Norman and Tax Practitioners Board
[2020] AATA 640
•20 March 2020
Norman and Tax Practitioners Board [2020] AATA 640 (20 March 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2019/7732 & 2019/7733
Re:Alan Norman and A G Norman & Associates Pty Ltd
APPLICANTS
Tax Practitioners BoardAnd
RESPONDENT
DECISION
Tribunal:Deputy President Dr P McDermott RFD
Date:20 March 2020
Place:Brisbane
The following order, made pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth), is desirable and appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
1.Subject to any further order of this Tribunal, the operation of the decisions of the Tax Practitioners Board dated 30 October 2019 terminating the applicants’ registration as tax agents is stayed until the decision of the Tribunal on the applications for review comes into operation.
2.The stay order is subject to the following conditions:-
(a)The applicants are:-
(i)not to accept any new taxation service clients whilst the stay is in effect, and
(ii)to lodge all required individual, company and trust income tax returns and business activity statements by their due date, or any extended date agreed to in writing by the ATO.
(b)The applicants must inform each of its practice clients of this stay decision.
(c)Upon request by the Tax Practitioners Board the applicants are to promptly provide to the Tax Practitioners Board evidence of the notification to the practice clients and provide a schedule with the name of each person or entity, the date they were notified and the manner in which they were notified.
(d)If any client requests further information about the stay, the applicants are not (without the prior written consent of an officer of the Tax Practitioners Board) to provide any explanatory information, other than the Tribunal reasons for decision relating to the making of these orders.
(e)The applicants are to provide to the Board a report with the names of any clients who have requested further information and a statement identifying the content of any information provided in response to their request, such report shall be provided within seven (7) days of providing further information.
3.Each party has liberty to apply.
............................[SGD]............................................
Deputy President Dr P McDermott RFD
Catchwords
PRACTICE AND PROCEDURE – application for stay of decision – termination of registration as tax agent – breach of code of professional conduct – interests of persons affected by the review – applicant’s personal circumstances – public interest – stay granted, subject to conditions
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Tax Agent Services Act 2009 (Cth)
Cases
Dekanic v Tax Agents’ Board of New South Wales (1982) 62 FLR 154
Drake and Minister for Immigration and Ethnic Affairs (1979) 2 ALD 634
Drake v Minister for Immigration and Ethnic Affairs (No 2)(1979) 2 ALD 60
Gould and Tax Practitioners Board [2019] AATA 1056.
Hopfner and Tax Practitioners Board [2019] AATA 851
Ristevski and Tax Practitioners Board [2019] AATA 5196
Re Scott and Australian Securities and Investments Commission [2009] AATA 798
Taxation Guru Pty Ltd and Watts v Tax Practitioners Board [2019] AATA 3249
Secondary Materials
Explanatory Paper TPB (EP) 02/0210: "Fit and proper person"
Justice Duncan Kerr , ‘Challenges Facing Administrative Tribunals – The Complexity of Legislative Schemes and Shrinking Space for Preferable Decision-Making’ (Speech delivered at the Council of Australasian Tribunals, 18 November 2013).
REASONS FOR DECISION
Deputy President Dr P McDermott RFD
20 March 2020
INTRODUCTION
I am considering an application by two applicants to stay two decisions of the Tax Practitioners Board (“the Board” or “the Respondent”). Mr Alan Norman (Mr Norman), a registered tax agent, is one applicant. The other applicant is A G Norman & Associates Pty Ltd (“the Company”) which is a corporate tax agent. Mr Norman is the sole director and supervising agent of the Company which is the trustee of the AG Norman Family Trust (“the Trust”). The Board opposes the stay applications.
DECISIONS UNDER REVIEW
One decision is to terminate Mr Norman’s tax agent registration pursuant to paragraph
40-5(1)(b) of the Tax Agent Services Act 2009 (“the Act”) because he ceased to meet the fit and proper person requirement set out in paragraph 20-5(1)(a) of the Act and impose a non-registration period of four years pursuant to subsection 40-25(1) of the Act.
The second decision is to terminate the Company’s tax agent registration pursuant to paragraph 40-15(b) of the Act because it failed to meet the requirement in paragraph
20-5(3)(a) of the Act that each director be a fit and proper person, and impose a non-registration period of four years pursuant to subsection 40-25(1) of the Act.FINDINGS
The Board has found that the Company had committed breaches of the Code of Professional Conduct (“the Code”) contained in section 30-10 of the Act independently of Mr Norman. However, the submissions have mainly focused upon the activities of Mr Norman. The Board has found that Mr Norman had committed a number of breaches which contravene subsection 30-10(1) of the Code:
(a)Mr Norman had failed to act honestly and with integrity in a number of instances;
(b)Mr Norman had failed to disclose overdue personal tax obligations and had stated that he had none;
(c)Mr Norman provided false or misleading information to an officer by telling the officer that the Trust’s overdue tax would be paid by a certain date, when it was not.
The Board has also made findings that Mr Norman has failed to comply with Australian taxation laws in the conduct of his personal affairs. It was found that he caused the Company, on behalf of the Trust, to make a false and misleading statement in an income tax return leading to the imposition of a 50% penalty for recklessness. There are findings that Mr Norman has failed to cause the Company, on behalf of the Trust, to lodge business activity statements for the Trust on the due dates for five quarters and has failed to cause the Company, on behalf of the Trust, to pay GST and PAYGW on the due dates. Further, it has been found that Mr Norman has caused the Company, on behalf of the Trust, to default on a payment arrangement made with the Australian Taxation Office (“the ATO”) on 10 January 2017, to pay activity statement debts of the Trust and that he failed to cause the Company, on behalf of the Trust, to pay the Trust’s activity statement debts when demanded to do so by the ATO, including the amounts of $8,079.10 and $11,978. These are contraventions of subsection 30-10(2) of the Code.
The Board had made a finding that Mr Norman has failed to maintain professional indemnity insurance (“PII”) from 23 March 2019. Mr Norman had been covered by the Company’s PII policy, which had lapsed in March 2019. This is a breach of subsection 30-10(13) of the Code. The Board has now abandoned that finding of failure to maintain PII.
As well as breaches of the Code, the Board has made a number of other serious findings concerning Mr Norman’s conduct. It has been found that he had made inappropriate interpretations of the taxation laws on behalf of clients, which exposed them to audit, amended returns, interest and penalties. It was found that he had communicated with clients in a way that did not support the integrity of the taxation system. Mr Norman has made admissions that he had amended clients’ taxation returns without their prior knowledge. It was found that he had made inappropriate interpretations of the taxation laws for his personal taxation affairs, in his capacity as sole director of the corporate trustee for the Trust, which was subject to audit and subsequent amended return and penalty. It was also found that he has failed to cause the Company to comply with a Notice to Produce Information and Documents issued pursuant to section 60-100 of the Act. The Tribunal notes that the Company provided a response to the notice four days late.
The Board has found that Mr Norman has submitted returns on behalf of clients in which deductions were wrongly claimed because there was no supporting substantiation or claims were made for items of a private or domestic nature.
The Board has found that Mr Norman has failed to advise clients about their rights and obligations resulting from audits of their income tax returns by failing to inform the clients of their right to seek review of the ATO’s decision.
The ATO had conducted an audit program of 30 income tax returns of the Company’s clients (representing 17 individual taxpayers) which resulted in substantial adjustments to each of the 30 returns audited. The ATO also imposed penalties on some of clients.
The ATO has identified some serious cases of excessive work-related expense claims. In 2017 there was a reduction in work-related expense claims of $1,205,274. After further intervention a further 82 amendments were made to returns, resulting in a further reduction in work-related expenses of $337,135.
After the decisions of the Board were made, the Board has now raised another allegation concerning Mr Norman’s fitness or propriety to remain registered. It is said that he may have failed to cause Investment Property Management Services Pty Ltd, a company of which he is the sole director, to lodge nine income tax returns for the period 2011 to 2019 inclusive by their respective legislative due dates. This would be a breach of subsection 30-10(2) of the Code. The Board contends that this indicates an ongoing failure to appreciate the significance of not complying with Australia’s taxation laws for a substantial period of time. Mr Norman has deposed that the company has never traded, and its ABN has been cancelled and a notice was lodged on the ATO portal. The Tribunal notes that Mr Norman has subsequently made an undertaking to lodge necessary returns.
The Board has quite properly pointed out that it is difficult to know what the case of the applicants will be on review. However, counsel for the applicants has assured the Tribunal that the applicants intend to contest the findings of the Board.
Explanatory Paper TPB (EP) 02/2010
The Board refers to its Explanatory Paper TPB (EP) 02/2010 (“the Explanatory Paper”) which provides guidance to tax practitioners regarding the respondent’s interpretation of the fitness and proprietary requirements of the Act. The Respondent has relied on Taxation Guru Pty Ltd and Watts v Tax Practitioners Board [2019] AATA 3249 at [21] and Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 (‘Re Drake No 2’) at 645 in its submission that that the Tribunal is not bound to apply the Explanatory Paper: “but it may, and it should, apply it in exercising its discretion unless it is unlawful or tends to produce an unjust decision”.
I do not accept that the Tribunal has any obligation to apply the Explanatory Paper. It is important to mention that the Explanatory Paper does not have any statutory foundation. Justice Kerr, when he was the President of this Tribunal, pointed out that the particular policy that was considered in Re Drake No 2 was made in the exercise of explicit statutory power and subject to parliamentary scrutiny.[1] The statutory jurisdiction that is vested in the Board (and this Tribunal) to reach the correct and preferable decision cannot be circumscribed by any policy document that is unsupported by statute. Even where a policy document was supported by statute, the policy document does not have to be automatically applied. In Drake v Minister for Immigration and Ethnic Affairs(1979) 2 ALD 60 at 70, Bowen CJ and Deane J remarked:
....the Tribunal is not, in the absence of specific statutory provision, entitled to abdicate its function of determining whether the decision made was, on the material before the Tribunal, the correct or preferable one in favour of a function of merely determining whether the decision made conformed with whatever the relevant general government policy might be.
[1] See, Justice Duncan Kerr, ‘Challenges Facing Administrative Tribunals – The Complexity of Legislative Schemes and Shrinking Space for Preferable Decision-Making’ (Speech delivered at the Council of Australasian Tribunals, 18 November 2013). See also Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 644-645.
Continuing Status of Dekanic
In the stay hearing the applicants relied upon the authority of Dekanic v Tax Agents’ Board of New South Wales (1982) 62 FLR 154 (‘Dekanic’) at 157, where Davies J observed that it is the ordinary practice of the Tribunal in the review of a cancellation of a tax agent’s registration to grant a stay until the hearing and the determination of the review.
The Board submitted that Dekanic is no longer the current state of the law in terms of how the Tribunal approaches the assessment of stay applications and that the correct statement of the law is set out in the decision of Downes J in ReScott and Australian Securities and Investments Commission [2009] AATA 798 (‘Re Scott’). Certainly the Tribunal in considering applications for a stay in tax practitioner applications has had regard to a number of factors including the factors outlined by Downes J in ReScott.[2] However, Downes J in Re Scott certainly did not regard the decision in Dekanic as no longer being relevant and this Tribunal has in recent decisions applied the considerations which are outlined in Dekanic.[3] This Tribunal does not lightly depart from the precedents which have been laid down by earlier Presidents of this Tribunal.[4]
[2] See, eg, Ristevski and Tax Practitioners Board [2019] AATA 5196 at [8].
[3] Hopfner and Tax Practitioners Board [2019] AATA 851; Gould and Tax Practitioners Board [2019] AATA 1056.
[4] See,e.g, Faulkner and Repatriation Commission (1990) 19 ALD 194; Price and Official Trustee in Bankruptcy[1998] AATA 67; Ryan and Australian Securities and Commission and Ors [1997] AATA 835; Re Samir Pty Ltdand Aged Care Standards and Accreditation Agency Ltd(2013) 135 ALD 567; Scott and Secretary, Department of Social Services (1996) 42 ALD 738; Tierney and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 257.
One of the considerations in Dekanic that was outlined by Davies J is that it is undesirable that there be a dislocation of the practice unless that dislocation will be permanent. The Company has some 1317 clients who will need to find another tax agent unless a stay is granted. It would seem to me appropriate to grant a stay to prevent any premature dislocation of the practice of the Company. The stay will enable the clients to remain with the practice if they desire. However, it is important that clients be informed about the stay. I have also had regard to the statement by counsel for the applicants that the Company may be put up for sale.
I have also had regard to the serious findings by the Board and consider that the applicants should not provide any new tax agent services during the operation of the stay. I have taken this course of action because although there is a denial by the applicants of misconduct, they have not directly explained any shortcomings in any finding of the Board.
I consider that a stay is appropriate on hardship grounds. I am also mindful that the Company comprises four people: Mr Norman and his de facto partner who is the receptionist, a senior accountant and a personal assistant. If there is no stay then the Company would effectively cease to exist and any hearing of these applications would be nugatory. I have further had regard to the interests of the existing clients; however, those clients should be appropriately informed about the stay so that they can decide whether to continue to use the services of the applicants.
The Tribunal finds it necessary to record that it would not on public interest grounds have granted a continuance of the stay if the applicants had failed to maintain professional indemnity insurance.
I wish to acknowledge the assistance of both counsel who appeared before me.
Conditions of stay
Even though I have considered it appropriate to continue the operation of the stay I consider that it is appropriate to impose conditions under s 41(6)(a) of the Administrative Appeals Tribunal Act 1975 (Cth). I accept the submissions of the respondent that if the Tribunal has decided to continue the stay that the applicants should be required to adhere to three conditions which were not opposed by the applicants.
These three conditions are that the applicants must :
(a)notify all of the existing clients about the existence of the stay of this Tribunal;
(b)not provide any new client with any tax agent services during the operation of the stay; and
(c)ensure compliance with all taxation obligations of the applicants.
It is important that the applicants adhere to these conditions during the operation of the stay.
I certify that the preceding 24 (twenty-four) paragraphs are a true copy of the reasons for the decision herein of Deputy President Dr P McDermott RFD
..........................[SGD]..............................................
Associate
Dated: 20 March 2020
Date of hearing: 31 January 2020 Counsel for the Applicants: Mr Hamish Clift Solicitors for the Applicants: Karsas Lawyers Counsel for the Respondent: Mr Tom Ritchie Solicitors for the Respondent: Tax Practitioners Board
5
6
0