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Ristevski and Tax Practitioners Board [2010] AATA 749 (30 September 2010)

Last Updated: 11 October 2010

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 749

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2009/6010

GENERAL ADMINISTRATIVE DIVISION
)

Re
Peter Ristevski

Applicant
And
Tax Practitioners Board

Respondent

DECISION

Tribunal
Senior Member Jill Toohey

Date 30 September 2010

Place Sydney

Decision
The decision under review is set aside and the matter is remitted to the Tax Practitioners Board with the direction that the applicant is a fit and proper person for registration as a tax agent.

................[sgd]..............................
Senior Member

CATCHWORDS
TAXATION AGENTS BOARD – Taxation Practitioners Board – refusal to register applicant as a taxation agent – whether applicant a fit and proper person – decision under review set aside


Income Tax Assessment Act 1936, s 251

Tax Agent Services Act 2009

Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009, s 2


Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Stasos v Tax Agents Board (1990) ALD 437

Re Su and Tax Agents Board (1982) 61 FLR 1

REASONS FOR DECISION


30 September 2010
Senior Member Jill Toohey

Introduction
  1. Peter Ristevski seeks review of a decision of the Tax Agents Board to refuse him registration as a tax agent.
  2. At the time of Mr Ristevski’s application for registration, s 251 JA(1) of the Income Tax Assessment Act 1936 (ITAA) provided that the Tax Agents Board was to register a natural person as a tax agent if satisfied that he or she was “a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters”.[1] Otherwise, the application was to be refused[2]. A person was not a fit and proper person if not of good fame, integrity and character[3].
  3. Registration of tax agents is now governed by the Tax Agent Services Act 2009 (the new Act) which established the Tax Practitioners Board as of 26 March 2009 and otherwise came into effect on 1 March 2010.
  4. A person is now eligible to become a tax agent if the Tax Practitioners Board is satisfied that he or she is “a fit and proper person”[4]. In determining whether a person is fit and proper, the Tax Practitioners Board is to have regard to whether he or she is of good fame, integrity and character[5].
  5. By transitional provisions, a thing done by, or in relation to, the Tax Agents Board under the new legislation, it is taken, for the purposes of any law after 1 March 2010, to have been done by the Tax Practitioners Board[6].
  6. It is common ground that the ITAA applies in these proceedings although, as can be seen, the new Act is not in terms materially different.

The issue

  1. There is no argument as to Mr Ristevski’s professional qualifications or competence as a tax agent. I have to determine whether he is a fit and proper person for registration.

Background

  1. Mr Ristevski started work for an accounting firm in 1993. In 1996, he completed a Bachelor of Commerce (Accounting/Law). In July 1997, he registered as a tax agent.
  2. In July 1998, Mr Ristevski formed Mack Partnership with George Markovski and George Nikolovski, also members of Sydney’s Macedonian community. In the same month, the partnership was incorporated as Mack Partnership Pty Limited (MPPL).
  3. MPPL operated from an office in Bankstown. It provided general accounting services and tax agent services, including preparation of individual and company tax returns, Business Activity and Instalment Activity Statements, and finance brokerage services. Tax returns and activity statements comprised the bulk of the work.
  4. MPPL was not a registered tax agent. Its practice was to appoint a “review partner” to whom all tax returns were submitted for checking and signing, and in whose name they were lodged. Mr Nikolovski, who was a registered tax agent, performed this function from 1998 to 2003.
  5. In 2003, Mr Markovski took over the function of “review partner”. All returns were submitted through him as registered nominee of his company, George Mark and Co, which was a registered tax agent.
  6. In early 2008, the relationship between the directors broke down for reasons which are not important here. In August 2008, MPPL went into liquidation.
  7. In July 2008, Mr Ristevski accepted an offer of employment as an accountant from J&D Business Advisory Services (J&D), a small accounting firm which traded as “Mack Partners (Bankstown)”. In a similar system to that at MPPL, he would prepare returns and submit them to the firm’s principal, Jim Dionysatos, for checking, signing and submitting under Mr Dionysatos’ tax agent’s registration.
  8. In July 2009, Mr Ristevski joined J P Rutkowski and Co (JPR) as an employed accountant. Shortly after, the firm started trading as “Mack Partners (Bankstown)” while retaining its existing business name. A similar system was in place whereby Mr Ristevski would prepare the returns and submit them to the principal, Jason Rutkowski, for review and signing, and submitting under his tax agent’s registration.
  9. In about March 2010, Mr Ristevski left JPR and has since been involved in establishing a branch of Yellow Brick Road, a national wealth management business with branches across Australia providing finance, insurance, accounting and financial planning. Yellow Brick Road does not provide tax services.

Mr Ristevski’s application for registration

  1. Mr Ristevski has not been registered as a tax agent since 2003. He says he considered it unnecessary after that time because of the review system in place at MPPL. On 21 May 2009, he submitted an application for registration. The Tax Agents Board advised he should submit it once his had his group certificate for the year and refunded his application fee. He withdrew the application and resubmitted it on 28 August 2009. On 19 November 2009 the Board rejected his application.

Grounds on which the respondent says Mr Ristevski is not a fit and proper person

  1. The respondent asserts five grounds on which Mr Ristevski is not a fit and proper person for registration a tax agent:

Involvement in breaches of s 251N of the ITAA

  1. Section 251N of the ITAA made it an offence for a registered tax agent to allow any person, not being his employee or a registered tax agent, to prepare on his behalf, either directly or indirectly, any income tax return or objection; or conduct on his behalf either directly or indirectly, any business of himself or any other person relating to any income tax return or income tax matter.
  2. The effect of s 251N was that a company, or a natural person, registered as a tax agent was prohibited from allowing a person to perform the specified functions unless under the supervision and control of the registered nominee of the company, or of the tax agent or registered nominee of the tax agent.

Preparation of tax returns

  1. Mr Ristevski gave oral and written evidence. He appeared guarded, and was not particularly forthcoming in his oral evidence, but perhaps that is not surprising in the circumstances. He gave evidence that, at MPPL, he would prepare returns and submit them with supporting documents to Mr Nikolovski who often had queries about them. Mr Nikolovski controlled the process and would only lodge returns once satisfied. From 2003 he submitted returns to Mr Markovski who, he says, was similarly prudent and careful and would not lodge returns until satisfied with his review. He says the same system was in place when he was an employed by J&D and JPR.
  2. Mr Nikolovski gave evidence. He struck me as someone who takes his professional responsibilities seriously. He says he took his role as review partner seriously, and the process was quite involved and time-consuming. He says Mr Markovski adopted the same system from 2003.
  3. Mr Dionysatos also gave evidence. He was less impressive. He has fewer years experience as an accountant than Mr Ristevski but regards himself as highly trained and would not say he was less experienced. He says Mr Ristevski prepared the returns and presented them to him with supporting documents; he would check them against the source documents and a checklist; smaller returns he would check himself, larger returns generally involved going through them with Mr Ristevski; they would sit down together on average twice a week; occasionally they met with the client together. However, he could not recall an occasion when he required Mr Ristevski to change something in a tax return.
  4. Given Mr Ristevski’s longer experience, it is probable that Mr Dionysatos’ supervision and control was less rigorous than he claims.
  5. Mr Rutkowski gave evidence by telephone. He said Mr Ristevski worked from JPR’s Penrith office on average three or four days a week and spent one day on the road seeing clients. He was aware that Mr Ristevski also spent time on his own business.
  6. Mr Rutkowski gave evidence that he was solely responsible for lodging returns; there were no exceptions to this arrangement. Mr Ristevski presented returns to him for final review with supporting documents. He would check for “validation errors” which, it appears, went more to form than content. Mr Rutkowski did not meet with Mr Ristevski’s clients; if he had queries, it was for Mr Ristevski to clarify them with clients and correct them.
  7. I have no reason to doubt that Mr Rutkowski took final responsibility for the returns. However, what he describes suggests a rather less rigorous system of supervision than Mr Ristevski asserts.
  8. The respondent accepts that Mr Dionysatos and Mr Rutkowski took some interest in the returns prepared by Mr Ristevski but contends that the arrangements did not involve the close supervision and control required to satisfy s 251N.

Office arrangements

  1. J&D was co-located with Mack Partners in what was formerly MPPL’s office in Bankstown and they shared a receptionist. Mr Dionysatos displayed a J&D sign on his office door. Mr Ristevski gave evidence that he always made clear to clients that he was employed by J&D but, in my view, there is room for doubt about this.
  2. JPR operated from an office in Penrith under its own banner; there was also a small Mack Partners sign. There was no JPR sign at Mack Partners’ Bankstown office.
  3. Mr Ristevski and Mr Dionysatos, and to a lesser extent Mr Rutkowski, tended to play down the association with Mack Partners, suggesting it was a matter of “signage” and convenience. However, it is clear that Mr Ristevski brought clients to both practices and operated with a measure of autonomy.

Involvement in breaches of s 251L of the ITAA

  1. Section 251L of the ITAA made it an offence for a person who was not a registered tax agent to knowingly or recklessly demand or receive any fee for preparing or lodging on behalf of a taxpayer a return, notice, statement, application or other document about the taxpayers liabilities under a taxation law.
  2. The respondent relies on two invoices issued in April 2008 by MPPL for preparation of tax returns and associated work by Mr Ristevski. It is common ground that MPPL was not a registered tax agent. The respondent also relies on Tax Agents Board records which show that, in September 2007, Mr Ristevski told the Board that 50% of fees generated by MPPL were due to his exertion.
  3. The respondent contends it is open to the Tribunal to infer that that Mr Ristevski was receiving a fee while at MPPL for preparation of tax returns while unregistered, and that MPPL was receiving a fee while unregistered, both of which meant he was involved in breaches of s 251L.
  4. I am not satisfied that the inference contended for can fairly be drawn from the limited evidence.

Breach of s 251O of the ITAA

  1. Section 251O of the ITAA made it an offence for a person not being a registered tax agent to directly or indirectly describe himself as or represent himself to be a tax agent.
  2. The respondent relies on two matters as evidence that Mr Ristevski represented himself to be a tax agent. The first is his Mack Partners business card which refers to him as CEO, and lists his professional qualifications and the following services: “Accounting and Taxation; Private Lending; Corporate Insolvency & Bankruptcy; Private Equity; Legal; Financial Planning”.
  3. Mr Ristevski denies describing or representing himself as a tax agent. He gave evidence that Mack Partners was unable itself to provide most of the listed services. Rather, it aimed to be a “one-stop shop” and arranged services through third parties including solicitors, financial planners, liquidators and others qualified or licensed to provide the relevant services. There is no evidence to the contrary.
  4. While there could be room for thinking that his business card meant that Mack Partners would provide taxation services directly, I am not satisfied that Mr Ristevski’s conduct amounted to a breach of s 251O.
  5. The other matter on which the respondent relies arises in the context of a complaint by a client in which she says “the tax agent” [Mr Ristevski] failed to do various things in connection with preparation of her tax returns. The complainant was not called to give evidence. In the absence of any evidence from her, it is not possible to know what she meant by referring to Mr Ristevski as a tax agent and it does not follow that he made any direct or indirect representation.

Adverse findings by CPA Australia & failure to disclose these

  1. In October 2007, the Disciplinary Committee of CPA[7] Australia found Mr Ristevski guilty of breaching its constitution. In May 2008, an Appeals Committee fined him $5000 and suspended his membership until 30 June 2009 for:
(iv) failing to undertake a Quality Assurance Review as required by the Quality Assurance Program.
  1. Mr Ristevski concedes that his conduct was unsatisfactory and warranted disciplinary action but submits it should be viewed in context.
  2. In the first matter, it was not suggested that Mr Ristevski failed to obtain the client’s authority at all. He concedes he should have obtained the client’s written authority but says he lodged the return at the insistence of the client who was in Queensland at the time. His relationship with MPPL subsequently became acrimonious and Mr Ristevski believes the client made the complaint to gain leverage in a dispute about his account.
  3. In the second matter, Mr Ristevski says he was not aware, until CPA Australia was investigating the first matter, that Mr Markovski had surrendered his Public Practice Certificate; up till then, he had retained the CPA logo on his business card, on the practice’s front window and in the reception. When this came to light, Mr Markovski and Mr Nikolovski resigned as directors, leaving Mr Ristevski as sole director, and the company’s share structure was rearranged, thereby satisfying CPA Australia’s ownership and control requirements.
  4. In the third matter, it is not suggested that Mr Ristevski did not have insurance; rather that he failed to provide a copy of his certificate as required. He maintains that he did provide it but, in the absence of proof, submitted to disciplinary action.
  5. Finally, Mr Ristevski says his failure to undertake the Quality Assurance Review occurred when his marriage was breaking down and he was involved in a “massive and devastating” custody dispute. In October 2008, he underwent the Review and his membership of CPA Australia was reinstated.
  6. Mr Ristevski did not disclose CPA Australia’s findings or penalties when MPPL applied for registration in 2008. He gave evidence that Mr Markovski was winding down his practice at the time; they agreed MPPL should seek registration and Mr Markovski wanted the application made as soon as possible. Mr Ristevski signed the application which did not reveal the adverse findings against him. He says he asked Mr Markovski not to lodge it until his solicitors had prepared a letter explaining the CPA Australia matters and he understood it would not be lodged until this had happened. Relationships were deteriorating at the time and Mr Markovski lodged it without his knowledge. As it happened, MPPL abandoned its application when the relationship between the directors broke down completely.
  7. I accept Mr Ristevski’s account of MPPL’s application but it was careless and poor practice to sign the form in circumstances where he had no control over its lodgement.
  8. Mr Ristevski submits that CPA Australia’s adverse findings ought not be held against him in these proceedings because they do not go directly to tax agent matters. I do not agree. The two are closely associated and it is unlikely that the public would draw such distinction. However, it is relevant that the penalties imposed by CAP Australia indicate the breaches were at the lower end of the scale - the maximum suspension is for five years - and that he underwent the Quality Assurance Review and has had his membership restored.

Complaints

  1. The respondent relies on three complaints by clients since April 2008 about Mr Ristevski’s professional conduct. They are:
  2. None of the complaints resulted in disciplinary action; one was resolved by MPPL reimbursing an amount to the client, and the Board found it lacked jurisdiction to deal with the third.
  3. Mr Ristevski gave evidence that the first complaint was not pressed by the complainant. The second involved a married couple who carried on business as a partnership; they had previously been treated as a single entity and the wife’s refund was applied to the husband’s fees; he understood the matter had been resolved to the client’s satisfaction. Mr Ristevski disputes the substance of the third complaint which he says arises from a misunderstanding by the client of a letter from the Australian Taxation Office. The Tax Agents Board found it lacked jurisdiction to deal with this matter.
  4. The respondent contends the complaints go to Mr Ristevski’s reputation and, hence to whether he is “of good fame”. The respondent contends that there is nothing to suggest that any of the complaints was not bona fide and the fact they were made show him to be a person about whom complaints are made.
  5. I do not accept that contention. No inference can reasonably be drawn from three complaints over the course of more than 12 years’ practice, about which very little is known and none of which led to disciplinary action.

Other matters and evidence relied on by Mr Ristevski


  1. Mr Ristevski has disclosed in these proceedings a drink driving conviction in April 2009 which he did not disclose in his application for registration. His appeal against the conviction was dismissed in September 2009, when his application was still under consideration. He concedes he should have disclosed the conviction but says he understood it was stayed by his appeal; he believed on legal advice that his appeal would likely succeed; and when it failed, it did not occur to him to notify the Tax Agents Board.
  2. Mr Ristevski also relies on the following:

Is Mr Ristevski a fit and proper person

  1. The expression “fit and proper person” comprehends a range of qualities including good reputation, competence, ability, integrity and honesty. In Re Su and Tax Agents Board[8], Davies J said:

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 law, 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.

  1. In Stasos v Tax Agents Board[9], Hill J referred to the mutual trust essential to dealings between a tax agent and the Australian Tax Office and others, particularly now that the Commissioner has moved to a system of self-assessment, saying:

... it is imperative that the honesty and integrity of the tax agent not be called into doubt ...

  1. It is common ground, in light of the serious consequences for Mr Ristevski should he be refused registration, that evidence to the Briginshaw[10] standard is required:

In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony or indirect references.[11]

  1. It is submitted for Mr Ristevski that the first ground relied on by the respondent cannot succeed because MPPL was not a registered tax agent at the relevant time and therefore no breach of s 251N in which he could have been “involved”. Further that, having alleged involvement in a breach of s 251N, the respondent cannot in fairness now assert something else: that Mr Ristevski was associated with unsatisfactory conduct.
  2. There is no dispute about the principle asserted for Mr Ristevski but I do not think it necessary to consider this particular matter at length. In the end, I am not satisfied that the evidence as a whole establishes to the high standard required that Mr Ristevski is not of good fame, integrity and character and therefore not a fit and proper person for registration.
  3. I have already said that the supervision and control exercised by Mr Dionysatos and Mr Rutkowski were probably less rigorous than Mr Ristevski asserts. He evidently operated with some autonomy even though an employee. His professional experience and high standing in the Macedonian community make it probable that Mr Dionysatos and Mr Rutkowski thought he needed less supervision and control than other employees. The fact that J&D and JPR traded under his business name may well have added to this. However, I do not think, on the evidence, that supervision and control was so lacking that Mr Ristevski’s character and integrity are seriously impugned.
  4. For the reasons above, I am not satisfied on the evidence that it can be inferred that Mr Ristevski was receiving fees for tax work while not registered. The allegation that he described or represented himself as a tax agent cannot be sustained on the evidence, and the fact that three complaints were made does not, without more, support the conclusion contended for by the respondent.
  5. The circumstances in which CPA Australia’s adverse findings were not disclosed to the Tax Agents Board leave Mr Ristevski open to criticism, as does his failure to disclose his drink driving conviction. I accept his explanations but they do not reflect well on him.
  6. Matters weighing in Mr Ristevski’s favour include the character references from other professionals and his church, and evidence of his extensive involvement in community affairs, none of which have been challenged.
  7. Taking into account the evidence, it cannot be said that Mr Ristevski was not of good fame, integrity and character at the material times. I am satisfied that he was and is a fit and proper person for registration as a tax agent.

Conclusion

  1. For the reasons set out above, I am satisfied that the applicant is a fit and proper person for registration as a tax agent and that the decision under review should be set aside.
  2. There are additional matters requiring satisfaction before a person can be registered about which there is no evidence before the Tribunal. It is therefore appropriate that the matter be remitted to the Tax Practitioners Board with the direction that Mr Ristevski satisfies s 251JC(1)(a)(i) of the ITAA.

I certify that the 68 preceding paragraphs are a

true copy of the reasons for the decision

herein of Senior Member Jill Toohey


Signed: ...................[sgd]..............................................................

Diana Weston Associate


Date of Hearing 22 September 2010
Date of Decision 30 September 2010

Representative for the Applicant Mr Thomas Russell, ERA Legal

Counsel for the Applicant: Ms Elizabeth Collins

Representative for the Respondent: Ms Paulina Fusitu’a, Australian Government Solicitor
Counsel for the Respondent Mr Geoffrey Kennett


[1] s 251JA (1)(a)(i)
[2] s 251JA (2)
[3] s 251BC (1)(d)
[4] s 20-5(1)(a)
[5] s 20-15 (none of the other matters listed in s 20-15(b) is relevant here)
[6] ss 2, Part 2, and s 15, Part 4, of Schedule 2 to Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009
[7] “A CPA is a finance, accounting and business professional with a specific qualification. The CPA designation is a mark of high professional competence. It indicates a soundness in depth, breadth and quality of accountancy knowledge”: CPA Australia website : cpaaustralia.com.au, 22 September 2009
[8] (1982) 61 FLR 1, at 4-5
[9] (1990) ALD 437 at 443-444
[10] Briginshaw v Briginshaw (1938) 60 CLR 336
[11] Briginshaw, per Dixon J at 362.

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