Tax Practitioners Board v Shanahan

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FEDERAL COURT OF AUSTRALIA

Tax Practitioners Board v Shanahan

[2013] FCA 764

Citation: Tax Practitioners Board v Shanahan [2013] FCA 764
Parties: TAX PRACTITIONERS BOARD v MARK ANTHONY SHANAHAN
File number: NSD 28 of 2013
Judge: RARES J
Date of judgment: 19 July 2013
Legislation: Federal Court of Australia Act 1976 (Cth) s 21
Tax Agent Services Act 2009 (Cth) ss 50-5, 50-15,
50-35(3), 70-5  
Cases cited:

Australian Securities and Investments Commission v Ingleby [2013] VSCA 49 referred to

Minister for Industry Tourism and Resources v Mobil Oil Australia Pty Limited [2004] FCAFC 72 applied

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 applied

Date of hearing: 19 July 2013
Place: Sydney
Division: GENERAL DIVISION
Category: No catchwords
Number of paragraphs: 23
Counsel for the Applicant: Mr C P O’Donnell
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: Mr S A Lawrance
Solicitor for the Respondent: Clayton Utz

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 28 of 2013

BETWEEN:

TAX PRACTITIONERS BOARD
Applicant

AND:

MARK ANTHONY SHANAHAN
Respondent

JUDGE:

RARES J

DATE OF ORDER:

22 JULY 2013

WHERE MADE:

SYDNEY

THE COURT DECLARES THAT:

1.On each of the 47 separate occasions detailed in Schedule A to these orders between about May 2010 and about June 2012, the respondent supplied a tax agent service in contravention of subsection 50-5(1) of the Tax Agent Services Act 2009 (Cth) by providing a service to the taxpayers referred to in Schedule A by reason of the following:

(a)the respondent requesting and receiving from the taxpayer information that was potentially relevant to  the preparation of the taxpayer’s income tax return and completing details of the taxpayer’s income tax return in preparation for lodgement with the Australian Taxation Office;

(b)for which the respondent either received or charged a monetary payment for providing the said service;

(c)with knowledge of the matters referred to in sub-paragraphs 1(a) and 1(b) above;

(d)while the respondent was not a registered tax agent pursuant to the Tax Agent Services Act 2009 (Cth) or working under the supervision and control of a registered tax agent;

(e)which was not a service relating to a business activity statement;  and

(f)which was not provided as a legal service;

in each case:

(g)by reason of the matters referred to in sub-paragraphs 1(a) and 1(b) above, provided a service that the taxpayer could reasonably be expected to rely upon to satisfy liabilities or obligations, or claim entitlements, that arise, or could arise, under a taxation law.

2.On each of the 2 separate occasions detailed in Schedule B to these orders between about December 2010 and September 2011, the respondent supplied a BAS service in contravention of subsection 50-5(2) of the Tax Agent Services Act 2009 (Cth) by providing a service to the taxpayers referred to in Schedule B by reason of the following:

(a)the respondent requesting and receiving from the taxpayer information that was potentially relevant to ascertaining liabilities, obligations,…

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Details
Case
[2013] FCA 764
Decision Date

CaseChat Overview and Summary

In the case of Tax Practitioners Board v Shanahan, the Tax Practitioners Board sought penalties against Mr Shanahan for contraventions of the Tax Practitioners Act. The contraventions involved Mr Shanahan acting in the capacity of a tax agent without being registered, and providing tax agent services without the supervision of a registered tax agent. Mr Shanahan admitted to the contraventions and the parties had initially agreed on a penalty of $45,000, to be paid in instalments. However, the Court was not satisfied that Mr Shanahan had the capacity to make the agreed payments and questioned whether the penalty amount was appropriate given the overlap in contraventions. After further discussion, the parties agreed on a reduced penalty of $30,000, payable in instalments commencing in June of the next year.

The main legal issues before the Court were whether the agreed penalty of $45,000 was appropriate given Mr Shanahan's financial situation and the overlap in contraventions. The Court also needed to consider whether the agreed penalty of $30,000 was within the permissible range. The Court found that the original penalty was too high given Mr Shanahan's limited financial means and the overlap in contraventions. The Court concluded that the reduced penalty of $30,000 was within the permissible range and an appropriate figure.

The Court considered the public policy implications of allowing parties to agree on a penalty. While an agreed penalty can avoid lengthy litigation and promote future compliance, the Court must still impose a penalty within the permissible range. The Court found that the reduced penalty of $30,000 was an appropriate figure given all the circumstances. The Court did not depart from the agreed penalty except in a clear case.

The Court ordered that Mr Shanahan pay a penalty of $30,000 to the Tax Practitioners Board, payable in instalments commencing in June of the next year, and a contribution towards the Board's costs of $1,000 payable by 31 December 2013.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Mr Shanahan is also in default in respect of credit card debts worth about $24,000 which are in the hands of a collection agency. In addition, he has business debts of about $65,000 and household debts of about $6,000. His current salary is in the order of about $60,000. Mr Shanahan, in his oral evidence, said that he earned about $1,100 after expenses net per week, with almost nothing left over. He now works, and has since August last year, for a company that provides financial planning advice. He is employed as an accountant and small business strategist under the supervision of a registered tax agent in his employer. His employer’s principal has given Mr Shanahan a reference that demonstrates that he is receiving appropriate support to deal with the issues arising from this litigation and in developing the skills necessary to seek to put himself in the position of being registered as a tax agent once again. The employer regards him as a very competent team member and a person who is highly valued by its clients.Consideration When the parties made their written submissions for the hearing today, they had agreed on a penalty of $45,000 and a contribution towards the Board’s costs of $1,000. Their agreement had been predicated on Mr Shanahan having a pecuniary penalty imposed on him for contraventions of each of ss 50-5(1) and (2), and as well as s 50-15. He said that he thought deeply for about three or four days about the amount that he could responsibility agree to pay by way of a penalty and the period over which he could do so. The agreement between the parties recorded that he would pay $6,000 by 31 December this year, and $10,000 by 31 December of each subsequent year until the total amount of $46,000 had been paid. Having heard his evidence, I was not satisfied that, first, Mr Shanahan realistically has the capacity to make those payments or, secondly, that $46,000 marked an appropriate penalty in all of the circumstances. I raised with the parties the question of whether they had overlooked in their discussions the application of s 50-35(3) in respect of the overlap between the contraventions of ss 50-5(1) and (2) and s 50-15, albeit that the overlap in penalties was, in one sense, a minor matter in the scheme of things. The parties then, over a short adjournment, discussed whether the agreed penalty should be re-considered. They have now agreed on a total penalty of $30,000 payable by instalments of $5,000 commencing on 30 June next year, with the $1,000 in costs being payable on 31 December 2013. The task of the Court in considering an agreed civil penalty was authoratively explained by Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290-298. Ultimately, it is for the Court, and the Court alone, to impose a penalty under the Act. But where parties agree as to an appropriate penalty, that agreement can assist the Court in arriving at a conclusion that that agreement is a proper figure. In NW Frozen Foods 71 FCR at 291A-B, Burchett and Kiefel JJ said in a passage that has equal application to similar agreements by individuals and regulators generally in respect of civil penalties:“There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.”