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Re Seymour and Tax Agents' Board (Qld)

Members:
KL Beddoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 15 December 1989.

K.L. Beddoe (Senior Member)

The decision for review is a decision of the respondent Board refusing the applicant registration as a tax agent and notified to the applicant by letter dated 18 July 1989. The reason for refusal was expressed in that letter as being that the applicant's previous employment did not meet the requirements of Income Tax Regulation 58CA. It was conceded by the respondent Board that the academic qualifications of the applicant were not in issue.

2. Section 251C of the Income Tax Assessment Act (``the Act'') provides that there shall be a Tax Agents' Board in each State. The Board is constituted by three members appointed by the Minister, one of whom, other than an officer of the Australian Taxation Office is to be the chairman (sec. 251D). At all meetings of the Board any two members shall form a quorum, all questions shall be decided by a majority of the members present with the chair having a deliberative but not a casting vote (sec. 251E). A Board or a member of a Board shall have such powers as are prescribed with respect to the taking of evidence, the administration of oaths or affirmations, the summoning of witnesses and the production of documents (sec. 251G). Regulation 58R prescribes wide powers as to the receiving of evidence including that the Board may take oral evidence on oath or affirmation, by affidavit

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and may receive documents, without formal proof, which in the opinion of the Board are relevant to the application or other matter under consideration, not being a document brought into existence solely for the purpose of the application.

3. A person desiring to be registered as a tax agent may make application to a Tax Agents' Board (``the Board'') for registration, such application to be in the approved form, accompanied by such information as is required by the form to be provided and also accompanied by a fee of $80 (sec. 251J).

4. The statutory reason for seeking to be registered as a tax agent is to be found primarily in sec. 251L of the Act. The section provides that a person shall not demand or receive any fee for or in relation to the preparation of any income tax return, or objection, or for or in relation to the transaction of any business on behalf of a taxpayer in income tax matters, unless the person is a registered tax agent. A second statutory reason is to be found in sec. 251O which has the effect of making it an offence for a person not registered as a tax agent to so represent or advertise that income tax returns will be prepared or income tax matters will be attended to by that person.

5. Section 251JA provides in para. (1)(a) that the Board shall register the applicant who is a natural person as a tax agent if the applicant satisfies the Board that:

  • (i) the applicant is a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters; and
  • (ii) the applicant is not an undischarged bankrupt;

and shall refuse to register such an applicant in any other case (subsec. (2)). Where the Board refuses to so register an applicant the Board is required to notify the decision in writing giving the reasons for that decision.

6. A person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time if:

  • (a) the person is not a natural person;
  • (b) both of the following conditions are satisfied;
    • (i)...
    • (ii) the person does not hold such qualifications (whether academic by way of experience or otherwise) as are prescribed;
  • (c)...
  • (d) the person is not of good fame integrity and character;
  • (e) the person has been convicted of a serious taxation offence during the previous five years; or
  • (f) the person is under sentence of imprisonment for a serious taxation offence (sec. 251BC(1)).

7. Regulation 58CA prescribes qualifications for the purposes of subsec. 251BC(1)(b)(ii) set out above. In so far as it is relevant the regulation prescribes the qualifications required as follows:

``(a) the person:

  • (i) shall have completed the academic requirements for the award of a degree, diploma or other qualification from an Australian university, college of advanced education or other tertiary institution of an equivalent standard, and have passed examinations in such subjects, under whatever name, which an appropriate authority of the university, college of advanced education or other tertiary institution certifies to the Board to represent a course of study in accountancy of not less than 3 years' duration and in commercial law of not less than 18 months' duration or shall possess such other qualifications as the Board regards as equivalent to those qualifications:
  • (ii) shall have:
    • (A) been engaged in relevant employment on a full-time basis for not less than a total of 12 months in the preceding 5 years;
    • (B) otherwise been engaged in relevant employment to an extent that the Board regards as equivalent to that referred to in sub-subparagraph (A); or
    • (C) been engaged in such other employment and for such time as the

      ATC 2003

      Board regards as equivalent to being engaged in relevant employment as referred to in sub-subparagraph (A); and
  • (iii) shall have, by written examination, successfully completed a course of study in Australian income tax law acceptable to the Board;...''

8. Subregulation 58CA(2) defines ``relevant employment'' to mean employment by a person or a partnership or as a member of a partnership in the course of which there has been substantial involvement in income tax matters including:

  • (a) the preparation or examination of a broad range of income tax returns;
  • (b) the preparation or examination of objections to assessments issued in respect of such return; and
  • (c) the provision of advice in relation to income tax returns, assessments or objections.

9. Application may be made to this Tribunal for review of a decision of a Board refusing to register a person as a tax agent (sec. 251QA). For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions conferred by the Act on the Board (sec. 43(1) Administrative Appeals Tribunal Act 1975).

10. By application made on the approved form dated 21 November 1988 the applicant applied for registration as a tax agent. That application was received by the respondent Board on 14 March 1989 under cover of a letter from the applicant of even date. The application fee of $80 was receipted by the Board on 4 April 1989.

11. The application disclosed that the applicant was then 38 years of age, that he held a Bachelor of Commerce degree from Griffith University with the requisite academic subjects for the purposes of subreg. 58CA(1). The applicant gave his occupation as ``accountant'' and disclosed a place of business.

12. Character references were attached to the application as was a copy of certificate of business name registration in respect of the applicant's business.

13. By the letter dated 18 July 1989 the applicant was advised that the respondent Board had formed the opinion that the applicant's previous employment outlined in the application did not meet the requirements of reg. 58CA. The letter went on to say that the application for registration had been refused.

14. By its statement pursuant to sec. 37 of the Administrative Appeals Tribunal Act 1975 the Board stated that it was of the opinion that the applicant did not possess prescribed qualifications for the purposes of subpara. 251BC(1)(b)(ii) of the Act. It went on to refer to the applicant's limited employment on a part-time basis in the years 1986 to 1988, which resulted in limited exposure to the preparation of income tax returns, causing the Board to find that the applicant had not demonstrated a substantial involvement in income tax matters. The Board also found that the applicant had not been engaged in relevant employment on a full-time basis for not less than a total of 12 months in the preceding 5 years.

15. At the hearing before the Tribunal the applicant conducted his own case and the respondent Board appeared by Mr Sorenson of the Australian Government Solicitor's office.

16. The applicant's evidence was that he had formed an association with a franchisor of income tax return preparation businesses but did not enter into a franchise agreement as such. The applicant paid the franchisor a fee for auditing and signing, as tax agent, income tax returns prepared by the applicant. The arrangement operated during the fiscal years 1985-1986 and 1986-1987.

17. The applicant then formed a similar association with a tax agent by the name of Ballard which applied for the fiscal years 1987-1988 and 1988-1989. Ballard determined the fee to be charged and billed the client in respect of each return and then paid the applicant a proportion of the fee paid by the client.

18. There is insufficient evidence before the Tribunal to determine the exact status of these arrangements and the Tribunal will not speculate as to the nature of the arrangements. However, I am satisfied that Ballard made no effective contribution in the preparation of the returns.

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19. The applicant's evidence is that he has established a full-time business trading as ``Logan City Bookkeeping Services'', a name registered with the Commissioner for Corporate Affairs. During the year ended 30 June 1988 the business had 70 clients which increased to 75 clients in the next fiscal year and at the time of the hearing stood at 112 clients.

20. Details of income tax returns prepared by the applicant (although not signed by him) are as follows: 

Type               1985/86       1986/87       1987/88       1988/89

Individual             19            31             56           84
Partnership             4             4              8            5
Trusts                  -             -              -            3
Companies               -             1              1            4

In the year ended 30 June 1988 the applicant also prepared a number of returns to help out another practitioner. The partnerships for which returns were lodged are trading partnerships as are two of the three trusts in respect of which a return was lodged.

21. The applicant's evidence is that he has also been involved in giving advice to clients on income tax matters but has not had any involvement in preparation or examination of objections to assessments issued in respect of income tax returns prepared by the applicant. This latter requirement in subreg. 58CA(2) is a somewhat strange provision. Although the statutory provisions do not require the Board to make a qualitative assessment of the substantial involvement in income tax matters the regulation implies a preference for persons who prepare income tax returns which result in objections. With the introduction of self assessment into the income tax system it is not hard to imagine that many objections are now lodged to correct incompetently prepared returns. In these circumstances it would be unfair and contrary to the apparent intent of subsec. 251JA(1) if a person with a substantial involvement in preparation of income tax returns was to be refused registration because those income tax returns did not result in involvement in preparation of objections to assessments made in respect of such returns. In other words the returns may be presumed to have been competently prepared and accepted by the Commissioner of Taxation. I am not prepared to discount a person's substantial involvement in income tax matters merely because returns prepared by that person have not resulted in objections.

22. The question which I am left to consider is whether the applicant has had substantial involvement in income tax matters. On the evidence the applicant has clearly had involvement in income tax matters so that the question is whether that involvement has been substantial involvement as required by subreg. 58CA(2).

23. The word ``substantial'' is notorious for its lack of precision of meaning. It is quantitatively imprecise with the result that no specific level of involvement is defined by so qualifying ``involvement''. In
Tillmans Butcheries Pty. Ltd. v. A.M.I.E.U. & Ors (1979) 27 A.L.R. 367 Deane J. referred to the difficulties inherent in the use of ``substantial'' in these terms at p. 382:

``The word `substantial' is not only susceptible of ambiguity: it is a word calculated to conceal a lack of precision. In the phrase `substantial loss or damage', it can, in an appropriate context, mean real or of substance as distinct from ephemeral or nominal. It can also mean large, weighty or big. It can be used in a relative sense or can indicate an absolute significance, quantity or size. The difficulties and uncertainties which the use of the word is liable to cause are well illustrated by the guidance given by Viscount Simon in
Palser v. Grinling ([1948] 1 All ER 1 at 11; [1948] AC 291 at 317) where, after holding that, in the context there under consideration, the meaning of the word was equivalent to `considerable, solid or big', he said: `Applying the word in this sense, it must be left to the discretion of the judge of fact to decide as best he can

ATC 2005

according to the circumstances of each case...'.''

24. Deciding as best I can according to the circumstances of this case I am satisfied that the applicant has had a substantial involvement in income tax matters except in relation to objections to assessments issued in respect of returns prepared by the applicant. However, the applicant has not been relevantly employed by a person or a partner in a partnership. The applicant's experience does not therefore come within the definition of relevant employment in subreg. 58CA(2).

25. The applicant does not therefore come within the terms of subpara. (ii)(A) and (ii)(B) of para. 58CA(1)(a) because those subparagraphs require the applicant to be engaged in relevant employment as defined.

26. Subparagraph 58CA(1)(a)(ii)(C) is worded differently and it must be assumed was drafted to deal with circumstances out of the ordinary. The question to be decided is whether the applicant has been engaged in such other employment and for such time as the Tribunal regards as equivalent to being engaged in relevant employment as referred to in subpara. 58CA(1)(a)(ii)(A). In considering that question I have taken into account the fact that the applicant was self-employed in his own business and also undertaking the degree course at the university until the end of the 1988 academic year.

27. In some cases it might be concluded that the business was of such a part-time nature as to make it unlikely that the applicant had achieved substantial involvement in income tax matters. Unlike the respondent Board I have had the advantage of the applicant conducting his own case before me and giving evidence. The applicant not only impressed me as an honest and frank witness but also as an energetic professional accountant who would fit more work into each day at his business than many of his peers engaged full time in their practice.

28. On this basis I have come to the conclusion as a matter of fact, that the applicant has been employed, on his own account, in employment equivalent to being engaged in relevant employment coming within subpara. 58CA(1)(a)(ii)(A). In so finding I have inferred that income tax returns prepared by a self-employed accountant in a one man business require a higher level of involvement and professional expertise than income tax returns prepared by an employed accountant who is subject to checking and supervision by a principal and who may have the assistance of other employees.

29. While it is apparent that this applicant is a borderline case I am satisfied that the applicant has met the criteria laid down by reg. 58CA, that he is a fit and proper person (as defined) for the purposes of sec. 251JA and that he is not an undischarged bankrupt. I should add that the applicant has only succeeded because of experience gained since the respondent Board made its decision.

30. For these reasons the applicant will be registered as a tax agent with effect from 15 December 1989.


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