Three Wickets Pty Ltd and Tax Practitioners Board
[2016] AATA 786
•7 October 2016
Three Wickets Pty Ltd and Tax Practitioners Board [2016] AATA 786 (7 October 2016)
Division
TAXATION & COMMERCIAL DIVISION
File Number(s)
2015/0029
2015/4195
Re
Hemanshu Juneja
Three Wickets Pty Ltd
APPLICANT
And
Tax Practitioners Board
RESPONDENT
DECISION
Tribunal Senior Member R W Dunne
Date 7 October 2016 Place Adelaide The Tribunal affirms the decisions under review.
....................[Sgd]............................................
Senior Member R W Dunne
CATCHWORDS
TAX AGENTS – termination of tax agent registration – renewal of registration – whether applicant is a fit and proper person – good fame, integrity and character – decisions under review affirmed.
LEGISLATION
Tax Agent Services Act 2009 (Cth) ss 20-5, 20-15, 30-10, 40-5, 40-15
CASES
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Burnett and Tax Practitioners Board [2014] AATA 687
Re Carbery and Associates Pty Ltd and Tax Agent’s Board of Queensland [2001] AATA 107
Re Delis and Tax Practitioners Board [2015] AATA 820
Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1Stasos v Tax Agents' Board (1990) 21 ATR 974, (1990) 21 ALD 437
SECONDARY MATERIALS
Tax Practitioners Board, Explanatory Paper TPB (EP) 02/2010: Fit and proper person (Tax Practitioners Board, 2010)
REASONS FOR DECISION
Senior Member R W Dunne
7 October 2016
INTRODUCTION
Mr Hemanshu Juneja (“Applicant”) is an accountant and a tax agent in Adelaide. At all relevant times, he was the sole director of a company called Three Wickets Pty Ltd (“Company Applicant”). On 12 November 2014, the Tax Practitioners Board (“Board”) decided to terminate the Applicant’s tax agent registration. Following receipt of a letter dated 5 December 2014 in which the Board advised of its decision to terminate the Applicant’s tax agent registration under paragraph 40-5(1)(b) of the Tax Agent Services Act 2009 (“Act”), an application for review of the Board’s decision was lodged with this Tribunal. In a letter dated 24 July 2015, the Board advised the Company Applicant that it had been decided to terminate its tax agent registration under paragraph 40-15(1)(b) of the Act. The Company Applicant applied to this Tribunal for review of the Board’s decision.
The material background relating to the above applications for review is set out below.
MATERIAL BACKGROUND
On 1 October 2010, the Applicant became a director of Cudmores Integrated Business Solutions Pty Ltd (“Cudmores”). At all relevant times, Cudmores was trading as the trustee of the Cudmores Integrated Business Solutions Trust (“Trust”). On 12 January 2011, the Applicant became the sole director and shareholder of Cudmores following the cessation of Mr Andrew Ryan as a director and shareholder. On 7 March 2011, Cudmores was granted registration as a tax agent. By that time, the Applicant was the sole director and shareholder of Cudmores. Cudmores (as trustee of the Trust) failed to lodge the following income tax returns by their respective due dates:
Period Ended Due Date Lodgement Date Days Outstanding 30/06/2010 07/06/2011 24/05/2013 717 30/06/2011 31/10/2011 24/05/2013 571 30/06/2012 31/10/2012 28/05/2013 209
Cudmores (as trustee of the Trust) failed to lodge the following ten business activity statements by their respective due dates:
Period Ended
Due Date
Lodgement Date
Days Outstanding
30/09/2011 25/11/2011 24/02/2012 91 31/12/2011 28/02/2012 06/07/2012 129 31/03/2012 28/05/2012 13/07/2012 46 30/09/2012 26/11/2012 28/05/2013 183 31/12/2012 28/02/2013 29/05/2013 90 31/03/2013 27/05/2013 07/06/2013 11 30/06/2013 26/08/2013 31/10/2013 66 30/09/2013 25/11/2013 08/04/2014 134 31/12/2013 28/02/2014 08/04/2014 39 31/03/2014 26/05/2014 25/07/2014 60
The outstanding tax liabilities of Cudmores, which relevantly included GST and PAYG withholding liabilities, increased over an extended period without any payment arrangement being in place. The following are the details:
(a)on 1 October 2010, when the Applicant was appointed as a director of Cudmores, the outstanding tax liabilities of Cudmores (as trustee of the Trust) totalled $105,971.63;
(b)on 12 January 2011, when the Applicant became the sole director of Cudmores, the outstanding tax liabilities of Cudmores (as trustee of the Trust) totalled $125,128.62;
(c)on 14 October 2013, when the Board sent a letter to the Applicant requesting an explanation about the outstanding tax liabilities of Cudmores, the relevant liabilities totalled $477,060.36; and
(d)on 24 February 2014, when the Applicant lodged an application for renewal of Cudmores’ registration as a tax agent, the outstanding tax liabilities of Cudmores (as trustee of the Trust) totalled $518,186.81.
On 13 June 2013, the Australian Taxation Office (“ATO”) received a telephone call from a person identifying themselves as “Hemanshu”, and the ATO’s record of that telephone call indicates that the caller told the ATO the trustee of the Trust was “a company and not an individual”. The caller was asked to provide a copy of the trust deed to the ATO. The Applicant does not deny making the call, but he does deny telling the ATO the trustee of the Trust was a company and not an individual. According to his evidence, the Applicant said:
“What I said and what I provided was a Trust Deed because it is the Trust who is responsible for the debt and not the company”
However, the available evidence shows:
(a)The Applicant made the telephone call;
(b)The telephone call was made on 13 June 2013, when the Applicant was the sole director and shareholder of Cudmores;
(c)The caller and the ATO representative discussed the Trust, the trust deed for the Trust and a debt owed by the trustee of the Trust.
By letter dated 14 October 2013, the Board sought an explanation from the Applicant as to why Cudmores (as trustee of the Trust) had outstanding lodgements and tax liabilities then totalling $370,967.50. In a letter dated 30 October 2013, the Applicant’s lawyers sent a letter to the Board, relevantly stating:
“We advise that we have been instructed by Mr Juneja, as a sole director of the above company [ie Cudmores Integrated Business Solutions Pty Ltd as trustee for the Integrated Business Solutions Trust] …
…
… At the time that he took over the company he understood that a contractor to the business was dealing with all of the usual tax affairs of the company and that matters were up to date. Indeed, he understood that this was continuing to occur with the same consultant after purchase and although he admits a lack of diligence in checking these matters personally, he did believe that these matters were being attended to.
To add to this we note that because the current director did not commence the business, he was not an authorised contact for the business with the ATO …
… our client remained the sole director of the company from October 2010 and became the full shareholder in the company from the 1st of July 2013.
Once our client became aware of this issue, thanks to information provided by your office, our client arranged to ensure that all outstanding lodgements and tax returns were prepared. We note that this is acknowledged in your letter. Our client notes the outstanding lodgement for June 2013 and expects this to be completed shortly. We also note this was the time when he became aware of the trust, as he had thought the business was trading as a company until that point and that because the business was a company that he did not have to have to change the ABN. Our client accepts that this is no excuse and that the trust has effectively traded over the period. We do note however that our client has now applied for an ABN to allow the company to trade in its own right (rather then [sic] as trustee of the trust) or at the least significantly resolve its tax liabilities such that appropriate arrangements can be made for any balance to be paid in the usual way.
You will appreciate that as a consequence of finding out the nature and extent of the tax debt and non-compliance that our client has had to consider arrangements for payment of the debt. … There is a probability of sale … within a short period of time and a period of less than three months is anticipated. It is also anticipated that the company would be able to use the funds obtained in that exercise to bring its tax affairs up to date (as trustee of the trust) or at the least significantly resolve its tax liabilities such that arrangements can be made for the balance to be paid …” [emphasis added].
On 26 November 2013, an investigator appointed by the Board advised the Applicant that, if Cudmores (as trustee of the Trust) did not pay its outstanding tax liabilities by ‘the end of March’ or enter a repayment arrangement with the ATO, then Cudmores would be investigated with a view to referring it to the Board’s conduct committee.
On 24 February 2014, the Applicant lodged an application on behalf of Cudmores for renewal of registration as a tax agent. The Applicant listed himself as the only registered tax agent and director at Cudmores and answered “no” to the following questions about Cudmores:
*Are there any other matters that may affect the company's eligibility for registration?
…
*Are there any matters or events that may affect any director's good fame, integrity
and character? This may include:
·…
·if they have outstanding personal tax obligations with the Australian Taxation Office, for example, debt or lodgment/s …
The Applicant also relevantly declared, on behalf of Cudmores, that:
·I have answered all the relevant questions to the best of my knowledge, information and belief and they are true and correct in every particular:
…
·I am aware that if I make a statement that is false or misleading in a material particular, then I may be guilty of an offence pursuant to section 8K of the Taxation Administration Act 1953 (Cth):
…
·I have made all necessary enquiries to establish the good fame, integrity and character of each company director to provide a response on behalf of our company directors.
On 19 June 2014, the Board decided to reject the Cudmores renewal of registration as a tax agent under s 20-25(1) of the Act, on the basis that it was not satisfied the Applicant, as the sole director of Cudmores, was a fit and proper person, as required by s 20-5(3)(a) of the Act..
On 19 August 2014, the Applicant lodged an application with this Tribunal for review of the decision to reject the Cudmores renewal of registration as a tax agent.
On 12 November 2014, the Board decided to terminate the Applicant’s registration as a tax agent under s 40-5(1)(b) of the Act on the basis that he had ceased to meet the registration requirement in s 20-5(1)(a) of the Act, namely, that he is a fit and proper person.
On 5 December 2014, the Board informed the Applicant of its decision to terminate his registration as a tax agent.
On 5 January 2015, the Applicant lodged an application with this Tribunal for review of the decision to terminate his registration as a tax agent.
On 2 February 2015, the Applicant lodged an Application for Voluntary Deregistration of a Company with ASIC (“Deregistration Application”) with respect to Cudmores.
In the Deregistration Application, the Applicant relevantly declared that:
“…
(e) the company has no outstanding liabilities; and
(f) the company is not a party to any legal proceedings.”
However, at the time the Deregistration Application was lodged with ASIC, the Applicant knew, or ought to have known, that:
(a)Cudmores (as trustee for the Trust) had a very large amount of outstanding taxation liabilities (ie $574,035.26);
(b)Cudmores was a party to the application for review of the decision to reject its renewal of registration as a tax agent.
Despite these facts, the Applicant did not inform ASIC, in the Deregistration Application or otherwise, that Cudmores had significant outstanding taxation liabilities or that it was a party to the application for review of the decision to reject its renewal of registration as a tax agent.
On 6 April 2015, Cudmores was deregistered by ASIC and ceased to exist under s 601AD(1) of the Corporations Act 2001 (Cth).
By 6 April 2015, Cudmores’ outstanding taxation liabilities had increased further to $583,775.98, and there was no repayment arrangement in place.
During the period between the Applicant’s appointment as a director of Cudmores and the deregistration of Cudmores, the only payment the Applicant arranged to have made towards the relevant outstanding taxation liabilities was a payment of $50,000.00 on 12 January 2015.
As at 6 April 2015, Cudmores (as trustee of the Trust) had also failed to lodge the following further income tax returns and business activity statements by their respective due dates:
Type Period ended Due Date Lodgement Date Income Tax Return 30/06/2013 15/05/2014 Not Lodged BAS 30/06/2014 28/07/2014 Not Lodged BAS 30/09/2014 28/10/2014 Not Lodged Income Tax Return 30/06/2014 31/10/2014 Not Lodged BAS 31/12/2014 03/03/2015 Not Lodged
The Applicant did not inform this Tribunal or the Board that Cudmores was deregistered on 6 April 2015 (at his request) and purported to take a number of steps on behalf of Cudmores in relation to its application for review between the time Cudmores ceased to exist on 6 April 2015 and the time he purported to make and file on 16 November 2015 a statement on behalf of Cudmores.
On 15 July 2015, the Board terminated the Company Applicant’s registration as a tax agent under s 40-15(1)(b) of the Act on the basis that it had ceased to meet the registration requirement in s 20-5(3)(a) of the Act that each of its directors be a fit and proper person.
The Board informed the Company Applicant of its termination decision by letter dated 24 July 2015.
On 17 August 2015, the Applicant lodged an application with this Tribunal for review of the Company Applicant’s termination decision.
LEGAL FRAMEWORK AND LEGISLATION
The object of the Act, as contained in s 2-5, is to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct. Part 2 of the Act deals with the registration of tax agents, BAS agents and tax (financial) advisers. Subdivision 20-A of the Act sets out the tax practitioner registration requirements. Subsection 20-5(1) relevantly provides that an individual applicant is eligible for registration if the Board is satisfied that, among other things, the individual is a “fit and proper person”. Subsection 20-5(3) relevantly provides that a company applicant is eligible for registration if the Board is satisfied that, among other things, each director of the company is a “fit and proper person”. Subsection 20-15(a) relevantly provides that, in deciding whether an individual is a fit and proper person, the Board must have regard to, among other things, whether the individual is of good fame, integrity and character.
Part 3 of the Act contains the Code that applies to all registered tax agents, BAS agents and tax (financial) advisers (s30-5). Subsection 30-10(2) of the Code specifically requires that a registered agent must comply with the taxation laws in the conduct of their personal affairs.
Section 40-5 of the Act relevantly provides that the Board may terminate the registration of an individual tax agent if the agent ceases to meet one of the tax practitioner registration requirements. Section 40-15 relevantly provides that the Board may terminate the registration of a company tax agent if the agent ceases to meet one of the tax practitioner registration requirements.
RELEVANT POLICY
The Board has published an explanatory paper entitled “TPB(EP) 02/2010: Fit and Proper Person” (“FPP Policy”). The FPP Policy gives examples of factors that may be considered when determining whether a person is a “fit and proper person”, including the management of personal taxation obligations. In particular, the FPP Policy relevantly states:
“83. The personal taxation obligations of a tax agent … include, but are not limited to, the agent’s timely lodgement of personal income tax returns and activity statements, payment of superannuation guarantee contributions and PAYG withholding and instalment payments.
…
85. A failure to accurately complete tax returns and notices and to comply with other requirements of the Commissioner or the Board may indicate a lack of competence, good fame, integrity and character, such that the individual concerned cannot be relied upon to adequately provide tax agent services ..”
86. A tax agent’s … inability to comply with the agent’s own taxation affairs could subsequently cast doubt over the competence with which the agent has prepared the returns of the agent’s clients. …
…[emphasis added]
The Board has also published a separate Explanatory Paper TPB (EP) 01/0210: ‘Code of Professional Conduct” (“Code Paper”). This Code Paper provides further guidance to agents on their obligations under the Code. For example, the Code Paper relevantly states:
35. The term ‘personal affairs’ refers to a tax agent’s … personal taxation obligations, including timely lodgement of personal income tax returns and activity statements, payment of superannuation guarantee contributions and PAYG withholding and instalment payments.
36. In the case of a company … tax agent …, the taxation obligations of the company or partnership mean the personal affairs of the company …
[emphasis added]
I am satisfied that, in reaching my decisions, it is appropriate for me to also have regard to the FPP Policy Paper and the Code Paper.[1]
[1] Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
ISSUES
The issues before me are as follows:
(a)Whether the Applicant is a ‘fit and proper person’ within the meaning of paragraphs 20-5(1)(a) and 20-5(3)(a) of the Act?
(b)Whether the Applicant’s tax agent registration should be terminated pursuant to paragraph 40-5(1)(b) of the Act?
(c)Whether the Company Applicant has ceased to meet the tax practitioner registration requirement in paragraph 20-5(3)(a) of the Act that each director of the company is a fit and proper person?
(d)Whether the Company Applicant’s tax agent registration should be terminated pursuant to paragraph 40-15(1)(b) of the Act?
In considering these issues it is not in dispute that, in determining whether the Applicant is a fit and proper person, I may take into account facts and circumstances occurring after the Board made its decision (see Shi v Migration Agents’ Registration Authority[2]).
[2] (2008) 235 CLR 286.
Relevant Cases
There are various decisions of Tribunals and the Federal Court that explain what should be taken into account when determining whether an individual tax agent is a “fit and proper person”. In Re Burnett and Tax Practitioners Board[3], Deputy President Bean stated that the resolution of the question of whether a tax agent is a fit and proper person is likely to turn on conclusions about three factual issues, broadly categorised as follows:
(a)Competence – whether [the agent] has a proper knowledge of taxation laws, is able to competently prepare income tax returns and deal with queries from the ATO, and is a person of such competence and integrity that others may entrust their taxation affairs to [their] care;
(b)Character – whether [the agent] is a person of such reputation and integrity that the ATO may be confident that the returns lodged by [them] are completed honestly and competently; and
(c)Contrition – whether [the agent] appreciates the significance of [their] wrongdoing, has expressed remorse, and has rehabilitated [themselves], such that there is unlikely to be a lapse in the standards required of [them] in the future.
[3] [2014] AATA 687.
These considerations are referred to hereafter as ‘the 3Cs’.
In ReCarbery and Associates Pty Ltd and Tax Agent’s Board of Queensland[4] Mr Carbery had applied for renewal of his registration which was refused by the Tax Agent’s Board of Queensland. One of the grounds for refusal to renew his registration was Mr Carbery’s failure to file his personal income tax returns as and when due. The Tribunal stated [at 55]:
“In the Tribunal's opinion the preparation of income tax returns across a wide range of businesses, professions, occupations and income sources (i.e. investments), is not to be taken lightly. It requires diligence, current knowledge of the relevant legal framework and competence in dealing with both client and the Australian Taxation Office, not to mention honesty (see: Re: Su and the Tax Agents Board, South Australia 82 ATC 4284, Davies J at 4286 and Stasos v Tax Agents' Board of NSW 90 ATC 4950, Hill J at 4959). This is especially so in the current ‘self-assessment’ regime where penalties for failure to disclose accurate and timely information can be levied on the taxpayer client, who relies on his/her/its tax agent to guide, advise and make proper and timely disclosures. Unless a person is judged competent in all these attributes then, in the Tribunal's opinion, that person would not meet the ‘fit and proper’ tests ...”.
[4] [2001] AATA 107.
The issue of whether the term ‘personal affairs’ in s 30-10(2) of the Code can be applied to a director’s management of a company that is registered as a tax agent was recently considered in Re Delis and Tax Practitioners Board.[5] The Tribunal relevantly stated [at 90]:
“Plainly, by breaching the taxation laws in the conduct of his personal affairs which includes when acting as a director of Delis Enterprises, Mr Delis has breached the Code of Professional Conduct which applies to registered tax agents. While the TASA prescribes sanctions for any such breach, failure to comply with the Code plainly says something about the good fame, integrity and character of an individual. Those matters are relevant criteria for determining whether an individual is a fit and proper person (s 20-15 TASA).”
…[emphasis added].
[5] [2015] AATA 820.
CONSIDERATION
The Board has submitted that I should adopt a similar approach to that taken in Burnett (supra) when determining whether the Applicant is a fit and proper person. This means that I should consider whether the Applicant meets each of the 3Cs at the time I make my decision.
Competence
As its sole director at the time, the Applicant was responsible for ensuring that Cudmores (as trustee of the Trust) complied with the taxation laws. However, he failed to ensure Cudmores (as trustee of the Trust) lodged:
(a) the returns referred to in paragraph 3 above by their respective due dates;
(b)the business activity statements referred to in paragraph 4 above by their respective due dates; and
(c)the further returns and business activity statements referred to in paragraph 24 above by their due dates.
The Applicant also failed to ensure that Cudmores (as trustee of the Trust) paid its outstanding taxation liabilities as and when they fell due over an extended period of time during which the level of outstanding liabilities escalated from approximately $107,000 to $583,775. The Applicant only ever arranged for one single payment of $50,000 to be made by Cudmores towards its outstanding taxation liabilities. However, that was not until 12 January 2015, which was more than six months after the Board decided to reject the application for renewal of the Applicant’s registration as a tax agent on behalf of Cudmores. It is also relevant that less than a month after the Applicant made his one and only payment, he lodged an application for voluntary deregistration of a company with ASIC with respect to Cudmores. At that time, Cudmores still owed $574,035.26 in outstanding taxation liabilities. The Applicant has repeatedly sought to explain his failure to address the mounting taxation liabilities owed by Cudmores on the ground that he did not know about them, or even the fact that his business was trading through the Trust until late 2013 or early 2014. As Austen J noted in Australian Securities and Investments Commission v Rich,[6] while considering the statutory duty of diligence owed by directors of companies, he said [at 40]:
“The statutory duty of diligence requires every director or officer to become familiar with the fundamentals of the business, to stay informed about the company’s activities, to monitor the company’s activities, to maintain familiarity with the financial status of the company by appropriate means and to have a reasonably informed opinion regarding the company’s financial capacity” [emphasis added]
[6] (2009) 75 ACSR 1 at [7203]
The Applicant accepted that that was his duty as director of Cudmores during his oral evidence. However, despite this fact, the Applicant:
(a) did not ask to see the company’s books;
(b)did not go through any statements of assets and liabilities, or other things that might record what debts the company was owing;
(c)did not have any discussions with Mr Anthony Ryan about the liabilities of the company; and
(d)did not take steps to ensure that he saw any integrated client account statements received from the ATO even after he became aware of the significant taxation liabilities owed by Cudmores.
Despite acknowledging that he owed such a duty of care as the sole director of Cudmores, the Applicant not only failed to ensure Cudmores met its tax obligations by arranging for its tax liabilities to be paid, he also failed to enter into any appropriate repayment arrangements. In fact, the only record of any contact between the Applicant and the ATO about the relevant taxation liabilities are the records relating to the telephone call in June 2013, and the Applicant is not even willing to admit making that call. Instead, he has sought to explain his failure to negotiate a suitable payment arrangement with the ATO by reference to the fact that he was not an ‘authorised contact person’. As the sole director and shareholder of Cudmores, the Applicant could have, and should have, been able to make the necessary arrangements to become an authorised contact person if that was what was required for him to negotiate a payment arrangement with the ATO. In my view, his inability, or unwillingness, to do so does not reflect well on his competence.
Another significant consideration when determining whether the Applicant is sufficiently competent to hold registration as a tax agent is his continued refusal to accept that Cudmores was the trustee of the Trust for the entire period that he was its sole director and shareholder. His continued refusal suggests that he knew that Cudmores was the trustee of the Trust, but was unwilling to admit that fact due to his concerns about the consequences of such an admission for his case. Alternatively, his inaction is unclear, especially when he had worked in accounting for many years and had acted for around 200 companies and trust entities. But even with this business experience he was still unable to tell whether Cudmores really was the trustee of the Trust. During his oral evidence, he was taken to records showing that the company appointed as trustee of the Trust in the trust deed had the same ACN as Cudmores. Even his own lawyers accepted that Cudmores was the trustee of the Trust and made this clear in their correspondence. If, despite having seen this evidence the applicant is still genuinely unable to tell whether Cudmores is or was the trustee of the Trust, then he must lack competence as both an accountant and a tax agent.
Although the Applicant continued to deny that Cudmores was ever the trustee of the Trust, he ultimately accepted during cross-examination that the liabilities were not owed by the Trust, but were owed by the trustee of the Trust. However, he continued to maintain that Cudmores was not liable for the tax liabilities because Cudmores was never the trustee of the Trust. This ongoing attitude of the Applicant casts serious doubts on his eligibility to hold registration as a tax agent. A person must be of good character and have sufficient competence to be registered as a tax agent. The Board submitted, and I would agree, that he does not satisfy the competence component of the fit and proper person requirement in the Act. Counsel for the Applicant submitted that it could not be argued that the Applicant had been so careless as to demonstrate no genuine attempt to carry out obligations imposed on him. On this, I would respectfully disagree.
Character
During cross-examination the Applicant accepted that he successfully established and ran a number of businesses other than Cudmores between the time he became a director of Cudmores on 1 October 2010 and the time Cudmores was de-registered in April 2015. He also conceded that:
(a)His business charged GST in addition to its fees, and that GST is collected by the business for payment to the ATO;
(b)GST is ordinarily remitted to the ATO once a quarter;
(c)Apart from the $50,000 payment made on 12 January 2015, he did not arrange for any other amounts to be remitted to the ATO in respect of any GST or PAYG collected by the trustee of the Trust.
The Applicant denied using any of the GST or PAYG that was collected but never remitted to the ATO to establish or run any of his other businesses or pay debts. However, notwithstanding this, he clearly failed to ensure that Cudmores paid all of the GST, PAYG and other tax liabilities as and when they fell due. Cudmores, and the Applicant as its sole director and shareholder, therefore had the use of monies that they were not entitled to be holding. That gave them an advantage over other taxpayers in the same industry who fulfilled their obligations. The Board submits that this suggests a lack of good faith, integrity and character in the context of the Applicant’s obligations as the sole director of Cudmores and, more significantly, as a registered tax agent.
On the evidence, the Applicant has made a number of statements that appear to have been false, or at least misleading. For example, he has claimed:
(a)To have become the ‘full director and shareholder’ or ‘full shareholder’ of Cudmores on 1 July 2013;
(b)To have only become aware of the Trust, or the fact his ‘business’ was trading through the Trust, after the Board contacted him in late 2013 or early April 2014;
(c)To have been offered ‘equity’ and a ‘directorship’ in Cudmores by Mr Anthony Ryan in or about 2013;
(d)To have left Adelaide to go to India to attend his sick father in 2013 and to have been ‘away for about 3 months through May, June and July, which corresponded with [his] offer of equity’.
However:
(a)The ASIC records show the Applicant became a director of Cudmores on 1 October 2010, and the Applicant became the sole shareholder and sole director of Cudmores on 12 January 2011 after Mr Andrew Ryan stopped being a shareholder and director of Cudmores;
(b)The Applicant admitted during cross-examination that he became a director of Cudmores on 1 October 2010, and he became a shareholder of Cudmores on 12 January 2011, and it was ‘not true’ to say that he became the full director and shareholder of Cudmores in 2013. Moreover, the Applicant admitted during cross-examination that his statement that he was away in May, June and July 2013 is ‘not accurate’ and he was really only away for one month between 4 and 24 July 2013.
The Applicant made a declaration about Cudmores to ASIC in the Deregistration Application that he has since admitted was ‘wrong’. He declared that Cudmores was not a party to any legal proceedings at a time when Cudmores was the applicant in its application for review.
The Board submits that I should find that the Applicant has not been truthful in his evidence about who owed the relevant taxation obligations or in his declarations to ASIC at the time he lodged the Deregistration Application. Finally, the Board submits that the Applicant has repeatedly attempted to deflect responsibility for his actions as the sole director and shareholder of Cudmores to Mr Anthony Ryan and other former staff of Cudmores. At one point the Applicant suggested that Mr Anthony Ryan may have been the person who made the telephone call to the ATO in June 2013. He also asserted on oath that Mr Ryan had impersonated him on a number of previous occasions. Mr Ryan emphatically denied making the ATO telephone call or pretending to be the Applicant in his oral evidence. The Applicant’s counsel did not challenge that evidence in cross-examination. In my opinion, the fact that the Applicant made such an allegation in sworn evidence in an attempt to deflect responsibility for the ATO telephone call to Mr Ryan reflects very poorly on his character.
The Board has submitted (and I agree) that the Applicant does not satisfy the ‘character’ element of the ‘fit and proper person’ requirement in s 20-5(1)(a) of the Act. When addressing whether the Applicant had a sufficient understanding of what is right and what is wrong so that he could be relied upon to carry out his role as a tax agent, his counsel submitted there was no issue on the facts of this case. With respect, I am unable to accept the accuracy of this submission.
Contrition
Despite all the evidence given during the hearing, the Applicant has maintained his refusal to admit that Cudmores was the trustee of the Trust and that he was therefore not responsible for the significant taxation liabilities incurred by Cudmores after he became its sole director and shareholder in 2011. In that context, it is not surprising that he has not given any genuine acknowledgement of wrongdoing. On his case, there should be no reason for him to apologise, because his company was not legally responsible for the taxation liabilities incurred by the business trading through the Trust. Of course, it is difficult to reconcile that positon with the Applicant’s payment of $50,000 to the ATO and his stated willingness to pay the ATO any further money he may receive from the sale of the Cudmores business.
The Board has submitted (and I further agree) that the Applicant cannot have it both ways. He cannot simultaneously refuse to accept responsibility for the taxation liabilities incurred by Cudmores while he was its sole director and shareholder, but expect to receive credit for making payments to discharge those liabilities. He also cannot properly claim to have acknowledged his wrongdoing and to have learned lessons from his previous conduct while he is still seeking to deflect responsibility for what he did to Mr Ryan and/or other former staff members of Cudmores. Given what is stated at paragraph 42 above about the Applicant’s duties as a director of Cudmores, the Board further submits that he should not be permitted to deflect responsibility for the tax affairs of Cudmores to other office holders, staff or former staff of Cudmores, particularly after he became its sole director on 12 January 2011.
It was ultimately the Applicant’s responsibility to ensure that Cudmores (as trustee of the Trust) paid its tax liabilities as and when they fell due. It may well have been appropriate for him to delegate certain logistical tasks, but he is the person who remained ultimately responsible to ensure that his company complied with its legal obligations. Despite that fact, the Applicant has not only failed to accept responsibility for the liabilities at the time they were accruing, he is also continuing to deny responsibility for them now. He has also refused to accept responsibility for one of the false statements he made to ASIC as well as for some of the misleading statements in the correspondence and other documents prepared by his lawyers. The Board submits that I should always view any belated expressions of contrition by tax agents facing disciplinary action with a degree of caution. However, in the Applicant’s case he has not even expressed any genuine remorse for his actions other than, perhaps, his tendency to trust other people to undertake tasks that were ultimately his responsibility.
The Applicant was given at least three opportunities to express contrition during his evidence in chief. However, he instead repeatedly referred to his own conduct in positive terms, at the same time as referring to current and former work colleagues in negative terms. During his cross-examination, the Applicant continued to cast himself in a positive light and to attribute the blame for what has occurred to others. For example, it was Mr Ryan’s fault for not telling him about the Trust, and it was Mr Ryan’s fault for not giving him a proper handover. As indicated previously, the Applicant even sought to blame Mr Ryan for making the telephone call to the ATO and accused him of pretending to be the Applicant on a number of previous occasions. In my view, none of this gives me any reason to be confident that the Applicant has learned from his past mistakes and is unlikely to repeat such conduct in the future.
The Board therefore submits (and the Tribunal accepts) that the Applicant does not satisfy the ‘contrition’ element of the applicable ‘fit and proper person’ requirement.
The Board’s Submissions
Based on the evidence and material outlined above, the Board submits that the Applicant no longer meets the registration requirement that he be a ‘fit and proper person’ for the purposes of s 20-5(1)(a) of the Act.
If I find that the Applicant is not a fit and proper person for the purposes of s 20-5(1)(a) of the Act, it must follow that the Company Applicant has also ceased to meet the requirement in s 20-5(3)(a) of the Act that each director of the company be a fit and proper person.
CONCLUSION
For the reasons outlined above, the Board has submitted that I should:
(a)affirm the Board’s decision of 12 November 2014 terminating the Applicant’s registration as a tax agent under s 40-5(1)(b) of the Act on the basis that he has ceased to meet the registration requirement in s 20-5(1)(a) of the Act, namely, that he is a fit and proper person; and
(b)affirm the Board’s decision of 15 July 2015 to terminate the Company Applicant’s registration as a tax agent under s 40-15(1)(b) of the Act on the basis that it had ceased to meet the registration requirement in s 20-5(3)(a) of the Act that each of its directors be a fit and proper person.
DECISION
Having regard to the Board’s submissions in paragraph 61, the Tribunal affirms the decisions under review.
I certify that the preceding 62 (sixty -two) paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne .....................[Sgd]...............................
Administrative Assistant
Dated 7 October 2016
Date(s) of hearing 21 June 2016 and 12 July 2016 Date final submissions received 1 August 2016 Advocate for the Applicant Mr A Kerin Solicitors for the Applicant Maurice Blackburn Lawyers Advocate for the Respondent Mr A Schatz Solicitors for the Respondent Australian Government Solicitor
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