Three Wickets Pty Ltd and Tax Practitioners Board

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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 1

Stasos 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

  1. 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.

  2. The material background relating to the above applications for review is set out below.

    MATERIAL BACKGROUND

  3. 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

  1. Cudmores (as trustee of the Trust) failed to lodge the following ten business activity…

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Details
Case
[2016] AATA 786
Decision Date

CaseChat Overview and Summary

This matter concerned applications for review by Three Wickets Pty Ltd and the Tax Practitioners Board. The dispute centred on the termination of the applicant's registration as a tax agent. The core issue was whether the applicant, as the sole director and shareholder of Cudmores Integrated Business Solutions Pty Ltd, was a fit and proper person to be registered as a tax agent, considering the company's significant tax liabilities and failure to lodge returns and activity statements.

The court was required to determine whether the applicant had ceased to meet the registration requirement of being a fit and proper person, as stipulated by section 20-5(1)(a) of the relevant Act. This involved assessing the applicant's conduct in relation to the substantial outstanding tax liabilities and lodgement failures of the company he directed, and whether this conduct demonstrated the good fame, integrity, and character expected of a registered tax agent.

The Tribunal affirmed the Tax Practitioners Board's decisions to terminate the applicant's registration. The reasoning focused on the applicant's prolonged failure to address significant tax debts and lodgement obligations, which escalated substantially during his tenure as sole director and shareholder. Despite explanations offered by the applicant's legal representatives regarding a lack of diligence and misunderstanding of the company's structure, the Tribunal found that the extent of the non-compliance and the applicant's awareness of it, coupled with the substantial outstanding liabilities, demonstrated a lack of the requisite fitness and propriety. The Tribunal applied the principles that a tax agent must maintain good fame, integrity, and character, and that significant financial and lodgement defaults reflect poorly on these attributes.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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: Cudmores (as trustee of the Trust) failed to lodge the following ten business activity statements by their respective due dates: 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].

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.