Stubbings and Tax Agents' Board of New South Wales

[2006] AATA 846

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 846

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2005/1272

GENERAL ADMINISTRATIVE DIVISION		)
Re		GREGORY STUBBINGS T/A BOTTOM LINE TAXATION SERVICES PTY LTD

Applicant

And TAX AGENTS' BOARD OF NEW SOUTH WALES

Respondent

DECISION

Tribunal Ms R Hunt, Senior Member

Date4 October 2006

PlaceSydney

Decision I find that the decision of the Tax Agents’ Board of New South Wales not to re-register the applicant as a registered tax agent should be set aside.

[SGD]

Robin Hunt
  Senior Member

CATCHWORDS

Tax Agent registration - Income Tax Assessment Act 1936 - fit and proper person to prepare income tax returns – application for re-registration refused – convictions for failing to lodge own returns – whether special circumstances exist – family pressures - absence of any complaints from clients.

Income Tax Assessment Act 1936, ss 251BC 251JC, 251K
Taxation Administration Act 1953, s 8C(1)(a)

Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Haidar v Secretary, Department of Social Security (1998) 52 ALD 255

Re Adamec and Tax Agents’ Board of Victoria [2005] AATA 913

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

Beadle v Director-General of Social Security 60 ALR 225
Re Cowlishaw and Ors and Tax Agents’ Board of Queensland [1999] AATA 412

Re Ivovic and Director‑General of Social Services (1981) 3 ALN 95

Re Reichert and Tax Agents’ Board of New South Wales [2005] AATA 188

Re Tighe and the Tax Agents’ Board of Victoria 96 ATC 2016
Re Pappalardo and Tax Agents’ Board of Victoria [2003] AATA 990
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1

REASONS FOR DECISION

4 October 2006 Ms R Hunt, Senior Member          

SUMMARY

1.               Mr Gregory Stubbings, the applicant, sought review of a decision by the Tax Agents’ Board of New South Wales (TAB). Mr Stubbings is the only nominee of Bottom Line Taxation Services Pty Ltd. The TAB, on 29 August 2005, declined to re-register Mr Stubbings as a tax agent under the provisions of Part VIIA of the Income Tax Assessment Act 1936 (the Act). Mr Stubbings neglected to lodge certain returns for himself and for Bottom Line Taxation Services. However, I have decided that I should exercise the discretion available under s 251BC of the Act in Mr Stubbings’ favour due to special circumstances. This means that Mr Stubbings’ application for review has been successful.

LEGISLATION

2.      Section 251JC of the Act provides that the Board shall re‑register an applicant as a tax agent if the applicant satisfies the Board that he is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. Section 251BC goes on to provide that 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 if the person is not of good fame, integrity and character.  Sub-section (3) provides that, when considering an application for re‑registration in a case where the applicant has a conviction or done or omitted to do something, the Board (or tribunal) may determine whether it is satisfied that special circumstances exist. If so, deficiencies may be disregarded “as the case requires”.

applicant’s circumstances

3.               In the present case, Mr Stubbings has more than once been convicted of an offence related to his failure to lodge his tax returns and returns on behalf of his company, Bottom Line Taxation Services. On that basis, the Board decided he was not a fit and proper person for the purposes of s 251BC and declined to renew his registration as a tax agent on 29 August 2005.

4.               At the hearing Mr Stubbings gave oral evidence about his history and how it happened that he did not meet these tax law requirements. He gave evidence that his father was a chartered accountant. Mr Stubbings said it was always his ambition to enter the same field as his father. He gave further evidence that, since he left school, he had been employed by various firms of chartered accountants. He also had studied at a TAFE college and obtained an associate diploma of accounting in 1994.

5.               Around October 1999, Mr Stubbings decided to set up his own accounting business at home. He said his business expanded as time went by and he had trouble meeting all his clients’ demands. It was then that he started to neglect his own returns, giving preference to his clients’ affairs. Mr Stubbings said he found it particularly difficult to work at home after the birth of his two children. His second child was born 11 months after the first. His son was born on 10 April 2003 and his daughter on 11 March 2004. It was hard to ignore family interruptions when his wife and children could see him at his desk. Mr Stubbings told me that he now usually works during the day at his clients’ premises and works at home in the evenings.

6.               According to a complaint by the Australian Taxation Office (ATO) made on  18 August 2005, Bottom Line Taxation Pty Ltd was convicted on 19 May 2004 for breaches of s8C(1)(a) of the Act and Mr Stubbings was convicted on 6 October 2004 for breaches of s8C(1)(a) of the Act. Bottom Line was fined $750 on the first occasion Mr Stubbings was fined and $350. The ATO complaint to the Board mentions that Mr Stubbings has a debt to the ATO and had failed to honour undertakings to the Board to lodge all outstanding tax returns and activity statements.

7.               Mr Stubbings gave evidence that he was again convicted of a serious taxation offence on 11 July 2005, for failure to lodge his own returns and BAS returns for Bottom Line Taxation Services. He gave further evidence that a magistrate fined him $25,000 on that occasion. Although I have no substantiation of this conviction before me, the Board’s representatives at the tribunal hearing did not challenge Mr Stubbings’ evidence about this further conviction and fine. The Board’s formal facts and contentions refer to Mr Stubbings’ further conviction for a serious tax offence on 6 October 2005, the second offence mentioned above. It may be that these particulars are incomplete. Nevertheless, it is clear that Mr Stubbings has been convicted more than once of serious taxation offences in relation to his company as well as and for his own personal taxation responsibilities.

8.               Mr Stubbings gave evidence that currently he had no outstanding returns or tax debts and the Board did not dispute this. The records before me show that the Board afforded Mr Stubbings more than one opportunity to comment on his convictions and to advise if he had any special circumstances that had led to his predicament. Mr Stubbings wrote to the Board making certain undertakings but did not keep within the time frame indicated. Further records before me show Mr Stubbings made undertakings on more than one occasion that he did not keep. When asked why he had not responded to the Board more promptly when they wrote to him and why he had not met the time frames set by the Board, Mr Stubbings said that he was already finding it difficult to meet all his obligations. In particular, the final date set by the Board in July 2005 fell within his busiest period for dealing with clients’ returns.

consideration

9.               Mr Stubbings has been convicted of more then one "serious taxation offence during the previous 5 years" for the purposes of section 251BC(1)(e) of the Act. It follows that he is "not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers", in the absence of "special circumstances". If I conclude that "special circumstances" within the meaning of subs 251BC(3)(c) do not exist, such as to justify disregarding his convictions, I will be prevented from finding that Mr Stubbings is a "fit and proper person" for the purposes of s 251JC(1)(a)(i). Then, under s 251JC(2), re-registration must be refused.

10.              Mr Stubbings failed to respond in a timely fashion to communications from the Board. This conduct sometimes may result in a finding that an applicant isn’t a fit and proper person for registration. Senior Member Dwyer observed in Re Pappalardo and Tax Agents' Board of Victoria[2003] AATA 990 at paragraph 32:

[a] person who is competent, and fit and proper to be a tax agent would clearly appreciate the importance of responding fully and promptly to correspondence from a regulatory authority.

11.              Similarly, in Re Cowlishaw and Ors and Tax Agents' Board of Queensland[1999] AATA 412 at paragraph 9, the tribunal noted that:

[t]he Tribunal regards the failure to treat the Tax Agents' Board with proper respect, as a serious neglect of the business of a tax agent.

These cases were referred to with approval in Re Adamec and Tax Agents’ Board of Victoria [2005] AATA 913. However, I will consider the full circumstances before reaching a conclusion about Mr Stubbings.

12.              Mr Stubbings circumstances are as follows. He is a young man with a young family. He has never worked in any other area but in tax and accounting. While he admitted before me that he could no doubt find employment in an accounting capacity with an employer, he believed that losing his registration would probably mean the end of his business. He explained that his clients expect the whole range of book keeping, payroll and other accounting services along with the preparation of their tax returns. This expectation meant clients might dispense with his services if he could not do their tax returns.

13.              Mr Stubbings pointed out that none of his clients have ever complained about his work as a tax agent. He has been a working as an accountant since the 1990s and operating his own business as a tax agent since 1999.  He is the sole nominee for registration as a tax agent for Bottom Line Taxation Services Pty Ltd.

14.              Mr Stubbings gave further evidence that he had taken steps to ensure that he did not make the same mistakes again and fail to lodge his returns. As a precaution since his convictions for tax offences, Mr Stubbings gave evidence that he had employed another accountant to handle his personal tax affairs and to lodge his personal tax returns and those of his company.

special circumstances

15.     Mr Stubbings did not deny he had committed serious tax offences and that it was open to a decision-maker to decide not to re-register him. Unfortunately, before the Board made the decision under review, Mr Stubbings did not take advantage of opportunities offered to him by the Board to explain why he had not met his tax obligations. This meant the Board had no other course but to reject his application for renewal of his registration. The Board, in its correspondence to Mr Stubbings, indicated it was prepared to consider any “special circumstances” and whether these might warrant his tax offences being disregarded in determining whether he was a fit and proper person to be a tax agent.

16.     The term “special circumstances” does not have a statutory definition but 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 6 ALD 1 Toohey J, presiding in the tribunal, 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.

17.     The Federal Court on appeal found it was not possible to lay down precise limits or rules about special circumstances when considering the legislation before it in that matter, see Beadle v Director General of Social Security 60 ALR 225.

18.     Again, in Re Ivovic and Director General of Social Services (1981) 3 ALN N95 at N97 the tribunal member 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. 

19.              Thus I note special circumstances 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.”

20.              The Board’s counsel also drew my attention to the case of Re Tighe and the Tax Agents’ Board of Victoria 96 ATC 2016. Deputy President BM Forrest decided in Tighe to affirm a reviewable decision to cancel a tax agent’s registration although the agent was under strain personally and financially. The case turned on whether Mr Tighe was a fit and proper person for other reasons and did not go into whether there were special circumstances. However, the reasons of the Deputy President, in affirming the decision to cancel Mr Tighe’s registration, noted, at 29, that the main purpose of ss 251BC and 251K was the protection of the public rather than punishment of the offender. Bearing this in mind, I note that there is no evidence before me that Mr Stubbings has taken a less than responsible attitude to his clients’ interests. The Board has made no reference to Mr Stubbings being the subject of any other complaint than that made by the ATO about the offences connected to Mr Stubbings’ own affairs. I also note that there is no suggestion that Mr Stubbings has failed to pay his taxes.

consideration and findings

21.              In Mr Stubbings’ case, I consider that his particular circumstances justify the making of an exception along the lines expressed by the Deputy President in Ivovic. While the factors leading to Mr Stubbings’ lapses are not extraordinary, I think they are “markedly different from the usual run of cases”, as suggested by the Deputy President in Re Reichert and Tax Agents’ Board of New South Wales [2005] AATA 188. Mr Stubbings’ failures occurred over a comparatively short period when compared to the 15 years during which Mr Reichert neglected to lodge his own tax returns. In Adamec, there were several complaints from clients involved. In addition, Mr Stubbings has taken steps to rectify his neglect of his town tax affairs by employing another agent to attend to this. He has also changed his work habits and now works away from home during the day to avoid the distractions from his young family. I do also take account of the lack of complaints from clients although this on its own would not amount to a special circumstance. I further note that the Board took a conciliatory approach to Mr Stubbings to the extent that it offered him an opportunity initially to explain his special circumstances but, unfortunately, Mr Stubbings was dilatory in responding appropriately. Mr Stubbings has now explained his difficulties and I accept his explanation.

22.              While I acknowledge that the main object behind s 251BC is to protect the public, as pointed out in both Reichert and Tighe, I also note that Mr Stubbings has been severely punished in the imposition of the fine of $25,000.  This is very severe compared to the earlier fines of $750 and $350 imposed in another court for similar offences. Mr Stubbings has not exhibited any lack of responsibility towards his clients and the public and, on balance, I consider that he poses little risk to the public taking into account his past record and the arrangements he has now put in place.

decision

23.              I find that the decision of the Tax Agents’ Board of New South Wales not to re-register the applicant as a registered tax agent should be set aside.

I certify that the 23 preceding paragraphs are a true copy of the reasons for the decision herein of  

Signed:         ...................................................................................

Rhonda Pietrini                 Associate

Date/s of Hearing  29 August 2006 
Date of Decision  4 October 2006
Solicitor for the Applicant          N/A – applicant self-represented
Counsel for the Respondent     Rhonda Henderson
Solicitor for the Respondent     Anna Bishop