June 2011, referring to the accounting and taxation work undertaken by Ms Modini for the company and the Manager personally;
·from M and KJ McQuillan, undated, stating that Ms Modini has undertaken their “accounting, GST and taxation wor[k] since 2006”, involving “a relatively large grazing property and … a trust”, and the sale of one grazing property and the purchase of another, for which Ms Modini has undertaken all “the accounting and capital gains tax work involved”.
Ms Modini gave evidence about not charging her clients for the tax work she undertakes for them. When asked whether she explained to her clients that she was not registered as a tax agent, she said she tells them, “look, I can’t charge you for this. On one or two occasions I’ve said, no, I’m not registered as a tax agent. But I – know perfectly well I cannot charge them for anything”. She told clients she could not charge them for such tax work because she had “been mucked up by the Federal Government in relation to this” (Transcript, p 71). Mrs Petske’s evidence about this is referred to above.
I also note that on one of Ms Modini’s invoices, addressed to “Ferndale P and C”, dated 22 August 2011, under her business name, the invoice states “Proprietor: Denise Modini B. Comm. B.A. CPA”. When cross-examined about this, Ms Modini said she “accidentally” left this on her invoice (Transcript, p 67). (Her membership of CPA Australia was forfeited on 19 May 2008.) Ms Modini said she is aware that she cannot describe herself as a CPA, but “I can say I’m at CPA standard”. She was then asked about her application to the Board for registration on 5 March 2012. This indicates under the heading ‘Associations’, that she is a member of the CPA, referring to her membership number. Ms Modini explained this as follows (Transcript, p 67):
What happened there was I wanted to let them know that I was CPA level although, I did say that – now, also too, around that date I was in contact with CPA. And my membership was being restored free of charge. So I wanted to let them know that I was at CPA standard and my membership number remains the same.
Mr Hodge pointed out that it appeared that her teleconference with the Chief Operating Officer of CPA Australia, Mr Hughes, at which he agreed to waive certain fees (see above paragraph 56) took place on 26 March 2012. Further, in the ‘Statement of Relevant Experience’ which accompanied her application to the Board, Ms Modini stated: “Work as CPA (sole trader) in my own registered business (2003-2012) – most of my work”. When asked about this, Ms Modini said (Transcript, p 68), “I meant that to be at CPA standard. I should have put there work as – at CPA standard”.
In my view, all the above suggests that Ms Modini has at times been disingenuous – that she was less than frank in disclosing that she was not currently a member of CPA Australia. This in turn raises a question about her integrity.
In the light of my concerns about whether Ms Modini has the necessary capacity for entering into a professional and reasoned dialogue with others, and given the relatively little other evidence, referred to above – as opposed to her assertions – which might support her case, I am not satisfied that there is sufficient evidence to support a finding on the question of whether Ms Modini is a fit and proper person to be registered as a tax agent. However, because Ms Modini is not represented in these proceedings and has not had the benefit of legal advice, I have decided not to make any finding on this question.
Relevant Experience?
In her application for registration as a tax agent, Ms Modini provided information about her relevant experience in the preceding years. Her claim was based on her having undertaken “work of another kind” (see Item 207(f) at paragraph 9 above). As noted above, she stated that she had worked as a CPA in her own business between 2003 and 2012 and that this comprised “most of her work”. She said her relevant experience included “All areas of accounting, financial statements and taxation”. She said in answer to question 8: “I work best when self employed. I cannot work with/in practices of incompetence and disorganisation (situation in many tax practices where I worked)”.
As evidence of her work, Ms Modini provided copies of letters from clients, including from Mrs Petske, and the invoice addressed to Fernvale P and C referred to above. She also provided a hand-drawn table setting out the hours worked for her nine clients between 2004 and 2012. It was this table that was the subject of questioning at the hearing. With regard to Mr and Mrs Petske, Mrs Petske’s business and their two trusts, Ms Modini claimed to have worked 300 hours per year for the years 2004 to 2011. Her evidence was, however, that she only charges Mrs Petske between $2,500 and $3,000 per year. Ms Modini said her charge rate is $110 per hour (Transcript, p 37). If one assumes that Ms Modini charged $3,000, this amounts to 27.27 hours, which would mean she was working the other 272.73 hours free of charge.
Ms Modini acknowledged that the 300 hours included travel time but said that a part of the time she spent undertaking work for Mrs Petske was done at home. She also said some of this time was spent dealing with Centrelink over Mr Petske’s pension claim, and dealing with Mrs Petske’s bank and with BMW Finance over matters of concern to Mrs Petske. Thus, it is clear that a part of the claimed 300 hours did not comprise relevant tax agent experience. Moreover, I find it hard to believe that Mrs Modini worked the 272.73 other hours – which amount to about 7 working weeks - without charging for them. This was put to Ms Modini at the hearing (Transcript, p 40 – 1), but while stating that she does a lot of work for free, she was unable to provide what, in my view, is a satisfactory explanation.
Ms Modini was also cross-examined by Mr Hodge about the other clients for whom Ms Modini undertakes accounting work. Her evidence in each case, is that she prepares the BAS Statements and tax returns for the businesses, trusts and individuals but that these statements and returns are submitted by those clients personally and that Ms Modini does not charge the clients for that tax work. Ms Modini does, however, charge for general accounting work undertaken for those clients, but it is not clear what proportion of the time she attributes to working for each client relates to relevant tax agent services. There is also very little evidence to support Ms Modini’s estimates of the total time worked for each client between 2004 and 2012. She said that in the case of some clients, her estimate was based on the invoices she submitted, while in the case of others she relied on time sheets. However, she said (Transcript p 62). :
What I’ve done with the Petske’s (sic) is I haven’t bothered about the timesheet but what I’ve done is I have charged them at the end of the day for what I consider would be fair and reasonable.
Ms Modini was asked whether, when she calculated the hours worked for her clients across the years, she went back to her records, checked the invoices submitted and then worked out how much extra time she spent doing work for them for which she did not charge. She said (Transcript, p 63):
I had a rough idea but I didn’t – but I thought, well, look, I felt that I didn’t want to do too much. Also to – with some of that, too, I was also suffering a bit from depression and sometimes it’s a little bit hard to remember what the actual amount of hours that I invoice them for and the actual amount that I actually did … so I did the best I could …
Item 201 of Schedule 2 of the TAS Regulations requires in paragraph (d) that “the individual has been engaged in the equivalent of 12 months of full-time, relevant experience in the preceding 5 years”. Relevant experience is defined in Item 207 as meaning work by an individual in one of a number of capacities in the course of which the individual’s work has included “substantial involvement” in tax agent services. Tax agent services are those defined in s 90.5 of the TAS Act (see paragraph 10, above).
Ms Modini’s evidence indicates that she has prepared BAS Statements and tax returns for nine clients over the years 2004 to 2012 as part of the general accounting work she undertook for those clients, although not under the supervision of a tax agent. It is not clear what proportion of her time working for those clients is attributable to providing tax agent services but it seems likely that a not insignificant proportion of her time was spent undertaking general accounting work rather than providing tax agent services. Thus, I am not satisfied from the evidence that Ms Modini’s work has included substantial involvement in tax agent services amounting to 12 months full-time relevant experience over the past five years and she does not, thereby, satisfy Item 207(d) of Schedule 2 of the TAS Regulations.
I also note, as Mr Hodge pointed out, that there is a question about whether the kind of work Ms Modini has undertaken, as a sole practitioner, should be considered work “of another kind approved by the Board” (Item 207(f) of Schedule 2 of the TAS Regulations – see paragraph 9, above). Ms Modini contends that she has expertise in small business and, certainly, her evidence suggests that she has experience in this field, although there is little evidence of the extent of her small business taxation experience beyond that discussed above. However, in circumstances where she is not a tax agent and her recent experience in taxation work cannot, in my view, be considered extensive, I agree with Mr Hodge that it is a matter of concern that she has been carrying out work that it would appear it was Parliament’s intention (see, for example, the Explanatory Memorandum for the Tax Agents Services Bill 2008 and the Explanatory Statement for the TAS Regulations) should be carried out under the supervision of a registered tax agent.
As stated above, I am not satisfied from the evidence presented that Ms Modini satisfies the ‘relevant experience’ requirement in Item 201(d) of Schedule 2 of the TAS Regulations. The decision of the Board to reject her application for registration must therefore be affirmed.
Ms Modini has also asked that I make a recommendation that she should receive an act of grace payment or be paid compensation under the CDDA (Compensation for Detriment caused by Defective Administration) scheme. In her final written submission dated 16 October 2012, she stated:
3. On account of ten years of mishandling of my applications, defamation, defective administration, cover ups and problems with some AAT Members, I have literally been left financially destitute, and at retirement age. …
4. I simply cannot afford an ordinary life, as I would have had if I had tax agent registration and had had the chance to build up a practice to sell. The professional, financial and health damage I suffered has been devastating. I am not responsible for all of the mishandling, cover ups and the ‘domino effect,’ (sic) I suffered. …
Ms Modini’s evidence indicates that her financial circumstances are undoubtedly straitened. However, in view of my decision, it is not appropriate that I make such a recommendation and I therefore decline to do so.
CONCLUSION
The decision under review is affirmed.
I certify that the preceding 87 (eighty seven) paragraphs are a true copy of the reasons for the decision herein of Deputy President R P Handley.
.........[sgd]...............................................................
Associate
Dated 6 November 2012
Dates of hearing 22 August 2012, 28 August 2012, 9 October 2012 Date final submissions received 16 October 2012 Applicant In person Counsel for the Respondent Michael Hodge Solicitors for the Respondent Australian Government Solicitor
0
7
0