Peterson and Tax Practitioners Board
[2018] AATA 93
•31 January 2018
Peterson and Tax Practitioners Board [2018] AATA 93 (31 January 2018)
Division:Taxation and Commercial Division
File Number(s): 2015/6018
Re:Mark Peterson
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Deputy President S A Forgie
Date:31 January 2018
Place:Melbourne
The Tribunal decides:
with effect from 1 March 2018, to affirm the decision of the Tax Practitioners Board dated 14 October 2015 to terminate the applicant’s registration as a tax agent.
............[sgd].........................................................
Deputy President S A Forgie
Catchwords
TAX AGENT – registration – whether breaches of code of professional conduct – decision affirmed
Legislation
Administrative Appeals Tribunal Act 1975 ss 2A, 33, 35, 37, 39
Income Tax Assessment Act 1997 s 995-1
Tax Agent Services Act 2009 ss 2-5, 20-5, 20-45, 30-1, 30-5, 30-10, 30-15, 30-25, 30-30, 60-95, 60-125, 90-1, 90-5
Cases
Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; 21 ALD 1; 94 ALR 11
Hughes and Vale Pty Ltd v State of NSW (No 2) [1955] HCA 28; (1995) 93 CLR 127
Legal Profession Complaints Committee v in de Braekt [2013] WASC 124
Re Lobo and Department of Immigration and Citizenship [2010] AATA 583; (2010) 116 ALD 639; 52 AAR 304
Re Guild, & Re Legal Practitioners Ordinance (1978) 32 ACTR 13
Re SHTX and Tax Practitioners Board [2016] AATA 451
Shi v Migration Agents’ Registration Authority [2008] HCA 31; (2008) 235 CLR 286; 248 ALR 390; 48 AAR 345; 103 ALD 467; 82 ALJR 1147
Stasos v Tax Agents’ Board of New South Wales [1990] FCA 379; (1990) 21 ATR 974; (1990) 21 ALD 437
Su v Tax Agents’ Board South Australia (1982) 61 FLR 1; 13 ATR 192
Surinakova v Minister for Immigration and Ethnic Affairs [1991] FCA 596; (1991) 33 FCR 87; 26 ALD 203
Secondary Materials
Explanatory Memorandum to the Tax Agent Services Bill 2006
REASONS FOR DECISION
Deputy President S A Forgie
Under the Tax Agent Services Act 2009 (TAS Act), Mr Peterson was registered as a tax agent on 1 March 2010 for a period expiring on 1 September 2016. On 21 October 2015, the Tax Practitioners Board (Board) notified Mr Peterson that it had decided on 14 October 2015 to terminate his registration as a tax agent under s 30-30 of that legislation. It did so on the basis that he had breached ss 30-10(2), (7), (13) and (14) of the TAS Act.[1] The termination would take effect from 25 November 2015. With the consent of the parties, I stayed the operation of the Board’s decision under s 41 of the Administrative Appeals Tribunal Act 1975 (AAT Act) until the application was determined or until further order provided that Mr Peterson did not provide tax agent services to any new clients while the stay order was in operation. That order was made on 17 December 2015. I made various orders regarding the lodgement of the parties’ material and the matter was heard on 7 December 2016. At Mr Peterson’s request, I adjourned the conclusion of the hearing while he, through his counsel, Mr Fickling, attempted to negotiate a resolution of the matter with the Board. That was unsuccessful and both parties made further submissions and lodged material in May 2017 regarding additional material lodged by the Board in February 2017. I have decided to affirm the decision of the Board dated 14 October 2015 but with effect from 1 March 2018 to give Mr Peterson the opportunity to make arrangements for his clients in an orderly manner.
[1] Section 30-10 is the Code of Professional Conduct
LEGISLATIVE FRAMEWORK
The object of the TAS Act is to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct. The TAS Act sets out three avenues by which it seeks to achieve its object. One is to establish a national Board, the Tax Practitioners Board (Board), to register tax agents, BAS agents and tax (financial) advisers. Another is by introducing a Code of Professional Conduct (Code) for all three groups of agents. I will refer only to tax agents in these reasons. The third path takes the form of sanctions to discipline them.[2]
[2] TAS Act; s 2-5
Eligibility for registration
Subdivision 20-A of the TAS Act sets out eligibility for registration. In so far as an individual aged 18 years or more is concerned, he or she will be eligible for registration as, among others, 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, BAS agent or tax (financial) adviser; and
(c)the individual maintains, or will be able to maintain, professional indemnity insurance that meets the Board’s requirements; and
(d)in the case of renewal of registration – the individual has completed continuing professional education that meets the Board’s requirements.
Note 1…
Note 2…”[3]
[3] TAS Act; s 20-5
The Code of Professional Conduct
The Code regulates a person’s personal and professional conduct as a registered tax agent.[4] The Code is set out in s 30-10:
[4] TAS Act; ss 30-1 and 30-5
“Honesty and integrity
(1)You must act honestly and with integrity.
(2)You must comply with the *taxation laws in the conduct of your personal affairs.
(3)If:
(a)you receive money or other property from or on behalf of a client; and
(b)you hold the money or other property on trust;
you must account to your client for the money or other property.
Independence
(4)You must act lawfully in the best interests of your client.
(5)You must have in place adequate arrangements for the management of conflicts of interest that may arise in relation to the activities that you undertake in the capacity of a *registered tax agent, BAS agent or tax (financial) agent.
Confidentiality
(6)Unless you have a legal duty to do so, you must not disclose any information relating to a client’s affairs to a third party without your client’s permission.
Competence
(7)You must ensure that a *tax agent service that you provide, or that is provided on your behalf, is provided competently.
(8)You must maintain knowledge and skills relevant to the *tax agent services that you provide.
(9)You must take reasonable care in ascertaining a client’s state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or a thing you are doing on behalf of the client.
(10)You must take reasonable care to ensure that *taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client.
Other responsibilities
(11)You must not knowingly obstruct the proper administration of the *taxation laws.
(12)You must advise your client of the client’s rights and obligations under the *taxation laws that are materially related to the *tax agent services you provide.
(13)You must maintain professional indemnity insurance that meets the Board’s requirements.
(14)You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.”
Investigations by the Tax Practitioners Board
Part 6 of the TAS Act establishes the Board and confers its powers. Subdivision 60-E is concerned with its investigative powers. Under s 60-95, the Board may investigate a person’s application to be a registered tax agent, any conduct that may breach the TAS Act or any other matters prescribed by the regulations.[5] The Board must notify the person it is investigating within two weeks of deciding to do so.[6] The Board’s procedure is a matter within its own discretion and it is not bound by the rules of evidence.[7] If, having investigated a person’s conduct under s 60-95, the Board finds that a person’s conduct breaches the TAS Act, it must either make a decision that no further action will be taken or take one or more of the following steps set out in s 60-125(2)(b):
“(i) impose one or more sanctions under Subdivision 30-B;
(ii)terminate an entity’s registration under Subdivision 40-A;
(iii)apply to the *Federal Court for an order for payment of a pecuniary penalty under Subdivision 50-C;
(iv)apply to the Federal Court for an injunction under section 70-5.
Note:The Board may terminate an entity’s registration under Subdivision 40-A without investigating conduct under section 60-95.”
[5] TAS Act; s 60-95(1)
[6] TAS Act; s 60-95(2)
[7] TAS Act; s 60-95(4)
Sanctions if Board finds, after investigation, failure to comply with the Code
Part 3 is concerned with the Code, which regulates a registered tax agent’s, BAS agent’s or tax (financial) adviser’s personal and professional conduct.[8] Of particular relevance in this case are the following provisions of the Code:
[8] TAS Act; ss 30-1 and 30-5
Section 30-10(2):
“You must comply with the *taxation laws in the conduct of your personal affairs.”
The expression “taxation law” means:
“(a) an Act of which the Commissioner has the general administration (including a part of an Act to the extent to which the Commissioner has the general administration of the Act); or
(b)legislative instruments made under such an Act (including such part of an Act); or
(c)the Tax Agent Services Act 2009 or regulations made under that Act.”[9]
[9] TAS Act; s 90-1(2) and Income Tax Assessment Act 1997; s 995-1(1)
Section 30-10(7):
“You must ensure that a *tax agent service that you provide, or that is provided on your behalf, is provided competently.”
The expression “tax agent service” means:
“(1) … 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.
Note:For specification by class, see subsection 13(3) of the Legislation Act 2003.”[10]
Section 30-10(13)
“You must maintain professional indemnity insurance that meets the Board’s requirements.”
[10] TAS Act; ss 90-1(1) and 90-5
Section 30-10(14)
“You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.”
Subdivision 30-B of Part 3 sets out the sanctions that may be imposed when the Board finds, after an investigation under Subdivision 60-E that a registered tax agent has breached the Code. Section 30-15(2) provides:
“The Board may do one or more of the following:
(a)give you a written caution;
(b)give you an order under section 30-20;
(c)suspend your registration under section 30-25;
(d)terminate your registration under section 30-30.”
Further provision is made in the TAS Act for each of the sanctions set out in ss 30-15(2)(b), (c) and (d). Section 30-20 is concerned with orders and provides:
“(1) The Board may make an order that requires you to take one or more actions including, but not limited to, the following:
(a)completing a course of education or training specified in the order;
(b)providing *tax agent services for which you are registered only under the supervision of a *registered tax agent, BAS agent or tax (financial) adviser specified in the order;
(c)providing only those tax agent services that are specified in the order.
(2)The Board must notify you in writing of the order. The order may specify the following, as appropriate:
(a)the period of time within which you must complete the requirements specified in the order;
(b)the period of time during which the order applies.”
Suspension is the subject of s 30-25:
“(1) The Board may, by notice in writing, suspend your registration for a period determined by the Board.
Note:The Board must cause notice of its decision to be published in the Gazette: see section 60-140.
(2)You must not provide *tax agent services during the period of the suspension.
Note:If you provide tax agent services while suspended, you may contravene a civil penalty provision: see subsection (4) and Subdivision 50-A.
(3)If, when the Board suspends your registration under subsection (1), your registration is already suspended, suspension is for a further period that the Board determines is appropriate. The further period commences at the end of the period of suspension.
(4)While you are suspended, you are taken not to be a *registered tax agent, BAS agent or tax (financial) adviser, except for the purposes of:
(a)Part 2 (Registration), Subdivision 30-C (Notifying a change of circumstances) and Part 4 (Termination of registration); and
(b)this Division.”
Section 30-30 simply states that the Board may terminate a registered tax agent’s registration. Subdivision 40-B makes provision for notice of a termination to be given and for the effect of a termination.
BACKGROUND
In this section of my reasons, I have set out the findings of fact that I have made having regard to the evidence and to admissions made by Mr Peterson in his Statement of Issues, Facts and Contentions as well as to his statement in support of his application for a stay and evidence at the hearing.
Background
Mr Peterson’s parents migrated to Australia in 1972 and he was born in 1977. He commenced a Bachelor of Commerce (Accounting and Finance) in 1995. After completing it in 1999, he commenced practice as a graduate accountant with a suburban practice in 2000. His parents went to live in Thailand in 2003 leaving Mr Peterson in Australia. Until 2007, he continued to work in small to small/medium accounting firms in Melbourne but, in that year, he purchased a business that was then trading under a different name.
Mr Peterson has been diagnosed with a medical condition. On 17 December 2015, I made an order under s 35 of the Administrative Appeals Tribunal Act 1975 (AAT Act) restricting disclosure and/or publication of evidence lodged by Mr Peterson regarding his medical condition to the parties and members and staff of the Tribunal. For that reason, I will not name the condition or other complaints from which he suffers. As a consequence of them, Mr Peterson must take regular medication.[11]
[11] Letter from Casey Medical Centre dated 13 October 2016: Exhibit C
Earlier complaints
In a letter dated 13 November 2012 and addressed to Mr Peterson, the Board referred to a complaint made by one person on 11 August 2012 and a complaint made by another on 10 October 2012. The Board advised Mr Peterson that it had considered all of the material that he had provided together with that provided by the complainants and others and that it had decided to finalise its enquiries. In deciding to finalise its enquiries, the Board told Mr Peterson that it had found that:
“· On or about 21 October 2012 you forwarded a replacement cheque to … . This cheque has now been cleared by the bank.
·You advised that, upon receipt of an ethical letter you will forward all required source documents to … tax agent.”[12]
[12] Supplementary documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (ST documents) at ST7; 143-144
The Board received a further complaint dated 27 May 2013. It had discussions with Mr Peterson and decided to finalise its enquiries in relation to the complaint. The Board notified Mr Peterson of its decision in a letter dated 21 November 2013.[13]
[13] ST documents at ST8; 145-146
In each of the letters dated 13 November 2012 and 21 November 2013, the Board reminded Mr Peterson of the following:
“The Code of Professional Conduct
As a tax agent, you play an important role in the administration of the taxation system in Australia. You are also subject to the Code of Professional Conduct (Code). The Code regulates your personal and professional conduct as a registered tax agent or BAS agent in certain areas, including:
§ honesty and integrity;
§ independence;
§ confidentiality;
§ competence; and
§ in certain other respects, including in relation to taxation laws.
You are also expected to comply with your personal obligations under the taxation laws. If the Board investigates you and determines that you have failed to comply with the Code, the Board may give you a written caution, order you to take specified actions, or suspend or terminate your registration.
Further information about the Code can also be obtained at ST documents; ST8 at 145-146 and see also ST7 at 143-144
Professional Indemnity Insurance
Mr Peterson had a Policy for Civil Liability Professional Indemnity Insurance (PII) in the sum of $1,000,000 for the period from 27 October 2015 to 27 October 2016.[15] He did not, however, have any PII for the period from 29 October 2014 to 26 October 2015.
[15] ST documents; ST11 at 155-156
In this matter, the Board made its decision to investigate Mr Peterson’s conduct that might have breached the Code on 1 September 2015. It notified Mr Peterson of its decision to do so by way of a letter dated 15 September 2015.[16] Attached to the letter was a submission prepared by a delegate of the Board and setting out allegations that Mr Peterson had breached the Code. The Board asked him whether he admitted the allegations or contested them.
[16] ST documents; ST12-156
Compliance with taxation laws
Mr Peterson agreed that he had failed to lodge his own income tax returns for the years ending 30 June 2011, 2012, 2013, 2014 or 2015 by their respective due dates. He lodged all of them in November 2015 with his 2015 return being only 16 days overdue but his return for 2011 being 1474 days overdue. The details are set out in the following table:[17]
[17] ST documents; ST9 at 150
Period Ended
Due Date
Lodgement Date
Days Outstanding
30 June 2011
31 October 2011
13 November 2015
1474
30 June 2012
31 October 2012
16 November 2015
1111
30 June 2013
31 October 2013
16 November 2015
746
30 June 2014
31 October 2014
16 November 2015
381
30 June 2015
31 October 2015
16 November 2015
16
Mr Peterson accepted that he failed to lodge his Business Activity Statements (BAS) for the period from 1 July 2012 to 30 September 2015. As appears from the following table, the periods for which the BAS were overdue varied from 16 days to 1110 days from the day on which they were originally due. In some instances, the ATO extended the lodgement date but, in all but one instance, Mr Peterson did not lodge by the extended lodgement date.[18]
[18] ST documents; ST9 at 151-152
Period Ended
Due Date
(Extended Due Date)Lodgement Date
Days Outstanding
30 September 2012
29 October 2012
(26 November 2012)13 November 2015
1110
31 December 2012
28 February 2013
13 November 2015
988
31 March 2013
29 April 2013
(27 May 2013)13 November 2015
928
30 June 2013
29 July 2013
(26 August 2013)13 November 2015
837
30 September 2013
28 October 2013
(25 November 2013)13 November 2015
746
31 December 2013
28 February 2014
13 November 2015
623
31 March 2014
28 April 2014
(26 May 2014)13 November 2015
564
30 June 2014
28 July 2014
(25 August 2014)13 November 2015
473
30 September 2014
28 October 2014
(25 November 2014)13 November 2015
381
31 December 2014
3 March 2015
13 November 2015
255
31 March 2015
28 April 2015
(26 May 2015)13 November 2015
199
30 June 2015
28 July 2015
(25 August 2015)13 November 2015
108
30 September 2015
28 October 2015
(25 November 2015)13 November 2015
16
A Family Trust
Mr Peterson was the registered tax agent for the Trustee for a Family Trust that I will call the “A Family Trust”. During the period from 1 April 2013 to 31 January 2014, he failed to lodge seven BAS for the Trust by the date they fell due for lodgement. He also failed to forward to the Trustee of the A Family Trust, whom I will call Mr B, two letters from the Australian Taxation Office (ATO) reminding the trustee of his failure to lodge the BAS and of the possible consequences of that failure.[19] Mr B did, however, become aware of Mr Peterson’s failure to lodge the BAS on 2 October 2014 and wrote to Mr Peterson on 7 November 2014.[20] Mr Peterson did not respond to Mr B. The relevant periods and dates are:
[19] T documents; T3 at 54-57
[20] T documents; T3 at 22
Periods for which BAS for A Family Trust not lodged
Letters from ATO regarding late lodgement of BAS for A Family Trust
01 April 2013 to 30 April 2013
01 May 2013 to 31 May 2013
01 July 2013 to 31 July 2013
01 August 2013 to 31 August 2013
01 October 2013 to 31 October 2013
01 November 2013 to 30 November 2013
01 December 2013 to 31 December 2013
16 January 2014
(Letter from ATO regarding 01 April 2013 to 31 October 2013)01 January 2014 to 31 January 2014
8 April 2014
(Letter from ATO regarding 01 October 2013 to 31 January 2014)2 October 2014
(Trustee of A Family Trust becomes aware of Mr Peterson’s failure to lodge BAS on behalf of the trust)7 November 2014
(Letter from Trustee of A Family Trust to Mr Peterson)8 September 2015
(Trustee of A Family Trust advised Board that he had not been contacted by Mr Peterson)[21][21] T documents; T3 at 59
Failure to obtain Professional Indemnity Insurance and to communicate with Board
Mr Peterson held Professional Indemnity Insurance (PII) up until 28 October 2014. His entry on the Board’s website recorded that fact.[22] On 24 February 2015, the Board wrote to Mr Peterson about various matters including the Trustee’s complaint. It also asked him either to up-date his on-line PII cover details or include a copy of his current PII Certificate of Currency when he responded to the other matters. The Board required him to respond by 10 March 2015.[23] In addition to posting the letter on 24 February 2015, the Board sent a copy of it to Mr Peterson by email on the same day.[24]
[22] ST documents; ST11 at 154
[23] T documents; T3 at 61-62
[24] T documents; T3 at 63
The Board wrote to Mr Peterson again on 30 March 2015 referring to its previous correspondence and asking for a response to the Trustee’s complaint and details of his PII cover. The letter was headed “Final reminder to provide information”. It asked for a response by 6 April 2015.[25] Again, the Board sent the letter to Mr Peterson by email as well as by post.[26] Its email was sent at 9:59am. Mr Peterson replied at 10:12am asking whether he could have more time.[27] The Board responded granting him until 13 April 2015 but also advising that there would be no further extensions allowed. In the Board’s view, Mr Peterson had been given ample opportunity to address the issues since he had last spoken with an officer of the Board on 18 February 2015.[28]
[25] T documents; T3 at 64
[26] T documents; T3 at 65
[27] T documents; T3 at 67
[28] T documents; T3 at 67
Mr Peterson did not respond to either the Trustee’s complaint or to the Board’s request regarding his PII cover. An officer of the Board telephoned Mr Peterson on three occasions dated 27 April 2015, 7 May 2015 and 12 August 2015. On each occasion, the call went to voicemail and the officer asked Mr Peterson to contact the Board.[29] Mr Peterson did not contact the Board.
[29] T documents; T3 at 69-71
On 15 September 2015, the Board wrote to Mr Peterson advising him of its decision to investigate his conduct under s 60-95 of the TAS Act as to whether it was in breach of the TAS Act. The Board also advised Mr Peterson that his conduct related to his alleged failure to comply with the following provisions of the Code:
Section 30-10(2): “You must comply with taxation laws in the conduct of your personal affairs.”
Section 30-10(7): “You must ensure that a tax agent service you provide or that is provided on your behalf, is provided competently.”
Section 30-10(13): “You must maintain the professional indemnity insurance that the Board requires you to maintain.”
Section 30-10(14): “You must respond to requests and directions from the Board in a timely, responsible and reasonable manner.”[30]
[30] ST documents; ST12 at 156-158
The Board then advised Mr Peterson:
“You are hereby notified that based on material presently available to the Board, a Delegate of the Board has made allegations in the attached Submission that you have breached the Code of Professional Conduct (Code), set out in section 30-10 of the TASA.
You are hereby requested by the Board, pursuant to section 30-10(14) of the Code in the TASA, which requires that you must respond to requests from the Board in a timely, responsible and reasonable manner, to notify … [Board officer] by 29 September 2015 whether you admit the allegations or whether you contest them.
You can do this by providing a written submission to the Board as to why you consider that the allegation is not correct – if that is your view – or you can otherwise explain your conduct in the attached Submission.
Please provide your written response to … [Board officer] by 29 September 2015.”[31]
[31] ST documents; ST12 at 157
Mr Peterson did not respond to the Board’s letter by 29 September 2015. On 1 October 2015, the officer called Mr Peterson and was transferred to voice mail. The officer left a message asking him to contact the Board regarding its investigation.[32] Mr Peterson did not respond.
[32] T documents; T3 at 72
Mr Peterson obtained PII coverage from 27 October 2015 to 27 October 2016.[33]
[33] ST documents; ST11 at 154-155
EVIDENCE
Purchase of business
Mr Peterson said that his early years in his business were not easy. At the time that he purchased the business, Mr Peterson estimated, it had approximately 600 clients requiring taxation returns to be prepared. That dropped by about one third in the first year. The three month handover he thought he had agreed with its previous owner did not happen as intended. He had thought that he would see the clients with the previous owner and that he would sit in when they consulted the previous owner. Instead, the previous owner attended the office only sporadically for the three month handover period and then Mr Peterson never saw her again. Mr Peterson felt that he was left to “fly by the seat of his pants”. There was no Operations Manual or pricing structure. He would look at what had been charged in the previous year and use that.
Until midway through 2009, Mr Peterson operated the business under the name it had when he bought it. He then changed it and also took over the lease from which the business operated rather than subleasing the space from another. That meant that he had to acquire a photocopier and telephone as well as undertake all of the administration himself.
Mr Peterson suffered tax losses that arose from a combination of having to pay the office rental, engaging in advertising that did not yield clientele and a failed business venture in the late 2000s. The failed business venture left him with a debt of $130,000 and payments of $1,200 each month.
Managing the business became a little easier, Mr Peterson said, when his parents returned from overseas in December 2009 to live in Australia. He could focus on the business but then his father died suddenly in April 2010. Again, he said, he had to run the business without the support and advice of his parents. In addition, he had to care for his mother, who had been widowed after 40 years of marriage, and take over the domestic duties of paying bills and such like that his father had previously attended to.
In order to save overheads, Mr Peterson now operates his business from the study in his mother’s house. His client base has built up to about 840 clients, of whom about 800 require taxation returns to be prepared. Some of his clients also require him to undertake other work such as establishing corporations and preparing Superannuation Guarantee Charge returns. He does virtually all the work himself. He has engaged in a savage cost reduction exercise. His payments and receipts are now made by electronic funds transfer (EFT) and he no longer has to worry about a missing deposit book. He has not continued his advertisement in the Yellow Pages as it was not proving particularly successful and he has ceased his sponsorship of a local sporting club.
Health issues
In his letter dated 13 October 2016, Mr Peterson’s General Practitioner set out the conditions from which Mr Peterson suffers and went on to write:
“These conditions require intensive treatments and monitoring on a daily basis and as such would have an effect on his work performance and ability to sort out his life/work obligations.”[34]
[34] Exhibit C
Mr Peterson stated in his letter to the Board dated 14 October 2016 that one condition, with which he was diagnosed in 2009, has:
“… placed a sizeable impediment on the amount of energy that I have on a daily basis. In the busiest time of the year:
·my days are very long, my days regularly finishing at 9.30 – 10pm each night;
·my diet and eating habits are all over the place; and
·the amount of sleep that I get is sporadic and irregular.”[35]
[35] Exhibit D
In his oral evidence, Mr Peterson referred to his being diagnosed in 2011. He said that the diagnosis was a shock and that he “pretty much muddled along for a couple of years” before realising that he needed to do something. In that time, he let his health go generally and, he said, he was not the “greatest person” to be around. He and his partner separated as a result. That was in 2012 and he went into a downward spiral. When his partner wanted to get back with him, things started going smoothly again for him from New Year’s Eve in 2012.
Family obligations
Mr Peterson’s father died unexpectedly in April 2010. Since that time, he has lived with his mother to help her to adapt. In his statement made on 15 December 2015, Mr Peterson said that “… in the last year things have become easier in this respect.”[36] In his letter to the Board dated 14 October 2016, Mr Peterson expanded on the support he has had to provide to his mother since his father died:
“· taking my mother to various appointments;
·taking her to my sister’s place (a return drive of over 200km so that she could look after her grandchildren);
·paying of bills; and
·filling up petrol.”[37]
[36] Exhibit A at 10(b)
[37] Exhibit D at 1
Mr Peterson’s partner confirmed that his father’s death has had a significant impact on him and his family. He had assumed the role of primary carer for his mother in place of his late father and the primary responder to the demands placed upon him by his mother. Each time he must take his mother to visit her daughter and her family, Mr Peterson is involved in a 90 minute commute each way. Her partner is a caring and supportive partner and family member as well as a very hard working small business owner but his career and business have suffered as a result of the impact of his father’s death upon him and the family. In an Indian family, or an Anglo-Indian family, the family relationships are close and it is considered rude to refuse a request for help. Even so, he has learnt to say “no” more often and his mother does not need to visit his sister as often now that her family is growing up and does not need her help.
Business Activity Statements
On 3 March 2016, the ATO wrote to Mr Peterson advising him that he had an overdue tax debt in the sum of $11,162.76 in respect of BAS. It asked him to pay the debt or to contact it within 14 days. On 23 March 2016, the ATO sent Mr Peterson a further letter dated 23 March 2016 advising him that it would refer the tax debt in that amount to a collection agency if it did not hear from him or he did not pay the debt by 6 April 2016.[38]
[38] ST documents; ST14 at 161-163
By 6 December 2016, Mr Peterson had lodged his BAS late on four further occasions and owed a debt of $13,037.27:[39]
[39] Exhibit 2
Period Ended
Due Date
(Extended Due Date)Lodgement Date
31 March 2016
28 April 2016
(30 May 2016)22 September 2016
30 June 2016
28 July 2016
(25 August 2016)22 September 2016
30 September 2016
28 October 2016
(25 November 2016)1 December 2016
In cross-examination, Mr Peterson agreed that he had been late in lodging his BAS but said that he looks after the affairs of his clients. He puts himself last after them. When Ms Haben-Beer asked him whether he prioritises his clients’ activities over others, he replied: “Don’t most self-employed people? Isn’t it the builders’ and plumbers’ houses who need fixing?” All self-employed people have that view that they are there for the clients. They sacrifice themselves for the benefits of their clients.
Professional Indemnity Insurance
Mr Peterson said that he failed to maintain his PII because of the nature of his work. It was an administrative oversight. When he changed brokers, he received a reminder about paying it. That was very much a wake-up call for him and he recognised that he has to keep it up to date.
Conduct of tax agent practice
In his letter to the Board dated 14 October 2016, Mr Peterson wrote that the diagnosis of his condition in 2009, the seasonal nature of his business and the death of his father in 2010 as well as the operational and administrative tasks of a sole accounting practitioner caused him not to meet his personal taxation obligations.[40]
[40] Exhibit D at 2
In his earlier statement dated 15 December 2015, Mr Peterson had explained that, when he purchased his business, the previous owner did not have practice management software or electronic accounting software. He appreciated that his delay and inaction reflected in the Board’s reasons for decision had been substantially due to the inappropriate structure of his business. In view of that, he had taken steps to ensure that there would be no further delay or inaction. He explained:
“(a) The reason my personal tax filings fell so far behind was because I was working off my bank accounts including the use of a deposit book to prepare my personal tax filings. I misplaced this deposit book and it took me many months to relocate it. The time taken to bring my tax filings up to date involved building my accounts from bank transactions (using QuickBooks online). I recognise that trying to operate the accounts of my own business from bank deposits has been wholly unacceptable and sets a bad example given my profession. I have in the past month taken steps to adopt QuickBooks Online and am using this in real time for invoice issuance and expense tracking going forward.
(b)I am continuing to evaluate other software which may make my business more efficient.
(c)I also now realise that trying to operate a business with me as the only person in that business is not an efficient or effective way to operate a business. In this respect I am putting in place arrangements for me to engage people to assist me with the tax return preparation process and communicating notices of assessments from the ATO to clients. I have obtained a certificate of workers compensation insurance and have registered for PAYG withholding. I have hired Mr Steven Richards, a part-time university student, on a part time basis to assist me with inputting the tax return data into my tax return preparation software. I have also seeking to engage an assistant who can help with answering phones and office duties. I am hopeful that I can work and develop staff going forward so as to provide them gainful employment and grow my business.”[41]
[41] Exhibit A at [11]
Mr Peterson also sought guidance from Mr Malcolm Wells, who has been a CPA for 28 years and run a business with staff for 25 years. Mr Wells agreed to be his mentor and to meet first in January 2016 and at least monthly thereafter to enable them to talk through all aspects of Mr Peterson’s business.[42]
[42] Exhibit A at [12] and Attachment MP-3
Also in January 2016, Mr Peterson attended a four hour training session conducted by Training Beyond Accounting. It was a four hour session under the headings: “Take control of your time” and “Deliver exceptional client service”.[43] He subscribed to Quickbooks Online and paid the first monthly subscription for the period 28 March 2016 to 28 April 2016.[44] Sage HandiSoft prepared a quotation for Mr Peterson.[45]
[43] Exhibit E
[44] Exhibit E
[45] Exhibit E
In a letter dated 14 October 2016, Mr Peterson set out the significant changes he had made to his practice since receiving the Board’s decision on 14 October 2015. These included:
“· the engagement of a Virtual Assistant to perform the administrative tasks;
·the implementation of QuickBooks Online to ensure that the bank information is automatically downloaded and to making the accounting/bookkeeping function more efficient;
·implementing SageHandiSoft Time and Billing to properly track the time spent on jobs and to properly invoice them;
·making regular appointments to see my doctor to ensure that my … [medical condition] is under control;
·over the past three years, I have lost 30kgs. This has given me more energy and I am able to work longer and more effectively each day.”[46]
48. In cross-examination, Mr Peterson said that Mr B and the A Family Trust had ceased to be his clients. He explained that the reality of accounting practice is that it can never keep all of its clients. There is always some degree of clients coming in to the practice and those going out. Some move interstate, some are not happy with the service and so on. We are looking at one disgruntled client in the form of Mr B. Mr Peterson acknowledged that the A Family Trust incurred a taxation liability from the Commissioner of Taxation (Commissioner) as a result of his failure to lodge BAS. Mr B, he said, had made him acutely aware of that as Mr B was want to do.
[46] Exhibit D at 2
Mr Peterson said in cross-examination that he is not denying what has happened in the past. It has happened but things have changed since then. Termination of his registration is like the Victorian Government’s taking away taxi licences and not paying compensation to the owners of those licences. It is taking away a right to make a living. His past performance has been poor, Mr Peterson acknowledged, but the Tribunal needs to trust him. Taking away the earning potential of someone with 800 long-term clients is to deny them the opportunity of having someone travel to them at their convenience. Taxation returns and BAS have been late but they were, he said, being paid. Is it denying the revenue of the Commonwealth if $17 is due to it, he asked.
Payment of taxation debt
At the hearing, Mr Peterson acknowledged that he had entered an agreement with the ATO to pay his taxation debt at the rate of $440 each fortnight. He had an agreement with the ATO and he had to make sure that he both lodged his BAS on time and that he paid it on time. There was lots of incentive for him to do that, he said. He had to set a new standard for himself. Just because there is a guillotine over his head, he had to keep the ducks in a row. If he were to lodge late, he did not know if there would be some ramification.
Contact with Board
On 6 April 2016, an officer of the Board telephoned Mr Peterson to ask him for an update of actions he had taken to address a complaint made by one of his clients. His call went to Mr Peterson’s voicemail and he left his name, contact details, the reason for his call and asked Mr Peterson to contact him to discuss the matter.[47] The same officer contacted Mr Peterson on the following day, 7 April 2016, regarding the complaint. Omitting the client’s name and substituting “Client A”, the file note of the conversation reads:
[47] ST documents; ST15 at 164
“1. Contacted Mr Peterson by telephone … as a follow up to the Board’s voicemail left with Mr Peterson requesting he contact the Board in relation to an update on actions taken by him to address the compliant by … [Client A].
2. Mr Peterson advised he had not checked his voicemail and was not aware of the Board’s request.
3.Board staff asked Mr Peterson to provide an update on his actions in relation to … [Client A]
4.Mr Peterson advised:
i.He had received an email from … [Client A] yesterday (6/04/2016) which contained information from an ATO officer advising her debt had been reduced;
ii.In her email to Mr Peterson … [Client A] enquired as to whether it was possible to have a further reduction of her debt; and
iii.He responded by return email to her advising he thought it was possible.
5.Board staff suggested that a summary of events so far of his engagement with … [Client A] was:
i.He had addressed the issues raised in her complaint to the Board;
ii.He was actively pursuing and undertaking further actions with the ATO on her behalf; and
iii.His actions at some stage would likely result in an outcome; i.e. a final decision made by the ATO.; and
iv.There was no way of determining that the outcome of the ATO’s decision would be considered as satisfactory by… [Client A]. However, on the basis of the work he had undertaken … [Client A] complaint could be considered as being resolved.
6.Mr Peterson at this point advised that he was becoming irritated and that Board staff were attempting to ‘put words in his mouth’.
7.Board staff advised Mr Peterson the suggestion was an attempt to encapsulate the events and actions of his recent contact with … [Client A] with the aim of the Board being in a position of being able to consider that her complaint may be finalised.
8.Mr Peterson advised that if the Board wanted to put words into his mouth like that then he would terminate the call.
9.Mr Peterson then terminated the call.
End of call.”[48]
[48] ST documents; ST15 at 165-166
Matters arising after the hearing
In a letter dated 15 February 2017, the Board wrote to the Tribunal’s Registry asserting that Mr Peterson was failing to comply with his obligations as a registered tax agent and as a taxpayer. It referred to its letter dated 2 December 2016 and addressed to Mr Peterson confirming a payment plan to pay the sum of $13,746.74 in respect of his BAS obligations. Conditions that were part of the payment plan were that Mr Peterson pay his instalments on time as per the schedule attached to the document and that he make all other tax lodgements and payments by their due dates. The schedule required fortnightly payments of $440 to be made to the ATO. The date by which each payment was to be made was set out in the schedule, which covered the period from 8 December 2016 to 15 February 2018. Mr Peterson’s Running Balance Account shows that, in the period from 2 December 2016 to 28 February 2017, he had made three payments under the payment plan. The first was in the sum of $200 on 1 December 2016, the second for $880 on 3 January 2017 and the third for $280 on the same day. By 28 February 2017, Mr Peterson was required to have made six payments each of $440 or a total of $2,640. His actual payments amounted to $1,360.
The Board’s letter dated 15 February 2017 also referred to Mr Peterson’s not cooperating with the ATO and enclosed a letter dated 15 December 2016 that the ATO had written to him. The ATO wrote to him after contacting him on two occasions to arrange a meeting to discuss the taxation affairs of his practice and his personal taxation affairs. On the first occasion, the letter asserted, Mr Peterson spoke to the ATO officer in an unprofessional manner. On the second, it asserted that he had terminated the call soon after the ATO officer identified where she was calling from.
The ATO arranged a meeting with Mr Peterson on 22 March 2017 in order to look at his working papers associated with twelve of his clients. It confirmed arrangements for the meeting made in a conversation on 20 February 2017 in a letter dated 22 February 2017. As well as gaining a better understanding of his practice, the ATO officers would cover how possible compliance risks are identified, possible compliance issues relating to the preparation of his client’s individual returns and questions in relation to Mr Peterson’s taxation affairs and those of his practice.
Mr Peterson addressed the assertions in a letter dated 26 April 2017. He referred to a conversation he had with an officer of the ATO shortly after the conclusion of the hearing. The officer told him that he had been selected for audit. Although he could not recall the conversation exactly, he said: “… I regret entirely my abruptness and discourtesy. The hearing which goes to my ability to practice had caused me untold stress. I was not my normal self.” Mr Peterson referred to an email exchange he had with one of the ATO officers who attended the meeting. That officer advised him that he had no concerns regarding the way in which the meeting proceeded.
With regard to the other matters affecting his business, Mr Peterson wrote in his letter that the terms of the stay decision had been, in effect, a stifling punishment for his business as he had not been able to refresh his client base as people left due to their re-locations and changing family relationships. He continued:
“That said, the stay that has been in place since 17 December 2015 has allowed me much introspection, and that has only increased in the months since the hearing on 7 December 2016. What I have learnt since 17 December 2015, and continued to learn in the six months since 7 December 2016 includes:
a.That the way that I was performing my bookkeeping function was substandard whereas as I said hearing I am now using Quickbooks Online. I am continuously learning how to make the administration of my business run with more efficiency because of this software and progressing to helping my clients work in the same way. To date, I have trialled Quickbooks Online and Receipt Bank, and will be offering to roll these programs out for my business clients.
b.That my systems, processes and procedures were inadequate and needed to be significantly revamped and improved.
c.That my attitude and behaviour to officers of the ATO and the TPB who are lawfully and justifiably and diligently carrying out their work, needs to be less aggressive and antagonistic and more proactive and engaging. I have continued to find my communication has yielded better outcomes in my dealings with the ATO.
d.That I need to be aware of my own physical and mental wellbeing and do something about it should something go awry.
e.That I need to ensure that my compliance obligations are up-to-date (which they are now).
f.I am continually looking to improve my administrative processes. My partner is actively considering joining me in the business.”
CONSIDERATION
Evidentiary material produced by Board after conclusion of the hearing
A. The submissions
On behalf of Mr Peterson, Mr Fickling opposed my having regard to the additional evidentiary material lodged by the Board with its letter of 15 February 2017. At the broad level, he submitted that the Board’s allegations suggested “petty mud throwing”. Regard must be had to the fact that, among the 41,227 tax agents in Australia at 30 June 2016, there would be variations in the level of quality and level of organisation. The key requirement is that they do their job and fulfil their duty under the Code. Mr Peterson has made significant efforts to rectify his own conduct and to improve his practice since the Board’s decision.
Following a directions hearing, both parties made further submissions regarding the issue. Mr Fickling submitted that the Tribunal is required to act judicially. Therefore, it should not accept new evidence after the conclusion of the hearing unless the new evidence is overwhelming, which it is not. That is consistent with general judicial practice.
As for the evidentiary material itself, Mr Fickling submitted that the letter from the ATO dated 15 December 2015 is highly prejudicial and the writer should properly be required for cross-examination. To do so would be inefficient and inconsistent with the objectives of the Tribunal set in s 2A of the AAT Act in circumstances in which the hearing has been completed. Section 33(1AB) requires the parties to use their best endeavours to fulfil the objective in s 2A. Reopening the hearing could only slow the resolution of the matter. To proffer the evidentiary material after the hearing is inconsistent with the Board’s duty under s 33(1AA) of the AAT Act. That section imposes a duty on the Board, as the decision-maker, to use its best endeavours to assist the Tribunal to make its decision in relation to the proceeding. In any event, the contents of the letter are inconsistent with the subsequent conversation that Mr Peterson had with the two ATO officers at his practice. Even if the contents of the letter are true, they relate to a single event and a single event is not evidence of a pervasive pattern or behaving unprofessionally. Mr Fickling referred to the case of Legal Profession Complaints Committee v in de Braekt[49] (de Braekt).
[49] [2013] WASC 124; Martin CJ, McKechnie and Hall JJ
On behalf of the Board, Ms King submitted that it is open to the Tribunal to consider new evidence. Under s 33(1) of the AAT Act, the Tribunal is not bound by the rules of evidence but may inform itself on any matter in any manner as it thinks appropriate. The evidence is relevant to the issues because it reflects an ongoing pattern in Mr Peterson’s behaviour. Mr Peterson has responded to the matters raised in the ATO’s letter and the Board had no objection to my having regard to his response.
B. Consideration
In considering whether I may have regard to the evidentiary material submitted by both parties, my starting point is the decision that I am reviewing i.e. the decision to terminate his registration as a tax agent under s 30-30 of the TAS Act. That follows from the principles established by the High Court in Shi v Migration Agents’ Registration Authority[50] (Shi). That was a case in which the Migration Agents’ Registration Authority (MARA) had made a decision to cancel Mr Shi’s registration as a migration agent. A differently constituted Tribunal decided to set aside MARA’s decision and substitute a decision cautioning the agent but, provided certain conditions were satisfied, setting that caution aside. The Tribunal had regard to matters occurring after the date of the cancellation. MARA argued that the Tribunal was limited to those matters that had already occurred or were existing at the time of its decision but the High Court decided that the Tribunal was required to have regard to those facts and circumstances existing at the time it made its decision.
[50] [2008] HCA 31; (2008) 235 CLR 286; 248 ALR 390; 48 AAR 345; 103 ALD 467; 82 ALJR 1147; Kirby, Hayne, Heydon and Crennan JJ; Kiefel J dissenting
In coming to those conclusions, the High Court established a number of principles for determining the time at which the Tribunal is required to have regard to the relevant facts and circumstances. I will set out those principles as I understand them to be[51] with the addition of Federal Court authorities that illustrate their application. They are, in summary and unless varied by the particular legislation conferring jurisdiction on the Tribunal:
[51] My reasons for reaching the understanding that I have are set out in Re Lobo and Department of Immigration and Citizenship [2010] AATA 583; (2010) 116 ALD 639; 52 AAR 304 at [27]-[39]; 647-654; 313-320. I adopt those reasons as part of these reasons.
(1)The decision that the Tribunal must review is determined by reference to the statutory provisions conferring jurisdiction on it;
(2)The Tribunal will address the same issues or questions as those addressed by the original decision-maker;
(a)“... It is, of course, well established that the Tribunal determines what was the correct or preferable decision having regard to the whole of the evidence placed before it. It is not confined to the evidence which was before the primary decision maker. The Tribunal is, however, obliged to address the same question as was before the primary decision maker. This distinction was spelled out by Davies J. in Freeman v. Secretary, Department of Social Security [1988] FCA 294; (1988) 19 FCR 342.”[52]
[52] The Hospital Benefit Fund of Western Australia Inc v Minister for Health, Housing and Community Services [1992] FCA 599; (1992) 39 FCR 225; 111 ALR 1; 28 ALD 50; 16 AAR 566 at [23]; 234; 11; 59; 575; Wilcox, Burchett and French JJ
(3)Unless there is a temporal element in the legislation requiring a contrary conclusion, the Tribunal reviews a decision as at the date it conducts that review and reaches its own decision;
(4)The Tribunal may have regard to evidence on issues and matters up to the date of its decision on review;
(a)“... There may be occasions where evidence of events subsequent to the decision may have relevance, not in the sense that those events are matters which should have been taken into account at the time of the decision was made, but rather as showing that the probability of the subsequent event happening is one that could be taken into consideration. By way of analogy, reference might be made to a decision which involved a matter of valuation. It is clear enough that subsequent events cannot affect a valuation made as at a particular date. However, evidence of subsequent events is admissible as showing the probability that such events may happen; cf Weldon v Union Trustee Co of Australia Ltd [1925] HCA 14; (1925) 36 CLR 165; Trustees Executors and Agency Co Ltd v Commissioner of Taxes (Vic) [1941] HCA 18; (1941) 65 CLR 33 and Longworth v Commissioner of Stamp Duties (1953) 53 SR (NSW) 342. I would accordingly admit the evidence. ...”;[53] and
(5)The task of the Tribunal:
(a)is to reach a decision that is the correct or preferable decision i.e. the decision that is correct according to the law and on the evidence and, where more than one decision meets that description, the decision that is preferable having regard to the limits imposed by the legislation under which the decision is made and the facts of the case; and
(b)is not to decide whether the decision under review is itself the correct or preferable decision.
[53] Surinakova v Minister for Immigration and Ethnic Affairs [1991] FCA 596; (1991) 33 FCR 87; 26 ALD 203 at [19]; 94; 205; Hill J
The TAS Act establishes a scheme of registration of, among others, tax agents that prescribes eligibility for registration, determination of that eligibility, registration and both commencement and duration of registration as well as renewal of registration. In so far as duration of registration is concerned, it comes to an end either at a time determined by the Board or, if it is terminated by the Board, at an earlier time. The Board may terminate registration under s 30-30 if, after an investigation, it decides that the registered tax agent has failed to comply with the Code. An individual’s registration may also be terminated if any of the events listed in s 20-45 of the TAS Act occurs,[54] he or she ceases to meet one of the tax practitioner registration requirements[55] or breaches a condition of registration.[56]
[54] The events are: being convicted of a serious taxation offence or an offence involving fraud or dishonesty, being penalised for being a promoter of a tax exploitation scheme or implementing a scheme that has been promoted on the basis of conformity with a product ruling in a way that is materially different from that described in the product ruling, becoming an undischarged bankrupt or going into external administration or being sentenced to a term of imprisonment.
[55] “Tax practitioner registration requirements” are “… the matters about which the Board must, under Subdivision 20-A, be satisfied before the Board is obliged to grant an application for registration under this Act.”: TAS Act; s 90-1 and see [3] above.
[56] TAS Act; s 40-5
It follows that registration is a fluid concept that continues for a pre-determined period provided an individual’s qualifications continue to meet the tax practitioner registration requirements and certain prescribed events do not occur. Whether that situation continues may change from time to time. A registered tax agent might, for example, meet all of the tax practitioner registration requirements but be found not to have complied with an aspect of the Code. A sanction such as a caution might have been imposed but, while that sanction was the subject of review, he or she might have failed to renew PII cover and so have failed to comply with all of the tax practitioner registration requirements. To suggest that the registered tax agent’s behaviour subsequent to being given a caution is not relevant would lead to an impractical situation. That would be a situation in which the Board would be required to make a separate decision imposing, if it thought fit to do so, a separate sanction for each separate incident. In the example I have given, the Tribunal might decide not to impose any sanction but the Board might immediately impose a sanction of termination of registration in view of the failure to have PII.
It follows that there is nothing in the TAS Act that requires me to deviate from the general principles established by Shi and that, subject to one qualification, I should have regard to evidentiary material relating to matters that have occurred since the hearing was concluded. That one qualification is that s 39(1) of the AAT Act requires the Tribunal, as a general rule in Divisions other than the Security Division and Social Security and Child Support Division to:
“… ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case and, in particular, to inspect any documents to which the Tribunal proposes to have regard in reaching a decision in the proceeding and to make submissions in relation to those documents.”[57]
I have given the parties that opportunity in these proceedings and they have responded regarding the merits of the evidentiary material and its relevance to the issues as well as on the preliminary question whether regard could be had to it.
[57] AAT Act; s 39(1)
Review of Board’s decision
A. The submissions
Relying on the case of Re SHTX and Tax Practitioners Board[58] (SHTX), Mr Fickling submitted that s 30-15 of the TAS Act represents a proportionate response to the different contexts that arise. In this case, what has been heard is all very sad but it is not all very bad. It is a tale of lateness rather than evil. Of the ten million taxation returns that are lodged each year, there are only a handful of appeals to the Federal Court and applications to this Tribunal in respect of them. People who prepare returns will have varying skills in terms of their life skills and will be facing varying difficulties in their lives. If each was held to a standard of perfection, ten million taxation returns would not be lodged. Discourteous behaviour, if there has been any, will not render him a person who is not a fit and proper person to be a registered tax agent.[59]
[58] [2016] AATA 451; Senior Member (now Deputy President) O’Loughlin
[59] [2013] WASC 124; Martin CJ, McKechnie and Hall JJ
In Mr Peterson’s case, he has been under stress for a number of reasons. They have included his not being able to take on new clients and facing the proceedings. Even so, he has worked hard to put his house in order and has started to use Quickbooks Online to enable him to lodge his BAS in a couple of days. Mr Fickling proposed that Mr Peterson be permitted to continue as a registered tax agent but subject to his completing an appropriate course and having a mentor.
Ms Haban-Beer submitted that Mr Peterson’s registration as a tax agent should be terminated. There has been no change in the pattern of his non-compliance with the Code over a number of years. He has been given opportunities to respond and has not done so and his breaches are serious. His clients have suffered as a result. Mr Peterson’s health and personal circumstances should be given little weight in reviewing his business practices. Circumstances such as the death of his father are not unusual and do not explain his ongoing failures to comply with his obligations as a registered tax agent. His late lodgement of BAS and taxation returns was only remedied when he was absolutely required to. That shows a neglect of his duties as a citizen and is not consistent with the behaviour required of a registered tax agent.
Consideration
Both parties referred me to cases decided in the Federal Court and in the Tribunal. The final decisions vary from case to case but, on analysis, they are consistent with each other. Their consistency arises from the fact that they apply consistent principles consistently to the particular factual circumstances with which they are concerned in order to reach their decisions. Variations in the decisions follow from the variations in the factual circumstances. That means that I must go back to the principles on which each case must be decided.
A. The principles
Mr Fickling placed considerable emphasis on the reasons for decision of Deputy President O’Loughlin in SHTX suggesting that it should be regarded as setting the new standard for the Board. I respectfully suggest that it is the TAS Act that set a new standard for the Board and this is reflected in Deputy President O’Loughlin’s reasons. Rephrasing the relevant passage from the Explanatory Memorandum to the Tax Agent Services Bill 2006, which he set out, he said:
“It is clear that the TAS Act is intended to create a system of measured and tailored response to breaches of standards. …”[60]
[60] [2016] AATA 451 at [21]
SHTX differs from this case in that the Board had decided to terminate SHTX’s registration on the basis that she was not a fit and proper person. In Mr Peterson’s case, it has decided to terminate his registration on the basis that he has been in breach of particular provisions of the Code: ss 30-10(2), (7), (13) and (14). That said, the difference is really procedural rather than substantive. In my case, I must first determine whether Mr Peterson has been in breach of those provisions of the Code as alleged by the Board. He has acknowledged that he has and I have found that to be so. The fact that the breaches have occurred, though, does not mean that the imposition of a sanction is an automatic consequence or the nature of the sanction that would be imposed. That can only be determined against the wider context in which the breaches occurred and which is a context, why they occurred, what the tax agent has done, and is doing, to rectify them and the likelihood of their recurring in the future. That wider context is one in which the provision of services of the type offered by Mr Peterson is regulated not only to protect those who avail themselves of them but the Commissioner and his officers who must be able assume that the services have been provided at an appropriate professional standard so that they can have some level of confidence that returns and the like have been prepared competently. At a broader level, the general community can have confidence that registered tax agents are acting consistently with their role in a system designed to ensure that tax is assessed and paid according to law.
In determining and assessing the wider context, the principles that the courts have considered in deciding whether a person is a fit and proper person for a particular role or task are equally relevant. They include:
(1)Australian Broadcasting Tribunal v Bond[61]
[61] [1990] HCA 33; (1990) 170 CLR 321; 21 ALD 1; 94 ALR 11
“ The expression ‘fit and proper person’ standing alone, carries no precise meaning. … from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive …”[62]
[62] [1990] HCA 33; (1990) 170 CLR 321; 21 ALD 1; 94 ALR 11 at 380; 40; 56 per Toohey and Gaudron JJ
(2) Su v Tax Agents’ Board South Australia[63]
“ 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.”[64]
(3) Stasos v Tax Agents’ Board of New South Wales[65]
“ In addition to the tax agent dealing with his client, he will, almost invariably have dealings with officers of the Australian Taxation Offie and perhaps the boards or tribunals … Those dealings must be able to be carried on in an atmosphere of mutual trust. The commissioner and his officers must be able to accept that, to the best of the ability of the tax agent, returns have been prepared which are true and accurate. This is particularly so now that the commissioner has proceeded to a system of self-assessment, with inaccuracies only coming to light in case of random audit or, presumably, other information coming to the hands of the commissioner.”[66]
(d)In the context of offices or vocations, it was said in Hughes and Vale Pty Ltd v State of NSW (No 2):[67]:
“… But their very purpose is to give the widest scope for judgment and indeed for rejection. ‘Fit’ … 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 …”[68]
[63] (1982) 61 FLR 1; 13 ATR 192
[64] (1982) 61 FLR 1; 13 ATR 192 at 4-5; 195 per Davies J
[65] [1990] FCA 379; (1990) 21 ATR 974; (1990) 21 ALD 437; 974 at [50]; 984; 444 per Hill J
[66] [1990] FCA 379; (1990) 21 ATR 974; (1990) 21 ALD 437; 974 at [50]; 984; 444 per Hill J
[67] [1955] HCA 28; (1995) 93 CLR 127 at 156 per Dixon CJ, McTiernan and Webb JJ
[68] [1955] HCA 28; (1955) 93 CLR 127 at 156; Dixon C.J., McTiernan and Webb JJ)
Sitting as President of the Tribunal in Su, Davies J considered the relevance of Mr Su’s being late to remit, or failing to remit in some instances, group tax instalment deductions made from the salaries of his employees and that of consistently failing to lodge his own personal taxation returns within the statutory time limits. The President said:
“… A tax agent who allows his own tax affairs to get into a state of disorder, who has constant problems himself with the Taxation Department, may not be a proper person to handle clients’ affairs for there may come a time when dissatisfaction which officers of the Department may have with the tax agent personally may be reflected in their handling of his clients’ affairs. Clients who seek extensions of time should not be embarrassed by the fact that the tax agent acting for them is himself continually late in complying with the time limits imposed by the Act and the regulations. Undoubtedly, even minor offences, if sufficient in number, can so interfere with a tax agent’s standing that he is rendered not a fit and proper person to be registered as a tax agent. …”[69]
[69] (1982) 61 FLR 1; 13 ATR 192 at 5; 195-196
In Su, Davies J adopted a general statement of principle that had been formulated by Blackburn CJ, Connor and Davies JJ in Re Guild, & Re Legal Practitioners Ordinance[70] in relation to legal practitioners:
“ The object of the disciplinary proceedings is the protection of the public and the maintenance of proper standards in the legal profession. Disciplinary proceedings are not taken by way of punishment, … or to extract retribution, …”[71]
[70] (1978) 32 ACTR 13
[71] (1978) 32 ACTR 13 at 35 cited at (1990) 61 FLR 1; 13 ATR 192 at [11]; 200 (citations omitted)
B. Application of the principles
Mr Peterson branched out into his own business in approximately 2007 when he had some seven years of experience as an accountant working in small to medium size accounting practices in suburban Melbourne. His experience could be thought to have well-suited him for the suburban practice that he purchased. In giving evidence, Mr Peterson said that he realised that the business had no Operations Manual, pricing structure, practice management software or electronic accounting software. He realised that in 2007 but he has not given evidence that he put systems into place in that year or the following years to install systems to administer his business generally or to enable him to work out the charges he should impose on his clients. Mr Peterson was unprepared in 2009 when he incurred additional costs of becoming the lessee, rather than the sub-lessee, of the premises in which he conducted his business. Those extra costs were part of the reason for his incurring tax losses in that year as were a failed business venture and advertising costs.
Mr Peterson, I find, resolved his leasing costs in or about 2010 when he moved the operation of his business to the study in his parents’ family home. Other than that, I find that Mr Peterson did very little with regard to introducing business systems in his accounting practice until early 2016. He did not subscribe to Quickbooks Online until March 2016. Sage HandiSoft had prepared a quotation for him but there was no evidence at the hearing or subsequent directions hearing that he had accepted that quotation. Whether he has or has not accepted the quotation, I find that it took Mr Peterson approximately six years to attend to the electronic and management systems whose absence and the need for which he had, on his own evidence, identified in 2000.
Mr Peterson blamed his failure to attend to his own BAS obligations on his preparing them from his deposit books and then being unable to do so because he had mislaid those deposit books. His using deposit books was a consequence of his not having electronic and management systems in place.
Mr Peterson has blamed his failure to attend to these omissions on his health issues. Just when he was diagnosed with what I will call his primary condition is unclear as he referred to its being diagnosed in 2009 and again in 2011. Whether it was 2009 or 2011, that condition does not explain why he did not take any steps to attend to the electronic and management systems in either the five or seven years that passed between the diagnosis and his beginning to implement changes that meant he would meet his obligations as they fall due. It does not explain why he did not implement them in the couple of years that passed between his purchasing the business in 2007 and his diagnosis.
On the material that I have, I find that two of his clients lodged complaints about him in 2012 and another did so in 2013. Each was resolved with the Board reminding Mr Peterson of the importance of his role in the administration of the Australian taxation system and of his obligations to comply with the Code and with his personal obligations under that law. It also reminded him of the range of sanctions that might follow if he failed to do so.
Despite the reminder of his obligations, Mr Peterson failed to attend to the shortcomings in the business administration of the practice that he had identified shortly after acquiring it. Depending on when the diagnosis was made, those reminders came either one or two years or three or four years after the diagnosis of his health issue and over two years after the death of his father. Mr Peterson’s failure to lodge the BAS for the A Family Trust in respect of the periods between April 2013 and January 2014 despite reminders from the ATO in April and October 2014 is consistent with his having failed to take steps to address the administrative aspects of his business. His failure to forward the ATO’s letters to Mr B as the Trustee of the A Family Trust and of his failure to communicate with Mr B at all on the subject as late as September 2015 is also indicative of his failure in that regard.
His response to Mr B’s complaints to him about his failures reveals a lack of understanding of the impact of his failure on Mr B as Trustee of the A Family Trust. While I understand that the Commissioner remitted the penalties that were imposed in respect of the failure to lodge the BAS, Mr Peterson had put Mr B in the position where he was in breach of his statutory obligations and where he, Mr B, had to apply for remission of those penalties, which did not automatically follow from Mr Peterson’s professional failure. Despite that, Mr Peterson’s response at the hearing did not reveal any contrition. Instead, he seemed somewhat put out that Mr B had made him acutely aware that he had incurred a penalty as a consequence of Mr Peterson’s failure.
His attitude to Mr B is also indicative of his attitude to his work as a registered tax agent generally. He saw Mr B as simply one disgruntled client and that there has to be some expectation that clients come and go. Mr Peterson did not see his failure with regard to Mr B and the A Family Trust as a possible indicator that his business systems were in need of attention. Even if his systems had not made him aware of his failure to lodge seven BAS in the 2013 calendar year, the first letter from the ATO on the subject would have reminded him shortly after it was written on 16 January 2014 as he would have been reminded on four more occasions with the last written on 8 September 2015.
Whatever the reason for his failure to adopt adequate administrative systems, I find that their absence led to his not providing a tax agent service to Mr B competently. Quite apart from the absence of adequate administrative systems, his consequent failure to lodge the BAS on Mr B’s behalf and his failure to forward the ATO’s correspondence to Mr B were failures to provide a tax service competently within the meaning of s 30-10(7) of the Code.
Mr Peterson’s first failure to lodge his income tax returns occurred in relation to the return for the year ending 30 June 2011. He did not lodge it by the due date that fell on 31 October 2011 and then failed to lodge his returns for the following four years. Mr Peterson failed to meet his BAS obligations in a similar period. I find, therefore, that Mr Peterson was in breach of s 30-10(2) of the Code. That provision requires him to comply with the taxation laws in the conduct of his personal affairs. Mr Peterson’s failure is consistent with his evidence that he was distracted from his practice by his having to assume broader family responsibilities after his father’s death.
Mr Peterson’s systems allowed him to overlook the renewal of his PII for a year. That was in breach of s 30-10(13). He blamed an insurance broker but, again, the fault must be put at the door of his business systems or lack of them. He did not have PII for the period from 29 October 2014 to 26 October 2015 and did not take any action to obtain it until after it was raised in the Board’s letter dated 15 September 2015 to him raising it, among other matters. Even then, there was a gap of some three or four weeks between the date on which he would have received the Board’s letter and the date on which he obtained PII i.e. 27 October 2015.
Mr Peterson was also in breach of s 30-10(14) of the Code when he failed to respond to the Board’s requests and directions in its correspondence to him dated 24 February 2014, 30 March 2015 and 15 September 2015 or to its voicemail messages left on 27 April 2014, 7 May 2015, 12 August 2015 and 1 October 2015. I have set them out in more detail at [14]-[27] above. His failure means that I am satisfied that he is also in breach of s 30-10(14) of the Code.
By the time of the hearing in December 2016, Mr Peterson had made changes to his business systems. He acknowledged that he had to pay his tax debt and that he had to do so on time if he were to escape any ramification. Despite his statement at the hearing that he would pay the instalments due on his tax debt, Mr Peterson failed to do so and was already some $1,300 in arrears on the agreed payment plan by mid-February 2016. Despite his assurances that he would ensure that he behaved professionally and acknowledgment that it gained him better results, Mr Peterson admitted in his letter dated 26 April 2017 that he had been abrupt and discourteous to officers of the ATO.
Registration as a tax agent enables a person to earn a living as a registered tax agent. It confers a right upon that person to do so but it is not an unqualified right. Instead, it is a right that is dependent upon the person’s complying with the Code and with the tax practitioner registration requirements. Viewed overall, Mr Peterson’s conduct of his tax agent’s practice and of himself as a taxpayer subject to the taxation laws have fallen short of the standards required of him by the Code. He has made some progress towards rectifying them but it has been a slow process. Even when he has acknowledged that he must comply with his obligations or there will be ramifications, he cannot comply. That was the situation that faced him in repaying his BAS debt. The same is true of his behaviour to officers of the ATO in December 2016. He agreed that it had not been appropriate and followed it with behaviour that was then appropriate with a different officer.
I find that Mr Peterson knows what he should do but I also find that he has not been able to demonstrate that he can do what he should do on a consistent basis. Understandably, he was bereft by his father’s death and assisted his mother in her time of grief. He suffers from a particular condition that requires his ongoing attention. By the time that the Board conducted its investigation, Mr Peterson had been dealing with these issues for at least five years. Sufficient time had passed to enable him to achieve a balance between the needs of his mother and his health needs and those of his clients that would ensure that he was able to give them competent tax agent services. Despite that, he was only just starting to put them in place in March 2016 some three months after he had received the Board’s decision to terminate his registration. He was still failing to meet his personal taxation obligations in 2017.
If each of Mr Peterson’s failures and omissions were taken on their own, it might be thought that Mr Peterson’s registration should not be terminated. He has taken steps to address his systems and has, in so far as the lodgement of his income tax returns and BAS are concerned, brought them up to date. He has had some complaints that have gone to the Board but not large numbers of them. Taken overall, however, I have decided that Mr Peterson’s registration should be terminated. What his history shows is that he has to be directed to do what is required of him and directed consistently to do so. Even when he was, as he put it, facing the guillotine following the hearing, he could not maintain his payment plan to repay the tax he owed personally. He did not avoid telephone calls from the ATO and fail to answer its correspondence as he had previously ignored calls and correspondence from the Board in previous times but his response was, again as he put it, abrupt and discourteous with one auditor. He put it down to stress but his response was consistent with the lack of concern or contrition he showed when Mr B expressed his displeasure about Mr Peterson’s putting him in a position where he failed to comply with his taxation obligation as the Trustee of the A Family Trust.
Although expressed in the context of what is a fit and proper person to hold an office or vocation, the principles expressed by Dixon CJ, McTiernan and Webb JJ in Hughes and Vale Pty Ltd v State of NSW (No 2) remain equally valid in the context of whether the discretion to cancel or suspend a registration to conduct an occupation. A tax agent must have honesty, knowledge and ability. The first two qualities are not in question in this matter but the third is. Mr Peterson, I find, has the will and intention to do what is required of him but he does not have the ability to carry them through whether that is because he has shown himself unable to set up proper administrative systems even though he recognised their absence soon after he had purchased the business and was dealing with the consequences of not having them, unable to attend to his own taxation affairs, pay his PII when it was due or meet the payment plan he agreed upon with the ATO. These things take time and Mr Peterson has, over the years, had other demands on his time because of the needs of his widowed mother and attending to his own condition. A consequence is, though, that he has not had the ability to do what he should have been doing as a tax agent and, even when the reasons for those demands on his time are no longer as insistent because his condition is under control and his mother needs his assistance less, he has not been able to put his affairs in order so that he can communicate in professional tones with the ATO or meet his obligations to pay them.
Termination will give him the opportunity to gain a proper understanding of his obligations and to develop his administrative skills. I have considered whether he should be permitted to do that while maintaining his registration and while working with the aid of a mentor but I have decided that this is not the appropriate course given the breadth of professional areas that he needs to address and bring to a professional standard.
For these reasons, I affirm the decision of the Board dated 14 October 2015 but with effect from 1 March 2018 to give Mr Peterson the opportunity to make arrangements for his clients in an orderly manner.
| I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for the decision herein of Deputy President S A Forgie |
.......[sgd]................................................................
Associate
Dated: 31 January 2018
| Date of hearing: Last submission received: | 7 December 2016 11 May 2017 |
| Counsel for the Applicant: | Mr JW Fickling |
| Counsel for the Respondent: Solicitor for the Respondent: | Ms AM Haban-Beer Ms Vikki King |
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