Case T86

Members:
P Gerber SM
KL Beddoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 29 October 1986.

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Dr P. Gerber and K.L. Beddoe (Senior Members)

In this case, the applicant is a chartered accountant carrying on business in a small town as a sole practitioner during each of the relevant years of income.

2. During this period, the applicant employed five or six regular employees, and also engaged additional assistants from time to time in order to do subcontracting work for another accountant. The applicant also acted as

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ATC 1121

agent for a building society, and at least one of the staff employed by him was employed full-time on that work.

3. The question to be decided is simply whether the applicant should be assessed on a ``cash receipts'' or an ``accruals'' basis. The respondent contends for the ``accruals'' basis, relying on the decision of the High Court in
Henderson v. F.C. of T. 70 ATC 4016; (1970) 119 C.L.R. 612. The applicant seeks to support the basis upon which he lodged his returns in reliance upon the decision in
F.C. of T. v. Firstenberg 76 ATC 4141, a decision of the Supreme Court of Victoria, and the decision of the High Court in
Commr of Taxes (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd. (1938) 63 C.L.R. 108.

4. The Tribunal must therefore enquire in the circumstances of this case, which basis is calculated to give a substantially correct reflex of the applicant's true income. This case is distinguishable from Henderson v. F.C. of T. which involved a large firm of public accountants, made up of 19 partners together with 60 or more associates who appeared to be partners in all but name. Such a practice is similar to this case only in that the persons involved are likewise accountants. At that point, the similarity ceases.

5. This Tribunal is bound by the decision of the Supreme Court of Victoria in Firstenberg's case unless there is a proper basis for distinguishing it. The effect of Firstenberg's case is that sole practitioners are assessed on a ``cash receipts'' basis. This applicant employed more staff than Mr Firstenberg; all of these staff were employed under his direction; none was a professional accountant; and the applicant took sole professional responsibility for the practice and signed all statutory certificates.

6. The Tribunal is satisfied that this case is governed by the decision in Firstenberg's case. The applicant's appeals are therefore allowed with respect to each of the years now before us and the decision under review is set aside.

Claim allowed