Zarac and Tax Agents' Board
[2004] AATA 430
•30 April 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 430
ADMINISTRATIVE APPEALS TRIBUNAL )
) N2003/1338
GENERAL ADMINISTRATIVE DIVISION ) Re Sasha ZARAC Applicant
And Tax Agents’ Board Respondent
DECISION
Tribunal Ms N Isenberg, Member Date30 April 2004
Place Sydney
Decision The Administrative Appeals Tribunal affirms the decision under review.
[Sgd] Ms N Isenberg
Member
CATCHWORDS
TAXATION – tax agents – application for tax agent registration refused – whether Applicant engaged in “relevant employment” or equivalent – whether “substantial involvement” in a broad range of returns – whether Applicant engaged in practical and relevant work experience - decision under review affirmed.
Income Tax Assessment Act 1936 section 251K(2)(d)
Income Tax Regulations 1936 Regulation 156Joseph Mula v Tax Agents’ Board of NSW N95/1795 AAT No 11490
D’Alessandro and The Tax Agents’ Board of Victoria (1993) 25 ATR 1037
Re Civiti and Tax Agents’ Board of Victoria (1990) 90 ATC 2039
Tax Agent’s Board of Queensland v Seymour (1990) 20 FCR 357REASONS FOR DECISION
30 April 2004 Ms N Isenberg, Member
DECISION UNDER REVIEW
1. On 31 July 2003 the Tax Agents' Review Board of New South Wales refused Mr Zarac's application for registration as a tax agent in New South Wales.
BACKGROUND
2. Mr Zarac graduated from the University of Western Sydney on 19 April 2001 with a Bachelor of Commerce majoring in accounting (T4/32).
3. He was employed with the following employers as follows:
·Michael Hayes & Co Pty Ltd (‘Hayes’) - 31 January 2001 to 31 January 2002
·W E Felsch & Co Pty Ltd (‘Felsch’) - 14 August 2002 to 11 December 2002
·AusTax Accountants and Financial Planners Pty Ltd (‘AusTax’) - 31 March 2003 to 15 May 2003.
4. Mr Zarac applied for registration as an individual tax agent by an application dated 15 May 2003 (T4/25), which was received by the Board on 24 June 2003 (T4/21).
5. In support of his application Mr Zarac provided a statement of relevant employment (‘SORE’) from each of his three named employers.
6. At the time of completing the SOREs, Silvano Jelich of AusTax was a registered tax agent, as was Hayes.
7. Felsch however ceased to be a registered tax agent on 18 April 2002 when the Board cancelled his three registrations under section 251K(2)(d) of the Income Tax Assessment Act 1936 on the basis that he had failed to respond to a number of serious complaints to the Board.
8. Therefore, during the period when Mr Zarac was employed by Felsch, he was employed by a person who was not a registered tax agent.
ISSUE BEFORE THE TRIBUNAL
9. There was no dispute that Mr Zarac met the academic and character criteria for registration as a tax agent. What remained in issue was whether Mr Zarac had been engaged in relevant employment on a fulltime basis for not less than a total of 12 months in the preceding 5 years, as required by Regulation 156 of the Income Tax Regulations.
10. ‘Relevant employment’ is defined in Regulation 156(2) as follows:
“… employment by a person or 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; or
(c)the provision of advice in relation to income tax returns, assessments or objections.”
APPEARANCES
11. A hearing was held before the Tribunal on 2 March 2003 at which Mr Zarac was represented by Ms K Richardson of Counsel and the Board was represented by Mr M Allatt of the Australian Government Solicitor's Office.
CONSIDERATION OF THE EVIDENCE AND FINDINGS
12. The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence, together with each party's statement of facts and contentions. A statement by Mr Zarac on 2 December 2003 was also tendered, and he adopted that statement in his evidence.
13. In coming to the correct and preferable decision, I took into account all the evidence, submissions, case law and relevant legislation.
14. I turn now to the issues to be determined.
Did Mr Zarac have relevant employment for 12 months?
15. Mr Zarac’s submission relied on his experience with 3 different employers, in chronological order:
· Hayes - one year
· Felsch - 4 months
· AusTax - 1½ months part time
Employment with Hayes
16. The evidence in relation to that work was that Mr Zarac, during the 12 months there prepared 50 individual tax returns and less than 20 more complex returns, such as those for companies and trusts. Mr Zarac essentially agreed with the information provided by Hayes in his SORE including that he had:
· only one initial interview with clients
· no experience in the preparation of objections to assessments
· no experience in providing advice in relation to tax returns, assessments an objections
· limited experience in liasing with the ATO
17. Mr Zarac said that he in fact worked under the supervision of an employee of Hayes, and that Hayes himself would have had little idea of what he, Mr Zarac, did during the time of his employment. In cross-examination he conceded that it would have been reasonable that Hayes had consulted with the employee who had supervised Mr Zarac, in order for the SORE to be completed by him.
18. Considering the period of time he was engaged, it might have been contended that the work with Hayes, by itself, sufficed to meet the requirement. However, I do not think detailed consideration is required of whether this period alone suffices, given the clearly limited nature of Mr Zarac’s work. While he disputed Hayes’ estimate that he only spent 25% of his time in tax related matters, even if this were the 50% he suggested in his evidence, it remains clear that in this, his first ‘accounting’ job he was clearly a very junior and inexperienced member of the Hayes’ team.
Employment with both Hayes and AusTax
19. Because of the controversy surrounding Felsch I turn now to consider if the criteria is met by adding together the Hayes and AusTax experience.
In relation to AusTax, Mr Zarac agreed that he had worked 30 hours per week. He only worked for 1½ months. He completed some 30 individual tax returns and about the same number of more complex returns. He did not dispute the weighting given to his work by AusTax, namely 68% income tax and 32% accounting matters unrelated to tax.
20. The SORE, with which he agreed, noted:
· no initial interviews with clients
· no objections to assessments
· minimal provision of advice
21. Although it was unclear precisely to what it related, AusTax records: ‘very competent in his areas of expertise’.
22. Mr Zarac took issue with the note that he had had no liaison with the ATO, stating that he was on the phone ‘daily’.
23. It was not strongly contended that these 2 periods of employment sufficed to meet the requirements of the Regulation.
24. Mr Allatt referred me to Joseph Mula v Tax Agents Board of NSW - N95/1795 AAT no 11490 at paragraphs 18 to 27 wherein there was discussion of the meaning of “substantial involvement” and “broad range”.
25. Of particular assistance was the reference there to D’Alessandro and The Tax Agents’ Board of Victoria (1993) 25 ATR 1037 where the Tribunal observed at 1043 in relation to the meaning of ‘substantial’:
“At one end of the scale ‘substantial’ may mean more than trivial, minimal or nominal and at the other end it may mean great or very considerable. The word always imports some imprecision. In the context of Reg 156 … we are satisfied that the meaning of ‘substantial’ in reg 156(2) is well up on the scale.”
26. Also referred to was Re Civiti and Tax Agents’ Board of Victoria 90 ATC 2039 where the Tribunal said at 2043:
“The word ‘broad’ is not one of similar meaning to ‘substantial’. In the context in which they are used, both terms are used as qualifying adjectives. ‘Broad range’ does not mean the same thing as ‘substantial involvement’ and vice versa. There may be one without the other. The respondent has to be satisfied the applicant has acquired both in order to have been engaged in relevant employment within the meaning of reg 156. Sub regulation 156(2) cannot, in my opinion, be construed as applying to a particular category of returns. It is not the experience within a category of returns but rather the scope of the returns which is the test to be applied. It is not a relevant consideration that reg 156 does not specify the categories of returns in defining ‘relevant employment’. It is explicit in the language used, that wide - ranging experience is required. A lack of experience in the areas of returns referred to, in my opinion, precludes satisfaction of the test of relevant employment.”
27. I also noted that in Mula, as in this case, the applicant’s work was undertaken under close supervision. The Tribunal’s observations represent the commonsense approach to the purpose of the Regulations:
“However the Applicant seeks registration as a tax agent, on the basis that he is able to work without supervision, and in effect as a leader rather than as one who is led.”
28. In my view, the relevant employment claimed with the above two employers does not in any event amount to compliance with the Regulation because on the face of the SORE documents provided, the breadth and depth of experience required is not evident.
Employment with Flesch
29. Having come to the view that the employment with Hayes and AusTax did not bring Mr Zarac within the criteria, his employment with Felsch is critical to his application. Indeed, this was the basis of his case for registration, because, on the basis of the SORE, it was with that firm, that he appeared to have gained the most relevant experience.
30. On the face of Felsch’s SORE, Mr Zarac spent his whole time undertaking income tax matters and completed a very large number of individual returns (595) during his 4 months employment. As well, he completed a variety of other returns, albeit in much smaller numbers. Felsch also indicated that Mr Zarac had undertaken all other specific aspects of work experience nominated on the form.
31. Mr Allatt submitted that Felsch’s deregistered status alone meant the time and experience gained by Mr Zarac with Felsch was to be disregarded. Ms Richardson submitted however that the regulations do not prescribe that the ‘relevant employment’ must be undertaken with a registered tax agent, but prescribed only the nature of the work to be undertaken. In this regard she invited my attention to the definition of ‘relevant employment’ insofar as it requires involvement in income tax matters.
32. I agree that the regulations do not specify that the employment be with a registered tax agent.
33. I observe however, that section 251L of the Income Tax Assessment Act 1936 prohibits a person who is not a registered tax agent from charging a fee for:
“(a) preparing or lodging on behalf of a taxpayer a return, notice, statement, application or other document about the taxpayer's liabilities under a taxation law; or
(b) giving advice about a taxation law on behalf of a taxpayer; or
(c) preparing or lodging on behalf of a taxpayer an objection under Part IVC of the Taxation Administration Act 1953 against an assessment, determination, notice or decision under a taxation law; or
(d) applying for a review of, or instituting an appeal against, a decision on such an objection; or
(e) on behalf of a taxpayer, dealing with the Commissioner or a person who is exercising powers or performing functions under a taxation law.”
34. Heavy penalties apply.
35. It seems to me that, although not expressed in identical terms, these activities which can only be commercially undertaken by a registered tax agent are in the very nature of the types of activities specified in regulation 156(2) in which a person who aspires to be a tax agent must obtain experience. It would be nonsense in my view, to suggest that a person may provide instruction for the purposes of regulation 156(2) in tasks which can only be undertaken by tax agents, when that person is performing that role contrary to law.
36. Mr Zarac said Felsch had ‘40 years experience’. I do not know how technically competent he may have been, nor was that an issue before me. However, if I accept Mr Zarac’s evidence, which is not disputed, that he performed work of the type described, he was receiving his supervision from a person who was operating contrary to law. There is some support for this view in Tax Agent’s Board of Queensland v Seymour (1990) 20 FCR 357) to which Mr Allatt referred.
37. I therefore find that the period of work undertaken by Mr Zarac cannot count in the calculation of the relevant period of experience for the purposes of regulation 156(2).
38. There was no dispute that Mr Zarac was unaware that Felsch had been deregistered prior to Mr Zarac joining the firm. I accept that he relied on:
· the signs outside Felsch’s shop window said ‘registered tax agent’
· the clients’ notice of assessments’ were addressed by the ATO to Felsch's postal address
· the ATO accepted the assessments
· the notices of assessments for the work that Mr Zarac completed for Felsch arrived back from the ATO at Felsch’s business post office box address in Pendle Hill
39. Mr Zarac said that he was 'devastated' when he discovered that Felsch had been deregistered, because as far as he could see Felsch was carrying on 'a proper business'. I accept that through no fault of his own he has effectively wasted 4 months in his quest to obtain registration as a tax agent, and in this regard I have some sympathy for him.
DECISION
40. The Administrative Appeals Tribunal affirms the decision under review.
I certify that the 40 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Member
Signed: Neil Glaser
AssociateDate of Hearing 2 March 2004
Date of Decision 30 April 2004
Representative for the Applicant Kate Richardson
Representative for the Respondent Murray Allatt
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