Yeung and Tax Agents' Board of New South Wales
[2004] AATA 1266
•30 November 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 1266
ADMINISTRATIVE APPEALS TRIBUNAL
GENERAL ADMINISTRATIVE DIVISION N2004/845
Re: Shun Kee Edward YEUNG
Applicant
And:TAX AGENTS’ BOARD of NEW SOUTH WALES
Respondent
DECISION
Tribunal: P.J. Lindsay, Senior Member
Date: 30 November 2004
Place: Sydney
Decision: The Tribunal affirms the decision under review.
. . . . . . . . . . . . . . . . . . . . . . . .
P. J. Lindsay, Senior Member
© Commonwealth of Australia (2004)
CATCHWORDS
Tax agent – Board refuses application for re-registration – no returns prepared by applicant during period of registration – applicant acts as tax agent to negotiate two disputes – applicant has not permanently ceased to carry on business as tax agent – employment does not have substantial involvement in income tax matters – decision under review affirmed
Income Tax Assessment Act 1936 ss.251JB, 251JC, 251QA
Income Tax Regulations 1936 reg 156, 158
Re Rodgers and Tax Agents’ Board of Western Australia (1978) 9 ATR 444
Fall v Hitchen [1973] Ch.66
Re Downes and Tax Agents’ Board of Queensland 93 ATC 2168
Tax Agents’ Board of Queensland v Haddad (1994) 125 ALR 301
Re Starr and Tax Agents’ Board of Victoria 97 ATC 2,090
REASONS FOR DECISION
P.J. Lindsay, Senior Member
1. This is an application for review of a decision by the Tax Agents Board of New South Wales refusing to re-register Shun Kee Edward Yeung as a tax agent. Mr Yeung was registered by the Board as a tax agent with effect from November 2000 for a period of three years. At the time of his registration he lived in Sydney. Since August 2001 he has been living and working as an accountant in Hong Kong.
2. As required by s.251JC(3) of the Income Tax Assessment Act 1936 (the Act), on 1 July 2004 the Board notified Mr Yeung of its reasons for refusing to re-register him as a tax agent:
In considering your application for re-registration the Board took into account it’s [sic] letter of 20 April 2004 and your reply dated 11 May 2004. The Board noted that the Australian Taxation Office lodgement records show that you have not lodged any tax returns for the years ended 1999 to 2003 and that you have no recorded clients for the years 1999, 2000, 2002, and 2003.
In the circumstances, at it’s [sic] meeting of 24 June 2004, the Board resolved to refuse to re-register you as a tax agent pursuant to section 251JC of the Act. Having regard to the concerns that the Board has raised in the above-mentioned letter, you have failed to satisfy the Board that under this registration you are carrying on the business of a tax agent. (T2)
3. Mr Yeung has applied to the Administrative Appeals Tribunal under s.251QA(b) of the Income Tax Assessment Act 1936 (the Act) which provides for review of a decision by the Board refusing to re-register a tax agent. At the hearing, Mr Yeung represented himself and Mr A Crockett from the Australian Government Solicitor appeared for the Board. The applicant tendered a bundle of documents that was accepted in evidence (Exhibit A1).
4. The application for re-registration by Mr Yeung was as a natural person and the relevant parts of s.251JC of the Act are as follows:
Re-registration of tax agents
(1) The Board shall re-register the applicant as a tax agent if the applicant satisfies the Board that:
(a) if the applicant is a natural person:
(i) the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and
(ii) the applicant is not an undischarged bankrupt;
…
(d) in all cases—the applicant has not permanently ceased to carry on business as a tax agent.
5. The respondent’s statement of facts and contentions asserted a number of facts in support of the submission that the applicant should not be re-registered under s.251JC(1) because he is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers:
· that Mr Yeung has not carried on the business of a tax agent in any of the years 2000 to 2004 whether in New South Wales or elsewhere in Australia and that he thus cannot satisfy s.251JC(1)(d). It was claimed that regulation 158 requires an applicant for registration to have an office in New South Wales.
· that he does not satisfy the requirement of demonstrating relevant employment for the purposes of re-registration.
6. The background is that Mr Yeung, aged 45, was admitted as a certified practising accountant (CPA) in the Australian Society of CPAs in February 1997. He holds a Masters in Commerce (Accounting and Finance) from the University of Sydney. In evidence at the hearing, he said he has been living in Hong Kong since August 2001. He is taking care of his elderly mother who is sick. He intends staying there to look after her.
7. Mr Yeung’s registration as a tax agent continued in force for a period of three years from 1 November 2000 (s.251JG(2)). Initially, there was some controversy as to whether he applied for re-registration within the time period specified in s.251JB of the Act. However, that dispute was eventually resolved (T14) on 25 February 2004. The Board accepted that the application was made before the registration ceased to be in force (s.251JB(4)(b)).
8. The Board subsequently notified the applicant on 20 April 2004 that it had received a “complaint” from the Australian Taxation Office, with the implication that the complaint referred to his conduct as a tax agent (T15). He was told that the Board considered the matters raised by the ATO may go to his fitness and propriety to hold registration as a tax agent. By letter dated 20 April 2004 (T16) the Tax Agent Integrity Unit within the ATO suggested that the Board should consider the Integrity Unit’s report into Mr Yeung’s operations as a tax agent before the Board made its final determination about his application for re-registration. Noting that he did not maintain a tax agent’s office in Australia and that during his period of registration Mr Yeung had not lodged a single tax return on behalf of any taxpayer, the Integrity Unit concluded that he may have breached s.251KG(1)(b) of the Act by not informing the Board that he has permanently ceased to carry on business as a tax agent. Section 251KG(1)(b) makes it an offence of strict liability not to inform the Board immediately if the person ceases to carry on business as a tax agent.
9. The Integrity Unit’s case report (T16-51) covered a number of other matters, including the applicant’s relatively large claims for work related expenses in the 1998 and 1999 income years and his failure to lodge his return for the year ended 30 June 2000 and later years. It was noted that Mr Yeung had been a resident of Hong Kong since August 2001. In the event, the Integrity Unit resolved not to take any action other than to refer the matter to the Board for its consideration.
10. Mr Yeung addressed these matters by informing the Board that he had responded to a request from the ATO for information regarding his claims for work expenses in the 1998 and 1999 years of income. His letter to the ATO dated 11 May 2004 (T17-58) explained the delay in lodging his returns for the years ended 30 June 2000, 2001, 2002 and 2003. His reasons were that he was currently working overseas, had a lot of work commitments between December 2003 and May 2004, and had been very sick during that period as supported by the medical certificates he provided. In a letter to the ATO on 18 May 2004 headed ‘Income arising in or derived from Hong Kong from 1 July 2001 to 30 June 2003’ Mr Yeung stated (exhibit A1-83):
(1) I returned from Australia to Hong Kong on 27 August 2001;
(2) I was not engaged in any employment or business activities in Hong Kong from1 July 2001 to 30 September 2001;
(3) I commenced to be employed by J. Enterprise Secretarial and Taxation Ltd on 1 October 2001;
…
(5) In my letter yesterday I referred to two clients subject to Tax Audit by the ATO. These two clients engaged the services of my above employer referred to in (3) under a Contract for Services as from 14 July 2003, whereas I served them through my employer under the aforesaid Contract for Services between my above employer and the clients, pursuant to my obligations and duties under my Contract of Service with my above employer;
(6) In my Tax Returns for 2001/02 and 2002/03 I reported zero Income from Australia as a fact. Furthermore, I regard myself as a tax non-resident as from 1 July 2001. I quit my employment with my last employer in Australia on 29 June 2001. From 30 June 2001 to 27 August 2001 I was unemployed in Australia. From 27 August 2001 onwards, I have stayed in Hong Kong and have only visited Australia on the following occasions to represent the aforesaid two clients in tackling their Tax Audits with the ATO:
- 13.3.03 to 16.9.03;
– 17.1.04 to 22.1.04 …
11. His income tax returns for 2001, 2002 and 2003, signed in May 2004, state that he is a resident of Australia. This is at variance with the letter quoted above. At the hearing he gave a confused explanation of the contradiction, asserting that his letter stated that he was a non resident because he has not earned Australian sourced income subsequent to his final period of employment here.
12. To grant an application for re-registration, the Board must be satisfied of the matters referred to in s.251JC(1). Turning firstly to s.251JC(1)(d), an applicant will be re-registered if the Board is satisfied that the applicant has not permanently ceased to carry on business as a tax agent. In a case before this tribunal, Smithers J reviewed a decision where a tax agent’s registration had been cancelled on the ground that he had permanently ceased to carry on business as a tax agent. The following passage from the tribunal’s decision is instructive:
… registration should be cancelled if the contemplated business for which registration was granted has come to an end in a permanent way, or if the contemplated business has never eventuated and there is such lack of intention to commence business that it is to be inferred that the business which was contemplated and the contemplation of which was the foundation of the application for registration has been abandoned. In either event the purpose of registration is fundamentally frustrated. (Re Rodgers and Tax Agents’ Board of Western Australia (1978) 9 ATR 444 at 445-6)
13. Mr Yeung submitted that the system of tax agent registration is not a business registration system, rather it is an accreditation of an individual in whom the public and the ATO can have confidence, and who will represent their clients responsibly in a self assessment environment. He cited Fall v Hitchen [1973] Ch.66, an English case, in support of his contention that a professionally qualified, employed person can serve their employer’s clients by providing taxation expertise that the employee holds as a tax agent. He said that throughout the period of registration, he has rendered taxation services both in Australia and in Hong Kong to two of his employer’s clients, though he did not embark on his own business as a tax agent. In addition, he submitted that a period of quiescence does not constitute a cessation of business.
14. Under cross-examination Mr Yeung agreed that he has not lodged any income tax returns while registered as a tax agent. He did emphasise, however, that he has acted for two Hong Kong based clients in discussions with the ATO concerning settlement of their disputes. He referred to the notices dated 11 August 2003 given to the ATO advising that he has been appointed the tax agent for those clients (T1-9&10). On their behalf he came to Australia for two meetings with the ATO. I find that his undertaking work in August 2003 as a tax agent for the two Hong Kong based clients demonstrates his intention to offer his services as a tax agent. His evidence was that his employer, J Enterprise Secretarial and Taxation Ltd, is not a registered tax agent. His registration has allowed the employer to represent the clients in matters that it could not otherwise have undertaken. It could be inferred that there would be logistical advantages for a client to have their Australian tax agent based in their home city. While the evidence (for example, T1-11&12) demonstrates that the clients are his employer’s, I find that the applicant, though an employee, is acting as a tax agent in the negotiations and discussions with the ATO. The ATO acknowledged as much in their notes of the meetings (exhibit A1). I consider that his representations in that capacity can be considered “business of a tax agent”. I find therefore as a fact, that he has demonstrated an intention to carry on acting as a tax agent. It follows that I am not satisfied that he has permanently ceased to carry on business as a tax agent. Regulation 158 of the Income Tax Regulations 1936 deals with lodgment of applications for re-registration as a tax agent. Agents should lodge them with the Tax Agents Board in the State with which they have their closest business connection. The regulation has little bearing on the question whether, as opposed to where, a tax agent’s practice is carried on.
15. It remains for me to consider the operation of s.251JC(1)(a)(i) in Mr Yeung’s circumstances (subpar (ii) not being relevant). Section 251BC sets out the criteria to be evaluated in determining an applicant’s fitness and propriety for preparing tax returns and transacting tax business on their behalf. The amended legislative scheme for the registration of tax agents that came into effect from 1988 requires applications for re-registration to be made every three years. The Board must make a positive finding every three years that the applicant is a fit and proper person to prepare income tax returns and transact tax business on behalf of taxpayers (see the discussion in Re Downes and Tax Agents’ Board of Queensland 93 ATC 2168). Current knowledge of Australian taxation law and procedures that the ATO requires tax agents to follow in order to promote efficient administrative practices, is an evident goal of the legislation.
16. There is no suggestion that Mr Yeung is not of good fame, integrity and character or that he has been convicted of serious taxation offences or is an undischarged bankrupt. That leaves only s.251BC(1)(b)(ii) for consideration. Under reg 156 an applicant for registration must have certain academic qualifications (reg 156(1)) but that is not an issue in this matter. The regulation also stipulates that an applicant shall have been engaged in ‘relevant employment’, for certain periods of time depending on the academic qualifications held. Regulation 156(2) deals with ‘relevant employment’ as follows:
(2) In this Regulation relevant employment means 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) the 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) the provision of advice in relation to income tax returns, assessments or objections.
17. The volume and diversity of a tax agent’s practice may be relevant factors in considering an applicant’s fitness to transact taxation matters for clients (Tax Agents’ Board of Queensland v Haddad (1994) 125 ALR 301). In the early part of his three year period of registration, Mr Yeung worked as a senior accountant for two firms of chartered accountants from November 2000 to June 2001. Those firms provided references that are included in exhibit A1. I find that his employment duties covered the preparation of financial accounts and statements, as well as income tax returns for individuals, partnerships, trusts, companies and superannuation funds. There was no mention of his preparation or examination of objections or providing taxation advice generally in relation to returns, assessments or objections. There is little evidence regarding the nature of the work that Mr Yeung had been undertaking in Hong Kong, where he moved in August 2001, but it is the case that he has not prepared income tax returns for any taxpayers. I infer that, apart from the two clients mentioned above, he has not been involved in any matters involving Australian income taxation law.
18. Assuming for argument’s sake that the applicant’s employment by the chartered accounting firms involved only tax and no accounting or audit work, then such work in preparing income tax returns would represent, at its highest, little more than 22 per cent of his time while registered as a taxation agent, and even then on but one aspect of Australian income tax matters. There was no evidence of his examination of a broad range of income tax returns or of his undertaking work of the kinds covered by pars (b) and (c) in reg 156(2). I am not satisfied, therefore, that he has had a substantial involvement in income tax matters during his period of registration, taking ‘substantial’ to mean “of considerable importance, size or worth” (Concise Oxford Dictionary, Tenth edition).
19. On the evidence before me, it can be readily inferred that Mr Yeung has very little exposure through his work to the Australian income tax environment, the legislation for which changes and expands relentlessly from year to year, as does the volume of administrative rulings and determinations issued by the Commissioner of Taxation.In my review of the Board’s decision not to re-register Mr Yeung, I am mindful of the following comments by Deputy President Forrest and Dr Re in Re Starr and Tax Agents’ Board of Victoria 97 ATC 2,090, also a case about an application for re-registration and requiring therefore the application of s.251BC(1)(b)(ii) and reg 156(2): “The Tribunal is fortified in its view by considering the objective sought to be achieved by the introduction of the current regulatory regime for tax agents. These provisions are aimed at ensuring people who are engaged in the preparation of income tax returns and advice for reward have appropriate knowledge of the law and practice … .” (at 2,093) Given my finding that his work during the period of registration cannot be described as substantial involvement in income tax matters and the legislative purpose for requiring tax agents to apply for re-registration on a three yearly basis, I am reasonably satisfied that Mr Yeung is not a fit and proper person to carry out the activities referred to in s.251JC(1)(a)(i) and should not be re-registered as a tax agent.
20. The decision under review is affirmed.
I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of P.J. Lindsay, Senior Member:
Signed:
Associate
Hearing 26 November 2004
Decision 30 November 2004
Applicant Self representedRespondent’s representative Australian Government Solicitor
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