Proh and Tax Agents' Board of Victoria [2010] AATA 149 (1 March 2010)

Last Updated: 1 March 2010

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 149

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2009/2614

GENERAL ADMINISTRATIVE DIVISION		)
	Re		EDWARD PROH

Applicant

And

TAX AGENTS’ BOARD OF VICTORIA

Respondent

DECISION

Tribunal

Mr G L McDonald, Deputy President

Date 1 March 2010

Place Melbourne

Decision

The Tribunal determines that: (1) the stay granted on 29 June 2009 is to continue in force until the expiration of 7 working days after the date on which the Tribunal publishes its decision; and (2) the decision under review is affirmed.

..................[signed]..................
Deputy President

CATCHWORDS

INCOME TAX ASSESSMENT ACT - Tax agent - history of delay in filing returns - conviction for failure to file BAS over three successive years - determination not to file because of delay on part of ATO to change periods in which documents to be filed - waiver of requirements to file by ATO should encourage compliance - suspension of registration - decision affirmed.

Administrative Appeals Tribunal Act 1975 ss 37 and 41(2)
Crimes Act 1914 s 19B
Income Tax Assessment Act 1936 ss 251A, 251BC(1), 251BC(1)(e), 251BC(3), 251K(2)(b)(ii), 251K(2)(d) and 251K(3B)
Taxation Administration Act 1953 ss 8C and 8C(1)(a)

REASONS FOR DECISION

1 March 2010

Mr G L McDonald, Deputy President

THE APPLICATION

1. The applicant, a tax agent, is applying for the review of a decision of the Tax Agents’ Board of Victoria (the Board) made under s 251K(2)(d) of the Income Tax Assessment Act 1936 (the Act) suspending him from practising as a tax agent for a period of three months. The Tribunal granted a stay of the suspension pending the hearing and determination of his case.
2. At the hearing, the applicant gave oral evidence and was cross-examined. Ms I. Chen, an officer of the respondent, provided a statement with supporting documentation, which was accepted as an exhibit, along with certified extracts recording the applicant’s conviction in the Magistrates Court on 14 October 2008 for three taxation offences. The documents filed in compliance with s 37 of the Administrative Appeals Tribunal Act 1976 (the AAT Act) were also before the Tribunal.

THE LEGISLATION

3. Section 251K(2)(d) of the Act provides that, if a tax agent is found not to be a fit and proper person to prepare income tax returns and transact business on behalf of tax payer in income tax matters, he or she may have his or her registration to act as a tax agent suspended. Additionally, s 251K(2)(b)(ii) of the Act relevantly provides that a tax agent may be suspended if he or she has been guilty of misconduct as a tax agent. Section 251BC(1)(e) of the Act provides that a person will not be a fit and proper person, as at a particular time, if he or she has been convicted of a ‘serious tax offence’ within the preceding five-year period. Section 251A of the Act determines that a conviction under s 8C of the Taxation Administration Act 1953 is ‘a serious tax offence’. Three months is the minimum period for which the registration of an agent can be suspended.[1]

THE FACTS

4. The facts are largely not in dispute. The Tribunal is satisfied of the following. In July 2000 the government introduced a goods and services tax. Businesses with a turnover exceeding $50,000 per annum were required to register and pay the tax. The business could lodge the returns on a monthly, quarterly or annual basis at his option. The applicant registered and opted to lodge the returns on a monthly basis. No returns (BAS statements) were lodged by the applicant for the balance of the calendar year 2000. In December 2000 the applicant telephoned the tax office and requested that his return requirement be amended from monthly to quarterly. He was aware that the change could not be implemented until outstanding monthly returns had been lodged.
5. The applicant did not submit a BAS return for the year 2001. While the applicant’s income did not reach the threshold of $50,000 in this period, he was aware that once he had registered he was required to file the BAS statements, even although his turnover did not meet or exceed the threshold. The applicant accepted that throughout this period he was receiving statements from the Australian Taxation Office (ATO) for completion once a month.
6. The applicant, in his evidence to the Tribunal, accepted that he had become fixated on the ATO undertaking, given to him over the telephone in December 2000, that his return requirement would be changed to quarterly lodgement. The Tribunal accepts that the applicant made a request to change his lodgement arrangements and that there was a lengthy delay in implementing the applicant’s request.
7. In 2002 the applicant failed to lodge his personal income tax return. As a consequence, he was charged with an offence under s 8C(1)(a) of the Taxation Administration Act 1953. The Magistrates’ Court convicted him but discharged him on a bond under s 19B of the Crimes Act 1914; that is, without the imposition of a penalty. Under s 251A of the Act, a conviction with an order discharging a person on a bond remains a conviction for the purposes of Part VIIA of the Act. The conviction meets the definition of a ‘serious taxation offence’ found in s 251A of the Act. As a result of his conviction, the Board wrote to the applicant on 9 December 2004 expressing concern at his conviction and drew to his attention the powers of the Board with respect to cancellation or suspension of a tax agent’s registration. The Board effectively warned the applicant without proceeding to take any formal action against him.
8. The applicant was required to apply for re-registration as a tax agent for the three years commencing on 1 March 2006. In completing his application he answered a question whether he had been convicted or placed under any sentence for a taxation offence in the previous five-year period by putting a cross in the ‘no’ box and stating ‘no conviction’.[2] Strictly speaking, while he had not been convicted of an offence, he had been placed under a bond and so he had been placed under sentence. The Tribunal accepts that the distinction is not one which would be readily apparent to a person in the applicant’s situation. It would be unfair and unjust to draw any adverse implication from the manner in which he answered the question.
9. In 2003 the applicant signed a form from the ATO which he claimed was intended to change his election to lodge BAS and pay GST quarterly. In fact, he signed a form requiring annual BAS and payment of GST. He said he did not read the form. He agreed that he was mistaken in not properly reading and understanding it before signing it and returning it to the ATO. His signing without checking the form is itself an unsatisfactory approach for a tax agent to adopt. The applicant stated that he had contacted the ATO in attempts to have the lodgement requirements changed but that nothing happened. While other telephone communications that the applicant had with the ATO were logged and were able to be reproduced[3], there was no record of the attempts the applicant said he had made on this topic after 2004.
10. The applicant said he thought by not lodging the returns there would be some reaction from the ATO, which would then result in what he wanted being implemented. He did not lodge the forms for each of the 2005, 2006 and 2007 years. On two occasions the ATO waived the formal requirements for the applicant to lodge his BAS returns. On 15 February 2005 the ATO relieved the applicant of lodging all BAS returns prior to the September 2003 quarter. On 5 April 2005 the ATO accepted the applicant’s telephone advice that there were nil BAS returns for nine of the months between October 2003 and October 2004.
11. On 14 October 2008 the applicant was convicted, again in the Magistrates’ Court, of three offences under s 8C(1)(a) of the Taxation Administration Act 1953 for failing to lodge his 2005, 2006 and 2007 annual returns. On this occasion, the applicant was fined a total of $3,100. As the result of his convictions for the three offences, the applicant was, by virtue of the operation of s 251BC(1) of the Act, deemed not to be a fit and proper person to prepare income tax returns. However, the Board exercised the discretion given by s 251BC(3), applicable in cases where an agent is seeking re-registration, to find special circumstances existed and decided to disregard the convictions. The special circumstances were stated to be that, as of the date of the Board’s decision, the applicant had no outstanding BAS and that he had entered into an arrangement with the ATO to repay an amount of $18,368.61 he owed to the Commissioner. However, the Board exercised authority given to it under s 251K(2)(d) and determined, at a meeting held on 24 April 2009, to suspend his registration for a period of three months.
12. The applicant told the Tribunal that he had since lodged the returns and that, as at the hearing date, he was up-to-date with all of his taxation lodgement requirements. However, when questioned he agreed that he had been late in filing his quarterly BAS for the quarter ending 30 September 2009. He had secured an extension of time to 11 November 2009 within which to lodge the statement but it was not lodged until after 5 February 2010. He explained the late lodgement on the basis that there was a nil return and that filing the return was therefore not a matter of great importance.
13. To his credit, the applicant conceded that he had become fixated with having the ATO follow through with its undertaking to convert his return requirements to a quarterly basis. He claimed to have tried to lodge the returns on a quarterly basis, saying if this had been accepted in December 2000, then none of the subsequent events would have occurred. He agreed that, in hindsight, this was probably not the best approach to have adopted. However, the explanation does not account for his failure to lodge his income tax return for the 2002 year; nor does it account for the late lodgement of the quarterly BAS return for September 2009.
14. Additionally, it does not entirely explain why the applicant failed so consistently, over a number of years, to file BAS statements which he knew had to be completed. His explanation does not take into account the concessions made by the ATO on two occasions to disregard his failures to lodge the BAS returns. It may be thought that, given the concessions the ATO made, he may have been prompted, rather than ignore, his responsibilities. A determination not to comply with legal requirements, unless compliance accords with the terms a person is seeking, does not constitute a reasonable excuse for failure to comply with what is currently required. It is an approach which, if adopted by everyone finding themselves in the applicant’s position of being unable to secure a timely response would result in administrative chaos. The approach also does not take into account the responsibility the applicant must accept for signing an application without checking its accuracy.

CONSIDERATION AND DETERMINATION

15. The purpose of cancellation or suspension of a tax agent’s registration is not to punish the person concerned, although it may have that effect but to protect taxpayers from agents who are not conforming to the legislative requirements attaching to their registration as agents. It is generally accepted, and the Tribunal accepts, that a failure of an agent to attend to his/her own taxation affairs demonstrates a lack of suitability, rendering the agent unfit to handle the affairs of those who may seek to utilise his/her services. The time at which such concerns are relevant is the time the Tribunal hears the application. That does not mean that at the time of hearing there must be outstanding breaches for there to be an adverse finding but that the facts as determined by the Tribunal must bear upon a person’s current fitness to carry out his /her functions as a tax agent.
16. The Tribunal is firmly of the view that the applicant’s convictions in October 2008, for events occurring over the preceding three year period, combined with his failure to lodge the quarterly return for the period ending 30 September 2009 until about three months later, do reflect on his fitness to transact business on behalf of taxpayers in income tax matters. If the applicant cannot be relied upon to lodge the returns he is expected to lodge, then he cannot be relied upon to attend to the income tax matters of his clients in a timely fashion. The lodging of returns in a self-assessment regime does not depend on the fact that no tax may be payable. Outstanding lodgements bring uncertainty to the revenue and causes expense to the authorities in ascertaining why lodgement has not occurred.
17. The applicant’s convictions in 2008 for the three offences resulted in him being convicted of serious taxation offences as defined in s 251A. The convictions result in a person not being a fit and proper person to prepare income tax returns under s 251BC(1)(e) of the Act. The convictions also constitute misconduct as an agent for purposes of s 251K(2)(b)(ii) of the Act. There is no doubt that the Board had the authority to consider suspending his registration. Considering the history of the applicant’s failures to lodge taxation documents on time, there is nothing in the applicant’s background which would militate against suspension of his registration. The Tribunal pointed out to him at the conclusion of the hearing that if not for the honest and open way in which he gave his evidence, an increased period of suspension may have been warranted. It is however sufficient for the Tribunal to affirm the decision under review.
18. The applicant told the Tribunal that there was time lapse between the Tribunal granting a stay of his suspension and the ATO reinstating his registration and that this added to the period of time his registration had been suspended while waiting to obtain the stay. This Tribunal has no enforcement role with respect to orders or determinations it may reach. It would however be appropriate for the respondent to recalculate the balance of the three-month suspension period taking into account the time it took for his registration to be reinstated after the stay was granted.
19. No doubt for similar reasons, the respondent contacted the Tribunal, requesting that if it was to affirm the decision then the previously granted stay be continued until the respondent has had the opportunity of arranging to implement the decision. Section 41(2) of the AAT Act contemplates the making of an order staying the implementation of a decision ‘...for the purpose of securing the effectiveness of the hearing and determination of the application for review’. In the view of the Tribunal, s 41(2) is expressed broadly enough to contemplate the continuation of the stay beyond the time at which the determination is issued, if doing so would secure the effectiveness of the determination of the application. It is not however desirable that the stay order should continue indefinitely. Accordingly, the Tribunal determines that the stay granted on 29 June 2009 is to continue in force until the expiration of 7 working days after the date on which the Tribunal publishes its decision to affirm the decision under review.

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of

Mr G L McDonald, Deputy President

Signed: ....................................[signed]......................................

Associate Grace Horzitski

Dates of Hearing 19 February 2010

Date of Decision 1 March 2010

For the Applicant self represented

Counsel for the Respondent Mr P. Gray

Solicitor for the Respondent Ms S. Thompson, Australian Government

Solicitor

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[1] s 251K(3B) of the Income Tax Assessment Act 1936.
[2] T documents, T9, page 41.
[3] Statement of Ms I Cheng, Exhibit R1 paragraph 12.