Norman and Tax Practitioners Board - [2021] AATA 848

Norman and Tax Practitioners Board [2021] AATA 848 (13 April 2021)
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL              )
  )  No: 2019/7732
TAXATION AND COMMERCIAL DIVISION            )
Re: Alan Norman
Applicant

And: Tax Practitioners Board
Respondent
DIRECTION
TRIBUNAL:  Member D K Grigg
DATE OF CORRIGENDUM:            13 April 2021
PLACE:           Brisbane

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 accordingly:

Amend the date of written reasons on page 3 from “## April 2021” to “13 April 2021”.

.........................................................
Member D K Grigg
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2019/7732
Re:ALAN NORMAN
APPLICANT

AndTax Practitioners Board
RESPONDENT

DECISION
Tribunal:Member D K Grigg
Date:13 APRIL 2021
Place:Brisbane

The Tribunal varies the decision under review and replaces it with a decision that the Applicant’s registration as a tax agent is terminated pursuant to section 40-5(1)(b) of the Tax Agent Services Act 2009 (Cth) (“TASA”) and that he may not apply for registration under the TASA for a period of two (2) years pursuant to subsection 40-25(1) of the TASA.
..........................................
Member D K Grigg

legislative background
Management of personal income tax obligations

issue for the tribunal
CONSIDERATION
Did Mr Norman fail to act honestly and with integrity (section 30–10(1), Code)
Declarations made to the TPB
Amending Clients’ ITRs without prior consent
Conclusion

Conduct in relation to Mr Norman’s tax affairs (section 30–10(2), Code)
Failure to Comply with Tax Obligations

Conclusion
Did Mr Norman act in breach of subsection 30-10(7) by failing to ensure he provided competent tax agent services?
Conclusion
Did Mr Norman act in breach of subsection 30-10(9) by failing to take reasonable care in ascertaining a client’s state of affairs?
Did Mr Norman fail to take reasonable care to ensure taxation laws were applied correctly to the circumstances in relation to which he was providing advice to a client? (section 30–10(10), Code)
Did Mr Norman breach section 30-10(12) of the Code by failing to advise his clients of their rights and obligations under taxation laws?
Findings re Code Breaches
Is Mr Norman a “fit and proper person” (section 20-5(1)(a), TASA)
What is a fit and proper person?
Consideration
Is the sanction imposed appropriate in the circumstances?
Conclusion
decision
INTRODUCTION

This matter concerns a decision made by the Tax Practitioners Board (“TPB”) to cancel the Applicant’s tax agent registration on the grounds that he breached various provisions of the Code of Professional Conduct (“Code”) contained within the Tax Agents Services Act 2009 (Cth) (“TASA”).
As a result of the alleged Code breaches, the TPB contends that Mr Norman is not a “fit and proper person” as required by section 20-5 of the TASA, and therefore, is not eligible to be registered as a tax agent.
BACKGROUND
Mr Norman has been a registered tax agent since 12 March 2007.[1] A G Norman & Associates Pty Ltd (“the Company”)…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2021] AATA 848
Decision Date: 13 April 2021

CaseChat Overview and Summary

This matter concerned an appeal by Mr Norman against a decision by the Tax Practitioners Board (TPB) to terminate his registration as a tax agent and that of his company, A G Norman & Associates Pty Ltd. The TPB contended that Mr Norman, as the sole director and controlling mind of the company, was not a "fit and proper person" as required by section 20-5 of the Tax Agents Services Act 2009 (TASA) due to alleged breaches of the Code of Professional Conduct.

The legal issues before the court were whether Mr Norman had breached various provisions of the Code of Professional Conduct, specifically sections 30-10(1) and 30-10(2), by failing to act honestly and with integrity, and by failing to ensure the company and the trust he controlled complied with taxation laws. The court was also required to determine whether these breaches, along with his own tax affairs being subject to audit and amendment, rendered him not a fit and proper person for registration as a tax agent.

The court found that Mr Norman had indeed breached section 30-10(1) of the Code by failing to disclose overdue personal tax obligations in multiple annual declarations and renewal applications submitted to the TPB, and by providing false or misleading information to a TPB officer regarding the trust's overdue tax obligations. Furthermore, the court determined that Mr Norman breached section 30-10(2) by causing the trust to make false and misleading statements in its income tax return, failing to lodge business activity statements and pay GST/PAYG liabilities when due, defaulting on payment arrangements, and failing to make arrangements to pay outstanding debts. These actions, coupled with the ATO's findings regarding his clients' deductions and his own tax affairs, led the court to conclude that Mr Norman was not a fit and proper person.

The court varied the TPB's decision, reducing the period for which Mr Norman was prohibited from reapplying for registration.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

As a result of the alleged Code breaches, the TPB contends that Mr Norman is not a “fit and proper person” as required by section 20-5 of the TASA, and therefore, is not eligible to be registered as a tax agent.BACKGROUND Mr Norman has been a registered tax agent since 12 March 2007.[1] A G Norman & Associates Pty Ltd (“the Company”) has been a registered tax agent since 2 April 2010.[2] Mr Norman has been the sole director and controlling mind of the Company since its incorporation on 8 October 1997 and at all relevant times was the sole supervising tax agent of the Company’s business.[3] The Company is the sole trustee (“Trustee”) of the A G Norman Family Trust (“Trust”).[4] The Company’s tax agency business is currently under the supervision of Mr Douglas Coghlan, not Mr Norman.[5][1] Exhibit 1, T documents, T4, page 26, paragraph 2, Submission to Board Conduct Committee Attachment 3[2] Exhibit 1, T documents, T4, page 26, paragraph 3, Submission to Board Conduct Committee attachment 3[3] Exhibit 1, T documents, T4, pages 26, 41-45, Submission to Board Conduct Committee attachment 3[4] Exhibit 1, T documents, T4, pages 26, 46, 79-81, Submission to Board Conduct Committee attachment 3[5] Transcript, P-7Australia Taxation Office Audit and Referral to the TPB In February 2017 the Australia Taxation Office (“ATO”) met with Mr Norman to discuss high risk deduction claims being made in paramedics’ income tax returns (“ITR”) in the 2016 financial year.[6] Mr Norman told the Tribunal that he personally reviewed every ITR that was filed in the 2016 and 2017 financial years.[7][6] Exhibit 1, T Documents, T4, page 126, Submission to Board Conduct Committee attachment 22[7] Transcript, P-17 On 24 July 2017 Mr Norman was advised by letter that a representative of the ATO would be meeting with him to discuss deductions claimed by the Company’s paramedic clients (“Paramedic Clients”), as a result of information the ATO had received from the Queensland Ambulance Service (“QAS”). The ATO advised the Company that the information from the QAS provides that paramedics:[8](a)are not entitled to deduct expenses for overnight travel or rental subsidies if they are based in a remote location; and(b)can claim meal expenses in limited circumstances only (those circumstances are explained in the letter).[8] Exhibit 1, T Documents, T4, pages 124-125, Submission to Board Conduct Committee attachment 22 Mr Norman was advised to not make any deduction claims for overnight travel or rental subsidies in any further ITRs lodged on behalf of paramedics and to only lodge claims for meal expenses if there is an entitlement to a deduction. On 24 July 2017 the Australian Taxation Office (“ATO”) informed Mr Norman that it would be conducting an audit of the Company in relation to the 2016 financial year.[9] Following the audit the ATO found that:[10](a)the Trustee had claimed deductible expenses in its ITR which were of a private nature contrary to section 8-1(2)(b) of the Income Tax Assessment Act 1997 (Cth) (“ITAA 1997”);(b)the Trustee had claimed deductions for fringe benefits which are not permitted by a family trust and, further, that FBT did not apply because the expenditure (which consisted of entertainment expenses) met the minor benefit exemption. As a result, a tax deduction was not allowable (as claimed) pursuant to section 32-5 of the ITAA 1997; and(c)the Trust had claimed expenses for a motor vehicle; however, it had not accounted for the fact that the vehicle was partially used for private purposes.[9] Exhibit 1, T Documents, T4, pages 98-99, Submissions to Board conduct Committee Attachment 21[10] Exhibit 1, T Documents, T4, pages 101-107, Submissions to Board Conduct Committee Attachment 15

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The TPB considered the matter and found that (“TPB Decision”):[20][20] Exhibit 1, T Documents, T6, pages 136-137 Extract of minutes from Board Conduct Committee ; T7, pages 139-142, Letter regarding outcome of investigation (a)Mr Norman failed to comply with section 30-10(1) of the Code by:a. Failing to disclose overdue personal tax obligations in the following documents lodged with the Board:i. Annual Declaration (“AD”) for A G Norman & Associates Pty Ltd (the Company), dated 18 April 2017;ii. his AD, dated 16 February 2018;iii. AD for the Company, dated 5 April 2018;iv. Application for renewal of his personal registration, dated 5 February 2019;v. Application for renewal of the Company’s registration, dated 5 March 2019.b. providing false or misleading information to a Board officer in response to enquiries about the Trust’s overdue tax obligations, by claiming the Trust had a “programmed final payment of $5,000” for the week ending 19 April 2019, when it did not do so and made no further payments of the debt until 26 July 2019(b)Mr Norman failed to comply with section 30-10(2) of the Code as follows:a. As sole director of the corporate trustee for the Trust, causing the Trust to make a false and misleading statement in the ITR for the Trust for the 2015/16 financial year, leading to the imposition of a 50% penalty for recklessnessb. Failing, as sole director of the corporate trustee for the Trust, to cause the Trust to lodge the business activity statements (BAS) for the following quarters by their legislative due dates:i. July - September 2014;ii. April - June 2015;iii. October - December 2016;iv. April - June 2017;v. April - June 2018c. Failing, as sole director of the corporate trustee for the Trust, to cause the Trust to pay its self-assessed amounts of GST and PAYGW for the following quarters by their legislative due dates:i. October - December 2016;ii. January - March 2017;iii. July - September 2017;iv. October - December 2017;v. April - June 2018;vi. July - September 2018;vii. October - December 2018;viii. January - March 2019d. As sole director of the corporate trustee for the Trust, causing the Trust to default on arrangements to pay the activity statement debts of the Trust made on 10 January 2017e. Failing, as sole director of the corporate trustee for the Trust, to cause the Trust to make arrangements to pay the activity statement debts of the Trust by the following due dates when demanded to do so by the ATO:i. $8,079.10, due immediately by 7 December 2017;ii. $11,978, due in full by 20 December 2018f. Failing, as sole director of the corporate trustee for the Trust, to cause the Trust to make arrangements to pay the activity statement debt of the Trust, which was $12,584 as at 30 August 2019(c)Mr Norman failed to comply with section 30-10(13) of the Code by failing to maintain professional indemnity insurance from 23 March 2019;(d)Mr Norman had ceased to meet the tax practitioner registration requirement under paragraph 20-5(1)(a) of the TASA, in that Mr Norman is not a fit and proper person as he is not a person of good fame, integrity and character as a result of the following:a. His conduct which resulted in the alleged Code breaches; which included providing false or misleading information to officers of the Boardb. Mr Norman has engaged with clients in a manner which was deemed to be an inappropriate interpretation of the taxation laws by the ATO; andc. Mr Norman’s own taxation affairs were subject to audit and subsequent amendment.

Ratio Decidendi

Legal Principle Established

As to whether Mr Norman breached section 30-10(13) of the Code by failing to maintain professional indemnity insurance that met the TPB’s requirements, this issue was resolved at the stay hearing and is no longer pursued by the TPB.CONSIDERATIONThe Breaches leading to Mr Norman’s Termination as a Registered Tax Agent As Mr Norman was the sole director and controller of the Company, Mr Norman is responsible for the conduct breaches engaged in by the Company. The alleged conduct which led to the termination of Mr Norman’s tax agent registration include the following:·the misapplication of taxation laws in relation to the Paramedic Client base;·the failure to inform the TPB of the Trust’s tax liability;·misleading the TPB regarding the proposed tax debt payment arrangement;·making a false statement in the Trust’s ITR for the 2015/16 financial year;·causing the Trust to fail to pay GST/PAYG when due;·causing the Trust to default on the payment arrangement for its tax debt;·the Company’s failure to lodge BAS when due in breach of sections 31-5 and 31-8 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act);Did Mr Norman fail to act honestly and with integrity (section 30–10(1), Code)Declarations made to the TPB In the Company’s annual declaration to the TPB submitted on 18 April 2017, Mr Norman declared that neither the Company nor its director had outstanding tax obligations.[25] As part of the application Mr Norman declared that he was aware that if he had made any false and misleading statements he may be guilty of an offence pursuant to section 8K of the Taxation Administration Act 1953 (Cth) (“TAA 1953”).[25] Exhibit 1, T Documents, T4, page 47-49, Submission to Board Conduct Committee Attachment 5 In Mr Norman’s annual declaration to the TPB submitted on 16 February 2018, Mr Norman declared that he did not have outstanding tax obligations.[26] As part of the application Mr Norman declared that he was aware that if he had made any false and misleading statements he may be guilty of an offence pursuant to section 8K of the TAA 1953.[26] Exhibit 1, T Documents, T4, page 53-54, Submission to Board Conduct Committee Attachment 7 In the Company’s annual declaration to the TPB submitted on 5 April 2018, Mr Norman declared that neither the Company nor its director had outstanding tax obligations.[27] As part of the application Mr Norman declared that he was aware that if he had made any false and misleading statements he may be guilty of an offence pursuant to section 8K of the TAA 1953.[27] Exhibit 1, T Documents, T4, page 55-57, Submission to Board Conduct Committee Attachment 8 In Mr Norman’s renewal application submitted to the TPB on 5 February 2019, Mr Norman declared that he did not have outstanding tax obligations.[28] As part of the application Mr Norman declared that he was aware that if he had made any false and misleading statements he may be guilty of an offence pursuant to section 8K of the TAA 1953.[28] Exhibit 1, T Documents, T4, page 58-64, Submission to Board Conduct Committee Attachment 9