VBY and Tax Agents' Board of Victoria
[2006] AATA 103
•8 February 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 103
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V2004/868
GENERAL ADMINISTRATIVE DIVISION ) Re VBY Applicant
And
TAX AGENTS’ BOARD OF VICTORIA
Respondent
DECISION
Tribunal Mr John Handley, Senior Member Date8 February 2006
PlaceMelbourne
Decision The decision under review is affirmed. ..............................................
Senior Member
TAX AGENTS – applicant registered as a tax agent from 1974 – application for re-registration refused in 2004 – previously appeared twice in Magistrates’ Court for failing to lodge own returns and previously been suspended – whether special circumstances exist consisting of ill health, practice and marriage instability, legal proceedings, death and illness of family members, absence of any complaints from clients – outstanding returns all of personal or family entities – decision affirmed
Income Tax Assessment Act 1936 (Cth) s 251QA, s 251JC, s 251BC and s 251K
Su v Tax Agents’ Board, South Australia (1982) 61 FLR 1
Re Carbery & Associates Pty Ltd and Tax Agents’ Board of Queensland (2001) 46 ATR 1106; [2001] AATA 107
Re Pappalardo and Tax Agents’ Board of Victoria [2003] 54 ATR 1011; [2003]
AATA 990
Re Dahia and Tax Agents’ Board of Victoria (1997) 36 ATR 1124
Re Prudzinski and Tax Agents’ Board of Victoria (1997) 36 ATR 1089;
(AAT 11882A, 29 May, 1997)
Re Reichert and Tax Agents’ Board of New South Wales [2005] AATA 188
Re Beadle and Director‑General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security, Federal Court, 27 September 1995, 989/95
Re Cowlishaw and Tax Agents’ Board of Queensland [1999] AATA 412
Re Ivovic and Director‑General of Social Services (1981) 3 ALN 61
Secretary Department of Social Security v Hulls (1991) 22 ALD 570
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Trimboli v Secretary, Department of Social Security (1989) 86 ALR 64
Re Adamec and Tax Agents’ Board of Victoria [2005] AATA 913
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Re Chapman and Tax Agents’ Board of South Australia (1984) 15 ATR 691
Re Tosio and Tax Agents’ Board of New South Wales [2005] AATA 1015
Australian Broadcasting Tribunal v Bond and Ors (1990) 94 ALR 11
Tax Agents’ Board v Bray [2004] FCA 1620
A Solicitor v The Council of the Law Society of New South Wales [2004] HCA 1
Re Mayes and Casino Surveillance Authority (1993) 29 ALD 585
Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279
Southern Law Society v Westbrook (1910) 10 CLR 609
REASONS FOR DECISION
8 February 2006 Mr John Handley, Senior Member 1. The applicant is an accountant and tax agent practising in regional Victoria. On 24 June 2004 the respondent (“the Board”) decided that he should not be re‑registered as a tax agent. The applicant by these proceedings seeks a review of that decision.
2. The applicant is presently practising. An Order to stay the operation of the decision under review was made with the consent of the Board by the Tribunal on 13 August 2004. The identity of the applicant has been concealed by a Direction made by me at the commencement of the hearing prohibiting the publication of his name and address, pursuant to s 35 of the Administrative Appeals Tribunal Act 1975. That application was made by his representative, to which the respondent did not object.
3. The applicant’s circumstances and the conduct giving rise to the decision made by the respondent will be summarised later, save that the applicant has, on two occasions, appeared before a Magistrates’ Court and pleaded guilty to the failure to lodge personal income tax returns. He also appeared by way of appeal before the County Court. There is also a history of delay in the lodgement of returns for entities with which he has been associated. There was no evidence of delay in the lodgement of returns on behalf of clients and the character of the applicant has been the subject of favourable comment by his doctors in medical reports which were received into evidence. Similar comments were also made by an accountant in the applicant’s employ.
the legislation
4. Section 251QA of the Income Tax Assessment Act 1936 (“the Act”) provides that an application may be made to this Tribunal to review a decision refusing to re‑register a tax agent.
5. Section 251JC of the Act provides that the Board shall re‑register an applicant as a tax agent if the applicant satisfies the Board that he is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.
6. Section 251BC provides that a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters if the person is not of good fame, integrity and character. Sub-section (3) provides that the Board is required, when considering an application for re‑registration, to determine whether it is satisfied by special circumstances that (relevantly) an “omission” of the applicant should be disregarded “as the case requires”.
7. Section 251K of the Act provides that if a tax agent has been convicted of an offence under legislation as described, the Board shall suspend or cancel the registration of the agent. In the present application there is no evidence that the applicant has ever been convicted. The conviction imposed on the second appearance before a Magistrates’ Court was quashed on appeal to the County Court. The first appearance before a Magistrates’ Court resulted in a fine but there is no evidence that any conviction was then recorded.
8. In the case of a person who is not found to be a fit and proper person (s 251K (2) (d)), the Board has a discretion as to whether to suspend or cancel the registration of a tax agent.
applicant’s practice circumstances
9. The applicant is presently 55 years of age and has been a practising public accountant since April 1976. He first registered as a tax agent in July 1976. He practised as an accountant in industry and with another accountant as an employee until 1982 from which time he has been in private practice. Between 1982 and 1988, he enjoyed a rapid expansion of his practice which generated increasing fee income. Between 1988 and 1989, he purchased freehold premises from which his practice operated and also purchased a rural property upon which he registered a hereford stud. Between 1989 and 1993 he suffered substantial financial losses because of high interest rates, increasing repayments on loans and leases, a downturn in his practice because of reduction in taxation services to wool growing clients (who suffered financially by reason of a downturn in the rural economy), borrowed against his credit cards in order to raise funds to meet increasing debts (thereby increasing his overall debts), was at risk of bankruptcy and disposition of his freehold properties by his mortgagee. On one occasion he was required to terminate the employment of one of five employed accountants within his practice who threatened to leave and who had sought to remove clients of the practice. Eventually the applicant restructured his businesses, he sold properties and farming equipment and raised approximately $500,000 to extinguish his debts. He also applied $100,000 of funds inherited by his wife to meet practice debts.
10. In 1993, the applicant’s father died and he thereafter acted as the administrator of his father’s estate. The surviving beneficiary was the applicant’s mother who was also ill. The estate comprised a number of farming properties which were not profitable. The applicant rearranged the farming enterprises to improve and increase production and profitability. This imposed a burden upon him.
11. In 1997, the applicant was responsible for the care of his terminally ill brother which included driving him to Melbourne on a frequent basis for treatment. The applicant was also required to rearrange and manage his brother’s financial affairs.
12. Between 2000 and 2003, the applicant was involved in legal disputes concerning a lease over premises upon which his practice operated and also was required to deal with a notice to quit issued by the owner of the premises. In 2003 the premises were relocated.
13. In January 2003, the employment of two employee accountants was terminated by reason of them acting to destabilise the applicant’s practice.
14. From March 2003, the applicant has engaged the services of an experienced accountant. He also has two other accountants in full time employment. The applicant’s wife is employed as an administrative officer.
the applicant’s health
15. A number of medical reports were received into evidence from doctors who had treated the applicant for many years. Some reports were prepared by his general practitioner who has been treating since 1986.
16. The applicant has been treated for depression and anxiety from 1986. In 1999 he suffered from a hiatus hernia and oesophageal ulceration with bleeding. In September 2002 he was admitted to hospital with suspected angina and subsequently suffered recurring chest infections. He has suffered from a right carpal tunnel injury which was decompressed by surgery in August 2002. Between 1996 and 2001 he suffered from sciatica with referred right hip and leg pain. He has also suffered from pain and discomfort in his right knee. Reports also exist of the applicant suffering a C6 nerve entrapment with headaches.
17. The applicant said, and the reports corroborate, that medication for all of the above conditions ceased at February 2003 from which time the applicant has, in apparent response to treatment and therapy, made a good recovery and has subsequently enjoyed good health.
court and tribunal proceedings and dealings with the board
18. In 1990 the applicant pleaded guilty before a Magistrates’ Court by failing to lodge his own tax return for the 1989 year of income. It is not known whether a conviction was recorded but the applicant was fined $500. The applicant disclosed what he believed to have been a conviction in his applications for re‑registration as a tax agent in 1992 and 1995.
19. On 19 September 2003, the applicant pleaded guilty before a Magistrates’ Court to six counts of failing to lodge his own returns for the years of income 1996 to 2001. He was fined a total of $5500 and was ordered to lodge his returns within 21 days.
20. Subsequently an appeal was lodged against those findings. On 28 May 2004, the Director of Public Prosecutions withdrew the charges against the applicant when it was noted that there were defects in the notices or summonses which gave rise to the proceedings before the Magistrate on 19 September 2003. The penalties therefore imposed by the Magistrates’ Court on that date were extinguished.
21. On 6 August 2001, the Board decided to suspend the applicant as a tax agent for the period 6 September 2001 until 6 February 2002 by reason of his failure to lodge his own returns for the period 1996 to 2000. The applicant applied to this Tribunal to review that decision in proceedings V2001/1437. A stay of that decision was granted. The applicant withdrew the proceedings on 24 April 2002 and the suspension of five months then commenced and expired on 23 September 2002.
22. These proceedings arise out of a decision made on 24 June 2004 by reason of outstanding personal and other related returns. The Board consented to the making of a Stay Order on 13 August 2004 and the applicant has subsequently practised, as a tax agent, by reason of that Order.
delay in lodgement of income tax returns
23. Each party prepared a schedule summarising the returns required to be lodged by the applicant concerning his personal returns and returns associated with a family superannuation fund, a family investment trust, a family trust and the estate of his father.
24. There was some dispute towards the end of the hearing concerning the accuracy of certain dates recorded in the summaries of the Board. It was learnt that the Board had relied on information made available to it by the Australian Taxation Office (“the ATO”) but when pressed by the applicant and his Counsel (having regard to documentation which was prepared whilst the hearing was part-heard), Counsel for the Board indicated that he was unable to obtain instructions to verify the accuracy of the information that had been made available to the Board. The applicant had also prepared a schedule. In fairness, a comparison of the schedules concerned a variation between the parties of a matter of weeks only and it would appear from the documentation made available by the applicant that his information as to lodgement dates was accurate.
25. Nonetheless, the summaries do point to considerable delays by the applicant in the lodgement of returns namely:
(i)His personal income tax returns for the years of income 1992 to 2002 were all lodged in October 2003.
(ii)The returns for his family’s superannuation fund for the years 2001, 2002 and 2003 were lodged in April, May and June 2004 respectively.
(iii)The returns for the estate of the applicant’s father for the years 1996 to 2003 were all lodged in June 2004.
(iv)The returns for the applicant’s family investment trust for the years 1992 to 2003 were lodged in April and May 2004.
(v)The returns for the applicant’s family trust for the years 1992 to 2003 were all lodged in April and May 2004.
26. It follows from the above summaries that all outstanding returns for all entities with which the applicant had an association save for the returns of the estate of his late father, were lodged with the ATO prior to, if only by a few days, the hearing of the County Court appeal in May 2004 (refer Transcript, page 121 and 122).
failure to respond to letters of the board
27. On 9 April 2001, approximately 10 days after the applicant applied for re‑registration on 29 March 2001, the Board wrote to him and recorded that by reason of his failure to lodge his personal income tax returns for the years 1992 to 2000 it may be decided that he is not a fit and proper person to practice as a tax agent. He was asked to give an explanation in writing for the delay in lodging the returns within 14 days. There was apparently no reply to that letter and on 14 May 2000 the Board again wrote to the applicant advising him of a recent decision of the Administrative Appeals Tribunal (“the Tribunal”) concerning an agent who was suspended for three months by reason of failing to respond to correspondence from the Board. The applicant was again asked to respond within 14 days.
28. On 16 May 2001, the applicant apparently had a discussion with a person in the office of the Board. The memorandum (T54) records that the applicant said that he would arrange for “Margaret” to type a reply to previous correspondence and forward it “next Tuesday 22nd”.
29. On 29 May 2001, the applicant apparently rang the Board and advised that he was intending to personally deliver his reply. He was advised to post it.
30. On 18 June 2001, the applicant had a discussion with a person in the office of the Board advising that he had difficulty lodging outstanding returns and would need upwards of six months to complete all outstanding returns. He was asked to record that in writing and forward it to the Board (T55).
31. On 20 June 2001, the applicant had a telephone discussion with an officer of the Board advising that he had lost previous correspondence and requesting that copies be forwarded to him. The memorandum (T56) of that date records that it was stressed upon him the urgency and importance of responding to earlier correspondence.
32. At a meeting of the Board on 25 June 2001, the Board apparently considered cancellation or suspension of the applicant’s registration as a tax agent. A letter of that date (T57) is entitled “NOTICE TO SUSPEND TAX AGENT REGISTRATION”. The applicant was advised that he had failed to respond to letters forwarded to him of 9 April and 14 May 2001 and was advised that the Board considered that a tax agent who was unable to look after his own affairs may not be a fit and proper person. His attention was also drawn to two decisions of the Tribunal where the consequences of failing to lodge returns and failing to respond to Board correspondence resulted in discipline by the Board. The applicant was asked to respond to the letter of 25 June 2001 within 14 days.
33. On 6 July 2001, apparently by reason of there not being a response to the previous letter, the applicant was again advised to respond without delay.
34. On 26 July 2001, the Board met and noted that the applicant had at that date failed to respond to earlier correspondence. The Board noted that there was also a failure to respond to a notice of suspension of 25 June 2001. Consequently the Board decided to suspend him for five months commencing on 6 September 2001.
35. The Board also wrote to the applicant on 26 November 2003 recording its concern of his failure to lodge returns for his partnership, the estate, the family trust and a family investment. (The Board conceded at the hearing that it was an error to compel production of partnership returns). The applicant was advised to respond within 28 days concerning the matters raised by the letter and provide an explanation. The applicant applied for re-registration on 10 March 2004.
36. In a telephone discussion of 2 April 2004, the applicant said to an officer of the Board that he had not ever received the letter of 26 November. It was then copied and forwarded to him. He was requested to reply to it before 15 April because the Board intended to meet on 23 April 2004.
37. On 15 April 2004, the applicant forwarded a letter by facsimile transmission to the Board. The letter summarised some of the issues which the applicant asserted were responsible for his delay in lodging returns. The Board decided, that having been advised by the applicant that he intended to appeal against the decision of the Magistrate of 2003 to impose a conviction, that it would not take any further action until the appeal was heard.
38. On 23 June 2004, the applicant wrote to the Board and advised that the charges against him had been withdrawn at the County Court on 28 May 2004. He also recorded that “returns for associated entities have also been lodged”.
the decision under review
39. The Board resolved at a meeting on 24 June 2004 to decline the applicant’s application for re-registration as a tax agent. The reasons for that decision are found at T25, page 79 as follows:
1.VBY continued failure, despite verbal and written reminders to respond in writing to written requests sent to him by the Board.
2.VBY continued failure to lodge the outstanding returns in respect of a large number of years of income and provide written explanations to the Board of why the returns were not lodged, despite formal demands for the lodgement of those returns being issued by the Tax Office.
3.The Board noted that it took a period of two and a half years from the time VBY was first advised that the returns were outstanding and the need to institute prosecution action, until their eventual lodgement.
The Board noted that, on VBY’s appeal against his conviction, the case against him was withdrawn. However, the Board determined that VBY’s continued and persistent failure to respond to requests by the Board for information and explanations, and his failure to comply with his own personal tax obligations in relation to a large number of years of income, meant that he was not of good fame, integrity and character.
Consequently, the Board determined that VBY was not fit and proper to be a registered tax agent as required by section 251BC of the ITAA36 and to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. The Board therefore resolved to decline VBY’s application for reregistration as a tax agent pursuant to section 251JC(2) of the ITAA36.
summary of tribunal and federal court decisions
Fit and Proper Person?
40. In Su v Tax Agents’ Board, South Australia (1982) 61 FLR 1 (“Su”) Davies J decided that a tax agent who is a fit and proper person is a person who is of good reputation comprising the elements of competence, integrity and trust. His Honour decided that the ATO should be entitled to assume that the agent has prepared returns honestly and competently. Davies J also decided that an agent failing to lodge his own returns does not permit a finding that he would necessarily fail to attend to the affairs of his clients but there is a likelihood that his clients’ interests will become affected.
41. In Re Carbery & Associates Pty Ltd and Tax Agents’ Board of Queensland (2001) 46 ATR 1106; [2001] AATA 107 (“Carbery”) , the Tribunal decided that a tax agent who fails to lodge his own returns commits a serious taxation offence and is not a fit and proper person. It was decided that a fit and proper person is measured by diligence, knowledge of the legal framework and competence when dealing with the tax office and with clients.
42. In Re Pappalardo and Tax Agents’ Board of Victoria [2003] 54 ATR 1011; [2003] AATA 990 (“Pappalardo”) , the Tribunal decided that an agent failing to lodge his own returns for five consecutive years had committed a gross dereliction of a fundamental duty.
43. In Re Reichert and Tax Agents’ Board of New South Wales [2005] AATA 188 (“Reichert”), the Tribunal decided that an agent failing to lodge his own returns over 15 consecutive years had not committed a “technical default” but had “knowingly and methodically maintained” a breach of duty. The Tribunal decided that a tax agent who is competent should obey relevant laws and lodge his own returns within time limits. In reaching its conclusions the Tribunal relied on the previous Tribunal decisions in Pappalardo and Carbery.
44. In Re Dahia and Tax Agents’ Board of Victoria (1997) 36 ATR 1124 (“Dahia”), the Tribunal reviewed a decision of the Board to cancel the registration of a tax agent who had been convicted and fined for failing to lodge his own returns for two years of income. The Tribunal noted that when the returns were ultimately lodged and assessed there was no outstanding tax liability. It was also found that the needs of the agent’s clients were met before his own and there were no complaints by any client. In the circumstances of that application and in the exercise of an available discretion, the Tribunal decided to set aside the decision to cancel and in turn substituted a decision that the agent should be suspended for a period of approximately five months.
45. The Tribunal as constituted in Dahia reviewed a decision of the Board in Re Prudzinski and Tax Agents’ Board of Victoria (1997) 36 ATR 1089; (AAT 11882A, 29 May, 1997). The decision is of interest because it was heard and decided in the same month as Re Dahia (and by the same Member of the Tribunal). In addition to failing to lodge her own returns for a number of years, the applicant had been the subject of complaint by clients and a former employee, she had pleaded guilty to offences of stealing and had allowed her husband to sign client tax returns during a period of time when he was not authorised as her nominee and at a time when he had been deregistered as a tax agent. Despite hearing evidence of the applicant’s ill health and character evidence, the Tribunal decided to affirm the decision to cancel, having decided that the agent did not exhibit honesty and integrity needed in a person who, as an agent, is required to lodge returns on behalf of clients and who may be entrusted with client monies.
46. In Re Cowlishaw and Tax Agents’ Board of Queensland [1999] AATA 412, the Tribunal reviewed a decision to suspend three applicants for a period of 12 months pursuant to s 251K of the Act. The Tribunal found that the agents had been claiming deductions on behalf of clients which were greater than deductions of comparative clients of other agents, the agents had caused considerable delay in explaining and substantiating the claims for deduction, the agents had failed to co‑operate with officers of the ATO, they had failed to respond to correspondence from the Board, had failed to treat the Board with respect, had been the subject of complaint by clients, had failed to file tax returns on time, had mislead clients and had failed to pass on correspondence to clients from the ATO. The Tribunal decided in the case of two of the three agents to increase the period of suspension from 12 months to two years.
Discretion under s 251BC
47. Under the above section, the Board is required when considering an application for re-registration of a tax agent to consider whether it is satisfied because of special circumstances that an omission by the agent should be disregarded.
48. Some decisions of the Tribunal refer to the decision Re Beadle and Director‑General of Social Security (1984) 6 ALD 1. The Tribunal then decided that the expression “special circumstances” was “incapable of precise or exhaustive definition” and consideration should be given to circumstances “that are unusual, uncommon or exceptional”.
49. In Groth v Secretary, Department of Social Security, Federal Court, 27 September 1995, 989/95, Kiefel J considered the Tribunal decisions in Re Beadle and also in Secretary Department of Social Security v Hulls (1991) 22 ALD 570, Re Ivovic and Director‑General of Social Services (1981) 3 ALN 61, Trimboli v Secretary, Department of Social Security (1989) 86 ALR 64 and Secretary, Department of Social Security v Smith (1991) 30 FCR 56. Ultimately Her Honour concluded (paragraph 12):
The phrase "special circumstances", it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case (229), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied. That question arose in Smith and in Ivovic's case. That may not be the only question which will arise in determining, in a particular case, whether special circumstances exist. In the context of some discretionary provisions, for example one which provides for a longer period of time to be fixed in "special circumstances" as in Beadle's case, it may be relevant to look to how a person comes to require the exercise of the discretion and therefore to the events preceding the arbitrary provision coming into effect.
50. That analysis was followed by Her Honour in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 at paragraph 19. Additionally Her Honour expanded the description of “unfair, unintended or unjust” and referred also to whether a strict application of legislation could result in an “inappropriate” outcome when considering whether a person’s circumstances are special (refer paragraph 20).
51. By way of example, there are two recent decisions of the Tribunal where the concept of “special circumstances” has been considered in the context of the refusal to re‑register a tax agent.
52. In Reichert, the Tribunal found that the agent during the period of 15 years when he did not lodge his own personal returns had been engaged in a small part time practice of 10 – 20 clients but where he had otherwise been in salaried employment in industry working long hours and was exposed to frequent travel. He had bought and sold his domestic premises, was the coach of a soccer team, had assisted in the running of a farm owned by his parents, he frequently visited his mother who was ill in Newcastle and had put his own affairs “on the back burner”. The Tribunal decided that none of the above events explained the delay in the lodging of returns and his personal circumstances were not exceptional, unusual or uncommon and were circumstances experienced by many other persons.
53. In Re Adamec and Tax Agents’ Board of Victoria [2005] AATA 913, the Tribunal considered the circumstances of an agent who had been convicted for failing to lodge personal returns for three consecutive years and who had been the subject of complaint by clients. The Tribunal found that the applicant had attended with his wife when she was diagnosed with cancer and had also assisted his mother-in-law when she was diagnosed with cancer. During this time the applicant’s father-in-law suffered dementia. There were lengthy periods when the applicant was required to care for his infant daughter. He was engaged in a legal dispute with his partners concerning his accounting practice and legal proceedings were instituted. He suffered turmoil with the introduction of GST and staff resigned. He suffered a “crash” of his computer and lost client records. He also entered into a floristry business which exposed him to greater responsibility and said in evidence that he was “stressed to the max”. Evidence was heard by the Tribunal from a treating psychologist who diagnosed PTSD, grief and depression. The Tribunal found that the applicant had been subject to “serious stresses” in both his domestic and business affairs over the past 10 years, many of them beyond his own control. The Tribunal referred to the decision in Re Beadle and also in Reichert and concluded (at paragraph 70):
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. . . . but this does not alter the fact that such events are prone to occur to anyone.
54. Contrast the above decisions with a decision of the Tribunal (involving the exercise of a discretion in favour of the tax agent) in Re Chapman and Tax Agents’ Board of South Australia (1984) 15 ATR 691. In that application the applicant was a registered tax agent and had been convicted for his failure to lodge taxation returns for companies over which he was the director. The applicant had also been convicted for failing to lodge four income tax returns of his own. It would also appear from the decision that the applicant had failed to disclose those convictions in his applications for renewal of registration as a tax agent. The Tribunal decided that the conduct of the applicant did not adversely or seriously affect his competence as a tax agent and there was no evidence that he had been less than competent in managing his clients’ affairs. The Tribunal decided that the personal circumstances affecting the practice of the applicant had been responsible for the failing to lodge returns, that those personal circumstances were behind him and it was unlikely that he would fail to lodge returns into the future. The Tribunal also acknowledged that the applicant had been foolish in his failure to disclose past convictions. That evidence did not persuade the Tribunal Member to find that he was not a fit and proper person, particularly in the absence of any evidence of complaint by, or neglect of, his clients’ affairs.
55. In Re Tosio and Tax Agents’ Board of New South Wales [2005] AATA 1015, the Tribunal reviewed a decision of the Board which decided to refuse the agent’s application for re‑registration as a tax agent. The applicant had been convicted and fined by reason of failing to lodge his own income tax returns for the years 2000 and 2001. By reason of the “special circumstances”, as found by the Tribunal, being depressive illness suffered from December 1996, increase in workload by reason of the introduction of the GST, working long hours and working in sole practice, the Tribunal decided that the decision under review should be set aside and the application for re‑registration as a tax agent be granted.
conclusion and reasons for decision
56. Section 251BC of the Act allows certain conduct or events on the part of a tax agent to be disregarded in an application for re-registration if special circumstances exist.
57. For the purposes of the following analysis it is noted that “an omission” (the only relevant event under ss (3)) is cast in the singular. The respondent has alleged a number of events which would constitute “omissions”, that is, more than a singular event. Additionally the concluding words of ss (3) “as the case requires” directs a focus in the finding (if any) of special circumstances as required by the case of an applicant. The discretion therefore is broad.
58. A person is not fit and proper to prepare income tax returns under s 251BC (1) of the Act unless they are of “good fame, integrity and character”. Those descriptions assist in comprehending what the legislation intended by requiring registered tax agents to be fit and proper persons. In my view those words point to the importance of the professional conduct of a tax agent and the reassurance that taxpayers should be entitled to have in tax agents who are entrusted to advise and manage their taxation affairs.
59. An issue that emerged at the conclusion of the hearing, and upon which considerable reliance was made by Mr Rosenbaum on behalf of the applicant, was the occasion when the fitness and propriety of a tax agent should be considered. It was submitted by him on the basis of the Federal Court decision in Tax Agents’ Board v Bray [2004] FCA 1620 (“Bray”)that that enquiry should be made and the special circumstances considered at the hearing of the review of the decision to cancel or refuse re-registration of an agent. It is noted from paragraphs 30 and 31 of Bray that Hely J noted the Tribunal at first instance had decided that the applicant should be re-registered because he was “now a fit and proper person”. Apparently that language was attacked upon appeal and His Honour decided that it was referrable to the balancing exercise of the discretion as to whether there were special circumstances. That is to say, the conduct of the applicant taxpayer and his personal circumstances subsequent to the decision under review, were relevant in the exercise of the discretion.
60. In the present case, s 251BC (1) of the Act, provides that a person is not a “fit and proper person . . . as at a particular time . . .”. It may be inferred that the Board decided that the applicant was not fit and proper at the date of the decision under review. Equally it may be inferred that prior to that occasion, the Board must have been satisfied that the applicant was a fit and proper person because he was allowed to practice. One may therefore also presume that the Board reached the stage where it no longer was satisfied that the applicant was fit and proper and decided that he should not be re-registered as a tax agent.
61. The High Court in Australian Broadcasting Tribunal v Bond and Ors (1990) 94 ALR 11 noted that the defendant being the holder of a broadcasting licence, was no longer fit and proper to hold a commercial broadcasting licence. That is to say, the High Court noted that the Broadcasting Tribunal had reached a stage where it was no longer satisfied that the holder of the licence was fit and proper. The High Court noted from the applicable legislation that the words “fit and proper person” did not carry any precise meaning but the meaning was to be taken from context. The Court also discussed
The question . . . whether improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that in certain contexts character (because it provides indication of likely future conduct) or reputation (because it provides indication of public perception as to likely future) maybe sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.
(Refer decision of Toohey and Gaudron JJ at page 56).
62. Another issue I think of relevance in deciding whether a person is fit and proper that is of “good fame, integrity and character”, is whether the conduct against the agent as alleged (giving rise to refusal to re-register) is conduct which has been personal or conduct which has been professional, whether the personal or professional conduct is different and whether any professional conduct should have a greater bearing on the fitness and propriety of a tax agent than the personal conduct (refer Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279).
63. Additionally, the High Court in A Solicitor v The Council of the Law Society of New South Wales [2004] HCA 1 decided at paragraph 20:
The dividing line between personal misconduct and professional misconduct is often unclear. Professional misconduct does not simply mean misconduct by a professional person. At the same time even though conduct is not engaged indirectly in the course of professional practice, it may be so connected to such practice as to amount to professional misconduct. Furthermore, even where it does not involve professional misconduct a person’s behaviour may demonstrate qualities of a kind that require a conclusion that a person is not a fit and proper person to practice.
64. In Re Mayes and Casino Surveillance Authority (1993) 29 ALD 585 the Tribunal, in the context of the blurring between professional and personal misconduct, was required to decide whether an applicant for a casino employee’s licence was a fit and proper person when that person had failed to disclose prior convictions. An applicant for such a licence must be a fit and proper person and in the context of the applicable legislation such an applicant must be a person who is “scrupulously honest”.
65. The exercise of considering special circumstances involves the weighing up of the events which on the one hand have given rise to the alleged conduct causing the Board to regard the applicant as not being fit and proper and on the other hand events or circumstances either explaining that conduct or otherwise permitting a finding to be made that the applicant is in fact a person who is fit and proper.
66. On the one hand there has not ever been any complaint made against the applicant by any of his clients. There is no evidence of the delay in the lodging of any returns on behalf of his clients. The applicant is a person who has been in practice as a tax agent since 1976 and the absence of such complaints and the absence of evidence of any delay is obviously to his credit. Additionally, there is no evidence of any dishonesty or impropriety by the applicant.
67. The applicant is regarded professionally as a person of considerable merit, refer the documented evidence of his employee accountant and the esteem in which he is held by his doctors in the community where he lives. In addition to providing medical reports, his doctor, particularly in his report of 2 July 2003 (Exhibit A4) has provided a testimonial of the applicant being a person who ‑
Has been known to our practice for the last 17 years and those of us who have attended him can vouch for his hardworking, honest nature and I feel that these current circumstances are exceptional, entirely out of character. He seems to have made significant changes to improve his hectic lifestyle and is now managing without anti-depressants and working hard to rectify matters that should have been dealt with earlier.
68. I am also satisfied, and find as a fact, that for many years prior to 2003 the applicant did not enjoy good health. Indeed he suffered a number of major and debilitating illnesses which I am satisfied have affected his ability to practice and indeed his ability to manage his own affairs. The undisputed medical evidence indicates that from 1986, the applicant has suffered depression and anxiety and has been prescribed appropriate medication. He has also subsequently suffered from angina, chest infections, carpal tunnel injury and subsequent surgery, sciatica with referred right hip and right leg pain, right knee injury, nerve entrapment at C6, headaches and gastric ulceration and haemorrhaging.
69. The applicant has also suffered turmoil within his accountancy practice over the years, despite rapid growth between 1982 and 1989. From 1988 he suffered a significant loss of income because of an increase in interest rates, was exposed to greater debt by having to borrow against credit cards, suffered instability within his practice by reason of a downturn in the rural economy, was at one stage facing bankruptcy and on another occasion was given notice to quit the premises in which he practised. It would also appear that he was undermined by other employees who sought to destabilize his practice.
70. The applicant also suffered from the effects of the death of his father and was subsequently required to manage his estate which comprised a number of farms and involved him changing previous farming practices in order to ensure that the properties became profitable. The sole beneficiary of his father’s estate was his mother who did not enjoy good health. The applicant was also required to care for his terminally ill brother including travel to Melbourne for treatment with him. He also suffered from instability within his marriage. A taxation liability was not incurred in respect of any of the returns, when assessed.
71. On the other side of the ledger:
·The applicant appeared before a Magistrate in 1990 for failing to lodge his 1989 return. He admitted his guilt. There was no evidence of a conviction being recorded.
·The Board decided that the applicant, on 13 June 1995 (T47, page 123), after he mistakenly advised on an application for re-registration that he had been convicted in 1990 (T42, page 110 and T45, page 118), that he be issued with a “warning letter”.
·The letter by mistake (T48, page 124) referred to the risk faced by the applicant if he was again convicted but did note that his Magistrates’ Court appearance was by reason of failing to lodge a return.
·The Board wrote to the applicant on 9 April 2001 (T52, page 138) advising that it had learnt that personal returns were outstanding from 1992. He was asked to explain within 14 days why the returns were outstanding.
·Thereafter there were a number of letters sent to the applicant and some contact was made by him by both letter and telephone with the Board. Irrespective of the submissions of both Counsel on the weight to be attached to the nature, type and content of subsequent communications between the parties, the personal returns then outstanding were not lodged until October 2003, some two and a half years later. This was also despite being put on notice on a number of occasions that he may not be a fit and proper person by reason of his neglect in lodging returns (refer T53, page 139, T57, page 143, T58, page 144).
·Despite being put on notice on 26 July 2001 by the Board that it considered suspending his registration (T59, page 145), actually suspending him for five months (T60, page 146) and consenting to a Stay of that decision after the AAT proceedings had been lodged (refer paragraph 21 earlier), the returns remained outstanding. Even after the period of suspension expired in September 2002, the returns were not lodged until October 2003 some 13 months later.
·By reason of the returns remaining outstanding the Board recommended on 25 October 2002 that prosecution proceedings should commence (T71, page 169). That decision was made upon the basis of returns from 1996 to 2000 only being outstanding. The returns from 1992 to 1995 were also then outstanding.
·The decision to suspend and prosecute was made by reason of outstanding personal returns. It is not apparent from the documents lodged whether the Board knew that many other returns were also outstanding.
·The applicant admitted his guilt at the Magistrates’ Court on 19 September 2003 when he was prosecuted for failing to lodge returns for the years 1996 to 2001.
·Despite the decision to prosecute and the notification of the intention to prosecute in April 2003, the returns continued to remain outstanding and were not lodged until the month following the appearance before the Magistrates’ Court. The conviction imposed by the Magistrate was set aside upon appeal in May 2004 when the Director of Public Prosecutions conceded that there was a defect in the original summons.
·The applicant admitted that he did not understand that he was required to lodge returns for the Estate, despite it incurring a loss (Transcript, pages 129 – 131). This demonstrates a failure to comprehend lodging requirements.
·All returns had not been lodged by 23 June 2004 (refer letter to the Board paragraph 38 earlier). The Estate returns for the years 2000 – 2002 inclusive were lodged by facsimile on 28 June 2004. The number of days of difference may be miniscule but the representation of 23 June 2004 was false, even if it was a genuine mistake on his part.
72. I agree with the applicant in both his written statement and in his evidence at the hearing that he was under considerable pressure for many years throughout the 1990’s by reason of practice and personal matters. The extent and severity of his illnesses would have made it very difficult for him to cope and I am impressed that he was able to manage the affairs of his clients. For some of that time he was also exposed to considerable pressures within his practice from both employees and financial institutions. His practice appears to have been at risk and it is to his credit that he was able to salvage it. He did not enjoy a happy marriage and to the credit of himself and his wife it would appear that their relationship has been restored. He enjoys the esteem of his doctors and his employee. Since 2004, when the last of the returns were lodged, there was no evidence of the delay in lodging the returns of himself, any family entity or any client. It would appear that from early 2003, when medication ceased, he has enjoyed good health and his practice is now stable.
73. But I cannot overlook his two prior appearances before a Magistrates’ Court where on each occasion he pleaded guilty. After his first appearance he was put on notice by the Board that he was at risk of suspension, cancellation or refusal to re-register if conduct giving rise to the appearance before the Magistrates’ Court was repeated. That conduct was repeated resulting in another appearance for which he again pleaded his guilt. The Orders of the Magistrate were set aside upon appeal but the circumstances giving rise to the prosecution remained, namely, there had been a failure to lodge returns. It was that conduct which gave rise to the first appearance in the early 1990’s. The applicant had also been suspended for a period of five months by the Board in 2002 with respect to the failure to lodge returns. Despite that suspension ultimately being served and returning to practice, the returns which gave rise to that suspension continued to be outstanding.
74. I am prepared to find that the applicant’s health, the circumstances within his practice and the tension within his marriage, most of which were at their peak in the 1990’s, occurred during the same periods of time that income tax returns for himself and family entities were outstanding. But on the evidence of the applicant’s doctors, and himself at the hearing, all medication ceased at February 2003 and he was regarded then as enjoying improved health. I would have thought that there would have been greater diligence on his part to immediately set about preparing returns and having them lodged. It is noted from other evidence that at or about this time the applicant’s accountancy practice stabilized and another employee accountant of considerable expertise was engaged. However the applicant’s outstanding personal returns were not lodged until October 2003 and the returns for other entities were not lodged until April, May or June of the following year. That is, some eight months after the applicant’s health had been restored and medication had ceased and after his practice had stabilized he first lodged his outstanding personal returns but the other returns were not lodged until a period of between 14 and 16 months later. Set against a background of two prior Magistrates’ Court appearances and a suspension from practice it would have been incumbent on the applicant to show a degree of “good fame, integrity and character” if his prior omissions should in the special circumstances that he asserted, be disregarded.
75. A finding that a person is not fit and proper is not a finding of “punishment” (refer Southern Law Society v Westbrook (1910) 10 CLR 609). A finding that a person is not fit and proper is a conclusion reached by a Statutory or Regulatory Authority that the licence or permission enjoyed by a registered person should no longer be issued because members of the public could not reasonably anticipate that such a person should be entrusted to competently and diligently manage their affairs. In forming that opinion, the Board was entitled, as were actual and potential clients to assume that a person who has appeared before a Court on two occasions and admitted his guilt for failing to lodge returns and who has been suspended from practice as a tax agent and who has continued to fail in his duty to lodge returns, is a person who should no longer enjoy the licence or permission of the Board to be registered as a tax agent, no less in this case where the number of outstanding returns and the duration of default was considerable.
76. The applicant’s circumstances of illness, instability within his practice, marital insecurity, being vulnerable to a rural economy and increasing interest rates, together with severe ill health, are circumstances which concern and affect many people. The applicant’s ill health and other circumstances was suffered and endured for many years. But whilst he did not lodge his own returns and the returns of other family entities for some years, he did continue to practice, he did manage his father’s estate including management of farming properties and he was able to restructure his business. It would appear that he did put his own circumstances behind those of his clients and whilst there might be some admiration given to him for the regard in which he does hold his clients, on the downside, he has ignored statutory obligations as both a taxpayer and as a tax agent.
77. Following the analysis of the concept of special circumstances in both Beadle, Groth and Chamberlain, I cannot find the applicant’s circumstances of ill health and vulnerability to an unstable rural economy whilst in a regional practice, marriage instability and workplace stress, no less in self employment, are alone, or in combination, to be “unusual, uncommon or exceptional” nor could I find in the application of the relevant legislation that to decide to refuse re-registration would cause an outcome which was “unfair, unintended, unjust” or “inappropriate”.
78. Mr Moore acknowledged that the applicant had not ever been convicted of “a serious taxation offence” or at all (refer s 251BC) and he was not automatically disqualified from registration. It was also submitted that if special circumstances are found not to exist, the only decision open to the Board, upon an application for re-registration is refusal to register. No other option exists, for example, to suspend, or admonish. I agree with those submissions. The Tribunal is required to consider, in the circumstance of the case under review, to determine whether if special circumstances do exist whether to disregard the “omission” of an applicant. If the decision to refuse re-registration is affirmed, it is open to an applicant to apply, without any period of prohibition, to the Board for registration. If that course is followed, the applicant, at the time of such an application will have the opportunity to demonstrate that he is fit and proper. Section 251K appears to apply only where an agent has been suspended or where his registration has been cancelled. In the present case it was the applicant’s application for re-registration that was declined.
79. The applicant’s history, Court appearances, previous suspension, subsequent default and neglect and the magnitude of it and its duration dictates that it would be inappropriate to decide other than to affirm the decision under review.
I certify that the 79 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed: .....................................................................................
Personal AssistantDates of Hearing 1, 2 and 8 December 2005
Date of Decision 8 February 2006
Counsel for the Applicant Mr N Rosenbaum
Solicitor for the Applicant Charlesworth Josam Partners Pty Ltd
Counsel for the Respondent Mr J Moore
Solicitor for the Respondent Australian Government Solicitor
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