COWLISHAW & ORS v TAX AGENTS' BOARD OF QUEENSLAND

Members:
DW Muller SM

Tribunal:
Administrative Appeals Tribunal

MEDIA NEUTRAL CITATION: [1999] AATA 412

Decision date: 25 May 1999

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DW Muller (Senior Member)

The applicants seek review of a decision of the Tax Agents' Board of Queensland to suspend the registration of each of them as tax agents, for a period of 12 months. The suspensions were made pursuant to the provisions of s. 251K(2) of the Income Tax Assessment Act 1936, which provides (inter alia):

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``251K(2) [Reasons for cancellation] A Board may suspend or cancel the registration of any tax agent upon being satisfied that:

• ...
• (b) the tax agent:
  • (i) has neglected the business of a principal; or
  • (ii) has been guilty of misconduct as a tax agent;
• (c) a registered nominee of the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
• (d) if the tax agent is a natural person - the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;''

2. The applicants came under the notice of officers of the Australian Taxation Office (ATO) in early 1994 when it was observed that clients of the applicants were claiming deductions in their tax returns, which were significantly higher than deductions claimed by other tax payers in the same occupations. It was decided by the ATO to put the applicants on a tax agents' ``program''. The applicants were required by the ATO to explain and substantiate a specific number of the claims for deduction.

3. The tax agents' program for the applicants was initially administered by Ms. Asadullah from the ATO. Ms. Asadullah made it clear that she suspected the applicants were making claims for their clients, which the applicants knew were not sustainable. The evidence placed before the Tribunal did not go far enough to prove whether Ms. Asadullah's suspicions were well-founded or not. However, the Tribunal accepts the evidence of Ms. Asadullah, that the applicants failed to co-operate with her. The applicants failed to answer Ms. Asadullah's correspondence and her telephone calls. Repeatedly the applicants failed to get back to Ms. Asadullah when she left messages for them to call her.

4. The applicants were kept on the tax agents' program throughout 1994, 1995 and 1996 because the applicants failed to adequately act on substantiation requests. This was despite the fact that the applicants had been given many extensions of time within which to comply.

5. The tax agents' program for the applicants was then administered by Mr. Plotzki of the ATO. In May 1997, Mr. Plotzki requested the applicants file certain material with the returns of specified customers for the 1997/98 tax year. Mr. Plotzki nominated 263 clients of the applicant of whom he required a ``schedule of work expenses'', to be filed with each of their returns. Later in 1997, Mr. Plotzki sought full substantiation of expenses for 60 of the applicants' clients.

6. Until the end of December 1997, the applicants had only submitted 90 schedules of work expenses out of the 263 nominated. By April 1998 the total number of schedules of work expenses was 121. Of the 60 clients nominated for full substantiation, only 18 were ever done. During the course of the Tribunal hearing, Mr. Cowlishaw searched the drawers in his office and found 14 of the 60 requests for full substantiation. Nothing had been done about those 14 requests.

7. Mr. Plotzki encountered the same difficulties with the applicants as Ms. Asadullah had in relation to failure to respond to telephone calls, correspondence and enquiries from the ATO.

8. The Tribunal takes the view that it is incumbent upon tax agents to co-operate with the officers of the ATO. The Tribunal regards the lack of co-operation of the applicants with Ms. Asadullah and Mr. Plotzki, as a serious breach of the proper conduct of a tax agent's business. It amounts to a serious neglect of the business of a tax agent.

9. The material placed before the Tribunal also shows that the applicants failed to adequately respond to correspondence from the Tax Agents' Board. The Tribunal regards the failure to treat the Tax Agents' Board with proper respect, as a serious neglect of the business of a tax agent.

10. The Tribunal heard evidence from former clients of the applicants, including Messrs Cramb and Brooker and Ms. Horne, Myers, Paulsen and Watt. Where the evidence of the former clients differs from that of Mr. or Mrs. Cowlishaw, I accept the evidence of the former clients. The evidence revealed the following deficiencies in the running of the Cowlishaw practice:

• (a) Failing to file tax returns within a reasonable time, or at all in some cases.

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• (b) Failing to respond to telephone calls and correspondence.
• (c) Misleading clients by telling them that their returns had been filed with the ATO, when they had not.
• (d) Failing to pass on correspondence from the ATO to clients.

11. In his evidence to the Tribunal, Mr. Cowlishaw attempted to shift the blame for some of the delays onto his clients. He claimed that he was waiting for them to supply more information. Mr. Cramb and Mrs. Horne were two such clients of whom it was claimed that they failed to supply necessary additional information. Both Mr. Cramb and Mrs. Horne denied that they had ever been asked for additional information, and that no explanation along those lines was ever given to them by Mr. Cowlishaw for the delay in filing their returns. Their returns were eventually filed without any additional information being furnished. The Tribunal accepts the evidence of Mr. Cramb and Mrs. Horne on this aspect.

12. Mr. Cowlishaw also attempted to put a large portion of the blame for delays in filing returns and failures to respond to ATO requests, onto his staff. He said that it was difficult to get competent staff.

13. The Tribunal takes a dim view of the attempt by Mr. Cowlishaw to put the blame for his neglect onto his clients and onto his staff.

14. The Tribunal also heard evidence which revealed that upon receiving numerous complaints from Mr. Cramb and Mrs. Horne about not receiving their tax refunds from the ATO, Thomas Cowlishaw sent $1,500 to Mrs. Horne and $1,000 to Mr. Cramb. The explanation given by Mr. Cowlishaw for this strange behaviour was that he was being kind and friendly, that he was giving them a ``loan'' to tide them over until they received their refunds. Mr. Cowlishaw could have solved their problems in a far more satisfactory way by simply filing their returns.

15. Mrs. Horne put her and her husband's material in the hands of the applicants on 27 July 1997. She telephoned the practice on more than 18 occasions between 24 October 1997 and 9 February 1998 to see why she and her husband had not received their refunds from the ATO. She received $1,500 from Mr. Cowlishaw on 18 February 1998. The returns had still not been filed as at June 1998.

16. Mr. Cramb put his material in the hands of the applicants in August 1997. Despite numerous telephone calls to the applicants, Mr. Cramb's return had still not been filed with the ATO by 17 April 1998. On 17 April 1998, Mr. Cramb spoke to Thomas Cowlishaw and demanded his paper work be sent back to him so that he could employ a new tax agent. Mr. Cowlishaw told Mr. Cramb that he had finalised the paperwork. Mr. Cowlishaw deposited $1,000 into Mr. Cramb's account on 17 April 1998. The return was eventually filed with the ATO in September 1998 following a personal visit by Mr. Cramb to the applicants' office.

17. The Tribunal takes the view that Mr. Cowlishaw put his clients in a difficult and compromising position by sending them the money. The Tribunal takes the view that he did it to keep his clients quiet, to stop them from complaining to any official body.

18. The Tribunal regards the matters covered in paragraphs 10, 11, 12, 13, 14, 15 and 16 above to constitute misconduct as a tax agent and to indicate that Thomas Cowlishaw is not a fit and proper person to prepare income tax returns or transact income business on behalf of taxpayers.

19. The applicant, GEM ANN COWLISHAW, is and was a partner of THOMAS COWLISHAW and part of the firm COWLISHAW AND CO. Gem Cowlishaw was involved in that part of the business which dealt with corporate clients whereas Thomas Cowlishaw dealt with the returns of individuals.

20. Evidence was given to the Tribunal that various complainants telephoned Gem Cowlishaw to complain about the matters set out above. Some of the complainants said that Mrs. Cowlishaw was rude to them. The Tribunal makes no finding as to whether or not Mrs. Cowlishaw was rude to the clients of the practice but it is clear that she knew that the partnership was not performing properly in relation to those clients to whom she spoke on the telephone. She does not seem to have done anything to assist in correcting the problems.

21. Gem Cowlishaw also knew or should have known about the numerous requests for information from the officers of the ATO. She did nothing to assist their enquires. The Tribunal accepts that Gem Cowlishaw was placed in a difficult position, in that she was, and is, the spouse of the other partner. Nevertheless, the Tribunal finds that as a

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partner who knew what the other partner was, or was not, doing she must bear responsibility for the poor state of affairs of the partnership, but not to the same extent as her partner.

22. The Tribunal adopts the observations made by Davies J. in
Re Su and the Tax Agents' Board, South Australia 82 ATC 4284 at 4286; (1982) 13 ATR 192 at 195, where he 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.''

23. The Tribunal would be failing in its duty to the public to let the penalty of 12 months stand for Thomas Cowlishaw and Cowlishaw and Company. The Tribunal will give Gem Cowlishaw the benefit of the doubt about her role in partnership affairs and leave her suspension at about the same level as the Tax Agents' Board decision.

24. The decision under review is varied as follows:

• (a) Thomas Cowlishaw to be suspended until 1 July 2002.
• (b) Cowlishaw and Company to be suspended until 1 July 2002.
• (c) Gem Ann Cowlishaw to be suspended until 1 January 2000.