The AAT has affirmed the Tax Practitioners Board decision to terminate a tax agent’s registration and the registration of a company.

The Board did so under s 40-15(1)(b) of the Tax Agent Services Act 2009 (TASA) on the basis that the company had ceased to meet the registration requirement in s 20-5(3)(a) of the Act that each of its directors be a fit and proper person. The individual’s registration was terminated under s 40-5(1)(b).

  • The individual was the sole director of the company applicant.
  • He also became the sole director and shareholder of a business solutions company that traded as the trustee of a trust.
  • That company was granted registration as a tax agent in March 2011.
  • It failed to lodge, by the due dates, a number of tax returns and BASs. The outstanding tax liabilities, which included GST and PAYG, totalled over $500,000.

The Tribunal noted that the individual had failed to ensure the trustee company had lodged tax returns and BASs by their due dates and had also failed to ensure the company paid its outstanding taxation liabilities as and when they fell due over an extended period of time, during which the level of outstanding liabilities escalated from approximately $107,000 to $583,775.

The Tribunal was critical of the individual’s continued refusal to accept that the company was the trustee for the trust for the entire period he was a sole director.

The Tribunal said it agreed with the Board that the individual did not satisfy the competence component of the “fit and proper person requirement” in the Act, nor the “character” element of that requirement.

In addition, the AAT said the individual could not “simultaneously refuse to accept responsibility for the taxation liabilities incurred by [the company] while he was its sole director and shareholder, but expect to receive credit for making payments to discharge those liabilities“.

The Tribunal said the individual was given at least 3 opportunities to express contrition during his evidence in chief, but “he instead repeatedly referred to his own conduct in positive terms”. It agreed with the Board that the individual did not satisfy the “contrition” element of the applicable “fit and proper person” requirement.

In the result, the Tribunal:

  • affirmed the Board’s decision of 12 November 2014 terminating the individual’s registration as a tax agent under s 40-5(1)(b) of the Act on the basis that he has ceased to meet the registration requirement in s 20-5(1)(a) of the Act, namely, that he is a fit and proper person; and
  • affirmed the Board’s decision of 15 July 2015 to terminate the Company’s registration as a tax agent under s 40-15(1)(b) of the Act on the basis that it had ceased to meet the registration requirement in s 20-5(3)(a) of the Act that each of its directors be a fit and proper person.

(Re: Hemanshu Juneja & Three Wickets Pty Ltd and Tax Practitioners Board [2016] AATA 786, Dunne SM, AAT File No: 2015/0029, 2015/4195, 7 October 2016.)

[LTN 198, 13/10/16]

Extract from AAT reasons – relevant case law

  1. There are various decisions of Tribunals and the Federal Court that explain what should be taken into account when determining whether an individual tax agent is a “fit and proper person”. In Re Burnett and Tax Practitioners Board [2014] AATA 687 Deputy President Bean stated that the resolution of the question of whether a tax agent is a fit and proper person is likely to turn on conclusions about three factual issues, broadly categorised as follows:

(a) Competence – whether [the agent] has a proper knowledge of taxation laws, is able to competently prepare income tax returns and deal with queries from the ATO, and is a person [clients] of such competence and integrity that others may entrust their taxation affairs to [their] care;

(b) Character – whether [the agent] is a person of such reputation and integrity that the ATO may be confident that the returns lodged by [them] are completed honestly and competently; and

(c) Contrition – whether [the agent] appreciates the significance of [their] wrongdoing, has expressed remorse, and has rehabilitated [themselves], such that there is unlikely to be a lapse in the standards required of [them] in the future.

  1. These considerations are referred to hereafter as ‘the 3Cs’.
  2. In Re Carbery and Associates Pty Ltd and Tax Agent’s Board of Queensland [2001] AATA 107, Mr Carbery had applied for renewal of his registration which was refused by the Tax Agent’s Board of Queensland. One of the grounds for refusal to renew his registration was Mr Carbery’s failure to file his personal income tax returns as and when due. The Tribunal stated [at 55]:

“In the Tribunal’s opinion the preparation of income tax returns across a wide range of businesses, professions, occupations and income sources (i.e. investments), is not to be taken lightly. It requires diligence, current knowledge of the relevant legal framework and competence in dealing with both client and the Australian Taxation Office, not to mention honesty (see: Re: Su and the Tax Agents Board, South Australia 82 ATC 4284, Davies J at 4286 and Stasos v Tax Agents’ Board of NSW 90 ATC 4950, Hill J at 4959). This is especially so in the current ‘self-assessment’ regime where penalties for failure to disclose accurate and timely information can be levied on the taxpayer client, who relies on his/her/its tax agent to guide, advise and make proper and timely disclosures. Unless a person is judged competent in all these attributes then, in the Tribunal’s opinion, that person would not meet the ‘fit and proper’ tests …”.

  1. The issue of whether the term ‘personal affairs’ in s 30-10(2) of the Code can be applied to a director’s management of a company that is registered as a tax agent was recently considered in Re Delis and Tax Practitioners Board [2015] AATA 820. The Tribunal relevantly stated [at 90]:

“Plainly, by breaching the taxation laws in the conduct of his personal affairs which includes when acting as a director of Delis Enterprises, Mr Delis has breached the Code of Professional Conduct which applies to registered tax agents. While the TASA prescribes sanctions for any such breach, failure to comply with the Code plainly says something about the good fame, integrity and character of an individual. Those matters are relevant criteria for determining whether an individual is a fit and proper person (s 20-15 TASA).” …[emphasis added].