Re Tosio and Tax Agents' Board of New South Wales

[2005] AATA 1015

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1015

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2004/1101

GENERAL ADMINISTRATIVE   DIVISION		)
Re		MARTIN TOSIO

Applicant

And THE TAX AGENTS' BOARD OF NSW

Respondent

DECISION

Tribunal Professor I A Shearer, Senior Member

Date13 October 2005

PlaceSydney

Decision The decision under review is set aside, and in substitution thereof it is decided that Mr Martin Tosio's application for re-registration as a tax agent be granted.

[Sgd] Professor I A Shearer                 Senior Member

CATCHWORDS

Re-registration as Tax Agent – Applicant convicted of offences under Taxation Administration Act 1953 for failure to lodge tax returns – the Tax Agents Board decided to not re-register Applicant as a tax agent - question of whether special circumstances exist – Applicant suffered from depressive illness during relevant period – circumstances surrounding depressive illness amount to special circumstances – decision set aside

Tax Administration Act 1953 sections

Income Tax Assessment Act 1936 sections

Reichert v Tax Agents Board of NSW [2005] AATA 188

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

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

Pappalardo v Tax Agent’s Board of Victoria [2003] AATA 990

REASONS FOR DECISION

13 October 2005 Professor I A Shearer, Senior Member   

1.      The Applicant, Mr Martin Tosio, seeks review of the decision of the Tax Agents’ Board of NSW (“the Board”), dated 29 July 2004, to refuse his application for re-registration as a tax agent.

2. On 28 August 2003 the Applicant was convicted of offences under section 8C (1)(a) of the Taxation Administration Act 1953 (“the TA Act”) for failure to lodge his income tax returns for the years ending 30 June 2000 and 30 June 2001. He was fined a total of $550, plus court costs of $99.50. Under section 251BC(3) of the TA Act the Board is empowered to disregard a conviction for a taxation offence, where the applicant for re-registration is not under sentence of imprisonment, if it is satisfied that, because of special circumstances, the conviction should be disregarded. The Applicant contends that the Tribunal should find that special circumstances exist having regard to (a) his moderate to severe depression during the relevant period, and (b) the impact of the introduction of the GST on his workload.

3.      The Applicant was represented by Mr P. Bruckner, instructed by M.C. Griffith & Co, Solicitors. The Applicant was represented by Mr. M. Allatt, of the Australian Government Solicitor.

facts

4.      The Applicant, Mr Tosio, is an accountant conducting a single person practice at Port Macquarie.  After working in South Africa for some years he immigrated to Australia in 1972.  He qualified as a member of the Institute of Chartered Accountants in Australia in 1976, with advancement to Fellow of the Institute in 1994. He worked in Sydney until moving to Port Macquarie in 1989. He was employed first by an accounting practice in Port Macquarie before moving into sole practice at the end of 1996.

5.      The Applicant is currently 60 years of age.

6.      Dr. J.T. Schofield, MB.ChB, M.R.C.Psych., M.R.C.GP., D.C.H., Dip.Obst.R.C.O.G, who has been Mr Tosio’s General Practitioner since 1991 gave evidence as to his depressive illness. (As will be observed, Dr Schofield also holds a postgraduate qualification in psychiatry).  Dr Schofield gave evidence that he had suspected the possibility of a depressive illness already in December 1996. However, at this time Mr Tosio seemed to be coping adequately.  During the next few years Mr Tosio presented with a number of minor ailments, which, in retrospect, Dr Schofield now considers “may well have been somatic presentations of depressive illness in a person who had difficulty in accepting depression or stress as a genuine illness, considering it to be a form of personality weakness or inadequacy, a not uncommon response to this illness in people of high work ethic and who believe that they should be able to cope with whatever comes their way.”  It was only in September 2001 that Dr Schofield persuaded Mr Tosio that he should take medication for that condition. He remained on medication for 12 months, and was then taken off it for a short trial period of a few weeks. However, Dr Schofield restored the medication after Mr Tosio’s depressive symptoms reappeared, and medication continued until February 2005.  Dr Schofield considers that Mr Tosio is now able to function well without medication, but does not rule out the possibility that it might be required again at some future time. He states that depression is an episodic illness whose course is difficult to predict. It can also occur “out of the blue”.

7.      In relation to the effect of the illness on Mr Tosio’s ability to attend to his own affairs, Dr Schofield deposed as follows:

“In relation to Mr Tosio’s ability to manage his own taxation obligations and those of his clients, my assessment is that the illness would have significantly impaired his abilities. This does not mean that there is any intellectual deficit but the illness makes concentration difficult, reduces the ability to organise one’s thinking and undermines self-confidence, so that normal tasks can take many times longer than usual. Normal motivation is lacking and it is a struggle to keep doing things that must be done. Endurance and tolerance of stressors is greatly reduced. Mr Tosio would have put all his resources into servicing his clients and have little energy left to manage or worry about his own affairs. Part of the depressive syndrome is the loss of self-esteem and a feeling of worthlessness. Concentrating one’s resources on trying to fulfil one’s obligations to others in preference to one’s own is a natural consequence of these feelings. I think it is quite likely that he had some degree of depression from 1996 until he commenced on treatment. I believe the diagnosis was delayed because of a natural tendency for Mr Tosio not to complain about mental symptoms and his belief that he should be able to carry out his obligations no matter how bad he was feeling.”

8.      I find Dr Schofield’s evidence convincing, not only in relation to the general nature of depressive illness but also in relation to the Applicant, whom he has been seeing as his patient regularly since 1991.  He was consulted by Mr Tosio on 47 occasions between November 1998 and June 2005.  I find that Mr Tosio was significantly affected by a depressive illness at least from the time of his consultation with Dr Schofield on 6 September 2001, and that he was most probably mildly affected from December 1996. The illness affected his ability to work, especially in relation to his own affairs, including preparation and submission of his own tax returns.  It began to abate after medication was taken from September 2001 until symptoms disappeared in February 2005.

9.      The Applicant gave evidence as to the effect of the introduction of the GST, on 1 July 2000, on his workload.  He estimated that his workload increased as a direct result by 50%.  He “took about two years to get used to it”.  He suffered from sleeplessness thereafter.  He remained in sole practice until 2004 when he employed an associate for four months to help out.  He is now in the process of downsizing his practice and “simplifying my life”.

10.     Cross-examined by Mr Allatt, Mr Tosio agreed that his lodgement record in relation to his personal income tax returns revealed that for the years 1990, 1991, 1992, 1993, 1996, 1997 and 1999 lodgements were made on demand; that is to say, they were late and made under threat of prosecution.  He was prosecuted and fined in relation to his failure to submit returns for 2000 and 2001. His returns for 2002 and 2003 had now been lodged.

11.     He was also questioned about his client base and evidence of lateness in submitting some particular returns. Mr Tosio admitted that some were late, owing to pressure of his work, but that others referred to were “dead wood” in the sense that the clients had not responded to requests for information or had ceased to be his clients.  He had, however, not reported these cessations to the ATO.  He estimated a current client base of about 140.

12.     He explained his general record of lateness as attributable to his illness and “general pressures of work”.  He estimated that he worked an average of 60 hours a week.  He was taken by Mr. Allatt through a list prepared by the ATO of 39 clients whose tax affairs had not been finalised.  In relation to all but two of these Mr Tosio claimed that there were special reasons for lateness not attributable to him.  In relation to the remaining two he agreed that he was at fault, but gave an undertaking that these matters would be attended to with urgency.

the law

13. Mr Tosio was convicted on 28 August 2003 of two offences against the TA Act, section 8C(1)(a) before the Port Macquarie Local Court. Had there been a single offence the applicable penalty would have not been more than $2,000. However, by reason of section 8E, if a person has been previously convicted of a relevant offence the applicable penalty is a fine not exceeding $4,000. “Relevant offence” is defined in section 8B(1) as including an offence against section 8C, and a person is to be treated as having been previously convicted of a relevant offence where “the person is convicted of the earlier offence and the subsequent offence before the same court at the same sitting ….” (section 8B(2)(b). Thus Mr Tosio was convicted of a “serious taxation offence” within the meaning of section 251BC (1)(e) of the Income Tax Assessment Act 1936 (“ITA Act”), taking into account the definition of “serious taxation offence” found in section 251A, in that one of the two offences was punishable by a fine not exceeding $4,000. The court record does not disclose that any differentiation was made between the two offences in assessing the penalty. The relatively light fine indicates that together they were regarded as lying at the lower end of seriousness 

14. Under section 251JC of ITA Act the Board must re-register an Applicant for re-registration as a tax agent where the Applicant satisfies the Board, inter alia, that he or she “is a fit and proper person to prepare income tax returns and transact business of behalf of taxpayers in income tax matters; ….”. Fit and proper persons for the purposes of both original registration and re-registration are described in section 251BC. A disqualifying factor under section 251BC(1)(e) is that the Applicant “has been convicted of a serious taxation offence during the previous 5 years” . However, in such cases the Board is given a discretion by section 251BC (3) as follows:

“Where:

(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.”

15.     Is this a case where the Board should have exercised its discretion, or rather, where the Tribunal, in making now the correct or preferable decision, should do so?

16. There was a conflict of view in argument before me as to whether or not suspension of registration was an option I was permitted to consider, as an alternative to either affirming or setting aside that decision. Mr Bruckner argued that section 251K of the ITA Act allowed me to consider suspension, but Mr Allatt pointed out that section 251K related only to cases of cancellation of existing registration and not to re-registration. Moreover, section 251K did not relate to convictions under section 8C of the Act.

17.     I consider Mr. Allatt’s argument to be correct on these points.

18.     Thus the question before me is whether I should find special circumstances sufficient to justify disregarding the conviction of the Applicant of a serious taxation offence and to direct that he be re-registered as a tax agent.

19.     In Re Beadle and Director General of Social Security (1984) 6 ALD 1, the meaning of “special circumstances”. was discussed:

“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.”

20.     Having regard to this helpful guidance, but bearing in mind that each case has to be judged by its own facts, I consider first that the Applicant’s invocation of the difficulties in adjusting to the introduction of the GST in 2000 as constituting special circumstances cannot be sustained.  No doubt those difficulties compounded the other problems experienced by the Applicant, but in themselves they cannot constitute special circumstances. They are circumstances that faced all tax agents at that time.

21.     However, in relation to the Applicant’s illness I do find special circumstances which markedly lift the case out of the ordinary.  I was impressed by the candour with which Mr Tosio gave his evidence and of his evident contrition.  I was especially impressed with the quality of the medical evidence, as set out above. I am satisfied that Mr Tosio is turning his affairs around successfully and has recovered from this regrettable episode.  I also take into account that in relation to the offences of which he was convicted a relatively light penalty was imposed; and that no clients of Mr Tosio’s appear to have suffered serious prejudice in their tax affairs.

22.     I note that, by way of comparison with the case of Reichert and the Tax Agents’ Board of NSW [2005] AATA 188 , the convictions were recorded in relation to only two years of tax returns in contrast to 15 years in Reichert, and that no medical evidence was led in that case.

23.     The Tribunal is conscious that the public should be able to place their trust in registered tax agents. This can be judged also by the agent’s ability to manage his or her own tax affairs: Carbery & Associates Pty Ltd v Tax Agents’ Board of Queensland [2001] AATA 107; Pappalardo v Tax Agents’ Board of Victoria [2003] AATA 990. It is understandable and proper that the Board should apply rigorous standards. But in this case I feel justified in finding special circumstances.

decision

24.     The decision under review is set aside, and in substitution thereof it is directed that Mr Martin Tosio’s application for re-registration as a tax agent be granted.

I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of Professor I A Shearer, Senior Member

Signed:         A. Krilis
  Associate

Date/s of Hearing  3 August 2005
Date of Decision  13 October 2005
Counsel for the Applicant         Mr P. Bruckner
Solicitor for the Respondent     Mr M Allatt