Toohey and Tax Agents' Board of Victoria
[2009] AATA 603
•14 August 2009
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
)No: 2007/1502
GENERAL ADMINISTRATIVE Division )
Re: Peter Toohey
Applicant
And: Tax Agents’ Board of Victoria
Respondent
TRIBUNAL: Deputy President G. L. McDonald
DATE: 21 August 2009
PLACE: Melbourne
CORRIGENDUM TO DECISION [2009] AATA 603
Pursuant to s 43AA of the Administrative Appeals Tribunal Act 1975 (the Act) the decision made pursuant to s 42C(2) of the Act dated 14 August 2009 in the above case the Registrar is directed to allow the text as follows:
In the second sentence of paragraph 1 the year 2002 be deleted and the year 2004 be substituted.
.......[sgd.G L McDonald]..............
G. L. McDonald
Deputy President
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 603
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2007/1502
GENERAL ADMINISTRATIVE DIVISION ) Re Peter Toohey Applicant
And
Tax Agents’ Board of Victoria
Respondent
DECISION
Tribunal Mr G L McDonald, Deputy President Date14 August 2009
PlaceMelbourne
Decision The Tribunal affirms the decision under review.
…….[sgd G L McDonald]...
Deputy President
CATCHWORDS – INCOME TAX ASSESSMENT ACT – applicant’s registration as a tax agent was not renewed – applicant failed to lodge his personal tax returns – applicant suffered depression and claimed he was burdened with heavy responsibilities – applicant prioritised his clients’ tax returns before his own – whether the applicant’s circumstances amounted to ‘special circumstances’ – whether the applicant is of good fame, integrity and character – no special circumstances – Tribunal not satisfied applicant will lodge future tax returns on time – decision under review affirmed
Income Tax Assessment Act 1936 ss 161, 163B, 251BC and 251K
Adamec and Tax Agents’ Board of Victoria [2005] AATA 913
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Shi v Migration Agents’ Registration Authority (2008) 248 ALR 390
Toohey (Formerly Identified as VBY) v Tax Agents’ Board of Victoria [2007] 67 ATR 522
Toohey and Tax Agents’ Board [2009] AATA 142
Toohey v Tax Agents’ Board (2008) 101 ALD 376
Toohey v Tax Agents’ Board of Victoria (No 2) (2008) 106 ALD 506
REASONS FOR DECISION
14 August 2009 Mr G L McDonald, Deputy President 1. The applicant has been a tax agent for 33 years. In 2002 his registration as a tax agent was not renewed. The reason for the non renewal was that he had failed to lodge personal tax returns and returns for three family entities[1] for which he was responsible for a period of 11 preceding successive years. He was also late by five and a half months in lodging his personal return as well as those for the family entities for which he was responsible for the 2006 tax year. His personal returns for 2007 and 2008 were lodged on time (he claims early) and he has told the Tribunal his 2009 tax return has all but been completed. The following tables, submitted by the respondent, outline each tax return and their period of lateness:[2]
[1] Being his father’s estate for which he was the executor, and two family trusts, one of which he was the director of the trustee and the other he was the trustee.
[2] These are not the original tables submitted by the respondent in its statement of facts and contentions, the Tribunal has edited them and only included the columns relevant to these reasons for decision.
Peter Toohey’s personal tax returns Year of Income Due Date Date of ATO demand Date lodged/ received Lateness of return 1992 1993 Est Oct 2003 10 years 1993 1994 (as above) 9 years 1994 1995 (as above) 8 years 1995 1996 (as above) 7 years 1996 1997 27 May 1997
22 Feb 2001
12 Nov 200229 Oct 2003 6 years 1997 1998 10 Feb 2000
22 Feb 2001
12 Nov 2002(as above) 5 years 1998 12 May 1999 (as above) 30 Oct 2003 4 years 5 months 1999 21 Jan 2000 (as above) (as above) 3 years 9 months 2000 30 Nov 2000 22 Feb 2001
12 Nov 2002(as above) 2 years 11 months 2001 3 Dec 2001 12 Nov 2002 (as above) 1 year 8 months 2002 31 Jan 2003 (as above) 9 months 2003 14 May 2004 3 Jun 2004 3 weeks 2004 15 May 2005 7 Jun 2005 3 weeks 2005 9 Sep 2005 Not late 2006 15 May 2007 29 Oct 2007 5 months 2 weeks
Returns of J F Toohey estate (Executor: Peter Toohey) Year of Income Due Date Date of ATO demand Date lodged Lateness 1996 31 Oct 2003
3 Dec 2003
9 Mar 200418 Jun 2004 6 years 46 weeks 1997 (as above) (as above) 5 years 46 weeks 1998 12 May 1999 (as above) (as above) 5 years 5 weeks 1999 31 Jan 2000 (as above) 29 Jun 2004 4 years 25 weeks 2000 30 Nov 2000 (as above) 28 Jun 2004 3 years 30 weeks 2001 3 Dec 2001 (as above) (as above) 2 years 29 weeks 2002 31 Jan 2003 (as above) 1 year 21 weeks 2003 31 Oct 2003 28 Jun 2004 34 weeks 2004 15 May 2005 7 Jun 2005 3 weeks 2005 15 May 2006 6 Jun 2006 3 weeks 2006 15 May 2007 29 Oct 2007 5 months 2 weeks
Peter Toohey Family Investment Trust (Director of the Trustee: Peter Toohey) Year of Income Due Date Date of ATO demand Date lodged Lateness 1992 31 Oct 2003 15 May 2004 11 years approx 1993 (as above) (as above) 10 years approx 1994 (as above) (as above) 9 years approx 1995 (as above) (as above) 8 years approx 1996 (as above) (as above) 7 years approx 1997 (as above) (as above) 6 years approx 1998 12 May 1999 (as above) 24 May 2004 4 years 47 weeks 1999 31 Jan 2000 (as above) (as above) 3 years 44 weeks 2000 30 Nov 2000 (as above) (as above) 3 years 23 weeks 2001 3 Dec 2001 (as above) (as above) 2 years 23 weeks 2002 31 Jan 2003 (as above) (as above) 1 year 14 weeks 2003 31 Oct 2003 (as above) 30 weeks 2004 15 May 2005 7 Jun 2005 3 weeks 2005 9 Sep 2005 Not late 2006 15 May 2007 29 Oct 2007 5 months 2 weeks
Toohey Family Trust (Trustee: Peter Toohey) Year of Income Due Date Date of ATO demand Date lodged Lateness 1992 6 Nov 2003
8 Jan 200415 May 2004 11 years approx 1993 (as above) 15 Jun 2004 10 years approx 1994 (as above) 15 May 2004 9 years approx 1995 (as above) (as above) 8 years approx 1996 (as above) (as above) 7 years approx 1997 24 May 2004 5 years 46 weeks 1998 12 May 1999 (as above) 5 years 1999 31 Jan 2000 (as above) 4 years 14 weeks 2000 30 Nov 2000 (as above) 3 years 23 weeks 2001 3 Dec 2001 (as above) 2 years 23 weeks 2002 31 Jan 2003 (as above) 1 year 14 weeks 2003 31 Oct 2003 (as above) 30 weeks 2004 15 May 2005 7 Jun 2005 3 weeks 2005 9 Sep 2005 Not late 2006 15 May 2007 29 Oct 2007 5 months 2 weeks 2. The applicant’s registration as a tax agent was suspended for a five month period from 24 April to 23 September 2002. On 10 March 2004 the applicant applied for re-registration as a tax agent. On 14 July 2004 the Tax Agents’ Board of Victoria notified the applicant that it was not satisfied that he was a ‘fit and proper person’ to prepare income tax returns or transact tax business on behalf of clients and refused to re-register him. From that decision he applied to this Tribunal for a review of decision on 29 July 2004. The Tribunal affirmed the decision on 8 February 2006. An appeal to the Federal Court of Australia was allowed on 21 March 2007 and the case was remitted to the Tribunal to be heard again.[3] After a further hearing the Tribunal again affirmed the decision on 2 April 2008.[4] A second appeal to the Federal Court was lodged and on 27 November 2008 the Court again allowed the appeal and set aside the decision.[5] It did so on the basis that the Tribunal had not sufficiently contextualised the applicant’s circumstances between the events leading to the Board’s initial declination of re-registration and the date the Tribunal reheard the case. The court remitted the case to the Tribunal directing that it was to be heard by a differently constituted Tribunal, unless the parties otherwise agreed. The parties agreed that the case could be reheard before the same member who presided at the second hearing. However, that member disqualified herself on the ground of apprehended bias.[6]
[3] Toohey (Formerly Identified as VBY) v Tax Agents’ Board of Victoria [2007] 67 ATR 522.
[4] Toohey v Tax Agents’ Board (2008) 101 ALD 376.
[5] Toohey v Tax Agents’ Board of Victoria (No 2) (2008) 106 ALD 506.
[6] Toohey and Tax Agents’ Board [2009] AATA 142.
3. The case was heard before the presently constituted Tribunal on 30 July 2009 having been adjourned twice at the applicant’s request, from the original hearing date of 9 June to 15 July 2009. The applicant first requested the hearing that had been listed on 9 June be deferred because he had lost a staff member at Christmas and it had taken until March to find a suitable replacement and was having difficulty finalising his documents. The hearing was then listed for 15 July. The applicant was directed to file documents he wished to rely upon at the hearing by 30 June. On 29 June the applicant requested an extension of time to file his documents until 7 July and confirmed he would be ready for the hearing to commence as scheduled on 15 July. The respondent did not oppose the extension and the Tribunal made an amended direction for the applicant to file his documents by 7 July. On 8 July Mr Toohey telephoned the Tribunal to say he was having difficulty getting his documents in on time. He assured the Tribunal he would have the documents in by the weekend, being Friday 10 July. On 13 July Mr Toohey made a further telephone call informing the Tribunal that his documents would not be ready. The Tribunal held an urgent telephone directions hearing on 14 July. The applicant asked for a further adjournment saying he was not properly organised for the hearing. The Tribunal then listed the matter for 30 July and asked the applicant to file his documents by 24 July. On 22 July Mr Toohey confirmed he would lodge his documents on time. Mr Toohey in fact filed his documents on 27 July.
4. At the hearing the applicant was self represented and gave oral evidence. He also called Messrs Kellock, Fitzgerald and Weaver to give oral evidence. A further witness, Mr Fleming, was made available for cross examination. The applicant filed a of number documents and witness statements to which the Tribunal has had regard[7] as well as a further medical report, dated 14 July 2009, from his current general medical practitioner, Dr Vrij. The respondent did not call any witnesses. The Tribunal had before it the appeal book used in the second Federal Court appeal hearing.
[7] Collectively tendered as Exhibit A1.
5. The Tribunal accepts that the applicant’s professional practice not only involves preparation and lodgement of tax returns but that the applicant also provides financial and business management advice. Mr Kellock in his evidence described what was offered was ‘a package’. The practice services a niche market for farmers, in part based on the applicant’s own family history in farming and his operation of several of his own farms, while maintaining his professional tax agent practice. This was established in the evidence of Mr Fitzgerald who told the Tribunal that the applicant had given advice on financial restructuring which had assisted the farming aspect of his (Mr Fitzgerald’s) interests.[8]
[8] Exhibit A1, page 72, paragraph 20.
6. The reasons the applicant claims that the tax returns were not lodged on time include:
(i)He suffered severe depression, which he initially denied, thinking it was a character failure which he could overcome without professional assistance. He commenced medication prescribed by his general medical practitioner in 1996. He says he continued to take the medication until late 2003 when for an uncertain time, but in excess of a year, he ceased taking medication, before recommencing. While sometime in March 1996 he consulted a psychiatrist it seems that there was no follow up and treatment continued to be administered by his general medical practitioner. His then general medical practitioner in a letter to the Tribunal dated 29 November 2005 stated, among other things:
… anti-depressants were commenced in February, 1996 and throughout that year he was suffering from stress related physical illnesses such as chest pain. That was much of the case through the 90’s and into the early part of this decade, up to early 2003. In 2001 he was seen again on 28th May, where he was suffering from extreme stress and again on 9th November, 2001 where he again was extremely stressed … and again in February, 2002 when he was still extremely stressed.[9]
The general medical practitioner noted the applicant was becoming more ordered, measured and in control of his affairs in recent times and opined that he (the doctor) did not expect to see the applicant ever reverting to his previous disorganised state. The same doctor confirmed his diagnosis and continued to express confidence in the applicant’s ability to continue his “good functional capacity” in a further report dated 5 December 2007.[10] His original general medical practitioner retired in 2007 and the applicant has continued to be treated by another doctor within the practice. His current treating doctor has confirmed in a letter dated 14 July 2009 that the applicant was continuing to take anti depressant medication.
(ii)His father, a farmer, died in 1993 and the applicant assumed, initially with his mother, the executorship of the estate. Eventually his mother became incapable of continuing to undertake that role and resigned, leaving the applicant as the sole executor to complete the winding up of the estate. Over time he assumed a greater responsibility for his mother’s financial support as his father’s estate apparently was unable to sufficiently provide financially for her as the farm had become run down. His mother died on 10 November 2007. The applicant told the Tribunal he has introduced new dry farming measures to improve the viability of the farm. The applicant told the Tribunal that his father’s estate was in the final stages of being wound up.
(iii)In the period 1988 to 1989 the applicant purchased two farming properties and commenced the running of a registered Hereford stud on them. He also purchased the business premises in the regional centre where he operates his tax agency. He financially overextended himself and this placed a strain on him. A Notice to Quit his professional premises was served on him on 11 April 2001.[11] He was obliged to sell some of his farming property as well as part of his practice, the office premises he had previously purchased and some farming plant and equipment. Additionally his wife contributed $100,000 from an inheritance to the repayment of debt he incurred.[12] The applicant also assisted his brother over a nine month period preceding his brother’s death from cancer July 1997.
(iv)He has five children, all of whom he has supported, including their educational needs, some attending university. The applicant maintained that there were added responsibilities, particularly financial, involved in having such a large family.
(v)In the period leading up to and during which he suffered financial problems in the early 1990s he suffered from a number of physical ailments including sleep apnoea, carpal tunnel to his dominant right arm, stomach ulcers, a prolonged period of sciatica and general lack of energy.[13]
(vi)The financial circumstances placed a strain on his marriage which, the applicant claimed, became in danger of breaking down.
(vii)The applicant also maintained that he came under pressure from two of his staff who, in January 2003, presented him with an ultimatum to accept their offer to purchase his business for a discounted price of $20,000 or they would resign, thereby placing further pressure on him.
[9] Exhibit A1, page 27.
[10] Exhibit A1, page 29.
[11] Exhibit A1, page 37, paragraph 35.
[12] Exhibit A1, page 35, paragraphs 28 to 29.
[13] Exhibit A1, pages 40 to 41, paragraph 50.
7. A combination of the above events and circumstances, along with a feeling that he needed to prioritise servicing his tax clients’ needs before his own, led to the applicant failing to lodge his own tax returns and those arising from his family trusts and his late father’s estate on time over a period of 11 years.
8. In July 2002 he secured the return to his practice of Mr Kellock who had worked in the applicant’s practice after his graduation in the early 1980s. Since that time Mr Kellock had operated his own accountancy firms and, while he had registration as a tax agent in the past, he was not registered at the time he recommenced working for the applicant in 2002. Mr Kellock gave evidence of the high professional regard in which he held the applicant. He said that the applicant had in place office procedures of a high standard which had ensured, during the relevant period the professional standards of the office were maintained, despite the applicant’s diminished capacity to cope. Mr Kellock returned in the role of a consultant for the period 2002 to 2006 on the basis of working three days a week at the applicant’s tax agency. In addition to undertaking other work, including as a tax agent, Mr Kellock prepared the tax returns for the applicant to lodge covering the period in which the returns had not been made, despite the fact he was not a registered tax agent.
9. Mr Kellock agreed in cross examination that the applicant was a proud man who went beyond the level which could normally be expected in his attempts to deal with confronting circumstances before he would concede he needed help. Mr Kellock agreed, when he rejoined the applicant’s practice in 2002, that the applicant was not working at the same disciplined pace that had been the case during the period Mr Kellock was first employed by the applicant. Other witnesses also commented on the applicant’s inability to cope as well as he had in the past in the period leading up to and including 2002 to 2003.
10. Mr Fitzgerald, a professional football coach, became a client of the applicant in 2005. Mr Fitzgerald told the Tribunal that the applicant is “… a very hard working, competent accountant. We are delighted that we made the professional decision to place our families (sic) personal and business financial affairs in [the applicant’s] custody.”[14] Mr Fitzgerald was aware of the applicant facing problems in the preceding years but believed that that was now behind the applicant.
[14] Exhibit A1, page 73, paragraph 28.
11. The applicant explained that his 2006 tax year return was lodged five and a half months late because he gave priority to the work for farmers who he said, in the drought conditions, had been reduced to having no income and for whom he needed to complete drought relief applications. Mr Gray asked why he had neglected to take care of his own affairs – particularly in light of the consequences he faced as the result of not lodging returns in the earlier period. The applicant responded that he felt a greater need existed to assist the drought affected farmers to obtain drought relief than existed for him to ensure his tax returns were lodged on time. The applicant explained that some of the farmers had no money or food. Mr Gray submitted that this was an unsatisfactory response given the warnings the applicant had received in the past.
12. It was Mr Fleming’s evidence that he had known the applicant since the 1960s when they met at a Rotary Young Leadership course. As well as observing the applicant’s leadership qualities, Mr Fleming had been a client of the applicant since relocating into the regional area in the early 1990s. He stated that he is well satisfied with the professional service he has, and continues, to receive from the applicant’s tax practice.
13. On behalf of the respondent it was submitted that in a letter dated 14 June 1995 the applicant was advised that the Board was “extremely concerned” about his conviction for failure to lodge a tax return.[15] The applicant was put on notice that the occurrence of any further convictions for not filing his tax returns on time would bring into consideration the suspension of his registration as a tax agent.[16] In the letter the Board referred to the power to cancel or suspend a tax agent’s registration found in s 251K(2) of the Income Tax Assessment Act 1936 (the Act).
[15] Appeal Book, page 124.
[16] Appeal Book, page 125.
14. On 9 April 2001 the Board wrote to the applicant and asked him to provide an explanation for the non lodgement of his tax returns for the years ending June 1992 through to 2000.[17] The letter notified the applicant that his reply would be placed before the Board. The applicant claimed that he contacted the secretariat by telephone and explained his situation including that that he continued to suffer ill health, financial pressures, a marital crisis, a heavy professional workload, staffing inadequacies (exacerbated by the introduction of the GST legislation) and problems associated with a Notice to Quit in regard to his premises. The applicant states that he undertook in that telephone conversation to respond by letter as soon as he possibly could.[18] No written response was received and reminder letters dated 14 May 2001[19] and 25 June 2001 were sent requesting a response.[20] The applicant claims that he rang the secretariat on 16 and 29 May and on 25 June and 5 July repeating the explanation of the problems he was facing and advised that he would respond in writing as soon as possible.[21] A file note dated 18 June 2001 records the applicant as ringing the secretariat and saying that because his affairs were so complex it may take up to six months for him to lodge the returns.[22] In a letter dated 25 June 2001 the Board gave the applicant notice that it was considering his suspension as a tax agent.[23] A file note records the applicant as telephoning on 6 July and explaining he had problems “… with losses in the past and stadff (sic) issues now.”[24] A meeting of the Board held on 26 July decided to suspend the applicant for a period of five months, a suspension of one month for each year outstanding.[25] The decision was made on the grounds that the applicant had not responded to letters from the Board and had not filed tax returns, in particular, in respect of the years 1996 to 2000 inclusive.[26]
[17] Appeal Book, page 138.
[18] Exhibit A1, pages 36 to 37, paragraph 34.
[19] Appeal Book, page 139.
[20] Appeal Book, page 143.
[21] Appeal Book, page 140 and Exhibit A1, pages 37 to 38, paragraphs 35 to 36.
[22] Appeal Book, page 141.
[23] Appeal Book, page 143.
[24] Appeal Book, page 144.
[25] Appeal Book, page 145.
[26] Appeal Book, page 146.
15. The applicant finally responded in a detailed letter dated 12 November 2001 which reiterated the problems outlined earlier in these reasons which the applicant was experiencing.[27] The applicant discussed the latter with the Board’s assistant secretary and requested that the Board reconsider its decision to suspend him.[28] The Board declined to do so at its meeting held on 22 November 2001.[29] The applicant also lodged an application with this Tribunal to review the Board’s decision to suspend him. The applicant was granted a stay of the Board’s decision to suspend him. He subsequently withdrew the application.[30] The decision to implement the suspension was activated and the applicant’s registration was suspended from 24 April to 23 September 2002.[31] The tax returns for the outstanding years had not been lodged by the time the applicant’s suspension ceased.
[27] Appeal Book, pages 149 to 153.
[28] Appeal Book, page 161.
[29] Appeal Book, page 162.
[30] Appeal Book, page 166.
[31] Appeal Book, page 169.
16. At a meeting held on 25 November 2002 the Board decided to have the applicant prosecuted for the non lodgement of his tax returns.[32] On 19 September 2003 the applicant pleaded guilty to offences alleging he had failed to lodge his tax returns, was fined and ordered to file the returns within 21 days. The applicant successfully appealed the convictions which were set aside. The Tribunal has addressed the consequences arising from this in paragraph 24 of these reasons.
[32] Appeal Book, page 170.
17. The Tribunal also notes that the applicant was late in 1998 and 2001 in lodging his application to have his registration as a tax agent renewed. The applicant wrote to the Board apologising each time for the late lodgement of the re-registration form after the Board had apparently contacted him and reminded him that this required his attention.[33]
[33] Appeal Book, pages 126 to 130 and 133 to 137 respectively.
18. The applicant maintained the problems outlined above in paragraph six which beset him were now largely behind him. He said that he and his wife are now qualified to access superannuation savings and despite the loss of some money in the Timbercorp corporate failure the future looked “rosy.” The applicant stated a number of times that the problems of the past were now behind him. He told the Tribunal he employed a dedicated employee who he wanted to train and ultimately take into partnership before selling the practice to him in three or four years. It is apparent, and the Tribunal accepts, from the evidence of Mr Kellock and from the written reference from Ms Whitehouse, dated 23 July 2009,[34] that the applicant regards the training of staff as an important aspect in the maintenance of the service offered by his business. A number of other people, some of whom are clients, and one a former employee, provided written references mentioning the applicant’s strong commitment to his professional business, the local community and to his family.
[34] Exhibit A1, page 108.
19. The applicant maintained the number of factors which blighted him in the relevant period amounted to ‘special circumstances’ in terms of the legislation such that they provided the reason for his omissions to file his returns on time. On behalf of the respondent Mr Gray maintained that the circumstances were not ‘special’ but simply reflected the vicissitudes of life. Mr Gray maintained it was not so much the occurrence of the events which was in issue but the manner in which the applicant dealt with them. He submitted that the applicant had the type of personality which made it hard for the applicant to appreciate that a problem existed and that stood in the applicant’s way of addressing that problem. This, it was submitted, was a personality trait and that traits do not change and do not arise from any mental or other illness from which the applicant may have suffered. The consequence of the applicant having such a personality trait was that there may be a recurrence of the applicant’s problems. If that occurred it would continue to undermine the trust which needed to exist between an agent and the tax office and the agent and the Tax Agents’ Board.
20. The applicant emphasised that he had learnt from his mistakes as evidenced by the fact his tax returns for 2007 and 2008 had been lodged on time. The applicant acknowledged that he was still taking prescribed medication for his depressive condition and that may well be ongoing. However, he said he now appreciated how foolish he had been not to seek and accept treatment for that illness when it first arose at which time he was in denial. He maintained that he remained under the care of his general medical practitioner for both his depressive illness and Type II diabetes, the latter being a new condition which had emerged.
21. Part VIIA of the Act provides for the registration of tax agents. Section 251BC(1) excludes people whose circumstances are described in the provision from being registered as tax agents. One of the circumstances, being the one faced by the applicant in this case, is that he is not a person of good fame, integrity and character.
22. There is a public interest in ensuring that tax agents maintain proper standards in the preparation and lodgement of tax returns. Subject to some exceptions not relevant to this case, s 161(1) of the Act provides that the Commissioner of Taxation is to advise in the Government Gazette the time in which every person must lodge an income tax return. Failure to lodge an income tax return on time results in the general interest rate becoming payable in those returns giving rise to an outstanding income tax liability as an additional tax payment.[35] The provisions relating to the lodgement of tax returns within the time permitted apply to tax agents as they do to all other people. It is clearly desirable that tax agents, in particular, should lead by example in having their tax returns lodged within time.
[35] Sections 163B(1) and (2) of the Act.
23. A person who is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers can be registered as a tax agent. Section 251BC(1) of the Act sets out the factors which may lead to person being denied registration, or re-registration, as a tax agent. These include a person not being of good fame and character[36] and having a conviction for a serious tax offence within the previous five year period.[37] The disqualifying circumstances do not limit the matters which can be considered but, as pointed out in the first Federal Court decision in this matter, they may inform the decision maker.[38] The applicable date to be considered is not that date on which the Board made its decision, but the date on which the Tribunal delivers its decision: Shi v Migration Agents’ Registration Authority.[39] In this case the time is now five years after the original decision was made. As may be expected the applicant’s circumstances have changed over that five year period and the circumstances with which this Tribunal must deal are different, in some respects, from those facing the Board in 2004 and the Tribunal in its two previous decisions. The historically established facts, of course, remain constant, for example, the applicant’s conviction for failing to lodge his income tax return for the 1989 tax year and his failure to respond to the respondent’s requests that he file outstanding tax returns. What has changed is said to relate to the applicant’s physical and mental health, which it is claimed adversely affected the manner in which he conducted his affairs including his professional affairs as a tax agent in the period leading up to 2004 tax year.
[36] Section 251BC(1)(d) of the Act.
[37] Section 251BC(1)(e) of the Act.
[38] Toohey (Formerly Identified as VBY) v Tax Agents’ Board of Victoria [2007] 67 ATR 522 at [9] per Middleton J.
[39] (2008) 248 ALR 390.
24. The Tribunal should address the issue raised in s 251BC(1)(e) first. On 19 September 2003 the applicant was convicted in the Victorian Magistrates’ Court of offences that he failed to lodge his personal income tax returns for the years 1996 to 2001. The applicant pleaded guilty to the offences and was fined and ordered to lodge his returns within 21 days. On 23 September the applicant lodged an appeal against his conviction. On 24 May 2004 the Director of Public Prosecutions in the County Court withdrew the cases against the applicant.[40] The ground on which the stated ‘withdrawal’ was made concerned the validity of notices sent by the Commissioner of Taxation to the applicant. The applicant must be regarded for the purposes of this application to be considered as being found not guilty of the offences. Accordingly, he cannot be considered a person who is not fit and proper to be registered as a tax agent as the result of any failure to comply with s 251BC(1)(e), that is, having been convicted of a serious tax offence in the five year period preceding his application for registration. This does not act as a bar to the Tribunal considering the applicant’s previous conviction for failing to lodge a tax return for the 1989 tax year.[41] Nor does it preclude consideration of the facts that the applicant failed to lodge tax returns in the ten year period including those years in respect of which the prosecutions were withdrawn. Finally, the Tribunal is not precluded from considering communications between the tax office and the applicant concerning the filing of the outstanding tax returns.
[40] Appeal Book, page 74.
[41] Appeal Book, page 110. There seems to be confusion as to whether the applicant was also convicted in 1991, see Appeal Book, page 120. Deputy President Forgie found the applicant was in fact only convicted in relation to the late lodgement of the tax return for the 1989 tax year: [2008] AATA 262 at [44]. The respondent submits the applicant was incorrect in regard to his admission to a 1991 conviction: see Respondent’s Statement of Facts and Contentions, footnote 1. The Tribunal therefore accepts there is only one conviction and it relates to the 1989 tax year.
25. Where re-registration has been refused and a claim of special circumstances is raised under s 251BC(3)(c) of the Act, as in this case, a factual assessment of what constitutes those circumstances and a decision as to whether they are ‘special’ must be undertaken by the decision maker. Some guidance as to what may be considered a ‘special circumstance’ was given in Re Beadle and Director-General of Social Security[42] where the Tribunal stated:
An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.[43]
[42] (1984) 6 ALD 1.
[43] (1984) 6 ALD 1 at 3 per Toohey J, Mr Wilkins and Dr Billings (Members).
26. An appeal against the decision in Beadle was unsuccessful before the Full Court of the Federal Court.[44] There the Court emphasised that what is constituted by ‘special circumstances’ will depend on the circumstances of the particular case.[45] In the instant case the circumstances must be considered within the context of the Act.
[44] Beadle v Director-General of Social Security (1985) 7 ALD 670.
[45] (1985) 7 ALD 670 at 674 per Bowen CJ, Fisher and Lockhart JJ.
27. For convenience, consideration of the applicant’s circumstances can be divided into two time related periods. The first involves an examination of the events leading up to 2002 when action was taken against him for his failure to lodge tax returns. The second relates to circumstances which post date that time up to the present.
28. The applicant does not agree that he was convicted of an offence for failing to file his 1989 tax return on time. He stated in his statement he was prosecuted in 1990 and pleaded guilty and was fined. However, after enquiries to the Magistrates’ Court in Ballarat there was no recording of a conviction.[46] Mr Toohey claimed this was consistent with no conviction being recorded and that he mistakenly disclosed it in his applications for re-registration as a tax agent. However, the respondent claims that the Magistrates’ Court records at Ballarat only go back so far as 1991. During his oral evidence Mr Toohey said he had no recollection of pleading guilty. Whatever the case may be, the respondent did not press the issue and the Tribunal does not rely upon it.
[46] Appeal Book, page 47.
29. Having a large family to support, even if five children is considered to be a large family, is not ‘special’. Illness, whether mental or physical, or a combination of both, is not and was not, in the period the Tribunal is considering, so exceptional as to be considered ‘special’. The applicant's conditions as subsequently occurred were all treatable and were treated without the need for specialist involvement. Difficulties in managing staff in the operation of a small practice, including moves for staff to purchase the business, are no so exceptional as to be considered ‘special’. That a farmer’s son, who is himself a farmer and a person with tax skills, assists in the winding up of his late farming father’s estate including providing financial and emotional support for his mother in her later years is unexceptional any more than is a sibling giving some support and assistance to another sibling experiencing illness. There are many problems and combinations of problems, not the least of which arise from financial mismanagement, which destabilise and place marriages under threat, that that also cannot be considered ‘special’.
30. While it is common ground that the applicant notified the Board by telephone of the problems he faced in the period up to 2002, that was not what the Board was requesting of him. Not unreasonably it wanted a written explanation for his failure to lodge returns to be considered by the Board. The applicant attributes his inability to comply by referring to the same circumstances which led him to not lodge his tax returns. The Tribunal notes that the applicant could have engaged another tax agent to assist him to attend to this aspect more promptly than occurred. The circumstances relied upon by the applicant for non compliance in this first period are not, whether viewed individually or collectively, such that they constitute ‘special circumstances’ to place a decision maker in a position to exercise the discretion available in s 251BC(3) of the Act.
31. In considering the circumstances since 2002 the Tribunal notes that the applicant was five and a half months late in the lodgement of his 2006 return. The reason given for this is that he was busy assisting drought affected farmers to secure drought relief funding. The applicant told the Tribunal that some of the farmers were without income or means to provide food for their families. He said that he considered their needs to be greater than his in having his tax return filed on time. Again, the applicant did not consider hiring another tax agent to either assist him or fully complete his tax return. He said he did not know whether the “hiccup”, that is, the extra workload due to processing drought relief forms, would last for weeks or months. The Tribunal is unable to accept this as a ‘special circumstance’ so that the omission to file his tax return can be ignored. By 2006 the applicant must be taken to have appreciated that failing to lodge his tax return was likely to impact adversely on his ability to remain registered. To delay in circumstances when he was operating under a stay granted by the Tribunal and while his case was being considered by the Tribunal and the Federal Court undermines his explanation and is indicative that he still did not appreciate the precarious situation which he faced. While the Tribunal appreciates the applicant may have been overwhelmed by his workload brought on by the circumstances of the drought, those circumstances did not prevent him from hiring another tax agent to complete his tax return on his behalf. That he failed to address his tax return while still under the cloud of legal proceedings concerning his past omissions speaks loudly to the Tribunal. The applicant should have treated the years he was concerned in proceedings before both this Tribunal and the Federal Court as an opportunity to show that he had mended his ways and now considered his own tax returns a priority. The respondent submitted, during closing submissions, that the 2006 tax year is the most proximate evidence of the applicant having to deal with difficult circumstances and it is very probative of how the applicant will behave in the future.
32. The respondent appropriately referred the Tribunal to the following paragraphs in Adamec and Tax Agents’ Board of Victoria[47] where Dr Hughes said:
No-one would deny that the applicant has experienced a difficult and distressing period of his life over the last 10 years or so. However, I find it difficult to accept, that these events are sufficiently unusual as to amount to "special circumstances" as that term is used in the Act. Family sickness, bereavement, domestic responsibilities, personality clashes in the workplace, fluctuating work loads and failed business ventures are not uncommon. Unquestionably the applicant's misfortune was accentuated by the fact that all of these challenging personal events confronted him within a relatively short period of time; but this does not alter the fact that such events are prone to occur to anyone. No doubt, some people are better equipped, psychologically, than others to cope with these vicissitudes, but this cannot alter the characterisation of the events themselves. In making an allowance for "special circumstances", the authorities provide that something more than misfortune is required. The existence of professional standards would become impossibly compromised if they were to be subject, as a matter of course, to the prevailing domestic harmony, physical wellbeing and general equanimity of the individual professional.[48]
…
The repeated failure of the applicant to lodge his own income taxation returns likewise calls into account his fitness to practise as a tax agent. It is insufficient for the applicant to state that he disregarded his own obligations because he was giving priority to his clients. While this explanation may be true, it evinces either severe personal disorganisation (which in turn is likely to impact adversely on his professional duties) or a severe lack of regard for the very legal framework within which he practises his profession. Either way, this places the applicant's clients at risk.[49]
[47] [2005] AATA 913.
[48] [2005] AATA 913 at [70].
[49] [2005] AATA 913 at [78] (emphasis added).
33. The applicant’s circumstances, particularly but without being limited to his illnesses, are unfortunate circumstances, but they are circumstances faced by many people in the Australian community. The circumstances cannot be considered in isolation. It must be borne in mind that the pubic interest in ensuring tax agents are fit and proper people to undertake tax advice on behalf of the public is the underlying consideration. The promotion of the public interest is the primary consideration for the Board and this Tribunal standing in place of the Board.
34. The applicant submitted that the factors that had impeded him before had now all gone and he was now able to prioritise his own tax returns. However, he did not say that he was now equipped to handle those factors should they arise again. It is almost certain that the drought will continue to affect farmers and the applicant may once again find himself overwhelmed with drought relief applications. The applicant has not satisfied the Tribunal that he will file his tax returns on time while handling such difficulties in the future. The applicant pointed to the fact he had filed the 2007 and 2008 tax year returns on time. The respondent submitted that the on time filing should not be given much weight, because that is the norm and that is what is required by law. While it is commendable that applicant filed the last two tax returns on time the Tribunal must also put those tax returns in context. During those two years, the applicant did not face any of the difficulties listed in paragraph six above. The last difficult circumstance the applicant faced was in 2006, and that adversely affected the timing of his lodgement.
35. The Tribunal should also have some regard to the way he has handled the preparation of his case before this Tribunal in recent months. The applicant claims he is no longer faced with constrictive family obligations and business obligations and that his depression is under control and that he is thus able to concentrate on his own tax returns. However, the applicant’s experience with the currently constituted Tribunal does not reflect his argument. In paragraph three above the Tribunal outlined the adjournments the applicant requested in order to file his documents on time, which were ultimately filed late in any event. Additionally, the applicant was given further time at the conclusion of the hearing to file evidence to support his submission that notices from the Commissioner of Taxation extended the tax return lodgement time for the 2004 and 2005 tax years (where some of the tax returns he was responsible for were noted as being three weeks overdue). Nothing was filed in the time provided. This is an important proceeding, the applicant’s future career as a tax agent depends on the Tribunal’s decision. It would be reasonably expected that the applicant would see this proceeding as of the utmost importance and a priority in his life. But the applicant has failed to take the opportunity to show that he has a grasp of the priorities in his life. Despite managing to file his tax returns in the 2007 and 2008 tax years on time, the Tribunal is not satisfied that the applicant does not continue to be adversely affected by the various vicissitudes of life as at the time this Tribunal is giving this decision.
36. While the Tribunal has no doubt that the applicant is an honest man who has always tried to put his clients’ interests before his own and has been adversely affected by health issues and other circumstances, the Tribunal is not convinced that he will file his tax returns on time in the future. The applicant asked the Tribunal to disregard his late tax returns. Put simply, the Tribunal cannot do that. As a tax agent, the applicant should hold himself up to a higher standard than the general public. He has an intricate knowledge of tax laws and it is reasonable to assume that he knows the importance of lodging tax returns on time. His clients, as well as the general public, should be able to entrust their taxation affairs to him and have confidence that he is able to lead by example and file his tax returns on time as required by the law.
37. For the above reasons the decision under review is affirmed.
I certify that the 37 preceding paragraphs are a true copy of the reasons for the decision herein of
Mr G L McDonald, Deputy PresidentSigned: .......[sgd G Horzitski].................
Grace Horzitski Associate
Date of Hearing 30 July 2009
Date of Decision 14 August 2009
For the Applicant Self represented
Counsel for the Respondent Mr P. Gray
Solicitor for the Respondent Mr E. Evagorou, Australian Government Solicitor
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