Tax Practitioners Board v Van Stroe (No 2)

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FEDERAL COURT OF AUSTRALIA

Tax Practitioners Board v Van Stroe (No 2) [2023] FCA 1533

File number: WAD 179 of 2021
Judgment of: BANKS-SMITH J
Date of judgment: 6 December 2023
Catchwords: TAXATION - application for civil penalties to be imposed for multiple breaches of s 50-51 of the Tax Agent Services Act 2009 (Cth) - respondent on notice of requirements of legislation and prospect of proceedings against her prior to relevant contraventions - no explanation or cooperation - need for specific and general deterrence - application of principles - fine imposed
Legislation: Tax Agent Services Act 2009 (Cth) ss 2-5, 50-5, 50-35
Cases cited:

Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (The Nine Brisbane Sites Appeal) [2019] FCAFC 59; (2019) 269 FCR 262

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

Australian Competition and Consumer Commission v Employsure Pty Ltd [2023] FCAFC 5

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

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

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560

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

Construction, Forestry, Maritime, Mining and Energy Union v Fair Work Ombudsman (The Botany Cranes Case) [2023] FCAFC 40; (2023) 297 FCR 438

Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39

Cruickshank v Australian Securities and Investments Commission [2022] FCAFC 128; (2022) 292 FCR 627

Flight Centre Limited v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68

Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357

Tax Practitioners Board v Caolboy [2020] FCA 1559

Tax Practitioners Board v Hacker (No 3) [2020] FCA 1814

Tax Practitioners Board v HP Kolya Pty Ltd [2015] FCA 472; (2015) 232 FCR 34

Tax Practitioners Board v Ordiales [2022] FCA 1612

Tax Practitioners Board v Van Stroe [2022] FCA 482

Tax Practitioners Board v Williams [2023] FCA 63

Trade Practices Commission v CSR Ltd (1991) ATPR 41-076

Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584
Division: General Division
Registry: Western Australia
National Practice Area: Administrative and Constitutional Law and Human Rights
Number of paragraphs: 50
Date of hearing: 31 August 2022
Counsel for the Applicant: Mr MJ Follett SC
Solicitor for the Applicant: MinterEllison
Counsel for the Respondent: The respondent did not appear

ORDERS

WAD 179 of 2021
BETWEEN:

TAX PRACTITIONERS BOARD

Applicant
AND:

JESSA VAN STROE (ALSO KNOWN AS JESSA LAYOLA)

Respondent

ORDER MADE BY:

BANKS-SMITH J

DATE OF ORDER:

6 DECEMBER 2023

THE COURT NOTES THAT:

A.Pursuant to orders made 3 May 2022, a permanent injunction remains in place permanently restraining the respondent from providing tax agent services (as defined in the Tax Agent Services Act 2009 (Cth) (TAS Act

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Details
Case
[2023] FCA 1533
Decision Date

CaseChat Overview and Summary

The Tax Practitioners Board filed a civil penalty application against Ms Van Stroe for multiple breaches of the Tax Agent Services Act 2009 (Cth). Ms Van Stroe, who was neither registered nor licensed to provide tax agent services, engaged in a pattern of conduct involving the preparation and lodging of tax returns for multiple taxpayers, charging them for her services. The Tax Practitioners Board had previously notified Ms Van Stroe of the potential consequences of her conduct, yet she continued to provide such services, earning approximately $99,590 in the process. The primary legal issue for the court was the appropriate penalty to impose on Ms Van Stroe for her continued provision of unlicensed tax agent services, despite prior warnings and the risk of legal action. The court had to balance the need for specific deterrence, to prevent Ms Van Stroe from repeating her actions, with the need for general deterrence, to discourage others from engaging in similar conduct.

The court found Ms Van Stroe's actions to be serious and deliberate, with significant potential harm to the taxpayers involved. It noted the importance of the licensing regime under the Tax Agent Services Act and the need to protect the integrity of the tax system. The court held that a penalty sufficient to strip Ms Van Stroe of her financial gain was necessary to achieve specific deterrence. Additionally, a strong general deterrent was essential to ensure the Act's purpose was upheld and to prevent others from engaging in similar conduct. The court imposed a pecuniary penalty of $230,000 on Ms Van Stroe, while also ordering her to pay the Tax Practitioners Board's costs.

Orders

Orders of the court

1. Pursuant to s 50-35(2) of the TAS Act, for the civil contraventions referred to in the Declaration, the respondent is to pay pecuniary penalties to the Commonwealth in the total sum of $230,000.

2. The respondent to pay the applicant's costs, including reserved costs, to be taxed on a party and party basis 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

Ms Van Stroe was notified of the date of the penalty hearing, but similarly did not appear and did not seek to file any evidence or submissions.Facts From at least 2017, the Board received a number of referrals about the conduct of Ms Van Stroe in relation to providing tax agent services for a fee, despite not being a registered tax agent. On 8 March 2018 the Board issued a letter to Ms Van Stroe (then known as Ms Layola) informing her that the Board was concerned with her conduct as an unregistered tax agent. In the letter the Board notified her of the civil penalty provisions under s 50-5 of the TAS Act and that the Board would not hesitate to apply to the Court for the imposition of civil penalties if it received information in the future that she was continuing to provide tax agent services for a fee or other reward. A schedule to the claim relied upon for the purpose of the first hearing set out particulars of each of 531 alleged contraventions of the TAS Act by Ms Van Stroe. It also provided details of each taxpayer who received services from Ms Van Stroe, the date and amount of payment to her, and the date the taxpayer's income tax return was lodged with the Australian Taxation Office (ATO). A number of taxpayers provided affidavit evidence as to their dealings with Ms Van Stroe. I accept the Board's submission that those taxpayer affidavits evince a pattern of behaviour indicative of a deliberate attempt to engage in a profit-making scheme in circumstances where Ms Van Stroe was operating outside the regulatory framework for a number of years. Her usual practice was to meet with a taxpayer who had heard of her services through word of mouth and came to meet with her at a specified address. Ms Van Stroe would access their MyGov accounts with them, and then complete details for their tax return. She did not take steps to confirm that information included in the tax returns was supported or substantiated by reliable documentary evidence. She generally charged $180 for her services. The affidavits provide examples where false income tax deductions were not brought to the attention of the relevant taxpayer. Further, the evidence indicates that at least seven of the deponents of taxpayer affidavits were subject to an audit by the ATO, with an administrative penalty being imposed on six of those taxpayers. The 531 contraventions the subject of the declaration all occurred after the Board sent the letter of 8 March 2018 to Ms Van Stroe. They occurred during the period 1 July 2020 to 16 August 2021. The Board's investigation reveal that Ms Van Stroe earned some $99,590 from taxpayers in relation to the conduct. As Ms Van Stroe did not participate in the proceeding, the Court has no relevant information from her as to the circumstances of the contraventions, her financial position or any otherwise mitigating factors.Relevant statutory provisions - penalty I set out in my earlier reasons the statutory regime in force, but will repeat here those provisions of particular relevance to the imposition of a penalty.

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

The applicant submits that the Court should also consider the respondent's profits ($99,590) from her contraventions and that, at the very least, the penalty should strip her of any financial gain from her contraventions. It submits that anything less would not have a deterrent effect.Consideration I accept that Ms Van Stroe's contraventions were serious. Of particular concern is the vulnerability of taxpayers to exploitation, in circumstances where they may have deliberately sought to obtain genuine advice as to their taxation obligations and have paid for that advice. The fact that ATO audits were carried out on some of the taxpayers who utilised Ms Van Stroe's services reflects the potential harm that may be caused by such conduct, and emphasises its seriousness. The licensing regime exists to regulate the standard of advice provided to taxpayers and the behaviour of advisers. Circumventing the license requirement undoubtedly undermines the purpose of the TAS Act. In assessing the evidence presented on behalf of the Board, I have taken into account the fact that Ms Van Stroe has not participated in this proceeding. However, even taking into account the basic elements of the conduct - the number of contraventions over some 13 months and the profit made - it is readily apparent that Ms Van Stroe invested significant time in what was in effect a business of providing quick, unsubstantiated tax returns. This was not a case of casual advice given from time to time, or of 'helping out' a few people. It was a steady, deliberate and repetitive course of conduct. In particular, I infer that Ms Van Stroe knew that she was operating in contravention of the TAS Act. I draw this inference on the basis of the communication from the Board of 8 March 2018, and because the conduct that founded the contraventions occurred after that date. I have no information as to Ms Van Stroe's financial circumstances. That is a product of her decision to decline to provide any evidence or submissions to the Court. But it means I have no details about Ms Van Stroe that may have otherwise suggested any mitigating circumstances. I am cognisant of the significant burden a penalty of the amount I intend to impose may have on an individual. Whether it will do so in this case is unknown, but I have taken that possibility into account regardless. It is regrettable that Ms Van Stroe declined to address such matters with the Court. The financial gain made by Ms Van Stroe was not insignificant. She continued to provide unlicensed services despite knowing she was contravening the TAS Act and despite being on notice of the risk of court proceedings being pursued. A level of specific deterrence is therefore required. A penalty that has the effect of permitting her to keep the benefits she has made from the contraventions would not be sufficient in the circumstances of this case. There is also a strong need for general deterrence. I accept the Board's submission that in the absence of a strong general deterrent, the purpose of the TAS Act and the integrity of the tax system would be undermined. The penalty needs to be sufficient to dissuade others from seeking to provide such services for benefit and without complying with the regulatory regime, including the requirement of registration.