Tax Practitioners Board v Van Dyke

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FEDERAL COURT OF AUSTRALIA

Tax Practitioners Board v Van Dyke [2024] FCA 899

File number: NSD 786 of 2023
Judgment of: ABRAHAM J
Date of judgment: 14 August 2024
Catchwords: TAXATION – Civil penalties – admitted contraventions of s 50-5(1) of the Tax Agent Services Act 2009 (Cth) – providing tax agent services while not a registered tax agent – respondent conscious of wrongdoing – respondent continuing to breach the Act after receipt of cease-and-desist letter outlining initial contraventions had been detected – need for specific and general deterrence – course of conduct principle in the assessment of pecuniary penalties – bankruptcy of respondent considered – grant of declaratory injunctive relief – imposition of pecuniary penalty
Legislation:

Bankruptcy Act 1966 (Cth), ss 82(3) and 153(1)

Federal Court of Australia Act 1976 (Cth), s 21

Tax Agent Services Act 2009 (Cth), Part 5, ss 2-5(1), 50-5, 50-35(1)-(2), 60-5, 60-15, 70-5(1)

Taxation Administration Act 1953 (Cth), Schedule 1, ss 298-80(b) and 298-85
Cases cited:

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; (2018) 262 CLR 157

Australian Building and Construction Commissionerv Pattinson [2022] HCA 13; (2022) 274 CLR 450

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 145 ALR 36

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540

Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [2011] FCA 372

Australian Competition and Consumer Commission v Employsure Pty Ltd [2023] FCAFC 5; (2023) 407 ALR 302

Australian Competition and Consumer Commission v Employsure Pty Ltd (No 2) [2021] FCA 1488

Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247

Australian Competition and Consumer Commission vMSY Technology Pty Ltd [2012] FCAFC 56; (2012) 201 FCR 378

Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25

Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243

Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; (2011) 195 FCR 1

Australian Securities and Investments Commission v Monarch FX Group Pty Ltd, Re Monarch FX Group Pty Ltd [2014] FCA 1387; (2014) 103 ACSR 453

Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd [2002] NSWSC 310; (2002) 41 ACSR 561

Australian Securities and Investments Commission v Select AFSL Pty Ltd (No 3) [2023] FCA 723

Australian Securities and Investments Commission v Stone Assets Management Pty Ltd [2012] FCA 630; (2012) 205 FCR 120

Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482

Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1

Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421

Hili v The Queen [2010] HCA 45

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Details
Case
[2024] FCA 899
Decision Date

CaseChat Overview and Summary

In the case of Tax Practitioners Board v Van Dyke, the Tax Practitioners Board (TPB) sought civil penalties and injunctive relief against Mr Van Dyke for his unauthorised provision of tax agent services. The Federal Court of Australia was tasked with deciding the appropriate pecuniary penalty and injunctive relief to be imposed on Mr Van Dyke for his admitted contraventions of the Tax Agent Services Act 2009 (Cth). Mr Van Dyke had engaged in providing tax agent services while not being a registered tax agent, a violation that occurred over a period of nearly four years. The court had to determine the appropriate penalty for these serious and deliberate contraventions, considering both the need for specific deterrence and the broader objective of general deterrence.

The court deliberated on the severity of the contraventions, noting that Mr Van Dyke had knowingly engaged in the unauthorised provision of tax agent services for significant financial gain, amounting to $1,658,000. The court highlighted the importance of deterring such conduct to uphold the regulatory framework designed to protect taxpayers. The respondent's personal circumstances, including his gambling addiction and bankruptcy, were considered, but these did not mitigate the seriousness of his actions. The court found that despite the respondent's acknowledgement of the cease-and-desist letter and his financial difficulties, he continued to provide unauthorised tax agent services. The court imposed a pecuniary penalty of $1,800,000 and granted a permanent injunctive relief to restrain Mr Van Dyke from providing such services without registration. Additionally, the court ordered that Mr Van Dyke pay the costs of the proceeding.

Orders

Orders of the court

2. Pursuant to s 50-35(2) of the Act, the respondent pay a pecuniary penalty totalling $1,800,000 in respect of 3,359 separate contraventions of s 50-5(1) of the Act.

3. The respondent pay the pecuniary penalty referred to in paragraph 2 above, to the Commissioner of Taxation of the Commonwealth of Australia on behalf of the Commonwealth of Australia.

4. Pursuant to s 70-5(1) of the Act, the respondent be permanently restrained from providing tax agent services (as defined in the Act) for a fee or other reward, whilst not a registered tax agent within the meaning of the Act.

5. The respondent pay the costs of the applicant on a party and party basis, to be agreed or assessed.

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

Background

Background to the litigation

In addition, the respondent tendered exhibits, most relevantly, a statement of financial affairs dated 6 May 2024 which he was required to provide to his trustee in bankruptcy.Facts As referred to above Mr Van Dyke admits to 3,359 contraventions of s 50-5(1) of the TASA by preparing and lodging 3,359 income tax returns for taxpayers, for a fee or other reward, whilst not a registered tax agent within the meaning of that Act. The following recites the Amended Statement of Agreed Facts, with aspects redacted containing personal details. Mr Van Dyke is not, and has never been, a registered tax agent with the Board within the meaning of the TASA. Mr Van Dyke has never lodged an application with the Board for registration as a tax agent.Communications between Mr Van Dyke and the Board prior to the filing of the proceedings On or around 15 September 2022, the Board sent an email enclosing a cease-and-desist letter to Mr Van Dyke advising that:The TPB is aware that you are engaging in conduct prohibited by the TASA, and is particularly concerned that:1. you are charging or receiving a fee or other reward for providing tax agent or BAS agent (tax practitioner) services when you are not a registered tax practitioner and you are not working under the supervision and control of a registered tax practitioner:a) assisting taxpayers with the preparation and lodgement of their income tax return/s.b) assisting taxpayers with the preparation and lodgement of their BAS.2. you are representing yourself as a registered tax practitioner when that representation is untrue.…What you must do to avoid legal action You must immediately stop any conduct, including representing yourself as a registered tax practitioner referred to above. As you are providing tax practitioner services, you must also cease such activity whilst you remain unregistered.We expect written confirmation of the above by 29 September 2022. Alternatively, you must provide reasons as to why you think your conduct is not a breach of the TASA. Failure to do so will lead to this matter being escalated for further action.This may include the [Board] commencing Federal Court proceedings for injunctions and/or penalty orders against you. (Original emphasis.) On or around 21 September 2022, Mr Van Dyke's legal representative emailed the Board confirming that:1. Mr Van Dyke has received your correspondence dated 15 September 2022.2. Mr Van Dyke understands the contents of the said correspondence, particularly the contention in relation to assisting taxpayers with preparation and lodgement of BAS and income tax returns.3. Mr Van Dyke takes seriously the matters raised in the said correspondence.Details of the respondent’s businesses From 1 July 2014 (to least the date of the agreed facts) Mr Van Dyke had an active registered Australian Business Number (ABN) identified as 23 468 846 337. From 9 June 2020 to 4 July 2023, Mr Van Dyke's registered business names associated with the ABN were:(a)'24/7 TAX TO YOU'; and (b)'JVD ACCOUNTANTS'.

Evidence

Evidence Before The Court

The Court is to assess this on the civil standard of proof according to the rules of procedure and evidence applicable to civil proceedings: ss 298-80(b) and 298-85 of Schedule 1 of the Taxation Administration Act 1953 (Cth).Evidence relied on This matter proceeded by way of an agreed statement of facts, which is recited immediately below. The respondent read an affidavit in his own name, affirmed 9 June 2024, and was cross-examined. I return to this below. In addition, the respondent tendered exhibits, most relevantly, a statement of financial affairs dated 6 May 2024 which he was required to provide to his trustee in bankruptcy.Facts As referred to above Mr Van Dyke admits to 3,359 contraventions of s 50-5(1) of the TASA by preparing and lodging 3,359 income tax returns for taxpayers, for a fee or other reward, whilst not a registered tax agent within the meaning of that Act. The following recites the Amended Statement of Agreed Facts, with aspects redacted containing personal details. Mr Van Dyke is not, and has never been, a registered tax agent with the Board within the meaning of the TASA. Mr Van Dyke has never lodged an application with the Board for registration as a tax agent.Communications between Mr Van Dyke and the Board prior to the filing of the proceedings On or around 15 September 2022, the Board sent an email enclosing a cease-and-desist letter to Mr Van Dyke advising that:The TPB is aware that you are engaging in conduct prohibited by the TASA, and is particularly concerned that:1. you are charging or receiving a fee or other reward for providing tax agent or BAS agent (tax practitioner) services when you are not a registered tax practitioner and you are not working under the supervision and control of a registered tax practitioner:a) assisting taxpayers with the preparation and lodgement of their income tax return/s.b) assisting taxpayers with the preparation and lodgement of their BAS.2. you are representing yourself as a registered tax practitioner when that representation is untrue.…What you must do to avoid legal action You must immediately stop any conduct, including representing yourself as a registered tax practitioner referred to above. As you are providing tax practitioner services, you must also cease such activity whilst you remain unregistered.We expect written confirmation of the above by 29 September 2022. Alternatively, you must provide reasons as to why you think your conduct is not a breach of the TASA. Failure to do so will lead to this matter being escalated for further action.This may include the [Board] commencing Federal Court proceedings for injunctions and/or penalty orders against you. (Original emphasis.) On or around 21 September 2022, Mr Van Dyke's legal representative emailed the Board confirming that:1. Mr Van Dyke has received your correspondence dated 15 September 2022.2. Mr Van Dyke understands the contents of the said correspondence, particularly the contention in relation to assisting taxpayers with preparation and lodgement of BAS and income tax returns.3. Mr Van Dyke takes seriously the matters raised in the said correspondence.Details of the respondent’s businesses

Decision

Reasons for decision

I also make the injunction in the terms sought, which is by consent.Conclusion For the reasons above, I impose a civil penalty of $1,800,000, and the declaration and injunction are made in the terms sought. The respondent is to pay the costs of the applicant.

Ratio Decidendi

Legal Principle Established

It will be necessary to return to these principles below.Consideration Given the purpose behind requiring registration of a tax agent, even a brief recitation of the respondent’s conduct reflects its seriousness. Mr Van Dyke’s conduct involved 3,359 contraventions of s 50-5(1) of TASA by preparing and lodging 3,359 tax returns for taxpayers, for a fee, while not registered as a tax agent. As acknowledged by the parties, taking this number at face value, this case represents the largest number of contraventions against s 50-5(1) of the TASA for which the Board has commenced proceedings. This conduct, which was deliberate, and undertaken for financial gain, occurred over nearly four years. It was a business conducted by Mr Van Dyke, from which he obtained a significant financial gain, being $1,658,000. Mr Van Dyke held himself out as a registered tax agent, knowing of the requirement for registration. The contraventions occurred in knowing defiance of the law. In doing so, he exposed many taxpayers to a scenario whereby tax agent services were being provided without the protections offered by a person who is registered under the TASA and subject to regulation by the Board. Despite Mr Van Dyke receiving from the Board a cease-and-desist letter (dated 15 September 2022), he continued to engage in the conduct for many months thereafter. This was in the face of the respondent acknowledging to the Board on 21 September 2022 that he understood the contents of the correspondence and took the matters raised “seriously”. Mr Van Dyke concealed the income that he earned from the conduct from the ATO by not disclosing it. The serious nature of the respondent’s conduct is self-evident. That said, I do not agree with the applicant’s characterisation that the respondent’s activities were “sophisticated”. Although it can readily be accepted that the respondent conducted a business, there was no sophistication to it. In that regard, I accept the respondent’s submission. However, therein lies the problem. The fact that this conduct can so easily be undertaken, and on a large scale, generating significant financial reward, starkly highlights the importance of deterrence. Moreover, the respondent’s submission that his clients had not been deprived of the opportunity to choose a tax agent who was subject to regulation by the Board because the clients approached him, entirely misses the point. Those clients approached him in circumstances where the respondent held himself out to be a tax agent. In doing so, he provided services to many taxpayers without the protections offered by a person registered under the TASA. The respondent, while accepting the serious nature of the conduct, submitted it occurred at the time when he was gambling heavily. He gave evidence that he became addicted to gambling at a young age, which had a significant impact on his mental health, personal life, and family. In many respects, the respondent’s evidence in cross-examination was unsatisfactory. He sought to minimise his conduct, giving explanations which downplayed the circumstances in which he committed the contraventions. The respondent’s counsel sought to advance this as a positive attribute, being evidence that Mr Van Dyke appreciates the seriousness of the position he is in. I do not accept that submission. The answers reflected the respondent’s willingness to minimise the serious of his conduct, which in turn impacts on the issue of specific deterrence.