Sabbagh and Tax Practitioners Board

[2020] AATA 5106

Sabbagh and Tax Practitioners Board [2020] AATA 5106 (17 December 2020)

Administrative Appeals Tribunal

ADMINISTRATIVE APPEALS TRIBUNAL              )

)  No: 2020/2115

TAXATION AND COMMERCIAL DIVISION            )

Re: Antoine Sabbagh
Applicant

And: Tax Practitioners Board
Respondent

CORRIGENDUM

TRIBUNAL:  RL Hamilton SC, Senior Member

DATE OF CORRIGENDUM:            19 April 2021

PLACE:           Sydney

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975 (Cth), to alter the text of the decision in this application. Such that the following typographical errors in the Reasons for Decision dated 17 December 2020, be edited as follows:

a.the words “as a tax agent” be deleted in the sentence “The Tribunal varies the decision under review such that the applicant may not apply for registration as a tax agent pursuant to section 40-25 of the Tax Agent Services Act 2009 (Cth) until 31 December 2022”; and

b.the reference to (lowercase) “tax agent” be changed to “BAS agent” in each of paragraphs [3], [5], [23], [42], [51], and [52].

............................[sgd].............................

RL Hamilton SC, Senior Member

Division:TAXATION AND COMMERCIAL DIVISION

File Number:          2020/2115

Re:Antoine Sabbagh

APPLICANT

Tax Practitioners Board And  

RESPONDENT

DECISION

Tribunal:RL Hamilton SC, Senior Member

Date:17 December 2020

Place:Sydney

The Tribunal varies the decision under review such that the applicant may not apply for registration as a tax agent pursuant to section 40-25 of the Tax Agent Services Act 2009 (Cth) until 31 December 2022.

........[sgd]................................................................

RL Hamilton SC, Senior Member

CATCHWORDS

TAX AGENT – prohibition on applying for registration as a tax agent – prohibition of five years – breach of Code of Professional Conduct – failure to honestly disclose convictions – fit and proper person requirements – failure to disclose tax obligations – TASA – prohibition period reduced – decision under review varied

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)

Tax Agent Services Act 2009 (Cth)

CASES

Australian Petroleum Pty Ltd v Australian Competition and Consumer Commission (1997) 143 ALR 381

Frugtniet v Tax Practitioners Board [2017] AATA 1393

Hill v Tax Practitioners Board [2020] AATA 678

Kishore v Tax Practitioners Board (2017) AATA 271

Middlebrook and Tax Practitioners Board [2020] AATA 3698

Rent to Own (Aust) Pty Ltd and Australian Securities and Investments Commission [2011] AATA 689

Stasos v Agents’ Board (NSW) (1990) ALD 437

SECONDARY MATERIALS

Australian Government Tax Practitioners Board: Explanatory Paper TPB(EP) 02/2010

REASONS FOR DECISION

RL Hamilton SC, Senior Member

17 December 2020

1. Ultimately, this matter resolves itself into an appeal against severity of the orders of the respondent Tax Practitioners Board (TPB). The applicant has submitted as much.

2. There is little dispute about the facts of the matter, except in one area involving responsibility for lodgement of a document with the Australian Securities and Investments Commission (ASIC).

3. By a decision dated 12 March 2020, the applicant’s registration as a tax agent was terminated by the TPB with effect from 17 April 2020, and he was prohibited from applying for re-registration for a period of five years pursuant to division 40 of the Tax Agent Services Act 2009 (Cth) (TASA).

4. The applicant was, at the time of the impugned decision, a registered BAS agent. He has sought a review of the decision of the TPB to terminate his registration as a BAS agent in accordance with paragraph 40-5(1)(b) of the TASA; and also of the decision prohibiting him from applying for registration under the TASA for a period of five years from the date of termination (17 April 2020) pursuant to subsection 40-25(1).

5. The applicant did not seek to renew his tax agent registration on 1 April 2020. When the TPB decision took effect, he was no longer registered as a tax agent.

6. The primary basis on which the TPB made its decision is stated in its reasons, namely, that the applicant had failed to act honestly and with integrity by making misleading statements to the TPB in his Annual Declaration (AD) of 29 March 2018 and 25 March 2019. These statements relate to the requirement for the applicant to be a fit and proper person. 

7. The fit and proper person requirements in the AD follow the wording of the Code of Professional Conduct in section 30-10 of the TASA, and state:

   It is an ongoing requirement that a registered tax practitioner meets the fit and proper person requirements.

   The fit and proper person requirement applies to registered individuals and each partner and director of registered partnerships and companies.

   In deciding whether an individual is a fit and proper person, the TPB must consider whether the individual has:

   •    held the status of an undischarged bankrupt, or became aware that you will be become an undischarged bankrupt

   •    been sentenced to or served a term of imprisonment (in whole or in part)

   •    been convicted of a serious taxation offence

   •    been convicted of an offence involving fraud or dishonesty

   •    been penalised for promoting a tax exploitation scheme

   •    been penalised for 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

   •    had matters that may affect your good fame, integrity and character e.g. subject to any disciplinary action by a regulator or professional association.

   Have any of the above events happened to you in the last five years?

8. The applicant answered ‘No’ to this question in his AD of 29 March 2018 and 25 March 2019. 

9. However, in 2017, before the Local Court, the applicant pleaded guilty to a charge of dishonestly obtaining financial advantage, or causing disadvantage by deception. He had, according to a statement of agreed facts in the criminal proceedings, made 15 transfers from a trust account of a client superannuation fund. He was sentenced to a suspended term of imprisonment of 18 months and required to enter into a 12 month good behaviour bond and pay compensation to the superannuation fund. An appeal against severity was dismissed.

10. He also answered ‘No’ to the following ‘tax obligations’ item in the 2018 AD:

    It is a requirement to meet the following by the due dates:

    •    lodgement of all required forms with the ATO, for example income tax returns, activity statements and payment summaries

    •    payment of all required amounts to the ATO (or subject to an agreed payment plan)

    •    obligations in relation to SuperStream and Superannuation Guarantee (if applicable).

    Do you have any overdue personal tax obligations?

11. At the time there were outstanding quarterly BAS statements of an associated entity. The same position applied in respect of the 2019 AD. There had been lodgement defaults in earlier years for other associated entities, but these had largely been remedied prior to lodgement of the ADs.

12. Further, the TPB considered that he had acted improperly by lodging a form with ASIC changing the name of the director and sole shareholder of a client company without a valid written resolution.

13. It also took into account was that he was uncooperative with the TPB investigation.

14. The applicant has, before the Tribunal accepted the essential correctness of the grounds, other than as to the incorrect lodgement of the ASIC document.

15. The applicant has accepted that his answers concerning personal tax obligations were incorrect and has offered an explanation discussed below.

16. The applicant has apologised for his un-cooperative attitude to the Board.

17. The applicant’s only cavil is with the ground treating him as responsible for the lodgement with ASIC of a notice of change of directorship and shareholding of a company, without properly checking the signature of the outgoing director, who was the estranged wife of the applicant’s client. The applicant’s explanation was that the company was controlled by the husband and that instructions were received from that gentleman. The husband had approached the applicant to obtain a form notifying ASIC of the resignation of one director (the wife) and the appointment of another and notifying of a change of shareholder. The applicant said he had provided the blank document to the husband to ‘take home’ and advised him to get his wife’s signature on that document. The document was returned to the applicant by the husband signed in the appropriate positions which was lodged with ASIC by the applicant.

18. The resignation document was apparently signed by a person other than the resigning director. The applicant neglected to check that the signature on the document was that of the wife, but that there is nothing in the evidence to suggest that he colluded with the husband.

19. The Tribunal does not need to determine what exactly occurred and who was primarily responsible. It is sufficient to note that there was a lack of due care by the applicant, which of itself appears to be a rather minor matter, though considered in context may indicate a level of carelessness (which is more serious).

20. The applicant has put before the Tribunal, in his witness statement, explanations for his failings. As to the criminal proceedings, it seems that he did not consider it necessary to disclose his conviction and sentence, as he considered that a suspended sentence with a good behaviour bond was not the same as being sentenced to imprisonment. He does not explain why he thought he did not have to disclose the conviction. Nor does he explain why he did not consider it reflected on his good fame and character. Obviously, it does. This is a rather weak excuse about sentencing, but one can perhaps appreciate that the technicalities were not clear to the applicant. A sentence is still a sentence even if it is suspended. He should have known that the offence involved fraud or dishonesty, and he knew he had pleaded guilty to the charge. The plea of guilty is a complete answer. He knew that he had a conviction and had appealed against the severity of the sentence. Even if he was under a mistaken belief about the imprisonment and sentencing question on the ADs, he should have been alert to the question concerning the conviction and its reflection on his good fame and character.

21. Concerning the outstanding personal tax obligations, the applicant explained that he did not consider that the question covered overdue obligations of corporations with which he was associated. The question on the Annual Declaration is somewhat ambiguous and should be made more specific. Although there were outstanding lodgement obligations, there was very little tax owing in respect of the overdue returns.

22. The applicant further explained that he had been enduring a number of personal crises over the years including marriage breakdown, major business and investment losses and serious health conditions (including ongoing anxiety and depression, although it did not disable him from working, as supported by a specialist medical opinion which was in evidence).

23. The applicant formally expressed his contrition and remorse concerning his failure to disclose his conviction. He voluntarily allowed his tax agent registration to lapse at 1 April 2020. It seems that he has reasonable insight into his deficiencies. I am satisfied that the criminal case and these proceedings have made it very clear to him how important probity and integrity are to a registered agent.

24. The applicant undertook to the TPB that he would not seek to renew his BAS agent registration after it expired on 1 April 2020. He also undertook to continue to address certain medical issues from which he was suffering and take his period of suspension as a time to reflect on his shortcomings. The Tribunal was informed that the applicant has observed the undertaking.

25. This means that he currently is not a registered person, so the Tribunal need not consider the issue of termination of his registration.

26. As to the applicant’s interaction with the TPB in relation to its investigation of this matter, the applicant has apologised for these actions and, given his personal and medical issues, one can perhaps give him some leeway for this.

27. The respondent has submitted that the applicant’s conduct shows dereliction over a considerable period of time. Further, that he fails to meet the necessary standard of probity and good fame required of tax agents to protect the public and maintain confidence in the profession. Protection of the public interest is one of the principal objectives of the TASA scheme (see section 2-5 and cases discussed below).

    CONSIDERATION

28. Tax agents are required, as a condition of registration to be fit and proper persons which involves good fame, integrity and character (see section 20-5 TASA).

29. Registered tax agents are continuously subject to the Code of Professional Conduct and have obligations to notify the TPB on a continuing basis of matters relevant to their fitness to practise (section 30-35 TASA).

30. Section 40-5 of the TASA gives the Board power to terminate registration including for a breach of the Code of Professional Conduct which is prescribed by section 30-10. This includes an obligation to act with integrity and, lawfully in the best interests of the client.

31. Section 40-25 of the TASA empowers the TPB to determine that a person may not apply for registration for a period of not more than 5 years.

32. A TPB Explanatory Paper of 2010 (TPB (EP) 02/2010) which deals with the fit and proper person test for initial and continuance of registration, indicates some of the factors taken into account in dealing with the application for registration. It provides guidance, which though not binding, assists the Tribunal in reaching its decision. It makes specific reference to receiving a sentence of imprisonment at paragraph 31, and also discusses the continuing disclosure obligations of registered persons relevant to the fit and proper requirement at paragraph 35.

33. This Tribunal gave guidance about the relevant factors to be taken into account in a registration determination decision in Kishore v Tax Practitioners Board [2017] AATA 271. These include: the seriousness of the conduct, the potential for repetition, the impact of the sanction on the individual and its effect on his or her capacity to earn a living, the public interest in seeing appropriate sanctions, whether the individual recognises the seriousness of the breach(es) and whether they have demonstrated genuine contrition or remorse.

34. Preventing re-registration of a defaulting tax agent should strengthen public confidence in the integrity of a tax system, balanced against the personal circumstances of the agent including ability to earn a livelihood, number of dependents, financial position, the seriousness of the conduct, and whether it was isolated or repeated, and whether the person had insight into their offending and recognised it through contrition or remorse.

35. On the failure to disclose a conviction, this constituted not only a breach of the continuing obligation to notify the Board in writing of matters affecting good fame and character imposed by section 30-35 of the TASA, he also answered wrongly on the 2018 and 2019 Annual Declarations which contained a number of questions relevant to this.

36. The offences related to a client of his practice, though not in relation to that client’s taxation affairs.

37. The respondent’s counsel has directed the Tribunal to a number of relevant authorities where a person has given false or misleading answers to TPB questions including: Frugtniet v Tax Practitioners Board [2017] AATA 1393; and Hill v Tax Practitioners Board [2020] AATA 678.

38. I was also referred to the decision of Hill J in Stasos v Tax Agents’ Board (NSW) (1990) ALD 437 in which his Honour discussed the fit and proper person requirement and the matters to be considered in deciding the fate of that person’s registration. The Tribunal must be satisfied that the agent appreciates the significance of his wrongdoing, regrets it, and has rehabilitated himself such as to be truly unlikely that there will be a lapse in the future. The more serious the dereliction of duty, the longer may be the time necessary to show this.

39. The respondent submitted that the taxpayer has shown insufficient insight into his offending and not enough contrition. As mentioned earlier, the applicant has made written submissions expressing his remorse and contrition, and the consequences of his actions (criminal and civil) have no doubt hammered the message home to him.

40. The applicant does have an explanation for his failure to disclose in the ADs in relation to the question concerning a sentence of imprisonment (i.e. that he understood a 12 month good behaviour bond was not a sentence of imprisonment), but this is quite inadequate as an explanation. He does not attempt to explain the failure to disclose his conviction of an offence involving fraud or dishonesty, or his failure to disclose matters which affect his good fame and character either in the ADs or upon his conviction.

41. The Tribunal does not have the facts concerning the conviction. The applicant’s fault was his failure to disclose that conviction.

42. The ongoing failure to lodge tax returns on time and the failure to disclose such lodgements are significant breaches of the applicant’s duty as a tax agent by which they are required to be of the highest probity and diligence in the conduct of their personal tax affairs.

43. On the question of the lodgement of the form with ASIC, although this indicates a lack of care, it is no doubt a common, very regrettable, practise of accountants and others of accepting instructions from clients/businesspeople who use their spouses as directors of companies of which they are the controllers, without doublechecking on them.

    RESOLUTION

44. The Tribunal raised with the parties whether or not the Tribunal had the power, and if so whether it was appropriate, to require the applicant to enter into an enforceable undertaking concerning his practice. The respondent made the following helpful submissions, and the applicant did not resist these arguments.

45. The respondent submitted that the Tribunal had no power to order the applicant to enter into an enforceable undertaking. The reasoning was that the TPB has no such power and thus neither does the Tribunal as the substitute decision maker (see section 70-10 TASA (which gives jurisdiction to the Tribunal); and section 43 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) (which places the Tribunal in the shoes of the decision-maker)).

46. There is no other power to do so which is apparent. In Australian Petroleum Pty Ltd v Australian Competition and Consumer Commission (1997) 143 ALR 381, Lockhart J said in effect that a power to order an enforceable undertaking required the authority of statute to make such an order.

47. Section 30-20 of the TASA does empower the TPB to order an agent to take certain actions, but there is no specific power of enforcement in the event that an agent fails to undertake the actions ordered.

48. It is also submitted that the Tribunal should be restrained in its action and should not be over anxious to permit a regulated activity (see Middlebrook and Tax Practitioners Board [2020] AATA 3698 quoting Rent to Own (Aust) Pty Ltd and Australian Securities and Investments Commission [2011] AATA 689 at [47]).

49. The Tribunal also canvassed with the parties the proposition that the applicant might be permitted to conduct practice under the supervision of another registered tax agent. The applicant put forward a supervision proposal. The respondent rejected it, pointing out a number of problems with it (for example it will be difficult to police; conflicts of interest with the supervisor; and that he would need to be re-registered, as at the moment he is not).

50. In view of the seriousness of the applicant’s failings, the proposal to permit the applicant to practise as a registered BAS agent under supervision would not fully convey to the applicant, and to the public, the negative view that the Tribunal takes of his failure to make a full and honest disclosure of his conviction.

1. In the present case, it seems too severe to impose a ban on him from applying for registration for five years. Perhaps in recognition of the gravity of the situation, the applicant did not renew his tax agent registration in April 2020. This may be regarded as a further act of contrition. Therefore, the Tribunal cannot make an order in relation to cancellation of his registration. Apparently, he is able to maintain his livelihood by working as a bookkeeper. The applicant is a mature man who has been registered for many years with no prior offences brought to the Tribunal’s attention.

   DECISION

2. The Tribunal considers that it is necessary in these circumstances, taking into account the factors set out above, to sanction the applicant and to demonstrate to the public and to the profession its disapproval of the applicant’s conduct, that the applicant be prohibited from applying for registration as a tax agent until 31 December 2022.

3. The decision of the Tax Practitioners Board of 12 March 2020 is varied accordingly so that the period of prohibition runs between 17 April 2020 and 31 December 2022.

I certify that the preceding 53 (fifty -three) paragraphs are a true copy of the reasons for the decision herein of RL Hamilton SC, Senior Member

..........[sgd]..............................................................

Associate

Dated: 17 December 2020

Date of hearing:	12 October 2020
Date final submissions received:	19 October 2020
Solicitors for the Applicant:	Mr M Elnajjar, Avondale Lawyers
Counsel for the Respondent:	Ms L McGovern
Solicitors for the Respondent:	Ms L Chen, Tax Practitioners Board