Yvonne Anderson and Associates Pty Ltd and Tax Practitioners Board (Taxation)
[2020] AATA 1881
•22 June 2020
Yvonne Anderson and Associates Pty Ltd and Tax Practitioners Board (Taxation) [2020] AATA 1881 (22 June 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2020/1621
Re:Yvonne Anderson and Associates Pty Ltd
APPLICANT
AndTax Practitioners Board
RESPONDENT
File Number(s): 2020/1622
Re:Yvonne Anderson
APPLICANT
AndTax Practitioners Board
RESPONDENT
DECISION
Tribunal:Member D K Grigg
Date:22 June 2020
Place:Brisbane
The Applicants’ applications for a stay pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) are refused.
The interim stay orders granted on 25 March 2020 are discharged.
............[SGD]...................
Member D K Grigg
CATCHWORDS
TAX AGENT REGISTRATION – termination of applicants’ registrations as tax agents – application for a stay pending decision under review – prospects of success – public interest – stay applications refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Income Tax Assessment Act 1997 (Cth)
Tax Agent Services Act 2009 (Cth)
CASES
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Scott and Australian Securities and Investments Commission [2009] AATA 798
Re Su and Tax Agents’ Board of South Australia (1982) 61 FLR 1
SECONDARY MATERIALS
Explanatory Paper TPB(EP) 01/2010: “Code of Professional Conduct”
Explanatory Paper TPB(EP) 02/2010: “Fit and Proper Person”
REASONS FOR DECISION
Member D K Grigg
22 June 2020
Yvonne Anderson and Associates Pty Ltd (“YAA”) and Ms Yvonne Anderson (collectively “the Applicants”) have been operating as registered tax agents since 23 July 2007 and 1 March 2010 respectively.[1]
[1] T documents, T4, pages 53.
Ms Anderson has been the sole director and controlling mind of YAA since 18 May 2007[2] and is a supervising tax agent for YAA.[3]
[2] T documents, T4, page 62.
[3] T documents, T4, page 53; T5, page 533; see also Tax Agent Services Act 2009 (Cth) section 20-5(3)(d)(i).
Since 18 May 2007 YAA has been the trustee of the Anderson Family Trust (“the Trust”).[4]
[4] T documents, T4, page 65.
In 2018 the Australian Tax Office (“ATO”) decided to monitor some of YAA’s clients because of concerns that some of YAA’s clients had claimed work related expense deductions for 2017 which were unusually high.[5] Following the monitoring operation the ATO decided to audit 19 of YAA’s clients (“the Clients”).[6]
[5] T documents, T5, page 573; T5, pages 676-710.
[6] T documents, T4, page 67.
As a result of its audit investigation the ATO determined that:[7]
(a)some of the deductions and claims made by the Clients in their 2017 and 2018 Income Tax Returns (“ITRs”) were incorrectly claimed;
(b)YAA had prepared the ITRs of the Clients who had made work-related expense claims;
(c)those Clients were required to amend their ITRs resulting in a tax shortfall of $135,089.51; and
(d)penalties should be imposed on those Clients totaling $52,694.55.
[7] T documents, T5, 711-728; T5, 545-546.
The ATO found there was an insufficient nexus between the expenses claimed by the Clients as work related expenses.
As a result of its findings and determinations, the ATO referred YAA to the Tax Practitioners Board (“TPB”) for potential misconduct.[8]
[8] T documents, T4, page 66-68; T5, pages 562-565.
On 13 September 2019, the TPB wrote to YAA and advised:[9]
[9] T documents, T4, pages 522-524.
1. On 16 July 2018, the Australia Taxation Office (ATO) contacted you to discuss your client’s work-related expenditure (WRE) and advised they would monitoring your client’s lodgements.
2. As part of this process, you received phone calls from the ATO in relation to your client’s income tax returns lodged and their WRE claims. You lodged some amendments to your clients returns based on these calls.
3. On 29 September 2018, the ATO advised you that they would review the tax affairs of twenty tax returns of your clients, being those lodged by:
[Client F, Client G, Client K, Client C and Client A]
4. Between December 2018 and June 2019, the ATO lodged amendments to your clients ITR’s to reduce the WRE claimed. In some cases, they also increased the income declared. This resulted in Income Tax shortfalls for your clients.
5. On 27 June 2019, the ATO finalised the audits of your client’s tax affairs and provided recommendations for your accounting practice and accuracy of WRE claimed, such as
a. Expenses are reasonably calculated;
b. Meet the deductibility test;
c. Are incurred during your clients performing their work duties;
d. Can be substantiated by employers; and
e. Ensure all deductions claimed are supported by evidence.
Additional Information identified
6. According to the Board’s records, your professional indemnity insurance (PII) policy expired on 1 July 2019, and there is no evidence that you have renewed this policy.
Ms Anderson explained in response that, among other things:[10]
[10] T documents, T4, pages 525-28.
·Our office procedures for the processing of tax returns, relies on the honesty of the taxpayer to be telling us the truth.
·We ask them to fill in an income declaration form and to sign a substantiation form that they are responsible for keeping all receipts for all work-related expenses claimed and that where necessary the claims need to apportion for personal usage.
…
·For each expense we advise that the expense must show a nexus and show how it relates to the taxpayer's employment income.
…
·We now also ask them to sign declarations for car expenses …
·If the taxpayer is claiming travel expenses for work, we ask if they received any allowances or reimbursements, if they have kept receipts and if they have international travel we ask if they had kept a travel log. We also ask how the travel is work related, and if receipts have been kept.
·…claims against work related clothing expenses we explain that the workwear needs to be either occupation specific…,
·Taxpayers are asked if receipts have been kept. To help with this we often use the clothing and laundry PDF in the ATO tax time toolkit.
…
·For work related study expenses, we ask the taxpayer how the study is related to their employment or what is the nexus between the study and their employment.
…
·We go to the ATO toolkit …
·[Client F]
o… It comes into the conversation about having the receipts as proof of the expense. Relying that we are told the truth and that the taxpayer does have the receipts.
o…We had never claimed any Rental Income or Expenses on [Mrs F’s] Returns as from information given to us from her husband the Rental Properties' income and expenses were always claimed exclusively on his return
·[Client G]
o… He assured us he had receipts and signed the substantiation form
·[Client K]
oHe claimed car expenses, clothing expenses, etc
o… He was asked if he had kept receipts he said yes.
·[Client C]
oRelied on client’s instructions
·[Client A]
oRelied on client’s instructions
oSaid she had receipts…
·Please find attached a copy of each of the above clients signed Income Declaration and signed Substantiation Declaration.
·… we have now implemented the declarations set out as templates from NTAA …
·We have found by using these the taxpayers are realising that they must keep much better records and not just tell us that they are doing so.
·… I have attached a copy of my current Pll Policy. In future I will ensure to update the TPB records at time of renewing the policy.
On 22 September 2019, two of YAA’s clients (“Mr and Mrs B”), made a complaint to the TPB. Mrs B told the TPB that: [11]
(a)Ms Anderson had provided them with incorrect advice resulting in their 2017 ITRs being audited by the ATO;
(b)the ATO were investigating claims for work related expenses, rental income, and rental property deductions;
(c)information/numbers in their ITRs had been entered incorrectly and that Ms Anderson had claimed large amounts on Mr and Mrs B’s behalf which did not exist;
(d)when she contacted Ms Anderson to discuss her ITRs Ms Anderson said she:
·was unable to explain how she had arrived at the figures she used in their ITRs;
·didn’t want anything to do with helping Mr and Mrs B; and
·was no longer liable as Mr and Mrs B had signed the ITRs.
[11] T documents, T4, pages 69-73, 77-93; T5, pages 566-570.
As a result of the audit, the ATO determined that Mr and Mrs B collectively owed more than $15,000 in extra tax for the 2017 income tax year.[12]
[12] T documents, T4, pages 94-101; T5, pages 790-797.
The TPB advised that as a result of the information it had obtained it was concerned that YAA may have breached sections 30-10(7), 30-10(9), 30-10(10) and 30-10(13) of the Code. Ms Anderson was given until 27 September 2019 to inform the TPB of the following: [13]
1. What processes or procedures you use (in particular, whether you use any checklists or questionnaires) to determine if your clients are entitled to claim particular WREs;
2. In relation to the five clients outlined above, what steps you took in particular to verify their income or other earnings and any deductions to which they were entitled. You should also produce a copy of your working papers and/or substantiation declarations for these clients;
3. What advice you give (if any) to ensure that your clients are advised of their record keeping obligations for substantiation and nexus of their WRE claims; and
4. The currency of your PII policy and why you have not updated the Board’s records in relation to your PII coverage.
[13] T documents, T4, page 523.
On 21 November 2019 the TPB contacted another of YAA’s clients, Client F (Mr and Mrs F).[14] Mr and Mrs F had been audited by the ATO regarding deductions claimed on some rental properties.
[14] T documents, T4, pages 129-130.
Mr F told the TPB that Ms Anderson never queried the list of deductions they provided her each year and that he was not aware that the deductions had to be claimed by both himself and his wife and not just him alone.[15] They are currently challenging the ATO’s amended IT assessments and imposition of penalties. When he contacted Ms Anderson, she said she would pay the penalties.[16] Ms Anderson provided the Client F with a written confirmation that she would pay the more than $7,000 worth of imposed penalties.[17]
[15] T documents, T4, page 130.
[16] T documents, T4, page 130.
[17] T documents, T4, page 131.
On 27 November 2019 the TPB wrote to YAA to advise that it would be investigating its conduct regarding possible breaches of the Tax Agent Services Act 2009 (Cth) (“TASA”).[18]
[18] T documents, T4, page 7.
Ms Anderson again responded to the TPB that:[19]
[19] T documents, T4, pages 104-6; T5, pages 753-5.
(a)Our office procedures for the processing of tax returns, relies on the honesty of the taxpayer to be telling us the truth.
(b)We ask them to fill in an income declaration form and to sign a substantiation form that they are responsible for keeping all receipts for all work-related expenses claimed and that where necessary the claims need to apportion for personal usage.
…
(c)Taxpayers are asked if receipts have been kept.
…
(d)Once the return is completed with all given income and expenses the return is signed. When signing the return, the Substantiation and income declaration are signed as well.
(e)Other advice we give are the ATO posters in all our offices and reception, and signs reminding clients the ATO data matches and the need to keep
(f)[Mr and Mrs B]
o… I prepared their returns in front of them and they keep all receipts and invoices. To prepare the returns they present figures and give them to me at the time we do the return. The returns are completed with the Taxpayers present in the office with duel screens so they can see what is entered at the time it is entered
o[Mr and Mrs B] originally lived in Cairns and then moved to Townsville and would drive up each year to prepare and lodge their tax returns and then moved to Gleneagle and would then fly up each year to prepare their tax returns.
oTo be accused of rounding off and putting in amounts that did not exist I am deeply hurt, as I always try to be an honest person. I have no answer for this.
oThey flew up once a year to do their tax returns and had an itemised list of their expenses and all invoices and files were at home.
oIf they had asked for my help with an audit it would be very difficult due to the distance between them and myself. They would have had to send me all their receipts etc and then I would have then had to send them to the ATO. Also, there is no record of a phone call or an email asking for help or an explanation.
…
oI have found email correspondence only relating to the 2018 tax return which I have attached along with copies of their signed tax returns and signed authorities.
On 24 January 2020 Ms Anderson submitted that:[20]
[20] T documents, T4, pages 529-530
(a)if she had done anything wrong “it was unintentional” and she had “done [her] best to correct it”;
(b)she “was unaware of what had been happening due to being ill (…diagnosed in May 2018 with lesions on [her] left lung”;
(c)she has been undertaking medical treatment since May 2018 and had surgery in November 2018 and December 2019;
(d)the staff who were working for her at the relevant time have all left and “measures have been tightened”;
(e)a representative from the ATO advised her in November 2019 that he would recommend that monitoring of 2020 ITRs would not be necessary;
(f)“[She did] not believe that [she] … breached the Tax Agents Services Act 2009. [She] [has] done [her] best as a human to follow the Code of Conduct core principals”
(g)“[She has] done [her] best to comply and to fix matters.”
(h)“[YAA does their] best to get information from the taxpayers and explain why they can and cannot claim for expenses. The Office has posters and notices everywhere that correct claims must be made and MO uses Data matching processes. The taxpayers are asked to sign a Statutory Declaration that they will be able to substantiate any expense claims made, as [YAA] do not keep any of their receipts.”
(i)“… The case with Mr and Mrs B [she] know[s] that [she] personally would not have said something to the effect "you signed the return it is your responsibility" and not try help in anyway. [She] would have pointed out that all information was given to [her] by them and they had signed the Statutory Declaration that they would be able to Substantiate the claims that they had made.”
Following its investigation, the TPB advised YAA on 21 February 2020 that it had decided that YAA had failed to comply with subsections 30-10(1), 30-10(2), 30-10(7), 30-10(9) and 30-10(10) of the Code of Professional Conduct (“Code”).[21] As a result of that decision the TPB decided to terminate YAA’s registration as a tax agent pursuant to section 40-5(1)(b) of the TASA (“YAA Decision”).[22] The termination was to take effect from 27 March 2020. The effect of the termination is that YAA must not provide any tax agent services or it may be subject to civil penalties pursuant to sections 50-5, 50-10, and 50-15 of the TASA.
[21] T documents, T1, pages 7-13.
[22] T Documents, T1, pages 7.
In its reasons for decision against YAA the TPB advised that:[23]
[23] T documents, T1, pages 7-13.
(a)it was satisfied, on the balance of probabilities, that YAA had breached subsection 30‑10(1) of the Code by making a false statement to the TPB on 6 December 2019. YAA had told the TPB that it had not received a request from Client B to provide them with assistance in relation to an ATO audit. Evidence indicated that YAA had emailed Client B on 21 March 2019 attaching a spreadsheet to assist them;
(b)it was satisfied, on the balance of probabilities, that YAA, as trustee of the Anderson Family Trust, had breached subsection 30‑10(2) of the Code in failing to:
(i)ensure the Trust lodged its ITR for the financial years ending 30 June 2017;
(ii)ensure the Trust lodged its monthly BAS for the periods – February 2017, May 2017, July 2017, November 2017, August 2018 and February 2019;
(c)it was satisfied, on the balance of probabilities, that YAA had breached subsection 30‑10(7) of the Code in failing to ensure that tax agent services that it provided, or that were provided on its behalf, were provided competently by failing to undertake sufficient enquiries of 19 clients to satisfy itself that there was sufficient nexus between the clients’ work related expense deductions when preparing their tax returns for the years ended 30 June 2017 and 30 June 2018;
(d)it was satisfied, on the balance of probabilities, that YAA had breached subsection 30‑10(9) of the Code in that it did not take reasonable care in ascertaining the state of affairs of four of its clients in the preparation and lodgement of those clients’ ITRs, in relation to rental property income and deductions and work related expense deductions; and
(e)it was satisfied, on the balance of probabilities, that YAA had breached subsection 30‑10(10) of the Code in that it did not take reasonable care to ensure taxation laws were complied with in providing advice to those four clients and failed to apply Taxation Ruling TR93/32 in respect of equally attributing rental property income and deductions for properties held in joint names.
The TPB also advised Ms Anderson on 21 February 2020 that it had decided that she had also failed to comply with subsections 30-10(1) and (2) of the Code and that she no longer met the tax practitioner requirements for registration as she was not a “fit and proper person” as required by section 20-5(1)(a) of the TASA.[24] As a result of that decision the TPB decided to terminate Ms Anderson’s registration as a tax agent pursuant to section 40-5(1)(b) of the TASA (“Anderson Decision”). The termination was to take effect from 27 March 2020. The effect of the termination is that Ms Anderson:
(a)must not provide any tax agent services or she may be subject to civil penalties pursuant to sections 50-5, 50-10, and 50-15 of the TASA; and
(b)may not apply for registration under the TASA for a period of 12 months pursuant to subsection 40-25(1) of the TASA.
[24] T documents, T2, pages 31-4.
In its reasons for decision against Ms Anderson the TPB advised that:[25]
[25] T documents, T2, pages 31-4.
(a)it was satisfied, on the balance of probabilities, that Ms Anderson had breached subsection 30‑10(1) of the Code by making a false statement to the TPB on 6 December 2019. YAA had told the TPB that it had not received a request from Client B, to provide them with assistance in relation to an ATO audit. Evidence indicated that YAA had emailed Client B on 21 March 2019 attaching a spreadsheet to assist them.
(b)it was satisfied, on the balance of probabilities, that Ms Anderson, as trustee of the Anderson Family Trust, had breached subsection 30‑10(2) of the Code in failing to:
oensure the Trust lodged its ITR for the financial years ending 30 June 2017;
oensure the Trust lodged its monthly BAS for the periods – February 2017, May 2017, July 2017, November 2017, August 2018 and February 2019;
(c)it was satisfied, on the balance of probabilities, that Ms Anderson was not a fit and proper person as required by paragraph 20-5(1)(a) of the TASA because she:
ohad breached subsection 30‑10(1) and 30-10(2) of the Code;
ocaused YAA to provide false information to the TPB;
ofailed to ensure the tax services provided by YAA were provided competently in that YAA failed to undertake sufficient enquiries of 19 clients to satisfy itself that there was sufficient nexus between the clients’ work related expense deductions when preparing their tax returns for the years ended 30 June 2017 and 30 June 2018;
ohad engaged in “gross incompetence…[which] raised real and significant doubt as to whether [Ms Anderson] could be trusted to handle the taxation affairs of members of the public (especially in circumstances where [her] own taxation affairs as a trustee were drawn into question)”
On 18 March 2020 Ms Anderson and YAA applied to this Tribunal for review of the Anderson Decision and YAA Decision.[26]
[26] T documents, T1, pages 1-23; T2, pages 24-45.
The Tribunal has jurisdiction to review the YAA Decision and Anderson Decision pursuant to section 25 of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”) and section 70-10(e) of the TASA.
On 19 March 2020 Ms Anderson and YAA respectively filed stay applications of the TPB’s decisions pursuant to section 41(2) of the AAT Act.
The TPB opposed both stay applications.
An interim stay in relation to the Decisions has been in place since 25 March 2020. The interim stay is subject to the following conditions:
(1) The Applicants will not engage any new clients during the operation of the interim stay
(2) the Applicants will write to their existing clients to inform them of the operation of the interim stay.
Both stay applications were heard together.
LEGISLATIVE BACKGROUND
The object of the TASA, as stated in section 2-5 is "to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct".
The TASA establishes the TPB and provides for the registration and regulation of tax agents. Part 3 of the TASA sets out the Code which applies to registered tax agents. Pursuant to section 60-95, the TPB is authorised to investigate a registered tax agent’s conduct that may breach the TASA.
Section 20-5(1)(a) of the TASA provides that an individual is eligible for registration as a registered tax agent, BAS agent or tax (financial) adviser if the TPB is satisfied that the individual is a fit and proper person.
In determining whether a person is a fit and proper person to be registered as a tax agent, the TPB must have regard to whether the individual “is of good fame, integrity and character”.[27]
[27] TASA section 20-15(a).
Explanatory Paper TPB(EP) 02/2010: "Fit and proper person" (“Explanatory Paper 02/2010”) provides guidance to agents regarding the TPB’s interpretation of the fitness and proprietary requirements of the TASA.
The Tribunal is not bound to apply the Explanatory Paper 02/2010, but it may, and it should, apply it in exercising its discretion unless it is unlawful or “tends to produce an unjust decision”.[28]
[28] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 640.
Brennan J explained the relevance of an adopted policy to decision-making in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 640:
Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy. By diminishing the importance of individual predilection, an adopted policy can diminish the inconsistencies which might otherwise appear in a series of decisions, and enhance the sense of satisfaction with the fairness and continuity of the administrative process.
The Tribunal is not aware of any cogent reason for not following the Explanatory Papers.
Paragraph 84 of Explanatory Paper 02/2010 explains that:
A failure by a tax practitioner to discharge their responsibilities on behalf of clients could reflect adversely on the tax practitioner's fitness and propriety for registration where it amounts to unsatisfactory or unreasonable failure in the tax practitioner’s circumstances and all the surrounding circumstances of the case.
Paragraph 86 of Explanatory Paper 02/2010 sets out specific examples of a failure to properly maintain client relationships that may in the circumstances reflect adversely on fitness and propriety for registration. One of those examples is:
· lacking the requisite knowledge and skills to provide services to a professional and competent standard
In Re Su and Tax Agents’ Board of South Australia (1982) 61 FLR 1 Davies J said:
The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
(emphasis added)
Section 30-10 of the TASA sets out the Code that registered tax agents must comply with in order to maintain their registration. The following subsections of section 30-10 are relevant here:
(a)section 30-10(1) provides that a registered tax agent:
“…must act honestly and with integrity”.
(b)section 30-10(2) provides that a registered tax agent:
“…must comply with the taxation laws in the conduct of your personal affairs”.
(c)section 30-10(7) provides that a registered tax agent:
“…must ensure that a tax agent service that you provide, or that is provided on your behalf, is provided competently.”
(d)section 30-10(9) provides that a registered tax agent:
“…must take reasonable care in ascertaining a client's state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or a thing you are doing on behalf of the client.”
(e)section 30-10(10) provides that a registered tax agent:
“…must take reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which you are providing advice to a client.”
Explanatory Paper TPB(EP) 01/2010: "Code of Professional Conduct" (“Explanatory Paper 01/2010”) provides guidance in relation to general principles and matters relating to the Code that may be relevant to the professional practice of registered tax agents. It provides the following in relation to what is “reasonable care” in ascertaining a client’s affairs:
What is ‘reasonable care in ascertaining a client’s state of affairs’?
121.It is considered that ‘more is expected of a registered tax practitioner than a taxpayer completing his or her own return’. This higher standard of care is a reflection of a registered tax practitioner's knowledge, education, experience and skill.
122.It should be noted at the outset that this requirement under the Code does not create a requirement that a registered tax practitioner effectively ‘audits’ all of the registered tax practitioner's clients before providing tax agent services to avoid breaching the Code.
123.Rather, this requirement is a duty of registered tax practitioner to take care beyond placing complete reliance on the accounts prepared, or work done, by a person without considering their level of knowledge and/or understanding of the taxation laws and the correctness of their work to ensure that the information upon which the provision of the tax agent services is based is accurate.
124.In most cases, this will require that a registered tax practitioner ask the client appropriate questions, based on the registered tax practitioner’s professional knowledge and experience, to ascertain the accurate factual basis upon which the tax agent services are provided and, where appropriate, to obtain supporting documents and records evidencing these facts.
125.The requirement to take reasonable care relates to the services that are to be provided and is therefore subject to the agreed scope of the engagement with the client. A registered tax practitioner would not be required to make further enquiries and it would be reasonable to rely on information or advice, if the scope of the tax agent services excludes the examination of information provided by the client or requires the registered tax practitioner to rely on the information or advice of another expert. These observations must also be considered in light of other paragraphs in this section and with the obligations under the TASA, which must be complied with.
126.Taking reasonable care will in many cases require that a registered tax practitioner ask questions based on their professional knowledge and experience in seeking information. Where there are grounds to doubt the information provided by a client, the registered tax practitioner must take positive steps and make reasonable enquiries to satisfy themselves as to the completeness and/or accuracy of that information.
127.Where a statement provided by a client seems plausible and is consistent with previously established statements and the registered tax practitioner has no basis on which to doubt the client’s reliability or the veracity of the information supplied, the registered tax practitioner may discharge their responsibility by accepting the statement provided by the client without further checking.
128.However, if the information supplied by a client seems implausible or inconsistent with a previous pattern of claim or statement, further enquiries would be required.
129.Again, whilst there is no requirement to audit, examine or review books and records or other source documents supplied by a client, a registered tax practitioner does not discharge their responsibility in such a case by simply accepting what they have been told.
(emphasis added)
If, having conducted an investigation of a registered tax agent, the TPB is satisfied that the tax agent has failed to comply with the Code, the TPB may terminate the registered tax agent’s registration pursuant to section 30-30 of the TASA. The termination of a registered tax agent’s registration takes effect on the day specified in the notice provided by TPB of the decision to terminate the registration.
Power and Criteria for the Grant of a Stay
The power of the Tribunal to grant a stay of the operation or implementation of a reviewable decision, derives from section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”) which provides:
The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
(emphasis added)
Pursuant to section 41(6) of the AAT Act, a stay order may be made subject to conditions.
The factors relevant to the exercise of the discretion to grant a stay are:[29]
(a)the prospects of success of the substantive application for review;
(b)the consequences to the applicants if the request for a stay is refused;
(c)the public interest;
(d)the consequences for the TPB in carrying out its functions; and
(e)whether the substantive application for review would be rendered nugatory if the request for a stay order were not granted.
[29] Re Scott and Australian Securities and Investments Commission [2009] AATA798, [4] (Downes J).
ISSUE FOR THE TRIBUNAL
The issue for the Tribunal is whether to grant a stay of the YAA Decision and Anderson Decision pursuant to section 41(2) of the AAT Act.
The prospects of success of the substantive application for review
The TPB submits that the Applicants do not have “strong prospects” of success because:[30]
(a)they have failed to demonstrate that they have an arguable case for setting aside the decisions under review;[31]
(b)they do not deny that they failed to lodge the relevant ITR and BAS for the Trust by their due dates;
(c)they have provided no acceptable explanations for their dealings with Client B;
(d)they seek to lay blame, at least in part, on another employee of YAA for the competency issues that the TPB has determined lies with YAA;
(e)the sum tax shortfalls of $135,089.51 and $52,694.55 in administrative penalties imposed on the 25 ITRs prepared by the Applicants are significant;
(f)in addition to the ATO referral, the TPB received a separate client complaint;
[30] Respondent’s Amended Submissions in Relation to Applications under Subsection 41(2) of the Administrative Appeals Tribunal Act 1975 dated 26 May 2020 (“Respondent’s Amended Submissions”), pages 7, 8 and 10.
[31] Respondent relying on Re Australian National Railways Commission v Moyle (1988) 15 ALD 571.
One of the most important factors to consider in determining whether to grant a stay is the likelihood of the applicant succeeding at the final review hearing.
The TPB submits that the Applicants have failed to demonstrate that they have an arguable case for setting aside the decisions under review which is what is required.[32]
[32] Respondent’s Amended Submissions, page 7.
It is trite to say that in considering prospects of success, it is not the role of this Tribunal to conduct a “mini trial” on the merits. The Applicant must merely show that they have an arguable case and a basis for their application.[33]
[33] Respondent relying on Re Dart and Director-General of Social Services (1982) 4 ALD 553.
The concerns of the TPB can be grouped into the following categories:
(a)YAA’s conduct in relation to its own tax affairs; and
(b)YAA’s conduct in relation to the Clients’ claims.
Ms Anderson is directly related to all of YAA’s actions as its controlling mind, director, and supervising tax agent of YAA’s employees.
The Tribunal will deal with each issue in turn.
YAA’s conduct in relation to its own tax affairs as trustee and tax agent for the Trust
The table below sets out the ITR and BAS statements that were not lodged by the Trustee by their due dates:[34]
[34] T documents, T6, pages 1168-1169; T5, page 541.
Lodgement Type
For period ending
Lodgement due
dateDate lodged
No. of Days late
ITR 30 June 2017 15 May 2018 14 June 2018 30 BAS February 2019 21 March 2019 3 April 2019 13 BAS August 2018 21 September 2018 2 October 2018 11 BAS November 2017 21 December 2017 28 February 2018 69 BAS July 2017 21 August 2017 20 September 2017 30 BAS May 2017 21 June 2017 11 July 2017 20 BAS February 2017 21 March 2017 27 April 2017 37
It is not in dispute that the Applicants failed to lodge one ITR and 6 BAS by their due dates.
It was during a period of significant illness (see discussion below) that the Trust’s ITR was lodged late (by 30 days). When the ITR was due (on 15 May 2018), Ms Anderson had just been diagnosed and admitted to hospital. It was during the illness period that one of the six overdue BAS was lodged late by 11 days.[35]
[35] Transcript dated 28 April 2020, pages 11-12.
In relation to the other 5 BAS Ms Anderson told the Tribunal she had “no excuse” for lodging the 5 BAS late.[36]
[36] Transcript dated 3 June 2020, page 27.
A registered tax agent should know what his/her tax obligations are and comply with them.
YAA’s conduct in relation to the Clients’ Work Expenses Claims
In the financial years ended 30 June 2017 and 30 June 2018, YAA lodged 19 income tax returns for the Clients. After auditing those ITRs, the ATO concluded that they required amendment. The ITRs were then amended to reduce their claimed deductions by $135,089.51. The ATO also imposed penalties on those Clients totaling $52,694.55.[37]
[37] T documents, T5, pages 545, 546 and 712.
The TPB contends that this indicates that YAA failed to comply with subsection 30-10(9) of the Code in that it did not take reasonable care in ascertaining the state of affairs of its Clients that were relevant to the preparation and lodgement of its Clients ITRs.[38]
[38] T documents, T5, page 547.
There was no substantiation by the Clients of the claimed work expenses and YAA’s conduct in not insisting on supporting documentation may, depending on the circumstances with those Clients, constitute a fundamental breach of its duties as a registered tax agent (see paragraphs 19 and 40). These issues will no doubt be more fully elucidated at the final hearing.
The Clients were entitled to rely on Ms Anderson for advice and guidance.
Evidence indicates that YAA had previously been reviewed in relation to some clients’ work related expense claims by the ATO in 2013.[39] In that instance the ATO advised that YAA implement improvements to verify and substantiate clients’ deduction claims to eliminate some errors that had been found. In 2017 YAA was contacted again by the ATO regarding some “unusually high” work related expense claims made by her Clients. The ATO informed YAA it would be monitoring any ITRs lodged and would consider further action if claims continued to be substantially higher than expected.[40]
[39] T documents, T4, page 74.
[40] T documents, T4, page 76
On the whole, the Clients were unable to provide the ATO with any records to substantiate the deductions claimed. Based on Ms Anderson’s responses to the TPB enquiries and her submissions, YAA may not have taken “reasonable care” to establish whether or not the work related expense and rental expense claims were deductible.
At the stay hearing Ms Anderson said she was ill at the time the ITRs of the Clients were prepared and that she employed a tax agent working to lodge all of the relevant ITRs.[41] Ms Anderson told the Tribunal that she had thought the chemotherapy treatment would not have affected her ability to work but that the reality is that she was not capable at that time. The chemotherapy treatment would “knock her out for a week” and then it would take a week to “come good” and then the next round of treatment would begin.[42] She took two lots of chemotherapy during July and August 2018.[43]
[41] Transcript dated 28 April 2020, page 6.
[42] Transcript dated 28 April 2020, page 13.
[43] Transcript dated 28 April 2020, page 14.
When ITRs were being prepared, Ms Anderson attended work one day per week and she was away from work having treatment from May 2018 to January 2019.[44] Prior to surgery she had chemotherapy to reduce the lesions and then surgery to remove them once they were operable.[45]
[44] Transcript dated 28 April 2020, page 6.
[45] Transcript dated 28 April 2020, page 7.
In relation to the tax agent YAA employed during Ms Anderson’s illness, Ms Anderson said the agent was registered with TPB, and she had done some seminars with her, so Ms Anderson was confident in the agent’s abilities.[46]
[46] Transcript dated 28 April 2020, pages 10-11.
When asked what control measures were put in place, Ms Anderson said she checked ITRs on the one day/week she went into the office.[47]
[47] Transcript dated 28 April 2020, page 11.
Ms Anderson does not dispute that errors were made but said “I’m just feeling upset … that I have to take the consequences from someone else’s work”. She continued, “It’s just really hard that I have to take the consequences from someone else’s actions”.[48] That person no longer works for YAA.[49]
[48] Transcript dated 28 April 2020, pages 6-7.
[49] Transcript dated 28 April 2020, pages 8 and 11.
In relation to the ATO’s compliance monitoring, Ms Anderson was asked how she implemented the ATO’s recommendations. Ms Anderson said all of the returns the ATO audited were all prepared and lodged during the period she was ill and going through treatment.[50]
[50] Transcript dated 28 April 2020, pages 11-12.
Ms Anderson is mistaken when she says all of the Clients’ ITRs were prepared when she was ill. Of the 20 Client ITRs, seven of those were lodged prior to Ms A being diagnosed.[51] Ms Anderson’s medical condition does not explain or excuse the majority of the concerns the TPB has about her conduct.
[51] Amended Supplementary T documents, ST2, 1362-1375.
The impact of Ms Anderson’s medical treatment was obviously serious and lengthy. The TPB said the evidence indicates the diagnosis but there is no verification of the impact the condition had on Ms Anderson’s ability to operate in accordance with the Code obligations and to the standard the community would expect.[52] This is not entirely accurate.
[52] Respondent’s Amended Submissions, pages 8-9.
Upon discovery of the lesion Ms Anderson was immediately admitted to hospital and she remained there for nine days. She then underwent chemotherapy treatment in July and August 2018 in an attempt to reduce the lesions size in order for them to be surgically removed.[53] The Tribunal does not think expert evidence is required of the common impacts on persons receiving chemotherapy treatment. Ms Anderson has described how it affected her and there is no reason to doubt that evidence. Further, her general practitioner advised the Tribunal that the treatment “would have caused tiredness and drowsiness” to such an extent that she was not permitted to drive during that period.[54]
[53] Report of Dr G. Sivasambu dated 29 April 2020.
[54] Report of Dr G. Sivasambu dated 29 April 2020.
Once the lesion was reduced Ms Anderson then underwent two surgeries in November 2018 and December 2019 to remove the lesion. The operations were successful, and Ms Anderson was able to return to work in January 2019. The TPB has also not taken into account the inevitable stress a person in Ms Anderson’s position would have been under.
The TPB submits that Ms Anderson’s responsibility is “heightened” because YAA was on notice that the ATO were reviewing her clients’ deduction claims, and it therefore should have implemented appropriate measures.[55]
[55] Respondent’s Amended Submissions, page 8.
The ATO refers to the fact that Ms Anderson was on notice of being monitored in 2013, but there was no wrongdoing found as a result of that monitoring.[56] Ms Anderson was also put on notice that YAA’s clients were being monitored in July 2018.[57] The Tribunal notes that this was when Ms Anderson had just been diagnosed with having lung lesions.[58]
[56] Respondent’s Amended Submissions, page 8.
[57] T documents, T5, pages 573.
[58] Radiology CT Scan Report of Dr A. Bila dated 10 May 2018.
The TPB submitted that it is concerned that Ms Anderson has a fundamental misunderstanding of basic tax matters such as work related expenses and how and when they can be claimed and this arose prior to the onset of her medical condition.
In explaining the errors, made Ms Anderson said she did ask questions of the Clients, and “the explanations given to us weren’t the explanations people gave when they were audited to the ATO”.[59]
[59] Transcript dated 3 June 2020, page 26.
She told the Tribunal that she tried to keep her knowledge base up to date by attending seminars and webinars. She checks with other colleagues if she is unsure of something and calls the ATO: “I do try to understand the law ... [people’s] perception of things can be different”.[60]
[60] Transcript dated 3 June 2020, page 27.
Given that YAA is no longer being monitored by the ATO, the Tribunal asked Mr McKechnie what the current risk level was. This is because deregistration of tax agents is a step taken by the TPB to protect the public, it is not a punishment. The TPB’s focus is on ensuring that taxpayers can have confidence that they are obtaining competent services. Mr McKechnie acknowledged that the fact that the ATO has decided to cease monitoring is something the Tribunal can take into account but said the TPB does not know why that decision to cease monitoring was made.[61] This information will no doubt be relevant at the final hearing.
[61] Transcript dated 3 June 2020, page 29.
The medical evidence may go someway to explaining the lapse in YAA’s conduct between May 2018 and January 2019. It is also possible, given the ATO’s determination that monitoring is no longer required, that deregistration is no longer required.
However, at this preliminary stage, the Tribunal is concerned about the extent of Ms Anderson’s understanding of the required nexus for work related expense deductions. There are also concerns that need to be addressed at the hearing regarding the lack of verification and quality control measures that have been implemented.
Mr and Mrs B
One of the grounds raised by the TPB concerns whether 30-10(1) of the Code to act honestly. This issue arose because of representations allegedly made by Ms Anderson to the TPB. At the hearing Ms Anderson said,
“I honestly can’t remember taking the call …. I’ve always tried to help everybody … I just don’t know why I would’ve just said … ‘you signed it and … its your responsibility’… I’ve prepared the tax return always in front of them and I have a dual screen so they see exactly what I’m entering at the time... I said to her ‘I got the figure [re rental property] from you’ … I asked about what causes the expenses to be what they were….I don’t understand why she is saying I didn’t try and help her … I can’t help if [that’s] the information they’ve given me and they’ve got the receipts [they did not give the receipts to Ms Anderson].
The Tribunal cannot, and is not expected to, decide the issue concerning the telephone call and the representations made in the context of a stay application. Ms Anderson’s evidence is contrary to the complaint made by Mrs B. This situation regarding Client B raises a possible concern regarding whether “TPB and the Commissioner can have confidence in the practitioner’s continued ability to honestly and competently discharge the functions of the profession”.[62] However, there is no evidence from Client B and no basis at this time to form a view that Ms Anderson acted dishonestly until a full hearing on the matter has occurred.
[62] See paragraph 95, Explanatory Paper 02/2010.
Conclusion
The Tribunal is satisfied that Ms Anderson has an arguable case and that there are some bases to the Applicants’ applications.
THE CONSEQUENCES TO THE APPLICANTS IF THE REQUEST FOR A STAY IS REFUSED
Ms Anderson would like to keep working and paying her bills to avoid bankruptcy.[63]
[63] Applicants’ Request for Stay Order received 19 March 2020, page 2.
Ms Anderson submitted that she has clients for whom she has already prepared three quarters of a year of BAS and bookkeeping and that if the stay is not granted they will have to pay someone else to redo the work already done or pay for them to check it. Apart from the additional expense for the clients she says some of the clients live in remote areas which makes communications difficult. She submits that this will put more hardship on small businesses in the current economic climate. Ms Anderson would like until at least 30 September 2020 to finalise and lodge all relevant ITRs and BAS for those clients.[64]
[64] Submission of Ms Anderson dated 15 April 2020.
At the stay hearing Ms Anderson said:[65]
(a)“All I want to do is complete what I’ve started this year and finish it off”;
(b)she is appealing the decision for her clients as well as herself;
(c)she is asking that a stay be granted until the end of September 2020 to do the final BAS, PAYG summaries and complete the ITRs of approximately 50 business clients;
(d)she has no other employees that capable of completing the tax work for those business clients.
[65] Transcript dated 28 April 2020, pages 7-8.
It is accepted by the TPB that the impacts on clients is a relevant factor to consider in considering whether to grant a stay.[66] At the hearing Ms Anderson said she had approximately 50 business clients.[67]
[66] Respondent’s Amended Submission, page 9.
[67] Transcript dated 28 April 2020, page 8.
There is no corroborating evidence before the Tribunal with regard to substantiating how many of YAA’s clients would be affected or setting out what financial loss would be incurred by YAA or Ms Anderson if the stay is refused.
The termination of the registration will have consequences in terms of the Applicants’ ability to maintain clients. This is a situation that would be faced by anyone in the position of losing their tax agency registration.
The Tribunal acknowledges there may be some inconvenience to the Applicants’ current clients having to find an alternative tax agent.
Given the lack of evidence, the Tribunal is not persuaded that the consequences to the Applicants’, resulting from not granting a stay, outweighs the public interest to justify the grant of a stay.
The public interest
Taxpayers have a right to expect that the advice they are receiving from their tax agents is competent and that they are not being led into danger of breaching their tax obligations by claiming deductions which cannot be maintained.
Application for review would not be rendered nugatory
The applications for review would not be rendered nugatory if a stay is refused. If the Applicants are successful at final review, the termination decisions will be set aside or varied, and the Applicants will be able to recommence the provision of tax agent services as registered tax agents.
CONCLUSION
As referred to above, Ms Anderson was the responsible agent for the majority of the Clients’ problematic ITRs and acknowledged that she had no excuse. She also provided no explanation, for why the Trust’s BAS were lodged late. There are potential concerns regarding Ms Anderson’s failure to conduct any verification of her clients’ instructions.
Given the lack of evidence concerning the impact of the stay, the Tribunal is not satisfied that a stay should be granted pending the outcome of the final hearing.
In the circumstances the Tribunal finds a stay order is not in the public interest and the public interest outweighs the detriment which the Applicants contend they will suffer if the stay is not granted.
The Applicants have not satisfied the Tribunal that the stay applications should be granted.
DECISION
The stay applications are refused, and the interim stay orders of 25 March 2020 are discharged.
I certify that the preceding 99 (ninety-nine) paragraphs are a true copy of the reasons for the decision herein of Member D K Grigg
...........[SGD].......................
Associate
Dated: 22 June 2020
Date/s of stay hearing:
28 April 2020 and 3 June 2020
Applicant
By telephone
Advocates for the Respondent:
Mr J Lie (28 April 2020 by telephone)
Mr M McKechnie, of Counsel (3 June 2020 by telephone)
Solicitors for the Respondent:
Mr J Lie, Lawyer
Tax Practitioners Board
Key Legal Topics
Areas of Law
-
Tax Law
-
Administrative Law
Legal Concepts
-
Judicial Review
-
Breach
-
Procedural Fairness
-
Remedies
-
Jurisdiction
6