Bell v Tax Practitioners BoardMembers:
BJ McCabe DP
Administrative Appeals Tribunal, Sydney
MEDIA NEUTRAL CITATION:
 AATA 2424
BJ McCabe (Deputy President)
1. Mr Duncan Bell practised as a registered tax agent in Darwin. He accumulated substantial debts owed to the Australian Taxation Office (ATO) over a lengthy period. Those debts, and the apparent failure of attempts to reach an arrangement with the ATO, brought Mr Bell to the attention of the Tax Practitioners Board. The Board decided Mr Bell contravened the Code of Conduct found in s 30-10 of the Tax Agent Services Act 2009 (the TAS Act). The Code of Conduct establishes a set of standards governing the conduct of
ATC 8885registered tax agents. Some provisions of the Code establish general expectations (eg s 30-10(1) requires that the tax agent "act honestly and with integrity") while other provisions are more specific and extend to the conduct of the agent's personal affairs. The Board found Mr Bell contravened one of those specific requirements - namely the requirement in s 30-10(2) that a tax agent "must comply with the taxation laws in the conduct of your personal affairs". The Board decided to terminate Mr Bell's registration as a tax agent pursuant to s 30-30 of the TAS Act on 26 September 2019. I note the Board did not decide Mr Bell should be prevented thereafter from seeking to be re-registered. He would presumably be entitled to apply for registration at any time if he could establish his eligibility.
2. Mr Bell has asked the Tribunal to review the Board's decision. He says, in effect, the cancellation decision was not a proportionate response to the conduct which occurred. Mr Bell said his non-compliance was at least partly the product of failures on the part of the ATO to engage with him to negotiate a proper arrangement. He was also critical of the Board's processes. He points to what he says is an otherwise unblemished record and the absence of any criminal convictions to argue that cancellation of his registration is not warranted.
3. At the hearing, the Board's argument was straight-forward. It said Mr Bell had failed to discharge his obligations over a long period of time. He has had plenty of chances to get his affairs in order, but he failed to do so. The Board said Mr Bell's conduct justified deregistration, but that outcome was also justified because of the message it would send.
4. There really is no doubt Mr Bell contravened s 30-10(2) of the TAS Act. The only really issue in this case is whether deregistration or some other form of administrative action might be appropriate.
5. Mr Bell has been a registered tax agent since 1982. He conducts a busy practice in Darwin. He described a boutique practice with about 400 clients. Most of the clients are small and medium sized businesses involved in construction and real estate. Mr Bell said he works hard. He is tired. He said he has been trying to sell the practice. To date, he has been unable to find a suitable buyer to take over the practice and look after his clients. He said he has plans to develop a new venture, but he cannot concentrate on that until he sells his practice. He said he won't be able to sell the practice or focus on the new venture - and he won't be able to meet his existing obligations to the ATO - if his registration is cancelled.
6. I was told Mr Bell has a good reputation in practice. He said he has not been the subject of any complaints about his conduct that were upheld. His dealings with the ATO on behalf of his clients are, he said, perfectly regular. The only issue is in relation to the conduct of his personal affairs. He has what he characterised as a long-running but genuine dispute with the ATO over the extent of his personal liability.
7. The dispute extends back to at least 2012 when Mr Bell's 'integrated client account' with the ATO went into debit. The integrated client account records an individual's liabilities to the ATO with respect to PAYG withholdings, GST, penalties (if any) and general interest charge (GIC). The ATO estimated that Mr Bell's balance owing had blown out to in excess of $475,000 by the beginning of 2016.
8. The ATO and Mr Bell had entered into a payment arrangement on 4 November 2015 to deal with all his debts. The ATO says Mr Bell defaulted on the arrangement within a month. While he managed to make some payments, the ATO was not satisfied Mr Bell was making satisfactory progress and resolved to take legal action in early 2016. The Deputy Commissioner of Taxation commenced court proceedings. Mr Bell did not file a defence and the Deputy Commissioner obtained a default judgment on 12 September 2016 in the amount of $454,072.80.
9. Mr Bell initially claimed he was unaware of the legal proceedings but admitted in cross-examination that he had received a summons. That stands to reason as the Deputy Commissioner would have had to provide evidence of service when he sought the default judgment. If Mr Bell was genuinely unaware of the proceedings, he could have applied to set the default judgment aside. But he did not, because, as he belatedly admitted, he was aware of the proceedings. He said he was involved in
ATC 8886negotiations with various officers in the ATO about a fresh arrangement at the time. He claims now that the ATO officers behaved unprofessionally in their negotiations. He said he was lulled into a false sense of security: he complained bitterly the officers were talking to him while preparing to take further action. He said the default judgment took him completely by surprise. It was, he claimed, a malicious and despicable act on the part of those officers.
10. It is difficult at this distance to form a view about the way in which Mr Bell engaged with the officers of the ATO in 2016. It was not apparent to me why the ATO officers would act in bad faith. The ATO wanted its money, and the best way to achieve that end was to reach a viable negotiated solution. But even if they did not conduct those negotiations in the correct spirit, Mr Bell's story falls short. He did not offer any explanation for failing to file a defence to the proceedings to protect his position. The indignation he expressed in his evidence does him no credit in circumstances where he did nothing to help himself. His inaction in the face of those proceedings and his subsequent bluster tells a worrying story.
11. Mr Bell said he fell behind in his commitments to the ATO from 2012 after he was cleaned out in a divorce. He also said business conditions in the Northern Territory have been difficult since 2015. His practice experienced a lot of bad debts as his clients struggled. He experienced cash flow problems. He said he was unable to communicate all of this to the ATO. He said he tried to discuss a more formal arrangement but the ATO would not assign a proper case officer with the power to negotiate in relation to his situation. He complained he was even forced to deal with a paralegal at one point. He also said there was an ongoing dispute over the quantum of the debt. Mr Bell said he has repeatedly attempted to get clarification about the amount he owed because he was not satisfied with the figures provided by the ATO. He said there is still confusion which prevents him dealing effectively with the issue. But he admitted in cross-examination that he has never had any genuine dispute in relation to the bulk of the debt. If there was and is a genuine dispute over any aspect of the debt, his answers in cross-examination suggest the dispute is confined to the calculation of interest.
12. While Mr Bell decried the failure of the ATO to negotiate effectively with him over the debt before the default judgment, he reached a fresh payment arrangement with the ATO on 26 September 2016. He was in default of that agreement by December 2016. It appears he effectively gave up on negotiations with the ATO thereafter. When asked about that inaction during the hearing, he indicated he saw no point in further talk in light of the frustrations he experienced in earlier dealings. In any event, he agreed in cross-examination that he did not have any records of contacting the ATO to discuss the debt between the end of 2016 and 7 February 2019 when the Deputy Commissioner issued a bankruptcy notice. It is likely the ATO became frustrated in the face of Mr Bell's inaction - and understandably so. Mr Bell was simply not giving his tax debts the priority they deserved. He appeared to be giving other creditors and commitments priority over the debts owed to the Deputy Commissioner.
13. Mr Bell said he had decided that selling the business was the best way to deal with his predicament. It is not clear whether he explained that conclusion to the ATO. He said his practice had attracted some interested parties but none of them had made a concrete offer. He mentioned one party in particular had shown interest in recent times. The possibility of a deal was impacted by the pandemic. He said he had made further payments to the ATO to reduce the amount of the debt but acknowledges he remains substantially in arrears. After the debt increased to in excess of $750,000 at one stage, the balance at the time of the hearing remained in excess of $600,000. Even if one gave him the benefit of the doubt and made an allowance for his quibbles in relation to the interest component of that amount, there is no doubt Mr Bell remains substantially in debt after making the more recent payments. He did not have a payment arrangement in place by the time of the hearing, and he did not say anything at the hearing that gave me any reason for confidence that he had the means or the intention of negotiating a viable agreement that would stand the test of time.
14. While angrily decrying the behaviour of the ATO, it is clear Mr Bell has failed to comply with his taxation obligations over a
ATC 8887long period. It is not simply that he has a debt; it is that he has failed to engage with respect to the debt and deal effectively with the ATO. The Deputy Commissioner should not have had to commence the proceedings in 2016, and he should not have had to issue a bankruptcy notice in 2019. For all his bluster, Mr Bell has not done what he was supposed to do under the law. In those circumstances, there is no doubt Mr Bell has contravened s 30-10(2) of the TAS Act.
SHOULD MR BELL BE DEREGISTERED IN LIGHT OF HIS CONTRAVENTION OF THE CODE OF CONDUCT?
15. Section 30-15 identifies the different forms of administrative action the Board may take if it was satisfied there was a contravention of the Code of Conduct after completing an investigation. The options include:
- (a) Giving the tax agent a written caution;
- (b) Making orders under s 30-20 - such as an order that the agent undertake a course of study, be subject to supervision or limit the range of services that he or she can provide;
- (c) Suspending the agent's registration for a specified period under s 30-25; or
- (d) Terminating the agent's registration under s 30-30.
16. The Board is not obliged to impose a sanction in the event it is satisfied there was a contravention. The Board (and the Tribunal upon review) must be satisfied it is appropriate to impose a particular sanction in the circumstances of the case.
17. The legislation uses the word 'sanction', but administrative action is not intended to punish an agent. The Code of Conduct is intended to protect the public which uses the services of tax agents, and to facilitate the efficient operation of Australia's system of taxation self-assessment. Those objectives must be kept squarely in mind when deliberating on what should be done in light of the agent's conduct.
18. Mr Adams, who appeared on behalf of Mr Bell, referred me to a number of published decisions in which the registration of an agent was terminated under this Part. In most of the cases, he argued, there was a finding that the agent was not a fit and person. Mr Adams argued that it would be excessive and unfair to deregister Mr Bell when there was no suggestion of any want of integrity or competence in the conduct of his practice. The argument appeared to be that people who use the services of tax agents do not need to be protected from Mr Bell.
19. I accept there is no evidence Mr Bell has failed to discharge his professional obligations to clients. The allegations - and the finding I have made - relate to the unsatisfactory conduct of his personal affairs. While I accept deregistration would ordinarily be reserved for serious contraventions of the Code where other sanctions would not be appropriate, I do not accept deregistration is limited to cases where there is an adverse finding as to competence or integrity. Any contravention of the Code may, in the right circumstances, invite deregistration if a sanction is required and the other sanctions referred to in s 30-15 are inadequate.
20. While there may not be a pressing need to take action to protect consumers from Mr Bell, that is not the end of the matter. His behaviour sets a poor example - for his clients, and for other tax agents. It also threatens the effective working relationship that must exist between each agent and the ATO. Even if there are no concerns about his integrity as such, Mr Bell's behaviour undermines the integrity of the system of self-assessment. That system depends on the expectation that individual taxpayers, shepherded by their tax agents, will comply with their basic obligations.
21. Mr Bell has failed to comply with these obligations over a long period. He has not learned any lessons from the legal proceedings that have been brought against him. There is no reason to suppose he will learn anything or modify his behaviour in response to a written caution from the Board. More stringent action is required to bring home the lesson. Moreover, a written caution would send the wrong message to tax agents more generally. A written caution would suggest to agents that they can ignore their obligations to the ATO and avoid serious action at the hands of the Board.
22. It is unclear how orders under s 30-20 would assist. Mr Bell's counsel argued there might be some benefit in ordering the applicant to undertake a course of study or take
ATC 8888other measures, but I am not satisfied any such orders would bring home the lesson that is required.
23. I am not satisfied that a suspension is the answer either. Section 30-25 provides for suspension for a defined period. That is not necessarily helpful. Given what has transpired, the best outcome is for Mr Bell to be deprived his registration until he has absorbed the lesson - but the best way of establishing that he has absorbed the lesson is for him to negotiate a robust and viable payment arrangement with the ATO that he is prepared to observe. That outcome might be achieved quickly, or it may take some time (or it might not happen at all). In those circumstances, it is difficult to determine a particular period during which the suspension should run.
24. The preferable alternative in the circumstances is to terminate Mr Bell's registration. If he can reach an arrangement with the ATO and provide other assurances about his future conduct, he would then be eligible for registration. To facilitate Mr Bell in achieving that outcome, I am satisfied his deregistration should not take effect until 30 July 2020. That will give him the opportunity to negotiate an arrangement with the ATO which could form the basis of an application for registration - and to make arrangements for the conduct of his practice in the interim if he wishes to do so.
25. The reviewable decision is affirmed.