Taxation Guru Pty Ltd and Gambhir Watts and Tax Practitioners Board - [2019] AATA 3249

Taxation Guru Pty Ltd and Gambhir Watts and Tax Practitioners Board [2019] AATA 3249 (4 September 2019)

Division:TAX AND COMMERCIAL DIVISION
File Number: 2019/4540 & 2019/5044
Re:Taxation Guru Pty Ltd and Gambhir Watts
APPLICANT

AndTax Practitioners Board
RESPONDENT

DECISION

Tribunal: Member D K Grigg
Date:4 September 2019
Place:Sydney

The Applicants’ applications for a stay pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) are refused.

The interim stay granted on 1 August 2019 is discharged.

...............................[Sgd]......................................

Member D K Grigg

CATCHWORDS

TAX AGENT REGISTRATION – termination of applicants’ registrations as tax agents - application for a stay pending decision under review – prospects of success – public interest - stay applications refused

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)

Tax Agent Services Act 2009 (Cth)

CASE LAW

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Ferozkohei v Commissioner of Taxation [2017] AATA 2405

Ferozkohei v Commissioner of Taxation [2017] AATA 2406

Re Su and Tax Agents’ Board of South Australia (1982) 61 FLR 1

Thambiannan v Commissioner of Taxation [2016] AATA 1004

Watts v Commissioner of Taxation [2017] AATA 2030

SECONDARY MATERIALS

Explanatory Paper TPB (EP) 02/0210: "Fit and proper person"

REASONS FOR DECISION

Member D K Grigg
4 September 2019

BACKGROUND

Taxation Guru Pty Ltd (“Taxation Guru”) has been operating as a registered tax agent for 16 years.
Mr Gambhir Watts has been operating as a registered tax agent since 1999 and is the sole director and controlling mind of Taxation Guru.
On 6 February 2019 the Tax Practitioners Board (“TPB”) wrote to Mr Watts, as director of Taxation Guru, to advise that it would be investigating the Taxation Guru’s conduct regarding a possible breach of the Tax Agent Services Act 2009 (Cth) (“TASA”).
On 30 May 2019 the TPB wrote to Mr Watts to advise that it would be investigating his conduct regarding a possible breach of the TASA.
The TPB advised Taxation Guru on 27 June 2019 that it had decided that Taxation Guru had failed to comply with subsections 30‑10(7), 30‑10(9), and 30‑10(10) of the Code of Professional Conduct (“Code”). As a result of that decision the TPB decided to terminate Taxation Guru’s registration as a tax agent pursuant to section 30-30 of the TASA (“Taxation Guru Decision”). The termination took effect from 1 August 2019. The effect of the termination is that Taxation Guru must not provide any tax agent services or it may be subject to civil penalties pursuant to section 50.5, 50.10, and 50.15 of the TASA.
The TPB advised Mr Watts on 15 August 2019 that it had decided that he had also failed to comply with subsections 30‑10(7), 30‑10(9), and 30‑10(10) of the Code and that he no longer met the tax practitioner requirements for registration as he was not a “fit and proper person” as required by section 20.5(1)(a) of the TASA. As a result of that decision the TPB decided to terminate Mr Watts registration as a tax agent pursuant to section 40-5 of the TASA (“Watts Decision”). The termination will take effect from 19 September 2019. The effect of the termination is that Mr Watts must not provide any tax agent services or he may be subject to civil penalties pursuant to section 50.5, 50.10, and 50.15 of the TASA.
In its reasons for decision against Taxation Guru the TPB advised that:

(a)it was satisfied, on the balance of probabilities, that the company had breached 30‑10(7) of the Code in failing to ensure that the service that the company provided, or that was provided on their behalf, was provided competently when preparing and lodging income tax returns (“ITRs”) for five of its clients in the 2013 and 2014 financial years. The TPB noted that the five clients had been subject to audits by the Australian Taxation Office (“ATO”), subsequent review by the ATO and, in four of the cases, subject to appeal to this Tribunal. The basis of the audits and subsequent reviews of those clients ITRs was due to the fact that work-related expense deductions had been claimed that did not have a sufficient nexus or could not be substantiated;
(b)it was satisfied, on the balance of probabilities, that the company had breached 30‑10(9) of the Code in failing to take reasonable care to ascertain the state of affairs of those five clients by failing to ask, or ensure that sufficient or pertinent questions were asked, regarding work-related expense deductions and/or sight the necessary supporting documentation to ascertain the expenses were actually incurred and substantiate these claims or deductions, prior to preparing and lodging their 2013 and/or 2014 ITRs;
(c)it was satisfied, on the balance of probabilities, that the company had breached 30‑10(10) of the Code in failing to take reasonable care to ensure that the taxation laws were applied correctly to the circumstances in which it provided advice to five of its clients that was relevant to the preparation and lodgement of their 2013 and/or 2014 ITRs, by incorrectly applying the eligibility criteria and substantiation rules relating to the claiming of their work-related expense deductions in those ITRs.

In its reasons for decision against Mr Watts the TPB advised that:

(a)it was satisfied that Mr Watts had breached subsection 30-10(7) of the Code by failing to ensure that tax agent services that he provided, or that were provided on his behalf, were provided competently in preparing and lodging income tax returns (ITRs) on behalf of:
(i)    four of his clients (Mrs Maria Baby, Mr Shreejith Mohan Kanoth, Mr Rohit Sahdev, and Mr Vishal Purohit) for the 2017 financial year; and
(ii)   five of the clients of Taxation Guru (Ms Moksha Watts, Mr Fazlrahman Ferozkohei, Mrs Malalai Ferozkohei, Mr Thangadurai Thambiannan and Mr Walter Secord) for the 2013 and/or 2014 financial years;
(collectively, "the relevant clients").
(b)it was satisfied that Mr Watts had breached subsection 30-10(9) of the Code by failing to ascertain whether work related expenses were actually incurred and substantiated prior to preparing and lodging the relevant clients' ITRs;
(c)it was satisfied that Mr Watts had breached subsection 30-10(10) of the Code by failing to correctly apply the eligibility criteria and substantiation rules relating to the claiming of work-related expense deductions in the relevant clients' ITRs;
(d)it was satisfied that Mr Watts ceased to be a fit and proper person given that:
(i)    in his capacity as sole director , supervising agent and controlling mind of Taxation Guru he was personally accountable for the conduct that breached the Code and resulted in TPB’s decision of 20 June 2019 to terminate Taxation Guru’s registration as a tax agent; and
(ii) Mr Watts has demonstrated a disregard of his obligations under the TASA by preparing and lodging the ITRs for clients of Taxation Guru and his individual clients across multiple years which included excessive deductions based on incorrect application of the taxation laws and without making adequate enquires.

On 28 July 2019 Taxation Guru applied to this Tribunal for review of the Taxation Guru Decision dated 27 June 2019.
On 18 August 2019 Mr Watts applied to this Tribunal for review of the Watts Decision dated 15 August 2019.
The Tribunal has jurisdiction to review the Taxation Guru Decision and Watts Decision pursuant to section 25 of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”) and section 70.10(e) of the TASA.
On 31 July 2019 and 18 August 2019 Taxation Guru and Mr Watts respectively filed stay applications of the TPB’s decisions pursuant to section 41(2) of the AAT Act and submitted:
We strongly believe that after AAT hearing the decision of the Respondent will be reversed. If not stayed it will cause severe hardship and harm to the business reputation and very substantial financial loss
The TPB opposes both stay applications.
An interim stay in relation to the Taxation Guru Decision has been in place since 1 August 2019.
The parties agreed that both stay applications should be heard together as the grounds relied upon by TPB, which give rise to the reviewable decisions, are the same.

LEGISLATIVE BACKGROUND

TASA

The object of the TASA, as stated in section 2-5 is "to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct".
The TASA establishes the TPB and provides for the registration and regulation of tax agents. Part three of the TASA sets out a Code of Professional Conduct (“Code”) which applies to registered tax agents.[1] The TPB is authorised to investigate a registered tax agent’s conduct that may breach the TASA pursuant to section 60.95.
[1] Section 30.5, TASA.
Section 20.5(1)(a) of the TASA provides that an individual is eligible for registration as a registered tax agent, BAS agent or tax (financial) adviser if the TPB is satisfied that the individual is a fit and proper person.
In determining whether a person is a fit and proper person to be registered as a tax agent, the TPB must have regard to whether the individual “is of good fame, integrity and character”.[2]
[2] Section 20-15(a), TASA.
The TPB referred the Tribunal to its Explanatory Paper TPB (EP) 02/0210: "Fit and proper person" (“Explanatory Paper 02/2010”) which provides guidance to agents regarding the TPB’s interpretation of the fitness and proprietary requirements of the TASA.
The Tribunal is not bound to apply the Explanatory Paper 02/2010 but it may, and it should, apply it in exercising its discretion unless it is unlawful or “tends to produce an unjust decision”.[3]
[3] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 645.
Brennan J explained the relevance of an adopted policy to decision-making in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 640:
Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy. By diminishing the importance of individual predilection, an adopted policy can diminish the inconsistencies which might otherwise appear in a series of decisions, and enhance the sense of satisfaction with the fairness and continuity of the administrative process.
The Tribunal is not aware of any cogent reason for not following the EP.
Paragraph 84 of Explanatory Paper 02/2010 explains that:
A failure by a tax practitioner to discharge their responsibilities on behalf of clients could reflect adversely on the tax practitioner's fitness and propriety for registration where it amounts to unsatisfactory or unreasonable failure in the tax practitioner’s circumstances and all the surrounding circumstances of the case.
Paragraph 86 of Explanatory Paper 02/2010 sets out specific examples of a failure to properly maintain client relationships that may in the circumstances reflect adversely on fitness and propriety for registration. One of those examples is:
·lacking the requisite knowledge and skills to provide services to a professional and competent standard
In Re Su and Tax Agents’ Board of South Australia (1982) 61 FLR 1 Davies J said, at 4-5:
The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
(emphasis added)
Section 30.10 of the TASA sets out the Code that registered tax agent’s must comply with in order to maintain their registration. The following subsections of section 30.10 are relevant here:

(a)section 30.10(7) provides that a registered tax agent:
“must ensure that a tax agent service that you provide, or that is provided on your behalf, is provided competently”;

(b)section 30.10(9) provides that a registered tax agent:
“must take reasonable care in ascertaining a client's state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or a thing you are doing on behalf of the client”;

(c)section 30.10(10) provides that a registered tax agent:
“must take reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client”.

If, having conducted an investigation of a registered tax agent, the TPB is satisfied that the tax agent has failed to comply with the code of professional conduct, the TPB may terminate the registered tax agent’s registration pursuant to section 30.30 of the TASA.[4] The termination of a registered tax agent’s registration takes effect on the day specified in the notice provided by TPG of the decision to terminate the registration.[5]
[4] Section 30.15, TASA; see also section 40.15 of the TASA which provides that where a registered tax agent is a company the board may terminate its registration for breach of the code of professional conduct.
[5] Section 40.20, TASA.

Power and Criteria for the Grant of a Stay

The power of the Tribunal to grant a stay of the operation or implementation of a reviewable decision, derives from section 41(2) of the AAT Act which provides:
The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
(emphasis added)
It is not in dispute that the factors relevant to the exercise of the discretion to grant a stay are:[6]

(a)the prospects of success of the substantive application for review;
(b)the consequences to the applicants if the request for a stay is refused;
(c)the public interest;
(d)the consequences for the TPB in carrying out its functions; and
(e)whether the substantive application for review would be rendered nugatory if the request for a stay order were not granted.

[6] Re Scott and ASIC [2009] AATA 798, per Davies J.

ISSUE FOR THE TRIBUNAL

The issue for the Tribunal is whether to grant a stay of the Taxation Guru Decision and Watts Decision pursuant to section 41(2) of the AAT Act.

CONTENTIONS

Applicants Contentions

The Applicants contend that stays should be granted on the grounds that:[7]
[7] Applicant’s written submissions.

(a)the Taxation Guru Decision and Watts Decision was wrong, harsh and unjustified;
(b)a very small number of irregularities in the conduct of the Applicants’ taxation practice have been taken out of proportion. Out of the 29 client files audited by the ATO, 24 of those decisions were fully or substantially reversed on lodging of the objection;
(c)in relation to the five clients who failed on appeal in substantiating their work-related expenses, those matters were not entirely relevant to the conduct of the Applicants;
(d)the Applicants did not engage in misconduct. Mr Watts told the Tribunal that some of his clients had “lied” to him regarding the expenses they had claimed as deductions in their ITRs;
(e)Taxation Guru has developed its reputation of the course of 16 years and is in the advanced stage of setting up a franchise under the name Taxation Guru which has been registered as a registered trademark with IP Australia. Taxation Guru provided copies of an agreement with DC Strategy Proprietary Limited, an incorporated legal practice, which has assisted in advising on a franchised structure;
(f)the cancellation of Taxation Guru’s registration will put a halt on its ability to provide taxation services and will hinder its ability to form a franchise network. The cancellation of its registration will be made public and will greatly harm Taxation Guru’s established reputation and future ability to franchise, and causing substantial financial loss;
(g)to satisfy the TPB that the issues of concern will not happen again Mr Watts states that he has designed templates for his practice developed from the CPA Australia regarding work-related expense schedules, checklists and records and require client declaration;
(h)Mr Watts told the Tribunal that:
(i) since he had become licensed to practice 17 years ago, he had never had any blemishes to his record;
(ii) he is a fellow of the CPA and a tax advisor for the Chartered Taxation Institute;

there has been no complaint against the Applicants and no claim has been made against Mr Watts’ professional indemnity insurance;

(j)if a stay is not granted, the Applicants will have to cease providing accounting services to 560 clients and that it will not be easy to regain those clients when he is ultimately successful at final review. Mr Watts believes that the harm will be irreversible;
(k)cancellation of the Applicant’s Tax Agent Licence will put these clients to a great inconvenience and discomfort;
(l)there are no public interests concerns because of the new practices he has put in place to ensure that the issues raised by TPB in relation to the relevant clients do not re-occur;
(m)the issues giving rise to the TPB Decisions happened several years ago;
(n)“As pointed out to the Commissioner and advised to the Board an officer from the Commissioner's office had visited the office of the Applicant in his capacity as the Principal supervising Tax Professional of Taxation Guru Pty Ltd in relation to his concerns with the 'relatively higher tax refunds' for the Taxation Guru clients. he had heated arguments with the Applicant – the director of the company and then he threatened that he would ''teach the director a lesson'' and then commenced the process of reckless audits.
All the 29 audits were conducted by one audit officer as selected by the officer who had threatened the Applicant teaching the director of the Applicant a lesson.
All the decisions (including against the Applicant and his family members) were initially against the Applicant. Majority of these adverse audit decisions were fully or substantially reversed on lodgingObjection. Only a few remained unchanged due to various reasons NOT entirely relevant to the Conduct of the Applicant.
Yet the Commissioner lodged complaint with the Board presenting all the cases selected for the initial audit, thus highly inflating the cases of ‘the Applicant’s ‘misconduct’. And the Respondent seems to have been indeed influenced by this number of cases reported to it by the Commissioner.”
(emphasis added)

TPB’s Contentions

The TPB contends that stays should not be granted on the grounds that:[8]

(a)the Applicant's application for review has no real prospects of success;
(b)in relation to the four clients of Mr Watts (as opposed to the five clients of Taxation Guru), multiple work-related expense deduction claims were reduced to nil upon completion of ATO audits due to not having sufficient nexus and/or not being adequately substantiated;

(c)“During the investigation, the Respondent made direct contact via telephone with Maria Baby and Rohit Sahdev who confirmed that the information they provided to the Applicant for the preparation of their ITRs did not support the deductions claimed by the Applicant on their behalf”;
(d)“the Applicant has demonstrated a lack of competence that is so severe that his ongoing provision of tax agent services places his clients at an unacceptable risk of receiving unreliable tax agent services and tax advice. Whilst the Applicant's existing clients are faced with the inconvenience of potentially seeking a new tax agent, the ongoing impact of addressing defective tax agent services or advice from the Applicant outweighs such an inconvenience and in fact is persuasive in refusing a stay”;
(e)“the serious nature of the underlying conduct constituting the breaches of the Code is such that the Applicant is not a fit and proper person to be registered to provide tax agent services. Furthermore, the adverse observations made by the Tribunal against the Applicant, which are available in the public domain, are already unfavourable to the Applicant's reputation and demonstrates that he is not of good fame”;
(f)“the continued registration of the Applicant presents an unacceptable risk to the public and undermines the regulatory authority of the Respondent”; and
(g)the granting of the stay is not necessary in order to secure the effectiveness of the hearing and determination of the application for review.

CONSIDERATION

[8] Respondent’s written submissions.

Prospects of Success

One of the most important factors to consider in determining whether to grant a stay is the likelihood of the applicant succeeding at the final review hearing.
The Applicants’ submissions on this point appear to be that the relevant clients number only five which is a small number in the grand scheme of things and that the issues were mere “irregularities”. There is no argument made that the ITRs were prepared correctly.
The Applicants submitted that the reasons the work-related expenses were not accepted by the Commissioner of Taxation were for reasons which had nothing to do with the Applicants. The Applicants did not identify what those reasons were.
There appears to be no real argument against the findings of the TBP, particularly given the decisions of this Tribunal in relation to four of those clients.
If, as Mr Watts told the Tribunal, he had been misled by those clients, this would have been apparent to him once the ATO’s audit had been completed and amended assessments issued. Why then did Mr Watts proceed to act for those clients in lodging objections to the amended assessments and then act for those clients on appeals to this Tribunal? If he had been aware, having been presented with the information obtained by the ATO on audit, that there was no basis for the work-related expenses claimed by his clients, why did he not at that stage advise his clients to accept the ATO’s amended assessments? Instead of taking that course, what he in fact did was continue to submit, on behalf of his clients, that the claimed work expenses were in fact incurred and should be allowed as deductions against his clients’ assessable income.
One of the relevant clients is Ms Moksha Watts, who is Mr Watts’ daughter. In her 2013 ITR she claimed, inter alia, more than $20,000 in work-related travel expenses, clothing and self-education. Her ITR was prepared by Mr Watts. Similar claims were made by Ms Watts in her 2014 ITR, also prepared by Mr Watts. The ATO decided to audit Ms Watts’ ITRs. Mr Watts assisted his daughter in attempting to demonstrate the basis for the claimed expenses. Ultimately the ATO determined that Ms Watts had not substantiated the travel, clothing, self-education and other expenses. As a result, the ATO issued amended assessments. Mr Watts then lodged an objection to the amended assessments on his daughter’s behalf. The matter ultimately proceeded to the AAT and is reported as Watts v Commissioner of Taxation [2017] AATA 2030. Senior Member Nicoletti found, among other things, that no permitted basis was identified regarding the travel expense claim. At the hearing, Mr Watts “admitted… that [his daughter] effectively claimed deduction in respect of expenses she had never incurred, which is clearly not permissible under any taxation law”.[9] There was also no evidence found substantiating some of the other claims. Senior Member Nicoletti found:
[49]At the hearing, it was clear that the Applicant’s taxation agent was under the misapprehension that because the claim made in FY2012 was “allowed” (meaning, in effect, that the income tax return for FY2012 was not audited), the Applicant’s claimed deductions for FY2013 and FY2014 must be allowed. This is a rather absurd interpretation of the tax regime and taxpayers’ obligations
[73]The Applicant further claims that "there has been absolutely no reckless[ness] or lack of reasonable care" but has provided no information to satisfy me that any of the impugned deductions were claimed on a reasonable basis. I must also add that it was evident to me that Mr Gambhir Watts, who represented the Applicant at the hearing and identified himself as the Applicant’s taxation agent, was largely responsible for submitting deductions which were clearly not permissible under the law. Having stated during the hearing that he has been a tax agent for more than 15 years, I find Mr Watts’ conduct in claiming deductions which he either knew or ought to have known were impermissible both reckless and inexcusable.
[74]I therefore agree with the Respondent that the Applicant and her taxation agent were reckless in preparing and lodging her FY2013 and FY2014 taxation returns.
(emphasis added)
[9] [2017] AATA 2030, at [48].
Similar findings regarding lack of substantiation for work expense claims were found in another of the relevant clients matters before the Tribunal, Thambiannan v Commissioner of Taxation [2016] AATA 1004. In that matter Mr Watts again represented the client in the pursuit of unclaimable deductions.
In another of the relevant clients matters, Ferozkohei v Commissioner of Taxation [2017] AATA 2405 and Ferozkohei v Commissioner of Taxation [2017] AATA 2406, the taxpayers were unable to substantiate the claims made in their ITRs. Senior Member Nicoletti found that Mr Watts and Mr and Ms Ferozkohei had been “reckless” in the preparation and lodgement of their ITRs and that despite engaging Mr Watts as their tax agent, the taxpayers had no records to substantiate many of the deductions claimed and took no “reasonable care” to establish the claims were deductible.[10]
[10] [2017] AATA 2405, at [54]-[55]; [2017] AATA 2406, at [54]-[55].
Despite the findings of the ATO and the Tribunal in the decisions referred to above, Mr Watts still maintains (in his written submissions) that the audits undertaken by the ATO were “reckless”. The Tribunal is very concerned about this submission as it indicates Mr Watts still fails to understand that the expenses claimed by his clients were unsubstantiated and therefore not maintainable. Clearly, given the decisions ultimately made by the Tribunal, it was Mr Watts’ conduct that was reckless, not the ATO’s.
The Tribunal is concerned with the fact that Mr Watts appears to take no responsibility for the false and misleading ITRs lodged by him on his client’s behalf’s. The comments made by Mr Watts, at the hearings before this Tribunal in relation to those clients’ matters, are of great concern and show a lack of understanding of relevant tax laws. This goes towards his competency and impacts on the prospects of success he will have in relation to these matters on final review.
Although the TPB Decisions relate to income tax returns lodged primarily in the 2013 and 2014 financial years, the templates and proposed new practice measures Mr Watts says he has put in place were only recently implemented by the Applicants. The TPB was not made aware of these proposed changes until receiving Mr Watts’ submissions. The Applicants were fully aware of the basis for the errors in the relevant clients’ ITRs by, at the very least, the end of the audit by the ATO or the handing down of the decisions by this Tribunal. No explanation was proffered by the Applicants to explain why those measures had not been implemented since at least by 2017. There is also no evidence that the templates annexed to Mr Watts submissions have in fact been utilised by him to date.

Consequences to the Applicants

The termination of the registration will have consequences in terms of the Applicants’ ability to maintain clients and the intended franchise operation. However, this is not a unique circumstance and would be faced by anyone in the position of losing their tax agency registration.
Documents provided by Mr Watts indicate that:

(a)Taxation Guru originally sought advice from Sparke Helmore Lawyers regarding setting up a franchise in 2014;
(b)DC Strategy was not engaged until May 2019, which is after the TPB began its investigations of Taxation Guru, and further was engaged by Mr Watts of “BMGW Pty Ltd”, not Taxation Guru Pty Ltd;
(c)DC Strategy was paid $14,454 in legal fees on 23 July 2019 regarding the Taxation Guru business; and
(d)the trade mark “Taxation Guru” was applied for and registered in the name of “BMGW Pty Ltd”, not Taxation Guru Pty Ltd.

Mr Watts explained in written submissions that the franchise idea was not pursued in 2014 because of a lack of funding and a family matter. The material provided indicates that after the TPB began its investigations of Taxation Guru, a different legal entity controlled by Mr Watts is intending to operate a business or franchise under the name “Taxation Guru”. Therefore, any impact the refusal to grant a stay on Taxation Guru will not have any impact in relation to any proposed costs/franchise operations of BMGW Pty Ltd.
Further, there are no current franchisees and there is no evidence that Taxation Guru has completed all necessary steps for it to establish itself as a franchisor. At this stage the consequence of the termination of registration is being unable to start a franchise. There is no immediate financial loss, nor is there any guarantee that the franchise would be successful in any event.
The Tribunal acknowledges there may be some inconvenience to the Applicants’ current clients having to find an alternative tax agent.

Public Interest

The expense and stress to each of those five clients and the other 24 clients that had to go through an objection procedure with the ATO, and in some cases review by this Tribunal, should not be underestimated. From the material before the Tribunal it appears that those reviews could have been avoided if the relevant clients had been properly advised by the Applicants, and had they not claimed expenses which could not be substantiated.
Taxpayers have a right to expect that the advice they are receiving from their tax agents is competent and that they are not being led into danger of breaching their tax obligations by claiming deductions which cannot be maintained.

Application for review would not be rendered nugatory

The Tribunal agrees with the TPB that the application for review would not be rendered nugatory if our stay was refused. If the Applicants are successful at final review, the termination decisions will be set aside or varied and the Applicants will be able to recommence the provision of tax agent services as registered tax agents.

Conclusion

In the circumstances the Tribunal finds a stay order is not in the public interest and the public interest outweighs the detriment which the Applicants contend they will suffer if the stay is not granted.
Mr Watts does not appear to have shown any “remorse, contrition and an awareness of the significance and consequences of the misconduct or wrongdoing…such that the TPB and the Commissioner can have confidence in the practitioner’s continued ability to honestly and competently discharge the functions of the profession”.[11]
[11] See paragraph 95, Explanatory Paper 02/2010.
The Applicants have not satisfied the Tribunal that the stay applications should be granted.

DECISION

The stay applications are refused, and the interim stay order is discharged.

I certify that the preceding 56 (fifty-six) paragraphs are a true copy of the reasons for the decision herein of Member D K Grigg

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Associate
Dated: 4 September 2019

Date of hearing:	27 August 2019
Applicant:	By telephone
Advocate for Respondent:	Mr Justin Lie (by telephone)
Respondent:	Tax Practitioners Board