The Applicant and Tax Agents' Board of New South Wales

[2004] AATA 482

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 482

ADMINISTRATIVE APPEALS TRIBUNAL

GENERAL ADMINISTRATIVE DIVISION            N 2003/1613

Re: The Applicant

Applicant

And: TAX AGENTS’ BOARD of NEW SOUTH WALES

Respondent

DECISION

Tribunal:       P.J. Lindsay, Senior Member

Date:             14 May 2004

Place:            Sydney

Decision:The decision under review is affirmed.

(Sgd) P. J. Lindsay, Senior Member

©        Commonwealth of Australia          (2004)

CATCHWORDS Application for registration as tax agent – meaning of ‘relevant employment’ in reg 156 Income Tax Regulations - applicant not supervised by registered tax agent in five years prior to application for registration – applicant did not perform relevant employment -– decision affirmed.

Income Tax Assessment Act 1936 ss.251BC, 251JA

Income Tax Regulations 1936 reg 156

Tax Agents’ Board of Queensland v Seymour (1990) 20 FCR 357

Tax Agent’s Board of New South Wales v Martin (1997) 45 ALD 192

REASONS FOR DECISION

P.J. Lindsay, Senior Member

1. The applicant has applied to the Administrative Appeals Tribunal for review of a decision by the Tax Agents’ Board of New South Wales to refuse her application for registration as a tax agent. The Board wrote to the applicant on 25 September 2003 informing her that it had decided not to grant registration under s.251JA of the Income Tax Assessment Act 1936 (the Assessment Act) because it was not satisfied that she had been engaged “ … in relevant employment on a full time basis for not less than a total of 12 months in the preceding 5 years, being an employee of a registered tax agent prescribed in Regulation 156 (1) (a) …”. (T2)

2. At the commencement of the tribunal’s hearing, the applicant sought an order that her identity be kept confidential. The respondent did not oppose the application. Being satisfied that it was desirable to do so, I made an order under s.35(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) that the publication of the applicant’s name and of any material tending to identify the applicant be restricted to members and staff of the tribunal, the parties, their representatives and the staff of Auscript. The applicant represented herself before the tribunal and Mr M Allatt, of the Australian Government Solicitor, appeared for the Board. The respondent lodged with the tribunal the documents (T documents) required by s.37 of the AAT Act.

3.      The legislation relevant to this application is found in the Income Tax Assessment Act 1936 (the Assessment Act), section 251JA(1) providing as follows:

(1) The Board shall register the applicant as a tax agent if the applicant satisfies the Board that:

(a) if the applicant is a natural person:

(i) the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and

(ii) the applicant is not an undischarged bankrupt; …

Section 251BC(1) of the Assessment Act deals with the expression ‘fit and proper person’ and reads:

(1) Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:

(a)the person is not a natural person;

(b) both of the following conditions are satisfied:

(i) the person was not registered as a tax agent, or as a nominee, for the purposes of this Part immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No. 2) 1988;

(ii) the person does not hold such qualifications (whether academic, by way experience or otherwise) as are prescribed;

(c) the person has not attained the age of 18 years;

(d) the person is not of good fame, integrity and character;

(e) the person has been convicted of a serious taxation offence during the previous 5 years; or

(f) the person is under sentence of imprisonment for a serious taxation offence.

4.      Regulation 156 in the Income Tax Regulations 1936 is also relevant.  In relation to a graduate in accountancy, reg 156(1)(a) is applicable and it states:

For the purposes of subparagraph 251BC (1) (b) (ii) of the Act, the following qualifications are prescribed:

(a) the person:

(i) shall have completed the academic requirements for the award of a                degree, diploma or other qualification from an Australian university,   college of advanced education or other tertiary institution of an   equivalent standard, and have passed examinations in such subjects,   under whatever name, which an appropriate authority of the university,   college of advanced education or other tertiary institution certifies to             the Board to represent a course of study in accountancy of not less   than 3 years'   duration and in commercial law of not less than   18 months' duration or shall possess such other qualifications   as the Board regards as equivalent to those         qualifications;

(ii) shall have:

(A) been engaged in relevant employment on a full-time basis   for not less than a total of 12 months in the preceding 5 years;

(B) otherwise been engaged in relevant employment to an   extent that the Board regards as equivalent to that referred to   in sub-subparagraph (A); or

(C) been engaged in such other employment and for such   time as the Board regards as equivalent to being engaged in                   relevant employment as referred to in sub-subparagraph                 (A); and

(iii) shall have, by written examination, successfully completed a              course of study in Australian income tax law acceptable to the                 Board;

Regulation 156(2) sets out the meaning of ‘relevant employment’:

(2)In this Regulation relevant employment means employment by a person or a partnership or as a member of a partnership in the course of which there has been substantial involvement in income tax matters including:

(a) the preparation or examination of a broad range of income tax returns;

(b))the preparation or examination of objections to assessments issued in respect of such returns; and

(c) the provision of advice in relation to income tax returns, assessments or         objections.

5.      On 30 July 2003 the applicant completed the application form relating to an individual applying for their initial registration as a tax agent (T4).  Her application, noted that she had completed a university degree, Bachelor of Commerce (Accounting), in 1996 and that she was eligible for membership as a CPA.  A copy of her academic record was attached.  It showed that she successfully completed the subject Taxation Law in the first semester of 1995.  The applicant agreed that her application for registration as a tax agent was made on the basis that she held a degree in accounting. She maintained she was able to demonstrate that she had performed relevant employment in the period prior to the application.

6.      In relation to taxation experience, the applicant said that she worked for the Income Tax Professionals (ITP) from July 1991 to November 1991, after completing a course of instruction in taxation that had been conducted by ITP.  The applicant attended an ITP refresher course in 1994. The applicant told the tribunal that she has made an earlier application for registration as a registered tax agent. That application in 1994 was unsuccessful. Subsequently, she became an accountant for   a company that was incorporated in 1994 and referred to herein as SJR Pty Limited. Her recent application for registration informed the Board that she had worked for SJR for 9 years 1 month from 1 July 1994.  The applicant furnished the Board with the following break-up of work performed during the period from the year ended 30 June 1994 to the year ended 30 June 2002:

Individuals	Partnerships	Companies	TOTAL
1994	50	2	1	53
1995	66	3	1	70
1996	60	2	3	65
1997	85	4	3	92
1998	101	3	3	107
1999	156	3	2	161
2000	171	3	1	175
2001	188	3	1	192
2002	160	2	4	166
Total	1081

However, a certificate of work experience, required from a nominee of the registered tax agent for whom the applicant has worked, SJR, had not been completed.

7.      In explanation, the applicant said that she was a director and 75 per cent shareholder in SJR, and a Mr A was the other director and holder of the remaining issued share capital.  SJR was registered as a tax agent. Mr A had been, and remains a registered tax agent in his own right, and became the nominee for SJR.  The applicant said that from approximately June 1994 to June 1998, she used to get Mr A, as nominee of ABC, to sign clients’ tax returns. She said she prepared the returns and Mr A would check them. He was paid a fee by SJR for checking and signing the returns.  SJR applied for re-registration but it was refused by the Board on 26 June 2003 because Mr A had resigned as a director on 7 May 2003 (exhibit R2) leaving the company without a registered nominee.

8.      The applicant said that from around June 1998, SJR could no longer afford to pay Mr A for signing the returns and it was operating at a loss. She said that Mr A had nothing to do with SJR from June 1998.  Despite this, she continued to prepare returns on behalf of SJR, insert SJR’s registered tax agent’s number on the returns and lodge them electronically with the Australian Taxation Office. In cross-examination she acknowledged that the Australian Taxation Office would not be aware that preparation and lodgment of such returns had not been authorised by a tax agent or nominee.  She insisted that she did nothing wrong and had acted honestly and in the best interests of the clients. She conceded, however, that she had not been supervised in her return preparation work since June 1998 and had worked independently of Mr A.

9.      The applicant said she approached Mr A with the request that he complete the certificate of work experience but he refused.  A letter written by him on 28 May 2003 (exhibit R2) to the Board sets out matters germane to the applicant’s application for registration as tax agent and Mr A’s reasons for not completing the certificate of work experience:

I refer to your letter of 19 May 2003.

[The applicant] approached me several years ago to assist her to obtain her full qualifications as a tax agent.

I agreed at that time to join with her in the formation of a company to be called [SJR Pty Ltd] on the strict understanding that I was to supervise and sign all tax returns

[The applicant] duly presented me with a substantial number of tax returns for my approval and signature and I proceeded to sign them for a period of approximately two years.

It now appears from the form that you have sent me that [the applicant] has continued to submit tax returns to your office in the name of the company of which I was a director but without my knowledge.  It has been so long since I signed off on tax returns submitted by the company that I had forgotten that I was a director and believed that the company was no longer operating.

I trust that my name has not been used in connection with any tax returns which have been submitted to you since the electronic lodgement regime commenced.

You will appreciate that I am not in a position to comment as to whether [the applicant] is a suitable person to be registered as a tax agent in such circumstances.

Mr A did not give evidence at the hearing.  Despite a letter to the Board from her solicitors on 31 July 2003 claiming that Mr A’s letter “does not accord with the facts” (T5), the applicant did not seek to cross-examine Mr A. The solicitors were instructed that she had a falling out with Mr A regarding remuneration but he had not complained about the quality of her work. Her oral evidence was to that effect.

10.     The applicant submitted that all her experience working on taxation matters should be taken into account in deciding whether she was a fit and proper person to prepare income tax returns. She referred to her work for ITP in 1991 and her subsequent work for SJR, where she was supervised by Mr A from 1994 to 1998.  She also submitted that from June 1998 onwards, she acted with a considerable degree of autonomy in the conduct of SJR’s practice as a tax agent because Mr A was not involved with the business. She said her role was analogous to the applicant in Tax Agent’s Board of New South Wales v Martin (1997) 45 ALD 192.

11.     For the respondent it was submitted that in satisfying itself that an applicant for registration holds prescribed qualifications by way of experience (s.251BC(1)(b)(ii)), that experience is defined by the scope of ‘relevant employment’ in reg 156(2). It was submitted that Tax Agents’ Board of Queensland v Seymour (1990) 20 FCR 357 established that the meaning of ‘relevant employment’ in reg 156(2) requires an employee of an incorporated employer to be under the supervision and control of a registered nominee. The respondent submitted that under reg 156(1)(a) only the applicant’s employment in the five years preceding her application, that is employment from 30 July 1998, is relevant. Finally it was submitted that, in any event, the applicant could not be registered since she did not provide evidence of having completed a second semester of university study in Australia income tax law, a requirement of the Board where an applicant with a degree majoring in accounting has not completed either the CPA taxation module or the Institute of Chartered Accountants tax module in the PY year program.

12.     It is not disputed, and I find, that from around 1 July 1994 the applicant was an employee of SJR, and the employment continued until at least 30 July 2003, the date of her application for registration. The applicant’s evidence was that Mr A, as nominee of SJR, supervised her preparation of income tax returns for a number of years, until around June 1998. This time frame conflicts with Mr A’s letter (exhibit R2) where he stated that he was involved in signing returns for SJR for approximately two years.  A letter dated 12 August 2003 from the applicant’s solicitors to the Board enclosed copy cheque butts for payments made to Mr A in May 1997 and September 1997, and copies of three tax returns for the 1996-97 income year showing his signature as tax agent (T9). In the absence of any later documentation corroborating the applicant’s evidence that Mr A was still involved in SJR’s business as a tax agent until June 1998, and I presume such evidence would not be difficult to produce, I find that Mr A’s supervision and control of the applicant had ceased by 11 September 1997, being the date of one of the cheques and of all three returns referred to above.

13.     There are a number of points that distinguish the applicant from the applicant in Martin.   Unlike Mr Martin, the applicant has never been registered as a tax agent, whether in her own right or as a nominee.  More importantly, the certificate of work experience from Mr Martin’s employer established that Mr Martin had a considerable degree of experience in tax matters, the employer had confidence in the returns Mr Martin had prepared and that the employer acquiesced in Mr Martin’s autonomous conduct of the business. But in this case, Mr A has refused to complete the certificate of work experience. Consequently there is no material before me from her employer attesting to her experience during the relevant five year period.  Moreover Mr A was unaware of the applicant’s continuing to prepare and lodge returns subsequent to his involvement in the business coming to an end in September 1997, and his supervision came to an end at that point. The applicant acknowledged that, even though Mr A was not involved in the preparation or checking of returns, she kept lodging returns that disclosed SJR’s tax agent registration number and asked the taxpayers to pay a fee for preparing the returns. While it is true that the applicant has continued to operate the business on her own, she did so without informing Mr A. So it cannot be said that she conducted the business with Mr A’s approval and implied confidence in her ability, much less with a concession of autonomy. 

14. The requirement that an applicant be subject to a tax agent’s supervision and control during the period of relevant employment is found in ss.251L and 251N of the Assessment Act. Section 251L makes it unlawful for, among other things, a person to charge a fee for the preparation of an income tax return unless the person is a registered tax agent. Broadly, where a company is a registered tax agent, acts done on its behalf, such as return preparation, must be done under the supervision and control of the company’s registered nominee (s.251N(2A)). It has been concluded, therefore, that the expression ‘relevant employment’ in reg 156(2) requires a company’s employee to be under the supervision and control of the company’s nominee as stated in s.251N (Seymour). The respondent submitted that insistence upon certification by a registered tax agent of satisfactory completion of relevant employment is appropriate and reasonable. I accept that submission.

15. I am satisfied that the applicant had not been under the supervision and control of a nominee of SJR at any time in the five years preceding her application for registration. Since the applicant does not hold the qualifications by way of experience that have been prescribed, it follows that she does not meet the requirements laid down in s.251BC(1) to be a fit and proper person to be registered as a tax agent. The question whether she does not hold academic qualifications because she has not completed two semesters at university studying Australian income tax law does not arise.

16.     The decision under review should be affirmed.

I certify that the 16 preceding paragraphs are a true copy of the reasons for the decision herein of P.J. Lindsay, Senior Member:

Signed:         E.Pope
  Associate

Hearing  3 May 2004
Decision  14 May 2004
Applicant  Self represented

Respondent’s representative                    Australian Government Solicitor