Re Reichert and Tax Agents' Board of New South Wales

[2005] AATA 188

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 188

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2004/1002

GENERAL ADMINISTRATIVE DIVISION		)
Re		WILLIAM EDWARD REICHERT

Applicant

And TAX AGENTS' BOARD OF NEW SOUTH WALES

Respondent

DECISION

Tribunal The Hon R N J Purvis Q.C., Deputy President

Date3 March 2005

PlaceSydney

Decision The decision under review is affirmed.

..............................................

R N J Purvis Q.C.
  Deputy President

Administrative
Appeals
Tribunal

ADMINISTRATIVE APPEALS TRIBUNAL  )                N2004/1002
  )  
GENERAL ADMINISTRATIVE DIVISION     )

Re:WILLIAM EDWARD REICHERT

Applicant

And:TAX AGENTS' BOARD OF NEW SOUTH WALES

Respondent

ORDER TO AMEND WRITTEN DECISION [2005] AATA 188

TribunalThe Hon R. N J Purvis Q.C A.M, Deputy President

Date8 December 2005

PlaceSydney

WHEREAS:

1.    The Tribunal released a written decision in this matter, which was dated 3 March 2005.

2.    It has come to the Tribunal’s attention that there was a typographical error in relation to the decision; and

3. The Tribunal wishes to amend the written decision so as to rectify this error and wishing to do so with the least cost and inconvenience to the parties, applies the provision of section 43AA of the Administrative Appeals Tribunal Act1975.

NOW THE TRIBUNAL THEREFORE ORDERS that the final sentence of paragraph 5 should read as follows:

1.Section 8E makes provision for a fine not exceeding $2000.

[Sgd] The Hon R. N J Purvis Q.C A.M
  Deputy President    

CATCHWORDS

Re-registration as Tax Agent denied because of conviction under section 8C (1) of the Tax Administration Act 1953 – whether special circumstances exist – nothing special in circumstances that take matter out of the ordinary – refusal to re-register is not unjust, unreasonable or inappropriate – discretion not exercised – decision affirmed

Carbery and Associates Pty Ltd and Tax Agents’ Board of Queensland [2001] AATA 107

Re Beadle and Director General of Social Security (1984) 6 ALD 1

Re Ivovic and Director General of Social Services (1981) 3 ALN N95

Pappalardo v Tax Agent’s Board of Victoria (2003) AATA 990

Re Houvardas and Tax Agents’ Board of New South Wales 91 ATC 2032

Tax Administration Act 1953 sections 8B(2), 8C(1), 8E(2)

Income Tax Assessment Act 1936 sections 251BC, 251JC

REASONS FOR DECISION

3 March 2005            The Hon R N J Purvis Q.C., Deputy President

the application

1. On or about 3 March 2004, Mr William Edward Reichert made on application to the Tax Agents’ Board of New South Wales (“the Respondent”) for re-registration as a tax agent. Mr Reichert had been registered as an agent for a number of years, his then current registration expiring on 1 April 2004. On 22 July 2004 the Respondent, pursuant to section 251JC of the Income Tax Assessment Act 1936 (“the Act”), resolved to refuse to re-register Mr Reichert as a tax agent, this on the ground that he had been convicted of a serious taxation offence and there were not special circumstances warranting the conviction being disregarded.

2.      Mr Reichert has appealed to the Tribunal seeking a review of the decision.

relevant statutory provisions

3.      The statutory provisions relevant to a consideration of the present application are as follows:

“Taxation Administration Act 1953

8B      Interpretation

(2)For the purposes of this Subdivision a person who is convicted of an offence against section 8C or subsection 8D(1) or (2) (in this subsection referred to as the subsequent offence shall be treated as having been previously convicted of a relevant offence (in this subsection referred to as the earlier offence) if:

(a)the person was convicted of the earlier offence on an occasion earlier than, but not more than 5 years earlier than, the person’s conviction of the subsequent offence; or

(b)the person is convicted of the earlier offence and the subsequent offence before the same court at the same sitting and the earlier offence was committed:

(i)at a time or on a day earlier than, but not more than 5 years earlier than, the subsequent offence; or

(ii)    at the same time, or on the same day, as the subsequent offence.

…

8C       Failure to comply with requirements under taxation law

(1)A person who refuses or fails, when and as required under or pursuant to a taxation law to do so:

(a)to furnish an approved form or any information to the Commissioner or another person; or

…

(b)to lodge an instrument with the Commissioner or another person for assessment; or

…

8EPenalties for failure to comply with requirements under taxation law

(2)       Subject to subsection (3), where:

(a)a person is convicted of an offence against section 8C or subsection 8D(1) or (2); and

(b)the court before which the person is convicted is satisfied that the person has previously been convicted of a relevant offence

the penalty that the court may impose in respect of the first-mentioned offence is a fine not exceeding $4,000.

…”

“Income Tax Assessment Act 1936

...

251A   Interpretation

serious taxation offence means:

(a)an offence against section 134.1, 134.2, 135.1, 135.2 or 135.4 of the Criminal Code, being an offence that relates to a tax liability within the meaning of the Taxation Administration Act 1953; or

…

251BCFit and proper persons to prepare income tax returns

(1)Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:

(a)the person is not a natural person;

…

(d)the person is not of good fame, integrity and character;

(e)the person has been convicted of a serious taxation offence during the previous 5 years; or

…

(3)Where:

(a)        a Board is required, in considering an application for:

(i)        re-registration as a tax agent; or

(ii)       re-registration of a nominee of a tax agent;

to decide whether the Board is satisfied that a particular person is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;

(b)the person is not under sentence of imprisonment for a serious taxation offence; and

(c)the Board is satisfied that, because of special circumstances;

(i)        a conviction of the person;

(ii)       the doing of an act or thing by the person; or

(iii)      an omission of the person;

should be disregarded;

the Board may in making the decision referred to in paragraph (a), disregard the conviction, the doing of the act or thing or the omission, as the case requires.

…

251JC           Re-registration of tax agents

(1)The Board shall re-register the Applicant as a tax agent if the Applicant satisfies the Board that:

(a)if the applicant is a natural person:

(i)the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and

(ii)the applicant is not an undischarged bankrupt;

…

(2)       the Board shall refuse to re-register the Applicant in any other case.”

the serious taxation offence

4. On 25 September 2003 Mr Reichert was convicted pursuant to section 8C(1)(a) of the Taxation Administration Act 1953 (“the Administration Act”) in the Penrith Local Court for failure to comply with a notice to furnish income tax returns for the years ended 30 June 1988 to 30 June 2002; 15 returns in all. A demand had been made for lodgement of the 1986 return. A fine of $1000 was imposed upon Mr Reichert.

5. The convictions resulted in Mr Reichert having committed a serious taxation offence within the meaning of the Act. Section 8C of the Administration Act makes it an offence to fail to furnish a return.  He had failed to lodge 15 returns and was convicted in respect of each failure.  The issue of whether the offence or offences constitutes or constitute a serious taxation offence is to be determined by the extent of the sanction that can be imposed under the legislation (see also Carbery and Associates Pty Ltd and Tax Agents’ Board of Queensland [2001] AATA 107 at paragraph 51). Section 8E makes provision for a fine not exceeding

explanation offered by mr reichert for non lodgement of the taxation returns

6.      Mr Reichert was first registered as a tax agent in 1968 or 1969.  On the basis of the evidence before the Tribunal, he did not experience any difficulty in the lodgement of his own taxation returns or those of his clients until 1986.  At all relevant times, and except for short periods when he was unemployed, he has been employed as an accountant as well as carrying on a relatively small private practice with a client base ranging from 10 to approximately 20 clients and a gross income from the practice at the time of re-registration being refused of about $2000.  He is a member of the Society of Certified Practicing Accountants and a member of the Australian Institute of Certified Secretaries.

7.      Mr Reichert explains the failure to lodge the returns this way.  In general he maintains that demands on his time over the years were such as to cause him to relegate the preparation and lodgement of his returns “to the back burner”.  His problems initially arose in 1988/89 when he and his wife sold their then home, bought land and commenced to build a new residence.  In 1989 he ceased his employment with John Lysaght (Australia) Limited after 18 years.   He was unemployed for a short period and was then engaged by an organisation that involved him working very long hours and doing some travelling.

8.      By 1991 he was again unemployed but by August of that year obtained a position as New South Wales State Accountant with a division of Clyde Industries Limited.  The work entailed long hours and lengthy travel to and from his place of employment.  He says the work was stressful.  He experienced some financial difficulty but remained so employed until January 1993.  From March 1993 to June 1995 he worked as an accountant for another firm.  He again experienced stress.  From July 1995 to October 1997 he worked as an Inventory Accountant and was then unemployed until January 1998, when he obtained a position with Rail Services Australia, where he remains working to this date.  He says the engagement is difficult and has involved him, over the last four or five years, working long hours.

9.      Apart from the above record of his employment, Mr Reichert says that he was forced to sell an investment property at a loss and did accounting work for private clients, most of whom he assisted with their financial affairs for some years.  He also coached a soccer team, and occasionally played a part in running a farm owned by his parents-in-law.  He spent time visiting his mother in Newcastle and since late 2000 assisting his wife who has not been well.

10.     It was in August 2002 that the Respondent made a request for Mr Reichert to lodge the outstanding returns.  He contacted officers of the Australian Taxation Office (“ATO”) asking for time to prepare the returns.  He did not prepare and lodge the returns in the time allowed and was charged and convicted as earlier detailed in these reasons.  The more recent delay he says, was largely attributable to his having to locate records stored in boxes and to redo and restore lost data and summaries.  There were demands on his time, which he admits he did not manage well.

11.     The returns have now all been lodged.  On assessments being issued a refund was due to Mr Reichert.

12.     Character references tendered before the sentencing Magistrate and now before the Tribunal speak of Mr Reichert being a person of integrity and he being one inclined to put the affairs of others before his own.

special circumstances

13.     The primary consideration in this application is whether “special circumstances” exist which are such as to warrant the serious taxation offences being disregarded by the Tribunal in determining whether Mr Reichert is a fit and proper person to be a tax agent.

14.     The term “special circumstances” does not have a statutory definition.  However it has been considered by the Tribunal and the Federal Court in a number of decided cases.  In Re Beadle and Director General of Social Security (1984) 6 ALD 1 at p.3 it was said:

“An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition.  The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur.  For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases.  This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”

15.     Again in Re Ivovic and Director General of Social Services (1981) 3 ALN N95 at N97 it was said:

“The reference to special circumstances ‘by reason of which’ a person liable ‘should be released’ requires in our view that there must exist in the circumstances of the case a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes

…must nevertheless be prepared to respond to special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate.  Thus special circumstance do not have to be extreme or unique, it is sufficient if there is something that takes the matter out of the usual ordinary case (see Haidar v Secretary, Department of Social Security (1998) 52 ALD 255 at 264; Groth v Secretary, Department of Social Security (1995) 40 ALD 541; Secretary, Department of Social Security v Ellis (1997) 46 ALD 1). In Groth (supra) at 545 the view was expressed “that the words require something that distinguishes a person’s case from others, something that sets it apart from the usual or ordinary case.”

submissions and decision

16.     I am satisfied that Mr Reichert was prosecuted and fined for failing to lodge the income tax returns as and when required and thereby committed a serious taxation offence.

17. This being so the Tribunal is required to determine whether there were special circumstances which would warrant the convictions being disregarded in considering whether Mr Reichert is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers including himself in income tax matters. (Section 251BC of the Act).

18.     The question is as to whether there was anything that was unusual, extraordinary, peculiar or special that occurred in his accounting practice or his life.  Was there something that went beyond the vicissitudes of life that explains let alone justifies his conduct?  Do the circumstances of his life have that necessary particular quality of unusualness of being uncommon or exceptional that permits them to be described as special.

19.     Mr Reichert experienced hardship in his employment history but many others experience a similar hardship.  He experienced hardship in selling and building a home.  He experienced a financial loss in selling the investment property.  He suffered ill health as did his wife.  He helped and tended to the welfare of others.  Unfortunately people do experience loss, suffer ill health and involve themselves to their own detriment in the help of their fellow human beings.

20. The taxation legislation is designed to give protection and to guard the welfare of those who would rely upon the professional assistance afforded by tax agents. Clients rely upon their agent to proffer appropriate advice and attend to their affairs in a timely and proper manner. Commission of a serious taxation offence is taken to be an indicia of a lack of fitness and ability to discharge the duties and responsibilities of a tax agent. It is only where strict enforcement of the prohibition created by the Act would be unjust, unreasonable or otherwise inappropriate that re-registration should be permitted.

21. In my opinion Mr Reichert was well aware of the fact that he had not prepared and lodged his own taxation returns over the relevant 15 years. He prevaricated. He deferred their preparation. Other factors entered his life, which he looked upon as more pressing, more urgent. No one of the events relied upon by him as explaining the delay was itself exceptional, unusual or uncommon. They were each such as many people experience. Considered together they take the matter no further. The failure to prepare and lodge the returns, an obligation resting upon all taxpayers, was not a technical default. It was a breach knowingly and methodically maintained for a number of years. It had the effect of achieving what the Act sought to prevent. A tax agent who is competent and who is to obey the law should be able to lodge his own tax return within the time allowed. I agree with the opinion expressed in Carbery and Associates Pty Limited v Tax Agents’ Board of Queensland (2001) ATC 2025 where at 2033 it was stated:

“In the opinion of the Tribunal this failure … to comply with basic requirements of the Australian Taxation Office in regards to its conditions for lodgement of the personal income tax returns of tax agents is tantamount to gross dereliction of a fundamental duty.  This failure is exacerbated, in the opinion of the Tribunal, because it is a failure to comply by a person who himself, is responsible for the management of his clients income tax compliance requirements.”

22.     There is not anything special in the relevant circumstances that would take the matter and the events out of the ordinary cause.  I do not see a refusal to re-register Mr Reichert as being in all the circumstances of this matter unjust, unreasonable or inappropriate.  As was said in Pappalardo v Tax Agent’s Board of Victoria (2003) AATA 990 at paragraph 44:

“Protection of the public is of course a major object of any system of regulation of a profession or occupation.  If tax agents are not competent at their work the public should be protected from relying on them for performance of the tasks required of a tax agent.  Similarly the public is entitled to expect that a tax agent’s professional conduct will be appropriate.”

23.     I am satisfied in all the circumstances of this application that, after considering the explanations given by Mr Reichert and the object and intent of the legislation, such explanations are not “of sufficient weight to counter the need to allow the public to be confident that those who practice as tax agents are fit and proper persons and competent professional people” (see Re Houvardas and Tax Agents’ Board of New South Wales 91 ATC 2032 at paragraph 28).

24.     For the reasons herein before set forth the decision under review is affirmed.

I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon R N J Purvis Q.C., Deputy President

Signed: A Krillis
           .....................................................................................
  Associate

Date/s of Hearing  17 February 2005
Date of Decision  3 March 2005
Counsel for the Applicant         Mr D Maddox        
Solicitor for the Respondent     Mr M Allatt