SNS DIWAKAR PTY LTD and Tax Practitioners Board (Practice and Procedure)
[2024] ARTA 82
•27 December 2024
SNS DIWAKAR PTY LTD and Tax Practitioners Board (Practice and Procedure) [2024] ARTA 82 (27 December 2024)
Applicant/s: SNS Diwakar Pty Ltd
Respondent: Tax Practitioners Board
Tribunal Number: 2024/5961
Applicant:Shonek Raj Diwakar
Respondent: Tax Practitioners Board
Tribunal Number: 2024/6649
Applicant:Tax on the Beach Pty Ltd
Respondent: Tax Practitioners Board
Tribunal Number: 2024/6972
Tribunal:General Member R Smith
Place:Adelaide
Date:27 December 2024
Decision:The application for a stay of the decision is refused. The interim stay order is discharged.
...........................[SGD].............................................
General Member R Smith
Catchwords
PRACTICE AND PROCEDURE – application to stay decision under review – termination of tax agent registration - whether stay necessary to secure the effectiveness of the hearing – whether the discretion to grant stay enlivened - stay refused – interim stay order discharged
Legislation
Administrative Review Act 2020 (Cth)
Tax Agent Services Act 2009 (Cth)
Cases
Le’Sam Accounting Pty Ltd v Tax Practitioners Board [2020] AATA 890
Scott and Australian Securities and Investments Commission [2009] AATA 798
Statement of Reasons
INTRODUCTION
On 11 July 2024, a decision was made by the Tax Practitioners Board (the Respondent) to terminate the tax agent registrations of Shonek Diwakar (Mr Diwakar),[1] SNS Diwakar Pty Ltd (SNS)[2] and Tax on the Beach Pty Ltd (TOTB)[3] (collectively the Applicants), and to impose a two year period during which the Applicants may not apply for registration.
[1] R1, T12, p 416.
[2] R1, T6, p 381.
[3] R1, T18, p 466.
The Applicants have applied for a stay of the decision of the Respondent until final determination of the review.
On 27 September 2024, the Tribunal ordered by consent that the decisions under review be stayed on an interim basis until the Tribunal hears and determines the stay application or until further ordered, subject to the condition that the Applicants do not accept any more clients.
The Respondent opposes the stay application.
BACKGROUND
Mr Diwakar
Mr Diwakar was registered as a tax agent with the Respondent on 5 July 2017.[4] His registration ceased on 14 August 2023 after he failed to renew his registration.[5] Mr Diwakar received a new registration on 20 September 2023.[6]
[4] R1, T4, p 19.
[5] R1, T4, p 19.
[6] R1, T4, p 41.
In lodging his application for registration on 12 September 2023, Mr Diwakar answered ‘no’ in response to the question ‘Do you or any associated entities that you have direct, or indirect control over, have overdue tax obligations?’[7]
[7] R1, T4, p 298.
On 24 September 2020, Mr Diwakar lodged his income tax return for the income year ending 30 June 2020. In that return he reported $40,441 of assessable income.
Following an audit, the Commissioner of Taxation (the Commissioner) amended Mr Diwakar’s income tax return for the year of income ending 30 June 2020 to include a superannuation benefit of $2,505.00 he received from the SNS Family Superfund (the Fund).[8]
[8] R1, T4, p 151.
The Commissioner also determined that Mr Diwakar, in omitting the income received from the Fund, made a ‘false or misleading statement in a material particular’ giving rise to an administrative penalty. The Commissioner determined the behaviour of Mr Diwakar at the time of making the false or misleading statement to be reckless and imposed a penalty at 50% of the shortfall amount.[9] An important factor in assessing the behaviour at this level was Mr Diwakar’s position as a registered tax agent.[10]
[9] R1, T4, p 152.
[10] R1, T4, p 152.
As at 10 May 2024, Mr Diwakar had an outstanding tax debt of $698.44.[11]
[11] R1, T4, p 156.
The Fund
The Fund was registered with the Australian Business register on 17 May 2019. Mr Diwakar and Saieshwari Diwakar were trustees of the Fund until 3 November 2023.[12]
[12] R1, T4, p 60.
Following an audit, the Commissioner disqualified Mr Diwakar from being a trustee of a self-managed superfund under subsection 126A(1) of the Superannuation Industry (Supervision) Act 1993 (SISA).[13]
[13] R1, T4, p 136.
The Commissioner concluded that Mr Diwakar did not have the capacity to be a trustee or a responsible officer of a superannuation fund in circumstances where:[14]
[14] R1, T4, p 143.
(i)he had accessed superannuation benefits during the income year ending 30 June 2020 without meeting the conditions of release;
(ii)the Fund’s annual returns for the income years ending 2019 to 2022 had not been lodged; and
(iii)the Fund had not been maintained in a manner that complied with the sole purpose test.
Several contraventions of the SISA occurred while Mr Diwakar was a responsible officer of the Fund.[15]
[15] R1, T4, pp 143-4.
The Commissioner also imposed an administrative penalty under subsection 34 of the SISA amounting to $67,200.[16]
[16] R1, T4, p 144.
There is no record of Mr Diwakar advising the Respondent of his disqualification as trustee under the SISA.
SNS
SNS was registered with the Australian and Securities Investments Commission (ASIC) on 7 May 2015.[17] The directors of the company are Mr Diwakar and Saieshwari Diwakar. SNS has been a registered tax agent since 28 September 2023 and Mr Diwakar is the sole supervising agent.[18]
[17] R1, T4, p 44.
[18] R1, T4, pp 47-8.
SNS failed to lodge the following income tax returns by their respective due dates:[19]
[19] R1, T4, pp 271.
Period ending
Lodgement due date
Date lodged
30 June 2015
29 February 2016
24 May 2018
30 June 2016
31 October 2016
24 May 2018
30 June 2017
31 October 2017
24 May 2018
30 June 2019
5 June 2020
18 July 2021
30 June 2020
17 May 2021
2 August 2021
30 June 2021
8 June 2022
Not lodged
30 June 2022
31 October 2022
Not lodged
30 June 2023
31 October 2023
Not lodged
SNS failed to lodge the following Business Activity Statements (BAS) by their respective due dates:[20]
[20] R1, T4, p 272.
Period ending
Lodgement due date
Date lodged
30 June 2015
11 August 2015
2 September 2015
30 September 2015
11 November 2015
23 November 2015
30 June 2016
11 August 2016
20 February 2017
30 September 2016
11 November 2016
2 August 2017
31 December 2016
28 February 2017
2 August 2017
31 March 2017
26 May 2017
9 August 2017
30 September 2017
27 November 2017
2 January 2018
3 June 2018
27 August 2018
17 September 2018
30 September 2018
26 November 2018
28 November 2018
31 March 2019
28 May 2019
8 June 2019
30 June 2019
26 August 2019
15 November 2019
31 December 2019
28 February 2020
26 March 2020
31 March 2021
26 May 2021
7 June 2021
30 June 2021
25 August 2021
8 March 2022
30 September 2021
25 November 2021
8 March 2022
31 March 2022
26 May 2022
9 July 2022
30 June 2022
25 August 2022
Not lodged
30 September 2022
25 November 2022
Not lodged
31 December 2022
28 February 2023
Not lodged
31 March 2023
26 May 2023
Not lodged
30 June 2023
25 August 2023
Not lodged
30 September 2023
27 November 2023
Not lodged
Following an audit, the Commissioner raised superannuation guarantee charge (SGC) assessments for the period 1 April 2021 to 30 September 2022. As SNS did not lodge SGC statements by the relevant due date, a penalty of 200% was imposed by operation of the law.[21] The Commissioner agreed to remit the penalty by 30%.[22] Notices of assessment were issued.
[21] R1, T5, p 360.
[22] R1, T5, p 361.
As of 11 July 2024 the SGC debt that remained unpaid totalled $163,742.65.[23]
[23] R1, T6, p 376.
In lodging an application for a new registration with the Respondent on 12 September 2023, in response to the question ‘do you or any associated entities that you have direct, or indirect control over, have overdue tax obligations?’, SNS said ‘no’.[24]
[24] R1, T4, p 306.
SNS is also the corporate trustee of RAJ & Associates which was registered with the Australian Business Register on 28 May 2023.[25]
[25] R1, T4, p 57.
RAJ & Associates failed to lodge the income tax return for the year of income ending 30 June 2023 by the due date.[26]
[26] R1, T4, p 272.
RAJ & Associates failed to lodge the following BAS returns by their respective dates:[27]
[27] R1, T4, p 272.
Period ending
Lodgement due date
Date lodged
30 June 2023
25 August 2023
31 August 2023
30 September 2023
27 November 2023
Not lodged
Tax on the Beach Pty Ltd
TOTB was registered with ASIC on 25 May 2020.[28] Mr Diwakar is the sole director. TOTB has been a registered tax agent since 15 February 2022 and Mr Diwakar is the sole supervising agent.[29]
[28] R1, T4, p 53.
[29] R1, T4, pp 53, 56.
TOTB failed to file failed to lodge the following tax returns by their respective due dates:[30]
[30] R1, T4, p 274.
Period ending
Lodgement due date
Date lodged
30 June 2022
15 May 2023
Not lodged
30 June 2023
31 October 2023
Not lodged
TOTB failed to lodge the following BAS returns by their respective dates:[31]
[31] R1, T4, pp 274-5.
Period ending
Lodgement due date
Date lodged
30 June 2020
25 August 2020
14 December 2020
30 September 2020
25 November 2020
14 December 2020
31 December 2020
2 March 2021
4 October 2021
31 March 2021
26 May 2021
4 October 2021
30 June 2021
25 August 2021
4 October 2021
30 September 2021
25 November 2021
14 January 2022
31 December 2021
28 March 2022
Not lodged
31 March 2022
26 May 2022
Not lodged
30 June 2022
25 August 2022
Not lodged
30 September 2022
25 November 2022
Not lodged
31 December 2022
28 February 2023
Not lodged
31 March 2023
26 May 2023
Not lodged
30 June 2023
25 August 2023
Not lodged
30 September 2023
27 November 2023
Not lodged
Supriya Accounting Pty Ltd (Supriya)
Supriya was registered with ASIC on 6 December 2018.[32] Mr Diwakar is the sole director. Supriya has been a registered tax agent since 7 February 2022 and Mr Diwakar is the sole supervising agent.[33]
[32] R1, T4, p 49.
[33] R1, T4, pp 51-2.
Supriya failed to lodge the following tax returns by their respective due dates:[34]
[34] R1, T4, p 274.
Period ending
Lodgement due date
Date lodged
30 June 2019
5 June 2020
13 August 2020
30 June 2022
31 October 2022
Not lodged
30 June 2023
31 October 2023
Not lodged
Supriya failed to lodge the following BAS returns by their respective dates:[35]
[35] R1, T4, p 274.
Period ending
Lodgement due date
Date lodged
30 September 2022
25 November 2022
15 December 2023
31 December 2022
28 February 2023
15 December 2023
31 March 2023
26 May 2023
15 December 2023
30 June 2023
25 August 2023
15 December 2023
30 September 2023
27 November 2023
15 December 2023
On 14 January 2022, in lodging an application for new registration with the Respondent, in response to the question ‘Does the company or any company director have any overdue tax obligations? This includes any associated entities that the company, or the director, has direct, or indirect control over’, Supriya responded with ‘no’.[36]
[36] R1, T4, p 313.
The Decisions Under Review
Following the completion of an investigation, the Respondent determined that it was satisfied:
(a)Mr Diwakar had breached subsections 30–10(1), 30–10(2) and 30–10(14) of the Code of Professional Conduct in the Tax Agent Services Act 2009 (Cth) (the Code) and had ceased to meet the tax practitioner registration requirement that he is a fit and proper person as required under paragraph 20–5(1) of the Tax Agent Services Act 2009 (TASA). In broad compass this was as a consequence of:[37]
[37] R1, T6, pp 378-380
(i)providing false or misleading information to the Commissioner in his personal income tax return for the year ending 30 June 2020 by understating his income resulting in a tax shortfall and a 50% penalty for recklessness being imposed;
(ii)being disqualified as a trustee of a self-managed superfund as a result of accessing his superannuation benefits during the 2019 20 income year without meeting a condition of release, not maintaining the SMS fund in the manner which complies with the salt purpose test and not lodging the S&S funds income tax returns for the financial years ending 30 June 2019 to 30 June 2023 together with failing to disclose to the Respondent of his disqualification within the required time period.
(iii)failing to comply with the taxation laws in the conduct of his personal affairs, in his capacity as director of SNS (both in its own right an as the corporate trustee for RAJ & Associates), in his capacity as trustee of the SNS fund, in his capacity as a director of Supriya and in his capacity as a director of TOTB.
(iv)failing to respond to two Preliminary Inquiry Letters issued by the Respondent in February and March 2024.
(b)SNS had breached subsections 30–10(2) and 30–10(14) of the Code and had ceased to meet the tax practitioner registration requirement that each of its directors be a fit and proper person as required under paragraph 20–5(3) of the TASA. In broad compass this was as a consequence of:[38]
(i)failing to comply with the taxation laws in the conduct of its personal tax affairs; and
(ii)failing to respond to two Preliminary inquiry letters issued by the Respondent in February and March 2024.
(c)TOTB had breached subsections 30–10(2), 30–10(13) and 30–10(14) of the Code and had ceased to meet the tax practitioners registration requirements that each of its directors be a fit and proper person as required under paragraph 20–5(3) of the TASA and that it did not maintain professional indemnity insurance as required. In broad compass this was a consequence of Mr Diwakar’s conduct and:[39]
(i)failing to maintain professional indemnity insurance; and
(ii)failing to comply with the taxation laws in the conduct of its personal taxation affairs.
[38] R1, T6, pp 376-8.
[39] R1, T6, pp 378-9.
On the basis of the matters referred to above, the Respondent made the decisions under review deciding to terminate Mr Diwakar’s tax agent registration pursuant to paragraph 30-30 of the TASA,[40] the tax agent registrations of SNS and TOTB pursuant to paragraph 30-30 of the TASA,[41] and to determine that the Applicants may not apply for registration for a period of two years from the day of the termination of each of their tax agent registration takes effect pursuant to subsection 40–25 of the TASA.[42]
[40] R1, T13, p 418.
[41] R1, T7, p 383; T19, p 468.
[42] R1, T7, p 383; T13, p 418; T19, p 468.
In making the decisions under review, the Respondent determined the conduct of each Applicant undermined the integrity of the taxation system and the professional standards expected of tax practitioners. Furthermore, it was found that Mr Diwakar lacked an appreciation of the seriousness of his conduct and it would raise significant risk to the integrity of industry should the Applicant’s remain registered.[43]
THE STATUTORY FRAMEWORK
[43] R1, T13, p 423.
The Act
Section 2-5(1) of the TASA sets out the objects of the Act, namely to support public trust and confidence in the integrity of the tax profession and system by ensuring that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct.
This is achieved in part, through the registration and regulation of entities that provide tax agent services by the Respondent, together with the Code for registered tax agents.[44]
[44] Section 2-5(2).
For an individual to be eligible for registration as a tax agent, the Respondent must be satisfied that each director is a fit and proper person.[45] In determining whether an individual is a fit and proper person, the Board must have regard to the matters set out in section 20-15 of the Act which relevantly include ‘whether the individual is of good fame, integrity and character’.
[45] Section 20-5(1)(a).
For a company to be eligible for registration as a tax agent, the Respondent must be satisfied that each director is a fit and proper person.[46]
[46] Section 20-5(3)(a).
In the case of a company, there is a further requirement for registration that there be a sufficient number of individuals being registered tax agents to provide tax agent services to a competent standard and to carry out supervisory arrangements.[47] The company must also maintain the appropriate professional insurance.[48]
[47] Section 20-5.
[48] Section 20-5(3)(e).
These provisions as supported by the Code which includes an obligation that a registered tax agent ‘must act honestly and with integrity’.[49]
[49] Section 30-10(1) of the Act.
The Respondent is empowered via subdivision E of the Act[50] to undertake an investigation into conduct that may be a breach of the Act. Upon completion of an investigation, if the Respondent finds the conduct breaches the Act, the Respondent must either make a decision to take no further action or do one or more of items set out in sections
60-125(2)(b). This extends to one of more of the sanctions under subdivision 30-B of the Act.
[50] Specifically sections 60-95 of the Act.
There are a range of sanctions under subdivision 30-B for failing to comply with the Code which include, but are not limited to, a caution, suspension of a tax agent’s registration, and termination of the tax agent’s registration.[51]
[51] Section 30-15 of the Act.
A company’s tax agent’s registration may be terminated under subdivision 40-A if, amongst other events, the director ceases to meet one of the registration requirements which includes whether the director is a ‘fit and proper person’.
Where the Respondent terminates a tax agent’s registration following an investigation, the Respondent may also determine a period of not more than five years in which the tax agent may not re-apply for registration.[52]
[52] Section 40-25 of the Act.
Part 3 of the TASA contains the Code which applies to all tax practitioners. The Code includes, but is not limited to, the requirement to act with honesty and integrity, to comply with the taxation laws in the conduct of one’s personal affairs, maintain professional indemnity insurance that meets the Boards requirements, and to respond to requests and directions form the Respondent in a timely, responsible, and reasonable manner.
Administrative review
A decision of the Respondent to terminate a tax agent’s registration is reviewable by the Tribunal, as is a decision to impose a period during which the tax agent may not re-apply for registration. In an application for review, the Tribunal exercises all the powers and discretions conferred on the original decision maker in making a fresh decision on the merits to determine the correct or preferable decision in relation to the decision under review.[53]
[53] Section 54 of the Administrative Review Act 2024 (ART Act).
Staying decisions
The making of an application to the Tribunal to review a decision does not affect the operation of the decision.[54] However, on an application by a party to a proceeding for a review of a reviewable decision, the Tribunal may make an order staying or otherwise affecting the implementation of the decision if the Tribunal considers that it is desirable to do so for the purpose of ensuring the effectiveness of the review.[55]
[54] Section 32 of the ART Act.
[55] Section 32(2) of the ART Act.
Before making, varying, revoking or staying a reviewable decision, the Tribunal must take into account the interests of any person who may be effected by the review of the decision.[56]
FACTORS FOR CONSIDERATION
[56] Section 32(7)(b) of the ART Act.
General Principles
The matters relevant to the granting of stay are well established. The matters, as set out by Downes J in Scott v Australian Securities and Investment Commission [2009] AATA 798 can be summarised as follows:
(a)the prospects of success;
(b)the consequence for Applicant of the refusal of a stay;
(c)the public interest;
(d)the consequences for the Respondent in carrying out its functions depending on the whether a stay is granted or not;
(e)whether the application for review would be rendered nugatory if a stay were not granted; and
(f)any other relevant matter.
The onus of satisfying the Tribunal that a stay is desirable in the circumstances lies with the Applicant.
CONSIDERATION OF FACTORS
The Applicants’ Case
Mr Diwakar provided to the Tribunal an email which sets out his position in relation to the application for a stay of the decision under review. His contentions in that email can be summarised as follows:
(a)SNS’ SGC debt arose as a result of an employee failing to follow instructions and including in the payroll employees that did not work for the firm; and
(b)that Mr Diwakar has been unable to access his own firm details and, as a consequence of this, the lodgements remain outstanding. He has sought assistance from the ATO and the Respondent, but this has not resolved the issue.
At the hearing, I allowed Mr Diwakar to expand on his position. In his evidence he stated:
(a)in relation to the late lodgement of BAS in 2015 up until 2018, SNS was not trading and he himself was not a registered tax agent. He ‘left it with’ the tax agent he was working for at the time to lodge nil assessments;
(b)when he was re-registered in 2018, the lodgements were brought up to date;
(c)in relation to the SGC debt of SNS, the figure submitted to the ATO via the single touch payroll system is not accurate and he intends to lodge an objection to the SGC assessments. Mr Diwakar did concede in his evidence that there is a liability but only not to the extent assessed by the Commissioner;
(d)some remedial steps have not been taken out of a concern he may inadvertently breach the interim stay;
(e)an auditor had been engaged to undertake an audit of the Fund and the withdrawals were to pay for those services. Mr Diwakar intends to object to the Commissioner’s disqualification decision; and
(f)SNS has attempted make payments to the Commissioner in relation to the super obligations, but they have all been refunded.
The evidence given by Mr Diwakar provided context to the past conduct and his intentions moving forward. However, it did not challenge the factual findings made by the Respondent which underpin the decisions under review.
Even if I accept Mr Diwakar’s evidence that he intends to dispute the Commissioner’s decisions, which include serious conduct by the Applicant, he has not yet done so. I can only consider the state of the evidence at the time of the hearing. The Commissioner’s decisions remain in force and the SGC debt remains unpaid.
Prospects of success
In general terms, an obviously strong case will weigh in favour of a stay and an obviously weak case will weigh against. In assessing the merits for this purpose, the Tribunal should not undertake a ‘mini trial’ but rather a ‘rough and ready’ assessment such as to permit an informed view as to whether a more favourable outcome in the review proceedings is likely.[57] The Tribunal, based on the submissions made by the parties, needs to be satisfied that the Applicant’s case is arguable.
[57] Le’Sam Accounting Pty Ltd v Tax Practitioners Board [2020] AATA 890 at [13]
The Applicants have not advanced any argument that the decision is incorrect or any circumstance that may lead to a different result. In fact, the Applicants do not dispute the factual basis upon which the decisions under review were made. Accordingly, the Applicants prospects of success on the substantive review are poor. This is a matter that weighs heavily in favour of the stay being refused.
Consequences to the Applicant if a stay is refused
The Applicants have not adduced any evidence or provided any information as to the consequences should the stay be refused. I infer however, given the nature of the decision under review, that it is likely that some economic or reputational consequences would be experienced by Mr Diwakar. In the absence of any further information, I am unable to quantify the impact in a material way.
The Respondent acknowledged that the Applicants may experience consequences should the stay applications be refused, however contended that any adverse consequences are outweighed by the other considerations including the public interest.
Even if I were to accept there were economic and reputational consequences to the Applicants this factor alone is an insufficient basis for securing a stay.
Public Interest
The Applicant has provided no evidence and not advanced any argument that goes to public interest.
The Respondent asserts this consideration weighs heavily in favour of granting the stay given the seriousness of the conduct underpinning the decision under review. They expressed a particular concern that there is a significant risk to granting a stay because aspects of the Applicant’s conduct involved dishonesty, and because they failed to properly manage their taxation obligations. The Respondent asserts that granting a stay will diminish the response and ability of the Applicant to fulfil its duty to maintain appropriate standards of professional and ethical conduct within the tax profession.
The Respondent also argued that the need to uphold the integrity of the tax system and preserve general community confidence in the taxation profession outweighs other factors in favour of the granting of stays.
Having regard to the conduct which supports the decisions under review, which is admitted by the Applicants, I agree with the submission of the Respondent. I note this factor weighs against granting the stay.
Consequences for the Respondent
In circumstances where the factual background is not disputed by the Applicant, the Respondent has argued their statutory duties may be undermined should a stay be entertained, and that a decision to refuse the stay would promote the integrity, reliability, and ethics of the statutory system.
In circumstances where the conduct is admitted by the Applicants, I agree with the submission of the Respondent.
Whether the application for review would be rendered nugatory if a stay were not granted
The Applicants have not provided any evidence or submissions in respect of this consideration.
Notwithstanding this, I make the general observation that the substantive application would not be rendered nugatory, and there would remain utility in the Applicants seeking to overturn the decision or obtaining a reduction in the prohibition period. A review would also give the opportunity to Mr Diwakar to overturn a finding that he is not a fit and proper person.
Consideration of this factor weighs against the making of the stay.
Conclusion
With the exception of the potential consequences to the Applicants, consideration of the remaining factors weighs in favour of not granting the stay. Accordingly, I refuse the application for a stay of the decisions under review. The interim stay orders are discharged.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for the decision herein of General Member R Smith
.............................[Sgd]..........................
Associate
Dated: 27 December 2024
Date(s) of hearing: 12 December 2024 Date final submissions received: 12 December 2024 Applicants: Mr Shinok Diwakar Respondent: Tax Practitioners Board
Counsel for the Respondent: Mr Thomas Liu
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