A 3-month suspension imposed on a registered tax agent for dishonesty – telling the ATO SMSF returns had been audited when they hadn’t – has been confirmed by the AAT. In the light of many tax agents suffering disqualification for years, for things less than dishonest, this seems unduly light. But there are reasons.

Vac Corp has been a registered tax agent since 31 March 2017. Between June 2017 and October 2019, it lodged with the ATO 20 annual SMSF returns containing declarations that the relevant funds had been audited by a named auditor. However, the funds had not been audited by that auditor or, indeed, by any SMSF auditor. Vac Corp eventually revealed this to the ATO.

The Tax Practitioners Board (TPB) decided to suspend Vac Corp’s registration for 3 months for breaches of the obligations in the Code of Conduct to act honestly and with integrity and to act competently. The TPB also issued a written caution and ordered Vac Corp’s supervising tax agent (JC) to undertake 3 courses of education (which she completed diligently).

The AAT said that recklessly lodging returns without ascertaining whether the audits had, in fact, been conducted was “dishonest”. “[R]epresenting something without a proper basis for making the representation is as dishonest as representing something that is known not to be the case.” Further, the lodgment over a 2-year period of 20 SMSF returns containing the false declarations demonstrated “a continuing failure over time to understand that what was being done was, in fact, dishonest”.

Although a meaningful sanction was required, the AAT said that a sanction at the lower end of the scale was preferred in view of Vac Corp’s otherwise unblemished record and the fact that JC had admitted the breaches and showed remorse, although the fact that there were no consequences as a result of what Vac Corp did was irrelevant. In all the circumstances, a 3-month suspension (in addition to the education orders and the written caution) was appropriate.

(Vac Corporate Pty Ltd and Tax Practitioners Board [2021] AATA 4098, AAT, Reitano M, 28 October 2021.) [LTN 218, 11/11/21]


It appears that the AAT has blurred the distinction between ‘dishonest’ and ‘reckless’ – there being two terms for good reason – the difference between knowing something is false, and being indifferent to the risk that the statement was not true. Reckless might be constructive dishonest, but I doubt that the Code, which was breached (in the Tax Agents Services Act 2009) has such a constructive notion built into it.

The AAT expressed it this way.

33. In that light, the dishonesty had a slightly different character from out and out dishonesty, or intentional dishonesty in the face of known facts to the contrary, because it did not involve knowing the true position and presenting another one. Rather, it was because of wanton or reckless behaviour that had no regard to the real or true position because there was no intention of ascertaining what the truth was. Vac Corp proceeded without finding out whether the audit had, in fact, been conducted so long as it allowed enough time for an audit to be undertaken. Viewed that way, Vac Corp’s statement that it made a mistake is a little more understandable.

34. I do not think it matters too much which view of the dishonesty is involved. It goes without saying that a professional and ethical process of tax administration using registered tax agents relies very heavily on the public’s and the ATO’s ability to have trust and confidence in tax agents. When a tax agent gives their word to someone, perhaps, especially the ATO but probably equally others, that should be the end of the matter. There should never be any reason to doubt the word of a registered tax agent.

In my opinion the difference DOES matter. A charge of ‘incompetence’ was available, and the word ‘reckless’ could still be used with it – supporting all the things the Tribunal member said about the important and trusted position tax agents have. Neither was it necessary to reach that ‘deep into the kit bag’ to justify the relatively light sanction. In my opinion, the tax agent should have been sparred the slur on her otherwise ‘unblemished’ character, that came with using the word ‘dishonest’.

[Tax Month – November 2021Previous 2021] 14.11.21


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