Troy and Tax Agents' Board of Queensland and Pioneer Accounting and Business Services Pty Ltd

[2001] AATA 991

DECISION AND REASONS FOR DECISION [2001] AATA 991

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2001/605

GENERAL ADMINISTRATIVE  DIVISION       )          
           Re      ADRIAN TROY      
  Applicant
           And    TAX AGENTS' BOARD OF QUEENSLAND    
  Respondent

AndPIONEER ACCOUNTING AND BUSINESS SERVICES PTY LTD

Party Joined

DECISION

Tribunal       Mr. D.W. Muller, Senior Member

Date5 December 2001

PlaceBrisbane

Decision      The Tribunal affirms the decision to refuse the registration of Adrian Troy as an Additional Nominee of Pioneer Accounting and Business Services Pty. Ltd.          
  .............(Signed).................................
  D.W. MULLER
  SENIOR MEMBER
CATCHWORDS
TAX AGENT – not relevantly employed for at least 12 months
Income Tax Assessment Act 1936: s 251KB, 251KC, 251BC, Reg 156

REASONS FOR DECISION

Mr. D.W. Muller, Senior Member             

1. This is an application to review a decision to refuse to register Adrian Troy as an Additional Nominee of Pioneer Accounting and Business Services Pty Ltd (Pioneer), pursuant to the provisions of the Income Tax Assessment Act 1936 (the Act).

2. Pioneer became a registered Tax Agent on 27 April 2001.  Pioneer's registered nominee is Keitha Laurie.

3. The Act allows for a partnership or a company to be registered as a tax agent but to be so registered, the partnership or company must have at least one registered nominee. To become a registered nominee, an application must be made under s.251KB of the Act, which provides that the proposed nominee must be an employee of the company.

4. A combination of sections 251KC(1), 251KC(2) and 251BC of the Act provides in effect that a proposed nominee must possess the qualifications necessary to be a tax agent.

5. In Mr. Troy's case there has been no issue raised as to his age, good fame, integrity, character or whether he has ever committed a serious taxation offence.

6. It has been conceded by the respondent that Mr. Troy has completed all necessary academic requirements to be registered.

7. The contentious issue relates to the "apprenticeship" period which must be served as part of the qualifications to become a tax agent, as provided for in Regulations 156(1)(a)(ii) and 156(2), the relevant parts of which are:

   "156(1)(a)  The person:
             …..

   (ii)       Shall have:

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

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

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

   Regulation 156(2) defines "relevant employment" to mean:

   "Employment by a person or a partnership or as a member of a partnership in the course of which there has been substantial involvement in income tax matters, including:
   (a)       preparation or examination of a broad range of income tax returns;

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

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

1. The employment must be by a person, partnership or company who or which is a registered tax agent.  The Regulations envisage that a prospective tax agent must have the benefit of being supervised by a registered tax agent in an agency dealing with a broad range of income tax matters in large numbers for at least 12 months prior to being registered and being allowed to practice and deal with the public in their own right.

2. The relevant history of the matter is as follows:

   (i)Mr. Troy met Ms. Laurie in December 1999.  At that time Ms. Laurie was a registered tax agent.  They discussed the setting up of an accounting practice partnership.  Ms. Laurie made it clear to Mr. Troy that she was in no financial position to pay him any wages.  Mr. Troy agreed to put up the finance necessary to get the practice started.

   (ii)Keitha Laurie had incorporated a company called Keitha Laurie Pty Ltd some years before December 1999.  The company was a service entity for her tax accounting business which she operated in her own name.  Keitha Laurie was the sole shareholder and Director.

   (iii)Mr. Troy incorporated a company called Adrian Troy Pty Ltd in which he and his wife were the shareholders and he was the sole Director.

   (iv)On 8 February 2000 a new company was registered.  It was called Pioneer Accounting and Business Services Pty Ltd.  The shareholders were Keitha Laurie Pty Ltd and Adrian Troy Pty Ltd.

   (v)On 9 February 2000 a "Deed of Partnership" was entered into between Keitha Laurie Pty Ltd and Adrian Troy Pty Ltd in which Adrian Troy Pty Ltd agreed to purchase 49% of the goodwill of Keitha Laurie Pty Ltd for $17,702.  They also agreed that the partnership would trade as a Company known as Pioneer Accounting and Business Services Pty Ltd.  Clause 24 of the Agreement said:

   "24.  KEITHA LAURIE, Director of KEITHA LAURIE PTY LTD agrees to provide ADRIAN TROY, Director of ADRIAN TROY PTY LTD with tutoring and mentoring in Tax Practice in order to provide ADRIAN TROY with the necessary experience to enable him to be registered as a Tax Agent."

(vi)All accounts were held in the name of Pioneer.  All income was directed to Pioneer.

(vii)The practice operated at Walkerston, a small town 20 kms west of Mackay.

(viii)On 2 March 2001, Mr. Troy applied for registration as a tax agent in his own name.  The application was accompanied by a "Statement of Relevant Employment", as required by the Board.  It contained the following disclosures:

(a)Mr. Troy's employer was Pioneer;

(b)Pioneer's business was a "public accounting practice";

(c)Pioneer's tax agent number was 66715-001, which was in fact Ms. Laurie's tax agent number;

(d)The work relationship between Ms. Laurie and Mr. Troy was "partner";

(e)Mr. Troy had been in the full-time employment of Pioneer from 11 February 2000 to 15 February 2001;

(f)Mr. Troy's involvement in income tax matters accounted for approximately 70% of his work with Pioneer, the other 30% being "accounting, financial management matters".

Ms. Laurie's status with Pioneer was said to be "partner/director".  It was further stated that Mr. Troy did not receive salary or wages, contract payments or commissions, but rather a share of profits to Adrian Troy Pty Ltd.

(ix)Shortly after the Board received Mr. Troy's application, a representative of the Board contacted Mr. Troy and Ms. Laurie and told them that Pioneer was not registered as a tax agent and consequently the employment of Mr. Troy by Pioneer could not be regarded as "relevant employment".  The Board's representative also told them that it was illegal for Pioneer to receive fees for the preparation of tax returns while not being registered as a tax agent.

(x)On 14 March 2001, Ms. Laurie applied on behalf of Pioneer to be registered as a company tax agent with Ms. Laurie as nominee.

(xi)On 14 March 2001, Mr. Troy applied to be a tax agent in his own right.  Among other things, he declared that he had been employed on a full-time basis with Ms. Laurie since 11 February 2000.

(xii)Mr. Troy withdrew his application on 23 March 2001.  He later applied to be an Additional Nominee of Pioneer.

(xiii)On 3 April 2001, Ms. Laurie again wrote to the Board in relation to the application for Pioneer to be registered as a tax agent.  Ms. Laurie stated, inter alia:

"… 2.  Employment
Attached is a copy of the year 2000 group certificate issued by Pioneer Accounting & Business Services Pty Ltd to Keitha Laurie.
In the financial year ended 30 June, 2000, Adrian Troy was not an employee of Pioneer Accounting & Business Services Pty. Ltd.  However he has commenced employment with the company and a Group Certificate will be available after 14 July 2001.

3.        Adrian Troy – Taxation experience
Attached is a summary of the taxation returns in progress currently being completed by Adrian Troy."

Enclosed with the letter was a copy of Ms. Laurie's 2000 group certificate showing that she was employed by Pioneer from 14 February 2000 to 30 June 2000, earning a gross salary of $10,400.

(xiv)On 17 May 2001, the Board wrote to Pioneer stating that at its meeting of 27 April 2001 it approved the application for registration of Pioneer as a tax agent effective from that date, with Ms. Laurie as a registered nominee of the company.  The Board refused Pioneer's application for registration of Mr. Troy as an additional nominee as it was:

"Not satisfied that Mr. Troy was employed by Keitha Laurie during the period relied upon to satisfy provisions of income tax regulation 156(1)(a)(ii), and therefore was not satisfied that he possessed relevant employment of the kind described in income tax regulation 156(2). The Board was not satisfied that Mr. Troy met the requirements of income tax regulation 156(1)(a), and pursuant to s.251KC(2) of the Income Tax Assessment Act 1936 refused the application."

1. The Tribunal heard evidence from Mr. Troy and Ms. Laurie.  They both contended that Mr. Troy had been an employee of Ms. Laurie from February 2000 and that he had not been an employee of Pioneer until about April 2001.  Mr. Troy said that he thought that he was an employee of Pioneer because he was a Director of Pioneer.  He also thought that dividends paid to Adrian Troy Pty. Ltd. were like wages.  They gave evidence that Ms. Laurie supervised Mr. Troy in the preparation of all tax returns that he did and that she thoroughly checked his work before the returns were forwarded to the Australian Taxation Office.

2. The Tribunal accepts that Ms. Laurie assisted Mr. Troy and checked his taxation work.  However, the Tribunal is not satisfied that Mr. Troy was ever an employee of Ms. Laurie.  The Tribunal is of the view that Mr. Troy exercised a greater degree of control over the business than did Ms. Laurie.  They did not have an employer/employee relationship.  They may well have been in partnership but the partnership, if it existed, was not a registered tax agent.

3. Mr. Troy does not currently satisfy the requirement that he possess "relevant employment" within the meaning of that term in the regulations set out above.

4. The Tribunal affirms the decision to refuse to accept the application of Mr. Troy as an Additional Nominee of Pioneer on this ground alone.

5. There was the additional contentious matter of whether or not Mr. Troy's experience in income tax matters amounted to "substantial involvement" including a "broad range" of income tax returns.  In the light of the above findings it is not necessary to address this matter.  Nevertheless, the Tribunal makes the observation that although the practice is based in a very small country town and some allowance may possibly be made for that fact, the experience provided by the practice does seem to be a bit on the thin side.

   I certify that the 14 preceding paragraphs are a true copy of the reasons for the decision herein of Mr. D.W. Muller, Senior Member.

   Signed:         .....................................................................................
              B. Hitchcock, Secretary

   Date/s of Hearing  3 December 2001
   Date of Decision  5 December 2001
   Counsel for the Applicant        Mr. T. Morgan
   Solicitor for the Applicant         Bill Cooper & Associates
   Counsel for the Respondent    Mr. D. O'Brien
   Solicitor for the Respondent    Australian Government Solicitor