Lecky v Tax Practitioners Board

Judges:
McBride GM

Court:

MEDIA NEUTRAL CITATION: [2025] ARTA 119

Judgment date: 20 February 2025

McBride (General Member)

1. The Regulatory regime for tax agents is set out in the Tax Agent Services Act 2009 (Cth) (TASA) . A core requirement of that Act is that a person providing tax agent services for a fee must be registered by the Tax Practitioners Board (Board) .

2. A mandatory Code of Professional Conduct (Code) complements the TASA registration provisions. The Code sets out explicit requirements of honesty, competence, lawfulness and conduct in the best interests of clients.

3. The Board can terminate a tax agent's registration in various circumstances, including among other things, where the tax agent has ceased to meet a registration requirement: TASA 405 (1) (b), or breached a registration condition: TASA 40-5 (1) (c).

4. If the Board conducts a review of a tax agent's conduct and concludes the agent failed to comply with the Code, the Board has various powers available to address the relevant breach. The Board's powers include (i) issue a written caution, (ii) impose a requirement for supervision of the agent, (iii) require the agent to undergo training or education, (iv) suspend the agent's registration, and, (v) terminate the registration.[1] TASA ss 30-15(2), 30-20 (1), 30-25(1) and 30-30.

5. When the Board terminates a tax agent's registration it may also preclude the agent from applying for reregistration, for a period of up to 5 years.[2] TASA s 40-25(1) and (2). Termination of registration being reserved for the most serious of cases.

6. In summary, competence, and lawful conduct in relation to Commonwealth taxation laws are intended to be preconditions to a tax agent's continuing registration status and ability to provide tax agent services for financial reward. The TASA is a scheme aimed at establishing a supervised regime for ensuring compliance with appropriate standards and facilitating the general availability of services of persons who satisfy the TASA registration and conduct requirements.

7. Various kinds of board decisions are reviewable by this Tribunal, including termination of registration and determination of a period of registration ineligibility.[3] TASA s 70-10 (e) and (h).

8.

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The Tribunal has stated on many occasions when considering a decision of the Board to terminate the registration of a tax agent for a period of years for contraventions of the Code: "Tax agents play an important role in our community. They assist ordinary taxpayers and businesses to manage their (sometimes complex) tax affairs. Tax agents deal with the Commissioner of Taxation on a client's behalf. Tax agents must exhibit a high level of competence and skill if Australia's self-assessment system is to work efficiently as intended. They must also be trustworthy. There is a strong public interest in ensuring that tax agents are properly regulated".[4] Ridden and Tax Practitioners Board [2020] AATA 422 at [1] per DP McCabe.

Background to these proceedings

9. Mrs Jennifer Lecky, the Applicant in these proceedings ( Applicant) was a registered tax agent. The Board wrote to the Applicant on the 22 March 2023 to advise her that the Board, after investigating the Applicant's conduct, had made a decision to terminate the Applicant's registration as a tax agent with effect from 19 April 2023 in accordance with subparagraph 60-125 (2) (b)(ii) and subsection 40-5 (1) (b) TASA. The Board also advised the Applicant she was prohibited from applying for registration for a period of 2 years pursuant to s 40-25 TASA. The reasons given for the Board's determination were that the Board was satisfied:

The Applicant was effectively subject to a 2-year ban which expires on 19 April 2025.

10. This case concerns the question of the Applicant's "competence", not any unlawful conduct in relation to Commonwealth taxation laws on the Applicant's part.

History of the matter in the Tribunal

11. On 9 June 2023, the Applicant filed an application for a review of the Board's decision. In order to progress the review, the Tribunal held case management directions hearings to take the case forward on 10 August 2023, and 11 September 2023 and the matter was listed for a one-day hearing on 27 March 2024. The Applicant's health problems resulted in the hearing date of 27 March 2024 having to be vacated.

12. On 9 October 2024, a further case management directions hearing was held, and the Tribunal made an order that effectively granted leave for the Applicant to file further evidence out of time with the Tribunal. The order stated the Applicant was to file and serve "any evidence on which they seek to rely on at the hearing (for example, witness statements of the applicant and others)."

13. To accommodate the Applicant's ongoing health issues, the matter was listed for hearing by telephone on 22 November 2024. On 18 November 2024 when it was apparent she had failed to file any further material, the Tribunal sent an email to the Applicant reminding her of the Tribunal's order that she file and serve any evidence on the Respondent by 30 October 2024. The Tribunal sent a further email on 21 November 2024 again requesting the Applicant provide the Tribunal with any further evidence by close of business on 21 November to allow her evidence to be included in the Tribunal Book. The Applicant failed to avail herself of the opportunity to file further evidence in support of her application.

14. It is regrettable the Applicant failed to provide any further material to assist the Tribunal to make the "correct or preferable decision" pursuant to s 56(1)(a) of the Administrative Review Tribunal Act 2024. It is worth noting that the evidence before the Tribunal consisted of the Tribunal documents (T-documents) filed by the Respondent in July 2023 marked R1, Supplementary T-documents filed on 13 October 2023 marked R2, Supplementary T-Documents filed 13 March 2024 marked R3, and Supplementary T-documents filed 8 November 2024 marked R4. In total, the Respondent filed 2,340 pages of documentary material, that included a 12-page Statement of Facts Issues and Contentions (filed 13 October 2023) and 24 pages of written submissions (filed 13 March 2024) in support of the Board's decision. In contrast, the Applicant filed a 3-page Statement of Facts, Issues and Contentions attaching 73

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pages of documentary material (filed 15 September 2023), and no further evidence or written submissions. Neither party called any witnesses.

15. The Application was heard by telephone on 22 November 2024, five months before the prohibition on the Applicant being able to apply for registration under the TASA ended. The Applicant was self-represented at the hearing, however her son Mr Giles who assisted the Applicant in her office and with her practice, after being sworn in, gave evidence on the Applicant's behalf that assisted the Tribunal.

16. At the hearing, the Applicant disputed the findings made against her that she had contravened the Code. The Applicant's submissions were directed towards demonstrating the ATO's preliminary audit findings and audit findings were incorrect, and the Board's decision was wrong. The Applicant's submissions were primarily directed to her personal circumstances and did not make it clear things would be different if she were allowed to resume her registration, nor did the Applicant volunteer to give undertakings as a condition of her registration in the event the Tribunal decided to set aside the decision of the Board.

Applicant's circumstances

17. The Applicant at the date of the hearing was 84 years of age and in poor health. The Applicant's Full Summary of her medical conditions (TB A2, p 2368) shows the Applicant had undergone several major invasive operations including a mastectomy in 2013, a pelvic fracture in 2014, an operation for a pacemaker in 2017, chronic cerebral microvascular ischemia in 2020, hypertension and a knee replacement in 2021, vertebral crushed fractures in 2021, rib fractures in 2023 and an operation on her spine on 8 July 2024.

18. The Applicant, a qualified accountant, has been a registered tax agent since 4 December 1990. Over the past 30 years the Applicant built up a busy practice in Muswellbrook, a mining town, and the surrounding areas in the upper Hunter Valley in rural NSW.

19. The Applicant carried on her business as a sole trader under the name of "Jennifer Lecky & Assocs" (the Business) . Prior to her registration being cancelled, the Business had 2,418 clients. The client base consisted mostly of individuals employed in the mining industry working as miners, marine engineers, tugboat operators, linesmen, truck drivers, mechanics and metal workers. It was apparent the majority of the Applicant's clients worked for the same employers in the same industry - mining operations - and they had similar work-related expenses.

20. The Applicant is also a partner in the partnership S.M Giles & J.A. Lecky (Partnership ) that carries on a farming practice in the upper Hunter Valley in New South Wales. Jennifer Lecky & Assocs is the tax agent linked to the Partnership on the Australian Taxation Office (ATO ) portal. Ms Giles is the Applicant's daughter. Ms Giles owns the land on which the farming is carried on. The evidence of the Applicant and Mr Giles was Ms Giles was the partner solely responsible for the farming operation carried on by the Partnership, the Applicant was a partner in name only.

21. On 8 June 2022, the Board received a referral from the Australian Taxation Office ( ATO ) on behalf of the Commissioner of Taxation (Commissioner). The referral advised the Board the Applicant had been selected by the ATO for its monitoring program in relation to income tax returns lodged for individual taxpayers who were clients of the Applicant's tax practice. The reason given by the ATO for selection of the Applicant's clients was the higher-than-average amounts claimed by the Applicant's clients for work-related expenses and other deductions in some of the income tax returns that had been prepared and lodged by the Applicant.

22. On 16 September 2022, the Board wrote to the Applicant to advise her the Board had commenced an investigation under Subdivision 60-E TASA concerning allegations the Applicant's conduct may have breached the Code.

23. Ultimately, 25 of the Applicant's clients were audited by the ATO over a period spanning 10 years, 1 July 2011 - 30 June 2021. The audit resulted in the ATO amending all of the 25 selected taxpayers' respective income tax returns. A summary of the

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Commissioner's findings in relation to each of the amended income tax returns are set out in the Tribunal Book ( TB ) at R1, T5 pp. 71. The majority of the amendments concerned work-related car expenses; work-related travel expenses; work-related clothing, laundry and dry-cleaning expenses,; union fees, and meal allowances.

24. The ATO audit findings attributed "fault primarily to the error and deficiency of the income tax return preparation practices by the applicant". None of the 25 audited taxpayers filed objections to their amended assessments challenging the audit outcomes.[5] TB R1, T7 at p 2092.

25. On 2 February 2023, the Board sent the Applicant a confidential letter headed " Notice of alleged failure to comply with the TASA " ( Notice) . The Notice advised the Applicant an allegation had been made to the Board that the Applicant may have breached the TASA . The Notice requested a written response from the Applicant by close of business on 22 February 2023.

26. The Notice set out, or stated the following:

27. No evidence was provided by the Applicant that she had requested an extension of time to file the above referred to income tax returns or the BASs for her Business or the Partnership.

28. On 22 February 2023, the Applicant sent an email in reply to the Board's Notice that was general in nature and did not address the matters outlined in the Board's Notice.[7] TB R1, T6 at p 2093. On 9 June 2023 the Applicant filed an Application for a Review of the Boards decision.

THE QUESTIONS TO DETERMINE BY THE TRIBUNAL ARE:

Breach of subsection 30-10 of the Code

29. The Board made a number of adverse findings with respect to the provisions of section 30-10 of the Code, I will deal with each of these findings in turn.

The applicant failed to act honestly and with integrity in contravention of section 30-10 (1) of the Code

30. The Respondent alleged the Applicant failed to declare in her annual declaration that was lodged with the Board on 15 January 2016 that she had overdue personal tax obligations, tantamount to making a false declaration to the Board. The Respondent's decision was based on the Applicant's Integrated Client Account (ICA )[8] TB R1, T5 at pp 181-183. that showed a debit for the BAS quarter ended 31 December 2015 of $2,818 as at 14 January 2016, that was not the subject of a payment plan with the ATO.

31. However, at the hearing Mr Giles gave evidence on behalf of the Applicant that the Applicant's ICA had a positive balance at the date the Applicant filed her annual declaration. Mr Giles pointed out 15 January 2016 was the processing date for the BAS and not the due date for payment of the BAS. The Effective date or the due date for payment of the BAS in 2016 was in fact 29 February (2016 was a

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leap year). Mr Giles was correct, contrary to the Board's findings on 15 January 2016 the Applicant did not have an outstanding ICA debt of $2,818, instead the Applicant's ICA was in credit.

32. The Tribunal finds the Applicant did not make a false declaration in her annual declaration to the Board when it was lodged by the Applicant on 15 January 2016.

33. In relation to the Applicant's 2017 TPA renewal application, the Respondent's evidence, that the Tribunal accepts, was the Applicant had an overdue tax obligation on the 10 December 2017, the date she paid the renewal fee of $500.00 to the TPA.[9] TB R1, T5 at pp 188-189. The due date for filing and payment of the Applicant's BAS for the September 2017 quarter was 27 November 2017. The Respondent's evidence was that on the date the Applicant paid her renewal fee to the TPA, the Applicant was 15 days late in lodging and paying her BAS for the relevant quarter. The Respondent's evidence was the Applicant's BAS was lodged and paid on the 22 December 2017, 12 days after the Applicant stated on her renewal application that she had no overdue personal tax obligations.[10] TB R1, T5 at p 189. The Respondent submitted the Applicant did not attempt to explain these matters, the Tribunal accepts that submission.

34. The tragedy of these proceedings is the Applicant failed to provide any written submissions to the Board or the Tribunal to explain the slightly late filing and payment of her BAS for the relevant quarter. When reviewing the Tribunal Bundle, in particular the document headed Applicant's full medical report,[11] TB, A2 at p. 2368. it was evident that in 2017 the Applicant had an operation for a pacemaker and suffered rib and thoracic compression. Regrettably, the Applicant did not take the Tribunal to the Full Medical report during the hearing. The Full Medical report, though general in nature, was sufficient to demonstrate the Applicant had suffered an extended period of serious illness from 2013 - 2024. The Applicant clearly had an operation for a pacemaker at some stage in 2017 that might have explained and excused the slightly late lodgement of her BAS for the September quarter in 2017, it is impossible for the Tribunal to know if that was the reason as no dates are provided other than the year in which the operation occurred.

35. There was no suggestion in any of the material filed by the Respondent that the Applicant had, in the period of the ATO audit and Board enquires, outstanding tax debts, or over her career had entered a payment plan with the Respondent and been in default of any payment plan. In fact, the Applicant's integrated client accounts show that where a General Interest Charge (GIC) had been imposed by the ATO in a period the CIG was reversed and there was no debt owing.

36. In essence, the alleged breach of s 30-10 (1) by the Applicant boiled down to her being 26 days late in filling her BAS and paying the GST for the quarterly reporting period ending 30 September 2017. The Respondent submitted the Tribunal should find the Applicant "was either reckless or indifferent to the correctness of that declaration" and therefore "not a fit and proper person for registration as a tax agent".

37. Given the Applicant's circumstances and the minor delay in filing and paying the BAS for the September quarter 2017 and no evidence the ATO imposed GIC on the late lodgement of the BAS, the Tribunal does not find the Applicant failed to act honestly and with integrity in contravention of s 30-10(1) of the Code.

The Applicant's late lodgements of her BAS and non-lodgement of her Income Tax Returns in contravention of subsection 30-10(2) of the Code

38. The Applicant failed to lodge her income tax return for the financial year ended 30 June 2020 by the due date of 17 May 2021. Instead, the Applicant lodged and paid the tax due on the 11 June 2021, 25 days late.

39. The Respondent's evidence was that the Applicant was also late filing her Income Tax returns for the years ended 30 June 2022 and as at the date of the hearing, had not lodged her income tax returns for the financial years ended 30 June 2023 and 30 June 2024.[12] TB, ST1 p 2248. The Applicant's failure to lodge her income tax returns by the due date was the basis of Respondent's finding that the Applicant in her individual capacity had failed to comply with a "taxation law", not nonpayment of the Applicant's income tax liabilities.

40.

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Mr Giles gave evidence that the due date for lodging income tax returns for a registered tax agent, which the Applicant was until 19 April 2023, was 15 May, not the 31 October date alleged by the Respondent. The Tribunal accepts that tax agents are given an extension to file their tax returns and the time for lodging is in May, not October.

41. In his evidence Mr Giles told the Tribunal the Applicant's 2022 income tax return had been prepared by the Applicant and it was "sitting in the system" (referring to the ATO portal) but had not been accepted as filed. Mr Giles explained the Applicant's deregistration came into effect on 19 April 2023, the day the Applicant tried to file her 2022 income tax return on the online portal, but the portal rejected it. Mr Giles said in his evidence:

"I think there was a belief in the early conversations that Jennifer had with the professional body and people who are advising it that this would be resolved fairly quickly. She would then be able to use normal channels to file because she probably had never done a submission through myGov personally. It's always been through the tax portal".

Mr Giles also gave evidence that the Applicant had prepared her 2023 income tax return but had not been able to file it through her myGov account as she had struggled to work out how to navigate the myGov System. Mr Giles told the Tribunal the Applicant's 2024 income tax return "had probably not been prepared".

42. The Tribunal accepts Mr Giles' explanation for the Applicant's failure to lodge her 2022 income tax return by the due date, and his evidence that the Applicant had prepared her income tax return for the income tax year ended 30 June 2023 but not lodged it. While the Tribunal appreciates the Applicant may have been overwhelmed dealing with the findings of the Board and her personal health issues, and procrastinated in addressing her own taxation affairs, it is difficult to accept that as a tax agent of some 30 years standing the Applicant did not appreciate that a failure to lodge her income tax returns by the due date is a failure to comply with her taxation obligations which in turn is a failure to comply with a Taxation Law.[13] See GJ Brown & Co Ltd v Tax Practitioners Board [2016] AATA 740 at [71] .

43. Mr Giles also gave evidence that the Applicant had bought the Business outstanding BASs and the Partnership outstanding BASs up to date by April 2023 and told the Tribunal:

" the BASs were submitted like on the day of the cutoff pretty much, which we didn't even know was the cut-off, it just happened to be the day they were sent through and at the time my sisters individual return went through. They pulled it up and then they subsequently let it go through".

44. In relation to the excessively late filings for the BAS quarters ending 31 December 2020 to 30 September 2021 and 30 June 2022, the Tribunal appreciates the impact Covid-19 had on all small business, particularly accountants, engaged in preparing returns for their clients to obtain Covid Government support payments. The Tribunal also recognises the demands placed on small accountancy and tax agent practices can result in accountants and tax agents lodging their client's BAS, and income tax returns and neglecting to attend to their own affairs in a timely manner. It is also clear from the Applicant's Medical History she had a number of health problems during the relevant period. The Tribunal is aware the ATO would have imposed a general interest charge (GIC) under the Taxation Administration Act 1953 on any income tax or GST the Applicant paid after the due date. There was no evidence before the Tribunal that the Applicant had failed to pay her income tax or GST plus any accrued GIC, once she had lodged her returns and BASs, or that she had entered into a payment plan with the Commissioner of Taxation or been in breach of a payment plan.

45. The issue the Tribunal is required to consider is the Applicant's delay in filing her BAS over a number of years. Section 30-10 (2) of the Code provides that registered tax agent's must comply with taxation laws in the conduct of their personal affairs. In other words, the requirement is a mandatory one. The failure of the Applicant to lodge the BASs for the Business' on time over an extended period is a serious matter. The Respondent's submissions included a table showing the Applicant had lodged the BAS for

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the Business' late for 16 quarterly reporting periods, and the Business' BAS for the quarterly reporting periods ending 30 September 2022 to 30 June 2023 (inclusive) remained outstanding. The Further Supplementary T-Documents prepared and filed by the Respondent on 13 March 2024[14] TB, R3, ST6, ST7 and ST8 at pp 2248-2249; 2296-2304. and 8 November 2024[15] TB, R4, ST9, ST10, ST11, ST12, ST13 and ST14. showed the Applicant had continued to ignore her obligation to file the BASs for the Business. At the date of the hearing the evidence before the Tribunal was the Applicant had filed no BAS for the Business for the period 30 September 2022-30 September 2024 (inclusive).

46. No submission was made by the Applicant that she would work diligently to file all of her outstanding income tax returns and BASs for the Business if her registration was reinstated. Presumably after the Applicant's registration was cancelled, the Applicant had time to attend to her personal tax affairs and the long outstanding BASs for the Business and work out how to file the BASs and her income tax returns via her myGov account. The fact that she failed to do so, does not allow an inference to be drawn that she has seen the error of her ways and will not continue the same pattern of carelessness when it comes to discharging her personal taxation obligations.

47. The same is true in relation to the filing of the Partnership income tax return for the year ended 30 June 2022 and for the Partnership BASs. The Partnership BAS lodgements were late for 38 quarterly reporting periods. Of those reporting periods, 21 BAS were lodged more than 100 days late, of those 5 were lodged more than 200 days late and 4 more than 300 days late without the Applicant making a request to the ATO for extensions of time to lodge.

48. The integrated client account for SM Giles & JA Lecky (TB 2304 ST-14) records the current status of the Partnerships income tax and BAS lodgements. It appears the Partnership's BASs for the BAS quarters ending 30 September 2023 to 31 March 2024 (inclusive) remained outstanding at the date of the hearing.[16] ST8 at p 2296. Whatever the position for failure to prepared and lodge the Partnership returns, the Applicant was dilatory in dealing with her personal tax obligations and the Business and Partnership's tax obligation.

49. The Tribunal accepts the Respondent's submission that failure to comply with tax obligations has been held as failure to comply with a taxation law.[17] GJ Brown &Co Ltd v Taxation Practitioners Board [2016] AATA 740 at [71] . It is axiomatic that the Applicant failed to comply with the obligations imposed on her under the subsection 30-10 (2) of the TASA.

Sub-Sections 30 - 10 (7), (9), (10) and (12) ATO compliance activities and outcome regarding the Applicant's Clients

50. In essence, the Respondent found the Applicant had failed to demonstrate competence when preparing tax returns for clients, or "maintain relevant qualifications, and appropriate knowledge and skills", as defined in
Birdseye and the Tax Practitioners Board (2021) AATA 1011 ( Birdseye ).[18] Birdseye and the Tax Practitioners Board (2021) AATA 1011 , at [35] . As SM Taylor stated in Birdseye, the requirement of competence set out in subsection 30-10 (7) overlaps with the reasonable care obligations set out in subsections 30-10 (9) and (10) of the Code:

"Competence in the provision of tax agent services necessarily requires the exercise of "reasonable care", both in the agent's own client dealings, and in the supervision and review of client services provided by the agent's employees and contractors." [19] Ibid at [36].

51. The Respondent relied on:

in reaching its decision that the Applicant was at a minimum careless when advising clients about their obligations to maintain their records or to ask appropriate questions before advising her clients on the deductibility of expenses.

52. In relation to the Applicant's current knowledge of the requirements imposed under the Income Tax Assessment Act 1936 ( 1936 Act ) and Income Tax Assessment Act 1997 ( 1997 Act ), the Respondent relied upon the records of contact by the ATO with two of the Applicant's clients and with the

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Applicant in relation those clients. The ATO Case Notes Reports make observations that the Applicant appeared to express a lack of understanding concerning the record-keeping requirements contained in Division 900 of the 1997 Act:

"We then discussed other allowances and circumstances in relation to claiming travel/meals. The agent didn't really appear to understand the rules or record keeping requirements".

"We discussed that the logbook wasn't valid and why. The agent was not aware of the rules in relation to keeping a valid odometers needed to be recorded. She said she has the opening and closing and I explained that it needed to be kept

for each trip. We talked about allowances, both taxed and non taxed and it was also evident that the agent had no idea that the amount incurred could only be claimed on a taxed allowance and nothing if a non taxed allowance was not reported. She believed that the CRR could be claimed. The agent asked me if a $12 taxed allowance was received and $15 spent if $15 could be claimed. I told her yes and she asked me when it changed. Told the agent as far as I was aware it has always been what was incurred could be claimed".[20] TB R1 T-5, pp 638-646.

"Tax agent has been contacted but only spoke to his assistant David few times. Spoke to TAG once, she was an old lady and was in hospital at that time. She called to enquiry about meal allowances. She was asking why the reasonable amount of OT meal allowances need receipts to cover the claim. TP and TAG both were non cooperative and non responsive through the audit process".[21] TB R1, T5 at p 966.

53. Having read the ATO Case Records included in the Tribunal Bundle, the Tribunal does not draw the same conclusion drawn by the Respondent, by way of example, as a general rule meal allowance expenses do not have to be substantiated if the meal allowance relates to overtime, is paid under an industrial instrument and is a reasonable amount. The ATO Case records are capable of being read out of context.

54. The fact that none of the 25 clients audited by the ATO lodged objections against their amended assessments of income tax does not necessarily lead to a conclusion that the taxpayers concerned lay all fault for the adjusted claims at the Applicants feet as was suggested by the Board and the ATO. Taxpayers always have the responsibility of checking their tax return before completing the Taxpayer declaration at the end of their individual tax return.

55. The Board summarised the alleged breach of subsection 30-10 (7) of the Code and stated at (41):

41. "in summary, of the ITR audits for Mrs Lecky's clients for the financial years ending 30 June 2012 to 30 June 2021 (inclusive), the Commissioner made adjustments to the total value of the deductions claimed of $104,763.00, resulting in a tax shortfall of $153,810.97, and total penalties of $26,986.70 being imposed. Of the 25 clients audited:

  • a. 9 clients were subject to findings of recklessness by the client or a tax agent as to the operation of a taxation law …,
  • b. 16 clients were subject to findings of a failure by the client or their tax agent to take reasonable care to comply with a taxation law …
  • c. 12 clients received a penalty, of whom:
    • I. One client was granted partial (75%) remission of the penalty imposed on them by the ATO
    • II. one client was subject to a partial (20%) increase to the penalty imposed by the ATO.
  • d. 13 clients were given penalty relief."[22] TB R1, T5 at p 71.

56. The ATO records show that no penalties were imposed in 12 cases. When penalties were imposed, they ranged from $25.30 to $26,986.70. The tax shortfall for 24 of the 25 clients audited ranged from $615.00 - $30,745, and with one exception, the total adjustments ranged from $230.62 to $12,378.49. In the case that was the exception, the Applicant had filed 10 years of returns late for a new client, and in that instance the tax shortfall was found to be $111,904.00 over the 10-year period and penalties of $26,968.70 were imposed.

57.

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The respondent submitted the facts in
D'couto and the Tax Practitioners Board[23] [2023] AATA 3485 at [22]-[23] . ( D'couto ) were similar and the Tribunal should be guided by the decision in that case. While the Tribunal accepts there are some similarities, D'couto is not on all fours with the facts currently before the Tribunal. The failures of the tax agent in D'couto were far more serious. For a start, in D'couto, the tax agent understated her taxable income in the financial year ending 30 June 2017 by $199,968 and in the financial year ending 30 June 2018 by $159,197 and failed to correctly declare GST supplies and correctly declare input tax credits in her quarterly BAS for the periods 1 July 2016 to 30 June 2018. Those circumstances alone may have coloured the Tribunal's view of the tax agent's failure to take reasonable care in the preparation and lodgement of the income tax returns for 22 of the tax agent's clients.

58. During the hearing, the Applicant disputed the ATO's audit findings that she had failed to provide competent service. Mr Giles gave evidence that some of the deductions disallowed by the ATO were in fact allowable deductions under the 1997 Act, citing union fees as an example. In respect of the responses given by a Mr Pettit to the Board's questionnaire (paragraph [23] of the Respondent's submissions), Mr Giles gave evidence that refuted Mr Pettit's answers to the questionnaire, stating emphatically "mother did provide him with that advice"

59. Mr Giles described how the tax returns of all of the taxpayer who were members of the same union were prepared, including Mr Pettit's. Mr Giles said in evidence:

"on the day in question we would go to the union rooms in Newcastle and do the returns of the union members back to back. I am responsible for the relevant taxpayer signing the declaration at the end. I print out the returns and get the union member to sign it. I've got a record that I keep that they signed the return, a status report. We update it when those assessments come in and all that sort of stuff. I have that on the spreadsheet that I keep so I've got all the details for that particular thing. As I said I know that if I go to our records will be able to find that signed declaration for sure."

60. In relation to Mr Pettit's statement that the Applicant did not ask him to sign any authority for the Applicant to lodge his tax returns with the ATO[24] TB R1, T5, at p 1710. Mr Giles said in evidence:

"So that's just simply wouldn't be true because they all do that as they go through sign the declaration everything, I print out a return with the declaration and Jennifer sends it to the printer and it prints out the declaration automatically as part of the return and we ensure that they signed it and give them a copy of the return."

61. In relation to Mr Pettit's statement that the Applicant did not keep him up to date with the audit conducted by the ATO or the amended assessments, and that the Applicant charged for audits and preparation of amended income tax returns, Mr Giles gave the following evidence:

"well, that's simply not true in both instances. I basically take the phone calls and I could look at the phone logs when Christopher called that year because we kept the phone logs as well just for our benefit. We do not charge hourly for the phone like a lawyer would, but we keep a log of calls coming in. Obviously around that time I can speak to the actual timing of that because I was working with the Applicant during the time of the audit. I know there was definitely conversations between Jennifer and the MUA guys regarding these audits at the time. As I said, we requested that Simon at the MUA (union) office print out all of the union membership details and asked that they send them to the ATO for the audit, that was evidence of the $2,930 union fees, which is a substantial amount of the actual amount that was knocked back because we were locked down in Muswellbrook and they couldn't come to us for scanning. Apart from the work-related travel which they say they were not advised that they couldn't claim as a deduction for the receipts they held and honestly, I can't say why he would say that because they were always advised. In fact, the union guys pretty much knew that amongst themselves anyway because they all have very similar annual expenses as they all do the same job. They are all

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linesmen on Tug's pretty much, some of them are operational. Well, I know we had conversations with Michael Cruz (an ATO officer) when these matters came up and we sent the information to Michael Cruz with the Enterprise Agreement or whatever you call it the employment agreement between the employer and the union. Then someone else in the tax office picked up the case and they couldn't find where we'd sent it to him and they were claiming that Svitzer didn't pay travel allowances which they did it was part of the enterprise agreement.[25] TB A-5 2379 – Svitzer Australia Pty Ltd and MUA Newcastle Lines and Morning Enterprise Agreement 2022 ( Svitizer ) at 17.1 p 2394, 17.2.2 p 2397, 17.2.8 p 2398.

62. Further submissions were made by Mr Giles that the laundry expenses, although they may appear high to somebody not living in a mining town and working in an extremely dirty industry, were perfectly within a range of what was reasonable for miners clothing, going so far as to advise the Tribunal and some of the taxpayers had 2 washing machines - one for work clothes and one for household clothes - because of the dust and dirt on the work clothing. Mr Giles said in evidence;

"I mean we live in a mining town and he ( referring to Mr Cruz) said "does everyone really have $150.00 for laundering their uniforms?" and I mean you can walk around Muswellbrook and everyone is covered in coal dust, a lot of them who kept their records have gone over $800, not to mention the fact that they have to turn their washing machines over regularly and some of them have two washing machines because they can't use the washing machine they use for their regular wash to wash their coal mining stuff. You know it's a quiet dirty place".

The Tribunal notes that substation is not usually required for work-related laundry expenses up to $150.00, and if a taxpayer does their own laundry, the ATO will allow a claim of $1.00 per load if only work-related clothes are washed.

63. As far as the position in relation to work-related expenses incurred pursuant to the workplace agreement with Svitzer, clause 17.2.8 of the Agreement states "the wages annual salary and payments under Part 4 of this agreement include all allowance (including an amount of $3,885.78 per annum in respect of meals, and an amount of $4,920.65 per annum in respect of travel")…, and no further amounts will be payable except as explicitly provided for in this Agreement." Mr Giles pointed out that a travel allowance was built into the salary which is correct. The Respondent submitted that "even if the allowance is paid there was no automatic entitlement to a deduction and the ATO generally disallowed deductions on the basis they were either not substantiated or did not have a nexus to the production of assessable income. There are many instances where claims are allowed, and those two hurdles were passed and that is really what the Board says about all of this."

64. Generally speaking, an allowance payment that is intended to cover an estimated expense is treated as assessable income of the recipient[26] Income Tax Assessment Act 1936 (Cth) (s 6-6 or 6-12 of 1936 Act) and does not give rise to an allowable deduction in the recipient's hands because the payments bear little relation to the actual costs incurred and employees are not required to account for their expenditure. As Hill J stated in
Roads and Traffic Authority of NSW v FCT[27] (1993) 26 ATR 76 . , "allowances fall within the definition of "salary or wages" and where thus not fringe benefits". Without all the factual detail it would appear that meal and travel expenses would not be claimable as a deduction and disallowed accordingly, not because of a failure to retain records to substantiate that expense.

65. In relation to union fees, the MUA is the maritime division of the Construction, Forestry, Maritime, Mining and Energy Union. The Tribunal accepts Mr Giles' submission that union fees or dues are a deductible expense under s. 8-1 of the 1936 Act. It is unclear on the evidence before the Tribunal why the ATO disallowed deductions for union fees, particularly when documentary evidence of expenditure is not always required. The ATO has a discretion to waive the substantiation requirement under s.900-195 of the Act. Tax Ruling 97-24 sets out the circumstances in which this discretion is likely to be exercised. In the case of union fees, one would have thought that this is precisely the type of expenditure that would not require substantiation.

66. A great deal of time during the hearing was devoted to the factual circumstances of one

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taxpayer, a mining engineer who worked as a specialist subcontractor and used her car to travel from mine to mine throughout Northern New South Wales and Queensland. The taxpayer's car expenses were reduced from $30,919 to $3,600. The Respondent submitted in evidence the amount:

"was an extraordinary expense for a car and one would expect that if there was a basis for a claim that size it could be more readily substantiated given the significance of the sum."

Mr Giles told the Tribunal he remembered that taxpayer and what occurred and said in his evidence:

" the taxpayer worked in mines she kept a log book on excel but she wasn't putting in the odometer reading at the start and the end of the period but she had the totals in the spreadsheet. It was the log book that she kept that didn't meet the requirements which is why the tax office knocked the deduction back".

Mr Giles told the Tribunal the taxpayer had been moved to Queensland and her return was done over the phone from QLD. Mr Giles said in evidence:

"we didn't see her logbook until it was sent down for the audit. She sent the information to the ATO, but the ATO weren't satisfied with her excel spreadsheet as being enough information for the log book. Honestly, she was due that $30,000 every cent of it she absolutely did hundreds of thousands of kilometres in that car to say that she was only due $3,600, that's less than the depreciation for the vehicle and it was a brand new Land Cruiser so you know that's your outrageous amount"

67. Mr Giles came across as a credible witness and the Tribunal accepts his evidence in relation to the above taxpayer as it is consistent with the ATO Case Record that records the conversations with the relevant taxpayer and the ATO.

68. The Respondent referred to the answers given by 5 of the Applicant's clients to the Boards questionnaire. The Board sent the questionnaire to 17 of the Applicant's clients, and 7 responded. The answers were consistent with respect to production of receipts and paperwork, all the taxpayers who answered the questionnaire said they were asked to bring relevant paperwork and receipts to the meeting with the Applicant, and in all but one case that the Applicant looked at the receipts and asked questions. Only Mr Pettit stated he had not given the Applicant authority to lodge his tax return. Only 2 taxpayers said they were charged for the audit. The most truthful answer was possibly given by Mr Ball who said "it was hard to remember."

69. It is regrettable the Applicant failed to provide any evidence, that could have been paperwork, or the spreadsheet referred to by Mr Giles to substantiate Mr Giles' statements or a witness statement of Mr Giles or Ms Giles. There is a well-known adage that "bad workmen blame their tools", and during an audit it is not beyond the realms of possibility that a taxpayer might place all fault entirely at the feet of their tax agent. On the other hand, it is not for the Tribunal to go behind the amended assessments issued by the ATO and speculate why decisions were made, or indeed to make out the Applicant's case for her on the scant material placed before the Tribunal by the Applicant.

70. The 1936 Act and the 1997 Act place the obligation to retain records on the taxpayer, not the tax agent. Division 900 of the 1997 Act makes it clear that it is the taxpayer who must comply with the rules and an expense is not deductible even if it satisfies all the requirements of section 8-1 if it cannot be substantiated. It is prudent for a taxpayer to keep receipts and other relevant documents to show that a particular expense was incurred, because the onus is on the taxpayer to prove that an assessment is excessive if an application for a review of an amended assessment is ever lodged in the Tribunal or the Federal Court.

71. The ATO also has powers to direct taxpayers to undertake an approved record keeping course when they have failed to comply with tax record keeping obligations. It appeared from the evidence before the Tribunal that the ATO placed all the fault with the failure to keep appropriate records entirely at the feet of the Applicant. The Tribunal notes the ATO wrote to the Applicant on 26th May 2022 and

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recommended "that in the future, you review your clients records prior to lodgement for the work related and other expenses being claimed to ensure that they comply with the requirements of taxation legislation and rulings". It was apparent from the answers given by the 7 taxpayers who answered the Board's questionnaire that the Applicant had requested the taxpayers bring all their receipts and paperwork to the meeting with the Taxpayer and the Applicant had looked through the receipts.

72. The ATO letter referred to above under the heading record keeping stated "your clients are required to keep all relevant records including all records examined as part of the audit, for at least five years." The letter quite correctly does not place that responsibility on the Applicant. From the evidence before the Tribunal, it would appear the taxpayers in question had not retained their records. There is no requirement in the 1936 Act or the 1997 Act that a tax agent is required to retain their clients' receipts or paperwork.

73. The evidence of the Applicant was that she had been engaged by several "families" as their tax agent for "2 generations some three", she was familiar with their jobs, working conditions under the relevant Union or Enterprise Agreement and the requirements of their jobs either as Tugboat operators, linesmen, miners, truck drivers or fitters. The Tribunal does not find there was a deliberate intention on the part of the Applicant to defraud the revenue, or deliberately over claim expenses for her clients. Overfamiliarity with her clients' work and family life may have resulted in a level of carelessness when preparing the returns.

74. Nevertheless, on the basis of the material submitted by the Applicant as her evidence, the Tribunal finds the Applicant was more likely than not to have been less than diligent when reviewing her clients records or turning her mind to whether the deductions being claimed by her clients were legitimate claims and breached section 30-10(9) and 30-10(10) of the Code in that the Applicant failed to take reasonable care in the preparation of her clients tax returns, and ensure that taxation laws were applied correctly.

75. On the evidence before the Tribunal, the Tribunal does not find the applicant breached s.10-30 (7) or s.10-30 (12) of the code.

76. Section 10-30(7) is primarily concerned with tax agents' "integrity, knowledge and capacity": Boards Explanatory Paper TPB 01/2010 "Code of Professional Conduct" ( EM 2010) at paragraphs 96 to 115. At [104], EM 2010 list a series of circumstances that suggest a lack of competency these as follows:

  • • providing tax agent services relating to an area of taxation law in which the registered tax practitioner is not properly qualified, capable or suitable, without first obtaining the necessary support of a third-party expert
  • • not providing clients with a measure of communicating with the registered tax practitioner or otherwise remaining inaccessible to clients
  • • causing inappropriate delay in the lodgement of client tax returns and other documents
  • • causing inappropriate delay in forwarding on client tax refunds from the ATO
  • • not making sufficient enquiries to ascertain the affairs of clients to enable the registered tax practitioner to be reasonably satisfied the documents they prepare and lodge on behalf of these clients are correct
  • • performance of work of a quality such that it needs to be redone
  • • failing to lodge the registered tax practitioner's own income tax returns or otherwise failing to adequately manage the registered tax practitioner's personal taxation affairs or those of their practice

77. At [105], EM 2010 lists a number of things a tax practitioner is required to do to ensure that services are provided competently these include the following:

  • • maintaining adequate knowledge, skill and resources in the areas the registered tax practitioner provides services
  • • not accepting an engagement or providing services where the registered tax practitioner has insufficient knowledge and skill to complete the engagement or provide those services competently unless the registered tax practitioner is able to obtain such

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    knowledge and skill, without delay and cost to the client
  • • not accepting an engagement or providing services where this would breach a condition that has been imposed on the registered tax practitioner's registration
  • • where a registered tax practitioner has a narrow, specialised area of expertise, not providing tax agent services outside of this area of expertise unless the registered tax practitioner has taken steps to obtain the necessary knowledge and skills
  • • setting out and agreeing the scope and costs of the services to be provided in a letter of engagement, signed consent, or other communication with the client. This should clearly outline what services are to be performed as part of the engagement based on the needs of the client and the skills, qualification and expertise of the registered tax practitioner
  • • obtaining expert advice and assistance where appropriate
  • • obtaining knowledge and skill through private study and research
  • • informing the client of any likely delay and cost for the registered tax practitioner to acquire the requisite knowledge and skill to provide the service competently, and obtaining the client's consent to the registered tax practitioner providing the service.

78. At [121], EM 2010 addresses the issue of "reasonable care" when determining the appropriate level of client inquiry, in other words, how much reliance can be placed on the accuracy of the information provided by the taxpayer.

79. Relevantly for present purposes paragraph [127] EM 2010 states "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".

80. Given the nature of the Applicant's practice, it is quite plausible the information supplied by her clients would have been consistent across her client base and the previous year's claims made by those clients. In the factual circumstances of this case, the need to "audit' or examine or review the books and records of her client base, one would ordinarily expect to be less than what would be required of a tax agent with no prior history of a client. It would appear in the circumstances perfectly reasonable for the Applicant to rely on the information provided by her clients without further enquires, as the Applicant would have little basis to doubt its accuracy.[28] EM 2010 at [122], [124], [127] and [129].

81. EM 2010 at [133] and [135] deals with the requirements of "reasonable care" to ensure the "correct interpretation of a taxation law". It does not impose an obligation on the tax practitioner to determine the correct application of the law, it simply imposes a requirement to take "reasonable care" to ensure the correct interpretation or application of a taxation law in the circumstances concerned.

82. When considering the evidence of Mr Giles on behalf of the Applicant, the length of time the Applicant had been preparing tax returns for her clients and the nature of the work-related expenses claimed for those clients, the Tribunal does not find the Applicant acted "incompetently" when preparing tax returns for her clients.

83. The Applicant's failure to attend punctually to her own taxation affairs and to maintain appropriate records of the professional development/continuing education undertaken by the Applicant over a 3-year period as required by the Code are dealt with under other provisions of the Code.

84. Section 30-10(12) requires a tax agent to advise their clients of the client's rights and obligations and a taxation law that is materially related to the tax agent services being provided to that client. Paragraph [153] EM 2010 clarifies the position regarding a client's rights and obligations to be materially related to the tax agent services, a connection between the rights and obligations of the tax agent services is required. At [155] EM 2010 states "this principle only extends to services within

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the scope of engagement between the registered tax practitioner and the client". Given the length of time the Applicant had been acting for the relevant taxpayers contacted by the Board and audited by the ATO, it is implausible the taxpayers who answered the Board's questionnaire had not been previously advised of their rights and obligations under the taxation laws relevant to the completion of their income tax returns. The Tribunal accepts the evidence of Mr Giles, that the Applicant's clients were aware of their obligations to keep proper records, had signed their tax returns in Mr Giles' presence, and the Applicant had been in contact with those taxpayers who were audited during the audit process.

Subsection 30-10 (8) Failure to Meet Continuing Professional Education Requirements

85. The Board's Explanatory Paper TPB (EP) 07/2021 ( EP 2021 ) sets out the objective of the continuing professional education ( CPE ) requirements as an essential tool to assist registered tax practitioners "who increasingly operate in a continuously changing globalised setting to maintain and build upon their primary qualifications". At paragraph [4], EP 2021 states "the TASA reinforces the view that it is essential for registered tax practitioners to maintain their knowledge and skills throughout their professional life. This includes completing more significant CPE during periods of legislative change and to account for changes to a registered tax practitioners' individual circumstances". EP 2021 at [11] (a) imposes a mandatory registration renewal requirement on tax practitioners, that requirement is to have completed CPE that meets the Board's requirements as set out in 20-5 (1) (b) TASA.

86. The EP 2021 states that to maintain registration as a tax practitioner, the Board expects that tax agents should complete a minimum of 120 hours of relevant CPE over 3 years. The Board also expects that the minimum level of relevant CPE for BAS agents is 90 hours over three years. EP 2021 at [45] provides examples of suitable CPE activities, and requires registered tax practitioners to ensure they maintain a contemporaneous record and evidence of CPE activities that they complete. The requirement is that records be made as soon as possible and practicable after CPE activity is completed and should include details of the activities and the hours completed. To this end, the Board has developed and made available on its website a CPE log for registered tax practitioners to use and requires the records to be kept for a period of five years from the end of the registered tax practitioners CPE. The Board requires confirmation of the CPE completed upon renewal of registration as a tax agent or BAS agent and requires evidence of confirmation or confirmation of CPE completed during the period of registration.

87. EP 2021 makes provision for extenuating circumstances which include illness and other disability, family and or caring commitments, natural disasters, financial or other hardship and other relevant circumstances. EP 2021 states in these type of circumstances, the Board will consider appropriate relief from the minimum level of CPE for registered tax practitioners, provided the registered tax practitioner can demonstrate that they have attempted to use the flexibility of their CPE period to manage any extenuating circumstances that prevented them complying with the Board's CPE requirements.

88. EP 2021 makes it clear that while a minimum amount of CPE may not be met in certain circumstances, registered tax practitioners should be mindful that their obligations under the Code to maintain knowledge and skills relevant to the tax agents services provided cannot be abrogated.

89. On the evidence before the Tribunal, the Tribunal finds the Applicant failed to comply with her relevant CPE obligations and further did not take advantage of the provision for extenuating circumstances. The Tribunal finds the Applicant breached subsection 30-10 (8) of the Code.

Subsection 30-19(14): Respond to requests and direction of the Board in a timely, responsible and reasonable manner

90. It is evident from the material filed in these proceedings that the Applicant did not engage in a timely basis with the Board. The Preliminary Enquiry Letter dated 16 September 2022 required a written response by 7 October 2022, a three-week turnaround time. The letter required a detailed written response to 23 questions. The Applicant was directed to

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include any other information or documents she considered relevant to the Board's consideration of any matter, including medical evidence from treating medical practitioners.

91. The Tribunal accepts the Applicant's evidence that she was overwhelmed by the amount of material she was requested to provide and the time frame within which she needed to provide it. However, the Board extended the time for a reply to 21st October 2022 and sent a further email on 4 November 2022 reminding the Applicant she had failed to respond to the Boards request for information. In that email, the Board requested the Applicant provide any personal circumstances she wished the Board to take into account as mitigating her failure to respond to the Board. The Applicant failed to take advantage of that opportunity.

92. The most serious breach in the Applicant's dealings with the Board was the length of time the Applicant took to produce evidence she had maintained professional indemnity insurance for the relevant period. The Respondent's evidence was the Applicant never provided a copy of her professional indemnity insurance to the Board as requested. Instead, evidence the Applicant had maintained professional indemnity insurance that met the Boards requirements for the period commencing 18th September 2021 to 18th September 2023 was filed in the Tribunal with the Applicant's Statement of Facts, Issues and Contentions.

93. A failure to adequately respond to correspondence from the Board has been held to be a failure to treat the Board with proper respect as the regulator of the tax agents profession.[29] See Pappalardo v Tax Agent’s Board (Vic) [2003] AATA 990 at [30] . : Such conduct also indicates a lack of appreciation of the importance of compliance with a registered tax agent's obligation under the TASA.

94. The Applicant demonstrated the same lack of appreciation of the importance of complying with the Tribunal's orders to file any evidence that might have assisted her to convince the Tribunal the Applicant was "a fit and proper person" and eligible to be registered as a tax agent.

95. There was no evidence that the Applicant's laissez-faire attitude to the Board would change in the future. The Tribunal finds the Applicant breached subsection 30-10 (14) of the Code.

Fit and Proper Requirement

96. Section 20-15 of the TASA sets out the criteria that the Board must consider in determining whether it is satisfied that an individual is "a fit and proper person" for the purposes of registration as a tax practitioner.

97. Section 20-15 of the TASA provides:

'In deciding whether it is satisfied that an individual is a fit and proper person, the Board must have regard to:

  • (a) whether the individual is of good fame, integrity and character, and
  • (b) without limiting paragraph (a)
    • (i) whether an event described in section 20-45 has occurred during the previous five years, and
    • (ii) whether the individual had the status of an undischarged bankrupt at any time during the previous five years, and
    • (iii) whether the individual served a term of imprisonment, in whole or in part, at any time during the previous five years'

Subsection 20-15 (b) does not apply to the Applicant.

98. In the matter currently before the Tribunal, the question of whether s 20-15 (a) is satisfied rests on the Tribunal finding on the facts before it that the Applicant was not of good fame, integrity and character in light of the Tribunal's finding that the Applicant's conduct breached subsections 30-10(2), ( 8), (9), (10) and (14) of the Code.

99. The object of the TASA is "to ensure that tax agents services are provided to the public in accordance with appropriate standards of professional and ethical conduct" (s 2-5). The object of the Act frames the way the various sections and subsections are to be interpreted. Deputy President Frost eloquently summarised the matters the Tribunal should take into account in determining the appropriate sanction in
Kishore and the Tax Practitioners Board [2017] AATA 271 at [19]:

  • • "The seriousness of the conduct warranting the sanction;

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  • • the likelihood that the conduct will be repeated and the potential harm to the public;
  • • the impact of a particular sanction on the individual (and especially where the sanction may inhibit or prevent the individual's capacity to earn a living);
  • • the interests of the public in seeing appropriate sanctions applied;
  • • the extent to which the individual has acknowledged the breaches and the seriousness of them; and
  • • the extent to which the individual has demonstrated genuine contrition or remorse."

100. The Applicant's failure to lodge her income tax returns and the Business BASs and the Partnership BASs in a timely way over a long period is difficult to reconcile with her long career as a registered tax agent. Given the Applicant is seeking a review of the Board's decision to terminate her tax agent registration for a period of two years, one would have thought the Applicant would have worked diligently to ensure her personal tax affairs and the partnership tax affairs were in order before the matter was heard. The fact that they were not is a serious matter.

101. During the course of the hearing the Applicant did not exhibit much insight into what she was required to demonstrate, that is, she had the capacity to change her conduct in the wake of the Board's decision to terminate her registration as a tax agent.

102. The Tribunal accepts much of Mr Giles' evidence in relation to the preparation of tax returns for members of the MUA. It is also apparent from the documents filed in the Tribunal that the Applicant's clients tax affairs were not complex, the claims for deductions mostly relating to the eligibility of work-related expenses for taxpayers working in the same industry. However, there was no evidence before the Tribunal that the Applicant would not repeat her lax approach to the preparation of tax returns for taxpayers who have been her clients for many years.

103. In
Stasos v Tax Agents Board [1990] FCA 379; (1990) 21 ATR 974, Hill J stated at 985:

"a person who has been shown to be other than a fit and proper person to be registered must satisfy the Tribunal considering his re-registration or cancellation of his registration as the case may be, that he appreciates the significance of his wrongdoing, that he regrets it and that he has rehabilitated himself such that it is truly unlikely that there will be any lapse in the future of the standards which are required of him . ….The Tribunal must be satisfied on the balance of probabilities that not only is that contrition actually felt, but that he will not again deviate from the high standards required of him as a registered tax agent." (emphasis added)

104. It is doubtful, given the Applicant has not rectified her personal tax affairs, that she appreciates the significance of her wrongdoing and there will not be any lapse in the future of the standards the Board requires of all tax agents.

105. The Board would be compromised in the performance of its function if it cannot rely on applicants for registration being scrupulous in their communications with the Board. A failure to adequately respond to correspondence from the Board undermines confidence in the registration process and has the potential to undermine the self-assessment system operated by the Commissioner.

106. Given the findings of the Tribunal, some form of regulatory action is justified in the circumstances. The question for the Tribunal is whether the case is in the most serious category which warranted to termination of the Applicant's registration by the Board. As DP Frost stated in
Kishore and the Tax Practitioners Board [2016] AATA 764 at [20]:

"…termination of registration should be reserved for the most serious cases of wrongdoing. That is because, except in the most serious cases, the public and the regulated industry can generally be adequately protected, and the public interest adequately served, by a sanction less severe than termination, or by no sanction at all"

107. In
Sovereign capital Limited and Australian Securities and Investment Commission [2008] AATA 80 DP McPherson

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and SM McCabe, when considering an Australian financial services licence, said at [84]:

"a licence should only be suspended or cancelled if it is necessary to do so in order to accomplish the objects of the legislative scheme. A suspension will ordinarily be preferable if there is a reasonable prospect that the licence holder can remedy the defects which prompted the concern . If there is no reasonable prospect of the issues being resolved, cancellation may be the appropriate course. The power to suspend or counsel should not be used merely to punish the licence holder for transgressions: see
Story v National Companies and Securities Commission (1988) 13 NSWLR 661" (emphasis added)

108. The express power in section 30-20 contemplates a rehabilitative function and allows conditions to be imposed on tax agent for example of course of education and providing undertakings that the affairs of the tax agent will be bought up to date and the tax agent will remain compliant with respect to their personal taxation affairs.

109. However, as the Tribunal observed in
Rent to Own (Aust) Pty Ltd and Australian Securities and Investment Commission [2011] AATA 689 at [47] per Downes J and DP Hack:

"In our opinion there is little scope for the use of a regulatory role for rehabilitation. Having said that, there will be cases where circumstances will cause a decisionmaker to opt for the alternative of the imposition of conditions or the acceptance of an undertaking as a basis for declining to cancel a licence of some kind. The central consideration remains, however, good regulation and good administration, not an overanxious desire to permit regulated activity wherever possible."

110. The Respondent submitted the ban of two years was appropriate and the Tribunal should follow the decisions in
Hill and Tax Practitioners Board [2020] AATA 678,
Ridden and Tax Practitioners Board [2020] AATA 422,
Norman and Tax Practitioners Board [2021] AATA 848 and D'couto because these cases dealt with similar conduct on the part of the applicants. There are numerous differences between the cases referred to and relied upon by the Respondent and the present circumstances.

111. In Ridden, the taxpayer had already been the subject of regulatory action and criminal proceedings and had continued to engage in "problematic conduct", including retaining tax refunds she received in respect of three different taxpayers. The tax refunds were paid into the tax agent's personal account because she failed to operate a trust account and intermingled with her personal funds. Further, the bank account in question was in deficit at various points after the refunds were received. In this case the Tribunal varied the period the taxpayer was prohibited from applying for reregistration to 2 years.

112. In the case of Hill, the tax agent had been found personally culpable for the failures of various entities to lodge income tax returns and business activity statements. The tax agent was also found to have been personally culpable for non-remission and non-payment of superannuation guarantee charge payments and liabilities for a number of entities associated with the tax agent. The tax agent had also failed to pay the Commissioner a default judgement debt for a significant amount. The taxpayer had a personal income tax debt greater than $40,000 and significant tax debts and lodgement defaults for 2 corporate entities associated with the tax agents former accounting practice. The total outstanding tax liabilities for the tax agent and entities associated with him was in the vicinity of approximately $720,000. The Tribunal in that case found the tax agent had given misleading responses to the Board in the disclosure of documents and the nature and extent of the taxation defaults. In Hill, DP Frost determined deregistration for a period of 2 years from the date of the Boards decision was a sufficient time.

113. In D'couto, the tax agent declared income of $5,820, when the actual reportable taxable income was $205,250 in the 2017 year. In 2018 the tax agent declared income of $2,540, when her income was found to be $161,737 for that period. The tax agent also failed to correctly declare GST supplies understating her GST obligations and overstating her input tax credits. The Tribunal found the tax agent had clearly understated her

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income and claimed deductions for expenses that were not deductible, for example $2,354.00 for the cost of a Labradoodle dog which she claimed as a security dog. The tax agent had claim deductions for carry forward losses exceeding $5,000,000 and was unaware she was required to retain her records to substantiate any of the losses, to cite but a few of the tax agent's failures. In that case, the Board prohibited the tax agent from reapplying for registration for 3 years.

114. As DP McCabe observed in Ridden at [40] "there is some danger in rifling through reported cases in search of comparison. Consistency is an important virtue in justice, as well as in public administration, but there is a danger of becoming lost in a forest of single instances. There is no substitute for making an objective assessment of what occurred, and what the regulatory regime appears to require, and then having regard to the individual circumstances of the case."

115. Were it not for the fact that the effective ban of two years is about to expire and the Applicant's personal tax affairs and the tax affairs of the Partnership remained outstanding at the date of the hearing, the Tribunal would have varied the Board's decision to suspension of1 year and impose conditions that the Applicant lodge all her outstanding personal income tax and BASs and those of the Partnership, and complete 30 hours of CPE in a relatively short period of time, as it appears to the Tribunal that the contraventions in this case are less serious and the public interest concerns less pressing than in the cases cited above and relied on by the Respondent.

116. However as the Applicant has not used the period of the 2-year ban to file all of the outstanding income tax returns and BASs for her Business and the Partnership, or undertaken any course of study that could satisfy the Board's CPE requirements, the Tribunal varies the Board's decision under review so that the Applicant's registration is suspended from 19 April 2019 until such time as the Applicant demonstrates to the Board that the all of the Applicant's outstanding tax affairs and those of the Partnership are up to date and the Applicant has completed suitable courses of study to satisfy the required 30 hours of continuing professional education for BAS agents. Once the suspension is lifted the required number of CPE hours for tax agents and BAS agents is to be completed over the period of 3 years.

117. On satisfying the Board that the Applicant has completed the necessary hours of continuing professional education for a BAS agent and has no outstanding income tax returns or BASs for the Business or the Partnership the Applicant is to be reinstated as a registered tax agent.

DECISION

118. The Tribunal varies the decision under review and replaces it with a decision that the Applicant's registration as a tax agent be suspended pursuant to section 30-25 such suspension to take effect from 19 April 2023 to the earlier of:

Footnotes

[1] TASA ss 30-15(2), 30-20 (1), 30-25(1) and 30-30.
[2] TASA s 40-25(1) and (2).
[3] TASA s 70-10 (e) and (h).
[4] Ridden and Tax Practitioners Board [2020] AATA 422 at [1] per DP McCabe.
[5] TB R1, T7 at p 2092.
[6] TB R1, T5 at pp 67-68.
[7] TB R1, T6 at p 2093.
[8] TB R1, T5 at pp 181-183.
[9] TB R1, T5 at pp 188-189.
[10] TB R1, T5 at p 189.
[11] TB, A2 at p. 2368.
[12] TB, ST1 p 2248.
[13] See GJ Brown & Co Ltd v Tax Practitioners Board [2016] AATA 740 at [71] .
[14] TB, R3, ST6, ST7 and ST8 at pp 2248-2249; 2296-2304.
[15] TB, R4, ST9, ST10, ST11, ST12, ST13 and ST14.
[16] ST8 at p 2296.
[17] GJ Brown &Co Ltd v Taxation Practitioners Board [2016] AATA 740 at [71] .
[18] Birdseye and the Tax Practitioners Board (2021) AATA 1011 , at [35] .
[19] Ibid at [36].
[20] TB R1 T-5, pp 638-646.
[21] TB R1, T5 at p 966.
[22] TB R1, T5 at p 71.
[23] [2023] AATA 3485 at [22]-[23] .
[24] TB R1, T5, at p 1710.
[25] TB A-5 2379 – Svitzer Australia Pty Ltd and MUA Newcastle Lines and Morning Enterprise Agreement 2022 ( Svitizer ) at 17.1 p 2394, 17.2.2 p 2397, 17.2.8 p 2398.
[26] Income Tax Assessment Act 1936 (Cth)
[27] (1993) 26 ATR 76 .
[28] EM 2010 at [122], [124], [127] and [129].
[29] See Pappalardo v Tax Agent’s Board (Vic) [2003] AATA 990 at [30] .

 

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