RE SCHRODER AND TAX AGENTS' BOARD OF VICTORIA
Members:BM Forrest DP
Tribunal:
Administrative Appeals Tribunal
BM Forrest (Deputy President)
This is an application by Mr Peter Schroder for review of a decision of the respondent Tax Agents' Board of Victoria on 20 October 1993 refusing his application for registration as a tax agent.
The Tribunal had before it the documents lodged pursuant to s. 37 of the Administrative
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The provisions governing the registration of tax agents are to be found in Part VIIA of the Income Tax Assessment Act 1936 ``the Act''. Section 251JA contains the requirements for registration of persons, partnerships and companies as tax agents. The Board is required to register an applicant as a tax agent if the applicant satisfies the Board that he or she or in the case of a partnership or company the nominee or executive officer is a ``fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters''. Section 251JA relevantly reads:
``251JA(1) The Board shall register the applicant as a tax agent if the applicant satisfies the Board that:
- (a) if the applicant is a natural person:
- (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;
- ...''
In determining whether an applicant is a fit and proper person to prepare income tax returns, s. 251BC prescribes a number of factors which if any are applicable will disqualify a person from being regarded as ``fit and proper''.
``251BC(1) Without limiting the generality of an expression used in this Part, but subject to this section, 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) the person was not registered as a tax agent, or as a nominee, for the purposes of this Part immediately before the commencement of section 39 of the Taxation Laws Amendment Act (No. 2) 1988;
- (ii) the person does not hold such qualifications (whether academic, by way of experience or otherwise) as are prescribed;
- (c) the person has not attained the age of 18 years;
- (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 5 years; or
- (f) the person is under sentence of imprisonment for a serious taxation offence.''
Regulation 156 of the Income Tax Regulations sets out the prescribed qualific- ations for the purposes of s. 251BC(1)(b)(ii).
Section 251JB(4) requires an application for re-registration as a tax agent be made no earlier than 60 days and no later than 30 days before the expiry date of the existing registration. The Board has a discretion limited to the expiry date of the existing registration to extend the time for the lodging of a re-registration application.
In deciding whether a person is ``fit and proper'' to be re-registered as a tax agent the Board has a discretion because of special circumstances to disregard a conviction, the doing of an act or thing or an omission: s. 251BC(3).
Section 251JC restates for the purposes of re- registration the requirements for registration contained in s. 251JA. Registration of tax agents is for a three year period: s. 251JG.
The applicant first became registered as a tax agent in 1981. He was continuously registered on an annual basis until 1989. Under the present scheme, following the introduction of the amendments to Part VIIA of the Act by the Taxation Laws Amendment Act (No. 2) 1988, ``the Amending Act'' in force from 1 November 1988, the annual notification was replaced with a triennial registration, whether for an original registration or re-registration. The applicant was registered for a three year period from 1989 and his registration as a tax agent expired on 1 April 1992 by force of s. 251JG.
In February 1992 the Board secretariat in a bulk mailing sent application forms for re-
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registration to its 8,500 registered tax agents to the addresses on Board records for the three year period commencing 1 April 1992. The Board does not keep a record of individual mailings.In April 1992 the Board sent another notice headed ``Failure to Lodge an Application for Re-Registration'' to those agents, about 800 in all, who had not responded to the notices for re- registration, informing that registration ceased on 1 April 1992 because of failure to apply for re-registration by that date and requesting that certificates of registration be returned. Applicants who had failed to re-register were invited to apply for registration. According to Mr Pietka the majority indicated they did not wish to reapply but about 50 who did have been granted fresh registration.
The applicant in evidence said he did not receive the February or April correspondence from the Board and at the time was unaware his registration was to expire on 1 April 1992.
On his application for re-registration in 1988 (T20, p. 39) the applicant gave his postal address as 7 Bond Avenue Blackburn South. There is no material before the Tribunal of the fate of any correspondence which was sent as part of the bulk mailing to agents from the Board in 1992, whether to this or some other address or whether it was sent at all. The most likely explanation is that it was sent to the address then current on Board files. In any event having heard the applicant I am prepared to accept that he did not receive the February and April correspondence from the Board.
The applicant discovered he was no longer registered when he made inquiry to the taxation department in June 1992 about the supply of taxation forms sent to agents.
That discovery was later confirmed in discussions with staff of the Board. Subsequently on 27 May 1993 the applicant made a fresh application to the Board for registration. In a letter (27 May 1993) to the Secretary accompanying his application he wrote:
``I enclose application for registration as a Tax Agent only because I was told I was no longer registered.
I was told this when I applied for stationery through your liasion (sic) centre. They said that my application was not renewed last February 1993 and yet since that time I have rendered many returns to the taxation office using my registered number.
To be honest I never received any renewal from your Board. This is all starting to make sense now because I continually rang the liasion (sic) office for reports on my client listing and on each occasion after having recorded my address nothing came to fruition. I even sent in a listing of `no longer clients' but never received an updated client listing. I was told that because the office shifted from Dandenong to Box Hill there would be some delay.
I feel a little disappointed that I have had to re register when returns we (sic) constantly coming in and no correspondence was made to the contrary.
I would be pleased if you would re register me so that I can continue my practice without causing a delay to my clients. Please also record my change of address, which may have also caused some of the problem.
Yours faithfully,
Peter Schroder
Agent No. 432 55 000
Old address 7 Bond Avenue Blackburn South 3130 since 1/11/91''
Asked in cross examination about the reason for the delay in making his application for registration once he had learnt he was no longer registered the applicant said that for a time he had become quite despondent about the matter after being informed he would have to apply anew for registration.
The applicant submitted that his application for registration should be treated not as a new application for registration but an application for re-registration given that he did not receive a re-registration notice from the Board. Further he submitted that his qualifications and experience are sufficient for the purposes of the Act.
Mr Sest submitted that it does not follow that from the applicant's prior registration as a tax agent he is classified as a fit and proper person and is automatically entitled to registration. This is inconsistent with the requirement of a positive finding, after due consideration, of fitness and propriety every 3 years. That requirement underlies the policy of the new scheme. At best such prior registration may
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give rise to an inference or presumption as to fitness and propriety. But that inference or presumption he submitted could be displaced by the provision of information and material to the contrary, and had been so displaced here.The applicant's first submission, that his application for registration should be treated as a re-registration application, is misconceived. The Board has no discretion in this regard once the expiry date of an existing registration has passed. The terms of s. 251JB(4) are quite specific. In the absence of an application for re- registration in time, the applicant's registration as a tax agent, by virtue of s. 251JG expired on 1 April 1992.
The lack of receipt of the re-registration forms cannot be relied upon as a ground for re- registration notwithstanding the practice to which agents were accustomed of the Board forwarding re-registration forms prior to expiry of registration. While understandable that agents could expect to receive re-registration forms, the onus is nonetheless upon agents and not the Board to ensure that the lodgment of re- registration applications takes place within the prescribed time. That aside, presumably if the applicant had informed the Board earlier of his change of address (see reg. 164) he would not have found himself in the present predicament notwithstanding the difficulties he had experienced with mail deliveries to his residence at Panton Hills on the outskirts of Melbourne.
The central issue for consideration is whether the applicant should be regarded as a fit and proper person to perform the duties of a tax agent.
The Board at its meeting on 20 October 1993 refused to grant registration. The grounds for refusal were that the Board considered the applicant did not possess adequate academic qualifications and experience.
Initially the Board informed the applicant that in declining registration his academic qualifications were acceptable but that he had failed to maintain a satisfactory level of income tax law. In a subsequent letter to the applicant from the Board it was pointed out that the acceptance of his academic qualifications was made in error. That an error was made in the earlier letter appears to be consistent with the handwritten note of the Chairman of the Board at its meeting on 20 October 1993 (T32).
``not adequate qualificat (sic)... experience''
The applicant has been a member of the Chartered Institute of Corporate Managers since 1980 and an associate member of the Institute of Chartered Secretaries. Since December 1993 he has been a member of the National Institute of Accountants by virtue of his membership of the Institute of Corporate Managers, Secretaries and Administrators. The applicant has a part time tax agents' practice with a limited number of clients. For the five years prior to 1993 he averaged thirty individual returns annually, four of which were business returns for sole traders. In addition he completed three partnership and one company return. In that period he was self employed as a contract accountant to several businesses on a part time basis performing accounting and secretarial work. The preparation of tax returns forms part of his work for these businesses. The applicant said that it is a requirement for his work for the company of which he is also a part time contract accountant that he be a tax agent. He subscribes to a publication to keep up to date with tax matters and has attended a training course to gain further practical experience. From 1993 the applicant has also been employed as an administrator of a primary school.
None of the criteria contained in sub-s. 251BC(1) of the Act operate to disqualify the applicant. In particular paragraph 251BC(1)(b) does not apply by reason of the applicant's status as a registered tax agent immediately before 1 November 1988. Paragraph (b) expresses an intention that the qualifications accepted for registration in the case of a tax agent who was registered immediately prior to the commencement of the Amending Act will be recognised as sufficient.
Mr Sest acknowledged that the applicant is not disqualified under 251BC(1).
While the applicant is not caught by any of the criteria in sub-s. 251BC(1) and is therefore not disqualified as a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers he nevertheless falls to be considered as a fit and proper person under sub-s. 251JA(1). On this point see
Re Downes and Tax Agents' Board of Queensland 93 ATC 2168 at 2172 where the Tribunal (Justice Bulley, Professor Christie and Mr Horrigan, Members) said:
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``We consider that sec. 251BC(1) is referable only to deciding in particular circumstances when a person is `not a fit and proper person'. In other words it is not concerned with setting up criteria to base a decision on whether a person is positively `a fit and proper person'.''
In determining ``positively'' whether the applicant is a ``fit and proper person'' Mr Sest submitted the Board did not determine the matter by the application of the prescribed qualifications pursuant to s. 251BC(1)(b) and reg. 156.
However, the difficulty with that submission is that it appears to be at odds with the material before the Tribunal. For the purpose of investigating the applicant's qualifications and experience, these were in effect tested against reg. 156, to which specific reference was made in letters from the Board to the applicant, of 8 June 1993 with annexures (T25) and 15 September 1993 (T30).
In his testimony Mr Pietka explained that the Board tested the applicant's qualifications and experience against the criteria that applied in October 1988, immediately preceding the introduction of the Amending Act. The Board's criteria at that time he acknowledged are now contained in reg. 156.
If that be the position and the applicant's qualifications and experience were so tested and found wanting in 1993 against the 1988 criteria then it would seem to follow in the absence of any other factors that the applicant's 1989 re- registration was a mistake. However, it was not suggested that the applicant's initial registration or re-registration in 1989 was made in error. Further, although not determinative of the matter Mr Pietka acknowledged that had the applicant applied in time he would have been re-registered in 1992.
In
Tax Agents' Board of Queensland v Haddad 94 ATC 4068; 48 FCR 223 the Board had refused in 1992 to re-register an agent first registered in 1987 on the ground he did not meet the prescribed employment requirements contained in reg. 156(i)(a)(ii). The Full Federal Court, in dismissing an appeal by the Board against the Tribunal decision to grant re- registration, found that reg. 156 did not apply in Mr Haddad's case, he being first registered as a tax agent before the Amending Act came into force.
Like Haddad, the applicant is a self employed person carrying on business as a tax agent. Unlike Haddad the applicant's registration has expired.
The Court in Haddad pointed to the inference or presumption of fact that an agent found to have been a fit and proper person and having been registered prior to the commencement of the Amending Act continues to be a fit and proper person, absent information to the contrary.
The Court said at p. 4071 (94 ATC); 227 (48 FCR):
``The form of the present legislation recognises that such an inference or presumption of fact will operate. The legislation establishes new qualifications for applicants applying for registration after the commencement of the Amendment Act in 1988, but it provides that lack of those qualifications does not disqualify a person who was already registered immediately prior to that date. Accordingly, the Act recognises that the lack of those qualifications will not disqualify a person who was registered when the Amendment Act came into operation. There must be something else to lead to a decision not to re-register a person who had been accepted as a fit and proper person to be a tax agent and was so registered when the Amendment Act commenced.''
Although the applicant for the reasons outlined is not eligible for re-registration under the re-registration provisions of the Act, the distinction recognised in s. 251BC(1)(b) between a person registered immediately before the commencement of the Amending Act (as was the case with the applicant) and a person who obtained registration after its commencement, nevertheless remains a relevant factor in the particular circumstances of the applicant, notwithstanding that by reason of his failure to apply for re-registration in time he is required to apply for registration anew.
Implicit in the applicant's registration to 1 April 1992 is a presumption of fitness and propriety. His qualifications and experience were said to be judged against the criteria applicable in 1988 when he applied for registration in 1993, however as stated earlier it was not part of the respondent's case that his re- registration in 1989 was made in error. The Tribunal is aware that the Amending Act
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introduced a more stringent regime for registration than previously applied although as it appeared from the evidence the Board in 1988 was then applying the criteria as now prescribed by reg. 156. There was no material before the Tribunal to indicate any change in the circumstances of the applicant other than the expiry of his previous registration.In the present matter while it is certainly true the applicant was remiss in failing to ensure he applied for re-registration in time, there was nothing put against him in the way of any suggestion of neglect or incompetence in the manner in which he carried out his duties on behalf of his clients. In determining whether the applicant was fit and proper no allegation was made against his conduct, character or reputation. This may be contrasted with the position in Re Downes where the Tribunal had reservations about the applicant's evidence. Here the Tribunal has no such reservations with the applicant's evidence.
In Re Downes the Tribunal found the applicant had very little involvement from 1986 to 1989 in the preparation of tax returns and thereafter was very largely restricted to family related returns. In the present applicant's case while the number of returns is not by any measure large he had maintained his involvement in taxation matters throughout the period of his registration. The number of taxation returns prepared by the applicant, while relatively low, has remained fairly stable over the years. In his capacity as accountant to various businesses he has had exposure since initial registration to income tax matters whether it be for individuals, businesses or for a company on a regular ongoing basis.
At the end of the day the question of the applicant's fitness and propriety requires a value judgment based on an objective assessment of his circumstances, knowledge and experience.
In all the circumstances the Tribunal considers the applicant to be a ``fit and proper'' person for the purposes of s. 251JA of the Act. Accordingly the Tribunal sets aside the decision under review and directs that the respondent register the applicant as a tax agent with effect from 20 October 1993.
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