Re Denton and Tax Agents' Board, South Australia.
Members:JD Davies J
Tribunal:
Administrative Appeals Tribunal
J.D. Davies J.
This is a review of a decision of the Tax Agents' Board, South Australia, made on 23 September 1981 under sec. 251K(2) of the Income Tax Assessment Act 1936 that the registration of Terence Richard Denton as a tax agent he cancelled with effect from 1 November 1981.
ATC 4010
The relevant provision reads:
``251K(2) A Board may cancel the registration of any tax agent upon being satisfied that -
- (a) any return which has been prepared by or on behalf of the tax agent is false in any material particular; unless the tax agent establishes to the satisfaction of the Board that he had no knowledge of the falsity or that the falsity was due to his inadvertence;
- (b) the tax agent -
- (i) has neglected the business of a principal;
- (ii) has been guilty of misconduct as a tax agent; or
- (iii) is not a fit and proper person to remain registered; or
- (c) in the case of a partnership or company - a nominee of the tax agent is not a fit and proper person to be such a nominee, or that a person who has become a member of the partnership, or a director, or manager or other administrative officer, of the company is under the age of 21 years or is not of good fame, integrity and character.''
In the course of the hearing before me, reliance was put by Mr. G.L. Muecke, of counsel, for the Tax Agents' Board, upon para. (2)(b)(ii) and (iii). The principal submission however was that Mr. Denton was not a fit and proper person to remain registered as a tax agent.
Mr. Denton, who was born on 4 March 1941, trained as an accountant. After ten years' employment in a firm of chartered accountants, Mr. Denton was admitted to the Institute of Chartered Accountants. He first sought and was granted registration as a tax agent in 1970. In the early 1970s he practised for some time in partnership with others, but about 1973 he commenced practice on his own at 55 Jerningham Street, North Adelaide. In the last few years Mr. Denton has carried on a small practice based upon the preparation of income tax returns. He has a clientele of about 300-400. Mr. Denton has not employed staff for some time.
In recent years Mr. Denton has been dilatory in preparing his own personal income tax returns and the following are relevant dates of lodgement:
Year ended Due date for Actual date of
30 June lodgement lodgement
1975 31 December 1975 20 January 1978
1976 31 December 1976 20 January 1978
1977 31 December 1977 9 June 1978
1978 31 December 1978 22 March 1979
1979 31 December 1979 12 June 1980
1980 31 December 1980 16 July 1981
1981 31 October 1981 21 September 1981
Mr. Denton has suffered 38 convictions, fines totalling $2,955 in respect of income tax offences. The following are the relevant details:
in respect of personal income tax returns -
Hearing date Matter Section Fine Costs
$ $
7/6/1978 1975 223(1) 20 4
7/6/1978 1976 223(1) 20 4
7/6/1978 1977 223(1) 20 4
21/3/1979 1978 223 50 4
11/6/1980 1979 223 20 10
25/3/1981 1980 223 85 11.10
14/7/1981 1980 225 60 13.20
ATC 4011
in his capacity as company secretary -
Hearing date Matter Company Section Fine Costs
$ $
8/6/1979 1976 Mackay Fireplaces 223(1) 40 10
8/6/1979 1977 Mackay Fireplaces 223(1) 40 10
8/6/1979 1978 Mackay Fireplaces 223(1) 40 10
8/6/1979 1975 Griffiths Inv. 223(1) 40 10
8/6/1979 1976 Griffiths Inv. 223(1) 40 10
8/6/1979 1977 Griffiths Inv. 223(1) 40 10
8/6/1979 1978 Griffiths Inv. 223(1) 40 10
12/9/1979 1976 Mackay Fireplaces 225 60 10
12/9/1979 1977 Mackay Fireplaces 225 60 10
12/9/1979 1978 Mackay Fireplaces 225 60 10
12/9/1979 1975 Griffiths Inv. 225 60 10
12/9/1979 1976 Griffiths Inv. 225 60 10
12/9/1979 1977 Griffiths Inv. 225 60 10
12/9/1979 1978 Griffiths Inv. 225 60 10
in his capacity as company director -
Hearing date Matter Company Section Fine Costs
$ $
18/4/1979 1976 Jaylaw Pty. Ltd. 223(1) 40 7
18/4/1979 1977 Jaylaw Pty. Ltd. 223(1) 40 7
18/4/1979 1978 Jaylaw Pty. Ltd. 223(1) 40 7
31/7/1979 1976 Jaylaw Pty. Ltd. 225 180 10
31/7/1979 1977 Jaylaw Pty. Ltd. 225 160 10
31/7/1979 1978 Jaylaw Pty. Ltd. 225 140 10
19/10/1979 1976 Croydon Ceramics 223(1) 100 10
19/10/1979 1977 Croydon Ceramics 223(1) 100 10
19/10/1979 1978 Croydon Ceramics 223(1) 100 10
16/4/1980 1976 Croydon Ceramics 225 250 10
16/4/1980 1977 Croydon Ceramics 225 240 10
16/4/1980 1978 Croydon Ceramics 225 230 10
in his capacity as a group employer -
Hearing date Month Section Fine Costs
$ $
24/3/1976 August 1975 221F(5)(a) 90 4
24/3/1976 October 1975 221F(5)(a) 90 4
23/6/1976 November 1975 221F(5)(a) 60 4
23/6/1976 January 1976 221F(5)(a) 60 4
23/6/1976 February 1976 221F(5)(a) 60 4
The offences as company secretary are not of great significance. They relate to two substantially dormant companies in relation to which Mr. Denton continued to hope that he would do the accounting and tax business but with respect to which he found it difficult to obtain instructions. The convictions tend to demonstrate his inefficiency in failing to have himself removed as secretary rather than any default on his part as a tax agent.
The offences which Mr. Denton incurred as company director did, however, result from his own default for he was the person who managed the affairs of the companies concerned. With respect to these companies it will be seen that the hearing dates took place only over a twelve months' period, although it must be conceded that the delays involved in the lodgement of returns were great.
With respect to the failure to lodge his own personal returns, the delays were very considerable.
The convictions with respect to failure to pay group tax were all heard in the middle of
ATC 4012
1976. Thereafter, Mr. Denton ceased to be a group employer and in recent years he has not employed staff.It was the convictions under sec. 223 and 225 and the fact that his 1980 lodgement arrangements had been suspended due to an unsatisfactory lodgement performance that led to the Board's decision to cancel Mr. Denton's registration.
In Re Su and Tax Agents' Board, S.A. 82 ATC 4284 at pp. 4286-4287 (delivered 24 June 1982) I 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.
There are certain convictions which, in themselves, may be inconsistent with the holding of a tax agent's registration. If a lawyer is convicted of fraud, his name may be struck from the roll of practitioners, for fraud is inconsistent with the practice of the law. If a doctor is convicted of a serious offence relating to illegal drugs, his name may be struck from the register because the offence is inconsistent with the task which medical practitioners perform. If a tax agent is convicted of an offence of tax evasion, his name may be taken from the register, for tax evasion is inconsistent with the role which tax agents are called upon to perform.
If offences for which a tax agent is convicted are not of that character, they may nevertheless justify the removal of his name from the register if, of themselves, or in combination with other factors, they indicate that the tax agent is not a person of such integrity and competence that clients' affairs should be entrusted to him or that he is not of such integrity and competence that officers of the Taxation Department may place reliance upon returns prepared and lodged by him.''
Similar views have been expressed in relation to accountants by Mr. K.L. Milne, in The Accountant in Public Practice. In that work Mr. Milne said, with respect to taxation work, at pp. 162-163, 1st ed.:
``The duty to the public, the profession and himself is a moral obligation while the duty to his client and the taxation department is both moral and legal. The accountant owes a duty to the taxation authorities to possess a thorough knowledge of taxation acts, regulations and legal decisions... Over a period of time reputable accountants have succeeded in winning and retaining the confidence of taxation officials, and it will be to the advantage of both sides if they retain it. In the interests of all it is desirable that accountants engaged in the preparation of tax returns should behave in such a manner that the officers in the departments know that they are dealing with men of repute, whose statements may be accepted as fact or relied upon as considered and honest opinions. The complicated nature of taxation law, combining as it does both statute and common law with departmental rulings and precedents, necessitates a close liaison between tax practitioners and the departmental officers.''
Mr. Milne's work is not irrelevant to tax agents, for the preparation of tax returns is often an incident of the carrying on of an accountant's practice.
In relation to his offences, Mr. Denton said that they resulted from difficulties he had due to matrimonial problems, as a result of which he had separated from his wife, and to financial problems arising from investments in two unsuccessful businesses. He said that the tax involved for himself and the companies was either nil or a very small amount. It further appeared from his evidence that he did not regard his defaults as offences.
ATC 4013
However, Mr. Denton's defaults were offences and for those offences he was properly fined. The offences undoubtedly resulted from a considerable degree of incompetence or inefficiency. Certainly he was unable to fulfil the obligations which were imposed upon him personally by the Income Tax Assessment Act and he failed to fulfil those obligations year after year notwithstanding that his failures were punishable offences. The offences were significant for there were 38 in all and fines totalling almost $3,000 were imposed.
But, as I said in Re Su, cited above, I doubt that a series of convictions such as Mr. Denton has incurred will of itself be sufficient ground for cancelling a tax agent's registration. Cancellation is a very serious step indeed. Normally, professional disciplinary bodies have available to them a range of sanctions ranging from and including the payment of costs, a warning or reprimand, suspension and, finally, cancellation or striking off. The last is a step which is taken by professional bodies in only the gravest of cases. This is because the person affected will usually have trained at a particular profession. Cancellation of his registration will affect his livelihood. The registration of a tax agent may be more than an attribute which is ancillary to an occupation. It may be, as it appears to be in Mr. Denton's case, an essential part of the qualifications pursuant to which the agent earns his living. Registration should not be taken away without very good reason.
The only sanction which the Tax Agents' Board may impose is a sanction by way of cancellation of registration. For this reason, cancellation of a tax agent's registration may be effected for less cause than would be the case if the alternatives of fine or suspension were available. Nevertheless, there should be strong reasons for cancelling a registration.
A further matter upon which the Board relied was the failure by Mr. Denton to comply with the lodgement programme laid down for him each year by the Taxation Department. I do not think that I need go into all the details of this. Clearly, Mr. Denton has some problems in his practice. He deals with a large number of artists and his clients are itinerant. Thus, in any year, he is not sure until he is actually asked to do so that he will have to put in a return for some of his clients. In the circumstances, it is perhaps not surprising that he has found difficulty in complying with the lodgement programme laid down for him. In its lodgement programme, the Department assumes that a tax agent who has lodged an income tax return for a client in the preceding financial year will be the agent for that person in the current year. It recognises a practice whereby, if an agent knows that he is no longer acting for a particular client, the agent may so inform the Department. But what occurs in Mr. Denton's case is that frequently he does not know whether or not he will sooner or later be called upon to put in a return for some of his clients. In respect of the year ended 30 June 1980, Mr. Denton's lodgement programme actually was suspended but it appears that each year the Department suspends the lodgement programmes of almost 9% of tax agents.
I take this factor into account but I do not give a great deal of weight to it. If the Department is dissatisfied with Mr. Denton's lodgements in any one year, it is perfectly entitled to suspend his programme as at 31 December in the year then to require Mr. Denton's clients who lodge thereafter to pay a late lodgement fee. Nevertheless, I have concluded from the other facts before me that probably Mr. Denton is not an efficient tax agent. The convictions which he has received in relation to his own affairs and the smallness of his clientele are sufficient indications of that. His failure to comply with the lodgement programme is another indication of it.
I doubt that, even taking into account the lodgement delays as well as the convictions, I would think that there sufficient reason for cancelling Mr. Denton's registration.
However, Mr. Muecke has relied upon two further factors. The first is that, year after year, the annual notice submitted by Mr. Denton to the Tax Agents' Board pursuant to sec. 251JA of the Income Tax Assessment Act showed against the question, ``Have you been convicted during the previous 12 months of any offence against the law of Australia, a State or any other law?'' the answer ``No''. This incorrect answer was given even on the notice lodged in April of 1982. Mr. Denton said in evidence that he
ATC 4014
had misinterpreted the question and thought that it referred to criminal charges and not to a matter such as convictions for the offences of which he was guilty. The honest answer to the questions should, however, have been quite clear to Mr. Denton.The other matter is that in 1978 or 1979 Mr. Denton's membership of the Institute of Chartered Accountants was cancelled for the reason that he had failed to pay his subscription for the 1978/1979 year. Notwithstanding that cancellation, Mr. Denton failed to alter the sign displayed outside his office and the letterhead which he used. The sign describes his firm as ``Chartered Accountants''. The letterhead continues to have the initials ``FCA'' after Mr. Denton's name. Mr. Denton has been requested twice by the Attorney-General of South Australia to have this position rectified but he has not yet done so although he has at last asked a signwriter to alter the sign outside his office.
Both these matters show that Mr. Denton has reached a stage where he no longer is able adequately to distinguish between what professional behaviour is right and what is wrong. I doubt that either the notices to the Tax Agents' Board or the continuing display of the title ``Chartered Accountants'' resulted from any deliberate dishonesty. But, whatever the reason, these acts were disgraceful. They show that Mr. Denton's defaults have not been limited to late lodgement of the income tax returns for himself and his private companies. False notices have been submitted to the Tax Agents' Board. And clients of Mr. Denton and the public have been misled over a number of years by his holding himself out wrongfully as having the status of a member of the Institute of Chartered Accountants.
Thus the evidence before me shows that Mr. Denton is not a person who presently can be relied upon to fulfil properly the functions which a tax agent is called upon to fulfil. He is inefficient and, apart from being so, he no longer has a sufficient understanding of what is right and what is wrong and what should be done and what should not be done.
Two character witnesses were called before me to say that they held Mr. Denton in good regard. I accept their evidence and have no reason to doubt it. However, their evidence is not inconsistent with any of the inferences which I have drawn from the other evidence before me. I have no reason to doubt that Mr. Denton is held in good regard in the circles in which he mixes.
The question in issue is whether Mr. Denton meets the criteria which a tax agent is called upon to meet, that is to say, whether he has such competence and integrity that he can be relied upon to give proper advice and to prepare and lodge with reasonable skill and care returns of income that are proper. In my view, he did not at the date of the Board's decision and does not presently have those qualities. For these reasons, I think that I should affirm the decision of the Tax Agents' Board of South Australia that Mr. Denton's registration as a tax agent be cancelled.
I should make it clear, however, that I do not have in mind that Mr. Denton should not hereafter hold a tax agent's licence. As I have mentioned earlier, it is a very serious step to preclude a person from carrying on the occupation for which he has trained himself. Despite the order which Mr. Justice Fisher made on 3 November 1981 staying the operation of the decision of the Tax Agents' Board, Mr. Denton has in fact been precluded from carrying on his occupation since April 1982, for he failed to lodge the required annual notice by 7 April 1982. Accordingly, a substantial period has elapsed during which Mr. Denton has been unable to carry on practice as a tax agent. Nothing in these reasons should be taken as an indication that, if Mr. Denton applies again for registration, that registration should not be granted. No doubt, by the time he applies again, Mr. Denton will have a much clearer idea of what are his duties under the Income Tax Assessment Act. If he were to reorganise his affairs so that he lodged returns on behalf of himself and his private companies in due time, if he lodged notices under sec. 251JA which were correct and if he no longer held himself out as a chartered accountant, it may well be that he would then be a fit and proper person to hold a tax agent's registration. There is no reason why he should not learn by the experience he has had from the cancellation of his registration. It is not uncommon for persons who have been struck off a register for reasons more grave than the
ATC 4015
reasons which operate in Mr. Denton's case to be readmitted to practise after an appropriate time. I therefore make it clear that nothing in these reasons should be taken as prejudicing the grant of registration to Mr. Denton in the future. His application should be dealt with on the facts as they then stand.This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.