Tax Practitioners Board v Munro

Case [2012] FCA 1338

FEDERAL COURT OF AUSTRALIA

Tax Practitioners Board v Munro [2012] FCA 1338

Citation: Tax Practitioners Board v Munro [2012] FCA 1338
Parties: TAX PRACTITIONERS BOARD v ISABELLA MUNRO
File number: QUD 269 of 2012
Judge: COLLIER J
Date of judgment: 28 November 2012
Catchwords: TAXATION – application for imposition of pecuniary penalties and related declaratory and injunctive relief – alleged contraventions of Tax Agent Services Act 2009 (Cth) – provision of tax agent services where respondent not registered tax agent – proceedings commenced by Tax Practitioners Board – respondent admits alleged contraventions – agreement between parties on penalty, declarations and injunctions – relevant principles – agreement on appropriate orders relevant but not decisive – agreed penalty appropriate in light of respondent’s conduct and need for general and specific deterrence – possible inability of respondent to comply with orders previously consented to
Legislation: Crimes Act 1914 (Cth) s 4AA(1)
Federal Court of Australia Act 1976 (Cth) s 21
Income Tax Assessment Act 1936 (Cth) s 251L
Tax Agent Services Act 2009 (Cth) ss 2-5, 50-5(1), 50-35(1), 50-35(2), 60-15, 70-5, 90-1
Cases cited: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 cited
Australian Building & Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2010] FCA 977 cited
Australian Communications and Media Authority v Clarity1 Pty Ltd (No 2) (2006) 155 FCR 377 cited
Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309 cited
Australian Competition and Consumer Commission v Goldy Motors Pty Ltd [2000] FCA 1885 cited
Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 cited
Australian Competition and Consumer Commission v Pacific Dunlop Ltd [2001] FCA 740 cited
Forster v Jododex Australia Pty Limited (1972) 127 CLR 421 cited
Gardner v Dairy Industry Authority of NSW (1977) 18 ALR 55 cited
Markarian v The Queen (2005) 228 CLR 357 cited
Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 cited
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 cited
Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 cited
Tax Practitioners Board v Hogan [2012] FCA 642 cited
Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 cited
White v Construction, Forestry, Mining and Energy Union [2011] FCA 192 cited
Date of hearing: 7 November 2012
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 33
Counsel for the Applicant: Mr PA Looney
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: The Respondent appeared in person

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 269 of 2012
BETWEEN:

TAX PRACTITIONERS BOARD
Applicant
AND:

ISABELLA MUNRO
Respondent

JUDGE:

COLLIER J

DATE OF ORDER:

28 NOVEMBER 2012

WHERE MADE:

BRISBANE

THE COURT DECLARES THAT:

1.On 14 separate occasions detailed in Schedule…

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Tax Practitioners Board v Munro [2012] FCA 1338
Case
[2012] FCA 1338
Decision Date

CaseChat Overview and Summary

In the matter of Tax Practitioners Board v Munro, the Tax Practitioners Board sought imposition of pecuniary penalties and related declaratory and injunctive relief against Ms Munro, for alleged contraventions of the Tax Agent Services Act 2009 (Cth). The Board commenced proceedings against Ms Munro for providing tax agent services while not being a registered tax agent. Ms Munro admitted to the alleged contraventions. The court was required to decide the appropriate penalty, whether to grant declaratory and injunctive relief, and the principles guiding such decisions.

The court considered the agreed penalty, declarations and injunctions, noting that while the agreement of the parties was relevant, it was not binding. The court found the agreed penalty appropriate, given Ms Munro’s conduct and the need for general and specific deterrence. The court also considered the possible inability of Ms Munro to comply with previously consented orders. The court found that the declarations and injunctions were appropriate to serve the public interest and clarify the law. The court ordered Ms Munro to pay a penalty of $40,000, to be paid in instalments over several years. The court also imposed injunctive relief, prohibiting Ms Munro from providing tax agent services unless registered, and requiring her to inform clients of specific matters before providing such services. The court further ordered Ms Munro to pay the costs of the proceeding.

Orders

Orders of the court

THE COURT ORDERS THAT:

2. For a period of three years from the date of this Order, the respondent be restrained, unless then registered as a tax agent pursuant to the Act, from requesting or accepting, whether directly or indirectly howsoever, a fee, benefit or reward of any kind for providing to another person or entity, whether directly or indirectly howsoever, a service relating to one or more of:

2.1 advising another person or entity in relation to their entitlements, liabilities or obligations in relation to an Australian taxation law;

2.2 completing for another person or entity a return or statement in relation to an Australian taxation law; or

2.3 lodging for another person or entity a return or statement in relation to a taxation law with the Australian Taxation Office.

3. For a period of three years from the date of this Order, if she is requested to provide to another person or entity a service relating to one or more of:

3.1 advising another person or entity in relation to their entitlements, liabilities or obligations in relation to an Australian taxation law;

3.2 completing for another person or entity a return or statement in relation to an Australian taxation law; or

3.3 lodging for another person or entity a return or statement in relation to a taxation law with the Australian Taxation Office,

the respondent must, before providing or agreeing to provide the said service, and unless then registered as a tax agent pursuant to the Act, inform the person or entity of the matters referred to in paragraphs 1 to 8 in Form A in Schedule B to this Order and, if the person or entity still requests the service be performed by the respondent:

3.4 have the person or entity complete and sign Form A in Schedule B to this Order;

3.5 send to the Tax Practitioners Board within 14 days of providing the service to the person:

3.5.1 a copy of the signed Form A; and

3.5.2 a statutory declaration:

(a) stating the details of the services provided to the person and whether the respondent requested or accepted a fee, benefit or reward of any kind, and if so, the nature of it; and

(b) witnessed by a person so authorised pursuant to the Statutory Declarations Regulations 1993 (Cth) as in force at the date of this Order; and

3.6 retain copies of each signed Form A and statutory declaration for a period of three years from the date of their execution.

4. In respect of the 14 separate contraventions of the Act, the respondent pay one pecuniary penalty in the amount of $40,000.

5. The respondent pay the pecuniary penalty to the Commissioner of Taxation on behalf of the Commonwealth of Australia, such penalty to be paid as follows:

5.1 $5,000.00 on or before 28 November 2013;

5.2 $5,000.00 on or before 28 November 2014;

5.3 $5,000.00 on or before 28 November 2015;

5.4 $5,000.00 on or before 28 November 2016;

5.5 $5,000.00 on or before 28 November 2017; and

5.6 the balance on or before 28 November 2018.

6. The respondent have liberty to apply in respect of the extension of any of the times provided for payment of the pecuniary penalty by Order 5 herein.

7. The respondent pay the costs of the applicant on a party and party basis to be taxed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Before turning to consider the relevant issues, it is useful to examine the agreed facts in more detail.Statement of Agreed Facts In summary, the parties have agreed the following facts:·Between about July 2010 and August 2011, Ms Munro agreed to requests to provide services to identified taxpayers in relation to the preparation and lodgement of ITRs. Ms Munro provided services to the taxpayers or their authorised representatives, in the course of which she:oreceived information and documents potentially relevant to the preparation of the ITR;oconsidered the information and read the documents and, when she considered it necessary, asked for further information or documents;odetermined or confirmed each taxpayer’s assessable income and allowable deductions or offsets; andocaused this information to be transmitted to the ATO through electronic lodgement.·The services extended to Ms Munro suggesting deductions to which she believed the relevant taxpayers were entitled, and making claims for deductions on behalf of certain taxpayers without instructions to do so.·Ms Munro charged or received a fee of $60 for services provided in relation to each relevant ITR.·Ms Munro’s purpose, and the effect of these activities, was to:ocalculate and communicate to the Commissioner of Taxation the taxable income of the taxpayers based upon which an assessment of the taxable income was to be made by the Commissioner under the Income Tax Assessment Act 1936 (Cth) (“ITAA”); andocommunicate information to the Commissioner for the purpose of the Commissioner’s calculation of income tax payable and determination of refunds or further payments of taxation due under the ITAA.·Ms Munro believed she had sufficient knowledge of taxation concepts to provide the services. In providing the services, Ms Munro believed that the taxpayers were relying on her experience and knowledge in relation to taxation matters and preparation and lodgement of ITRs.·Ms Munro provided similar services to those described, in similar circumstances, in relation to other 2010 and 2011 ITRs not specifically identified in these proceedings.·Around 4 July 2011, Ms Munro pleaded guilty in the Magistrates Court of Queensland to 16 offences against s 251L of the ITAA for charging or receiving a fee for preparation of ITRs while unregistered.·From 1 March 2010 to 29 March 2012 Ms Munro was a registered business activity statement (“BAS”) agent pursuant to the Tax Agent Services Act. Ms Munro was aware, when she provided the services to the relevant taxpayers, that she was required to be registered as a tax agent if providing such services for a fee or reward. Ms Munro was not, and was aware she was not, a registered tax agent pursuant to the Tax Agent Services Act.·Ms Munro has never lodged an application for such registration and it has therefore never been established by the Tax Practitioners Board that she has the required educational qualifications or relevant experience or is otherwise considered to be a fit and proper person for the purposes of registration. None of the services provided by Ms Munro was a service provided in relation to a BAS or as part of a legal practice.·Ms Munro obtained a financial benefit of $840 by providing the relevant services. She acknowledges she has received further payments for providing similar services in similar circumstances in relation to ITRs for the 2010 and 2011 tax years other than those identified.·The Commissioner undertook audits in respect of tax returns believed to have been lodged by Ms Munro for the 2010 tax year. Two of the relevant taxpayers had ITRs adjusted for increased tax liabilities as a result of the audit. One of the audited taxpayers had a penalty imposed of $7,740 for reckless preparation of his ITR in relation to an over-claim for a deduction. Ms Munro prepared and lodged that ITR and acknowledges the over-claim was the result of her error.Relief sought

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

In relation to the penalties sought in this proceeding, it is trite to observe that although the parties have reached agreement in respect of both imposition and quantum, this agreement is not binding on the Court. It is ultimately for the Court to determine whether a penalty ought be imposed, and the appropriate penalty: Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [70]. However it is also clear that the Court should accord weight to the agreement of the parties and, unless that agreement falls outside the appropriate range, should impose the penalties to which the parties have agreed: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291 and 298-299; Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [129]; White v Construction, Forestry, Mining and Energy Union [2011] FCA 192 at [5].Declarations The Federal Court has power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth), including declarations that a person has engaged in conduct contravening the Tax Agent Services Act (cf Tax Practitioners Board vHogan [2012] FCA 642). Relevant factors for the Court to take into account in considering whether declaratory relief should be given include:·A declaration must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions (Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582 per Mason CJ and Dawson, Toohey and Gaudron JJ).·The person seeking the declaration must have “a real interest … [and] must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought” (Forster v Jododex Australia Pty Limited (1972) 127 CLR 421 at 437-438 per Gibbs J, quoting Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 per Lord Dunedin; see also Ainsworth at 582 per Mason CJ and Dawson, Toohey and Gaudron JJ).·A declaration will not be granted if:oit will produce no foreseeable consequences for the parties (Gardner v Dairy Industry Authority of NSW (1977) 18 ALR 55 at 69 per Mason J); oroit will have no utility (Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99 per Sheppard J).·The public interest nature of the statute which has been contravened and the role of the applicant in enforcing the statute (Hogan at [12]). In particular, the public interest may be served by the making of declarations because:odeclarations are appropriate vehicles to record disapproval of the relevant conduct (Tobacco Institute at 100; Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309 at [36]);odeclarations serve to vindicate a regulator’s claim of contravention (Australian Competition and Consumer Commission v Goldy Motors Pty Ltd [2000] FCA 1885 at [30] and [34]);odeclarations assist in clarifying the law (Goldy Motors at [34]); andodeclarations may inform the public of dangers resulting from a respondent’s contravening conduct (Australian Competition and Consumer Commission v Pacific Dunlop Ltd [2001] FCA 740, at [59]-[69]).