Re Su and the Tax Agents' Board, South Australia.
Members:JD Davies J
Tribunal:
Administrative Appeals Tribunal
J.D. Davies J.
This is a review of a decision of a Tax Agents' Board made on 23 September 1981 that the registration of Stephen Tien-Ping Su as a tax agent be cancelled.
Section 251K of the Income Tax Assessment Act 1936 provides, inter alia:
``251K(2) A Board may cancel the registration of any tax agent upon being satisfied that -
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- (a) any return which has been prepared by or on behalf of the tax agent is false in any material particular; unless the tax agent establishes to the satisfaction of the Board that he had no knowledge of the falsity or that the falsity was due to his inadvertence;
- (b) the tax agent -
- (i) has neglected the business of a principal;
- (ii) has been guilty of misconduct as a tax agent; or
- (iii) is not a fit and proper person to remain registered; or
- (c) in the case of a partnership or company - a nominee of the tax agent is not a fit and proper person to be such a nominee, or that a person who has become a member of the partnership, or a director, or manager or other administrative officer, of the company is under the age of twenty one years or is not of good fame, integrity and character.''
In cancelling Mr. Su's registration, the Board took the view that Mr. Su was not a fit and proper person to remain registered.
Mr. Su, who is 35 years of age, became a member of the Australian Society of Accountants in 1969 and a member of the Chartered Institute of Accountants in 1972. After working for a firm of accountants, he established his own accounting practice in 1973. His registration as a tax agent was first granted in July 1970 and continued thereafter. His practice grew with such rapidity that in the middle 1970s he employed over 200 members of staff and, on his evidence, had the largest practice of any single practitioner in Australia. His practice was based in Adelaide but extended to Western Australia, Victoria, New South Wales and Tasmania. However, the administration of a large practice is no easy task and Mr. Su encountered problems which have led to the disintegration or scaling down of his practice. Presently, he carries on practice only in Adelaide and has only five employees.
The difficulties which Mr. Su encountered were reflected in the conduct of his own affairs. The following is a list of the dates upon which Mr. Su's personal income tax returns were lodged during recent years:
Year Date lodged
1975 September 1976
1976 11 July 1978
1977 11 July 1978
1978 26 April 1979
1979 11 January 1980
1980 22 April 1981
1981 22 December 1981
With respect to each of the years, the respondent's contention is that Mr. Su, being a tax agent, was required to lodge his return by 31 December following the end of the close of the year of income. In evidence, Mr. Su said that, with respect to some of the years, he believed he had extensions. Nevertheless, it can be seen that, for most of the years, the delay in lodgment was great.
On 9 May 1979, Mr. Su was convicted of failing to duly lodge his personal income tax return in respect of the year ended 30 June 1978. He was fined $40. On the same day, he was convicted on two charges of failing to pay to the Commissioner within the prescribed time the amount of the deductions made from the salary and wages of employees of Stephen Su & Company during November and December 1978. He was fined $50 for each month. On 23 January 1981. Mr. Su was convicted on two charges, as a director of Suco Cotton Pty. Ltd., of failing to furnish a return of the income derived by that company and was fined $20 on each. On 22 April 1981, he was convicted of failing to lodge his personal income tax return and was fined $100. On 30 September 1981, he was convicted of failing to pay to the Commissioner the amount of the deductions made from the salary or wages of his employees during May 1981. He was fined $400. On the same day, he was convicted of failing to pay to the Commissioner the amount of the deductions made from the salary or wages of his employees for group tax purposes during June 1981. He was fined $600.
The following is information supplied by the respondent with respect to the payment by the applicant of the amount of the instalments deducted from the salary or wages of his employees:
On 17 March 1982, judgment was entered by the Commissioner of Taxation against Mr. Su for $37,959.58 with respect to the tax deductions for the months of June 1981 to December 1981, together with penalty and costs. A Bankruptcy Notice was issued on 7 April 1982 in the amount of $32,801.55 with respect to the judgment debt together with certain other amounts and less a payment on 1 April 1982 of $5,759.40. The Bankruptcy Notice was served on 14 April 1982 and an act of bankruptcy occurred on 28 April 1982. At the time of the hearing before me, 12 and 13 May 1982, the matter had not been resolved though the applicant was negotiating with the Commissioner of Taxation.
In considering whether the applicant was a fit and proper person to remain registered as a tax agent, the Tax Agents' Board took into account three convictions pursuant to sec. 223 of the Income Tax Assessment Act, one conviction pursuant to sec. 225, these four convictions being in respect of the lodgement of his personal income tax returns and two convictions pursuant to sec. 221F with respect to failure to remit group tax instalments in his capacity as an employer. The precise details of the convictions were not correct but there is little significance in this. The fines totalled $230. The Board took the view that these convictions were of such a nature that they rendered the applicant not a fit and proper person to remain registered as a tax agent. I would not myself have thought that, standing alone, the convictions would have justified that conclusion.
The function of a tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
There are certain convictions which, in themselves, may be inconsistent with the holding of a tax agent's registration. If a lawyer is convicted of fraud, his name may be struck from the roll of practitioners, for fraud is inconsistent with the practice of the law. If a doctor is convicted of a serious
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offence relating to illegal drugs, his name may be struck from the register because the offence is inconsistent with the task which medical practitioners perform. If a tax agent is convicted of an offence of tax evasion, his name may be taken from the register, for tax evasion is inconsistent with the role which tax agents are called upon to perform.If offences for which a tax agent is convicted are not of that character, they may nevertheless justify the removal of his name from the register if, of themselves, or in combination with other factors, they indicate that the tax agent is not a person of such integrity and competence that clients' affairs should be entrusted to him or that he is not of such integrity and competence that officers of the Taxation Department may place reliance upon returns prepared and lodged by him. And there is one further aspect. A tax agent who allows his own tax affairs to get into a state of disorder, who has constant problems himself with the Taxation Department, may not be a proper person to handle clients' affairs for there may come a time when dissatisfaction which officers of the Department may have with the tax agent personally may be reflected in their handling of his clients' affairs. Clients who seek extensions of time should not be embarrassed by the fact that the tax agent acting for them is himself continually late in complying with the time limits imposed by the Act and the regulations. Undoubtedly, even minor offences, if sufficient in number, can so interfere with a tax agent's standing that he is rendered not a fit and proper person to be registered as a tax agent. See Re Charles Stuckey (District Court of Queensland, 20 July 1959), wherein Judge Taylor said:
``In principle, I consider that a sufficiently bad personal record in tax matters by a tax agent, even if no question of fraud or dishonesty arises, could constitute misconduct, accepting misconduct to be a course of conduct which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency. I also consider that a sufficiently bad personal record in tax matters by a tax agent, even if no question of fraud or dishonesty arises, could render that person not a fit and proper person to remain registered as a tax agent.''
As I have said, I doubt that the convictions upon which the Tax Agents' Board relied were themselves so serious or so many that the applicant's name should have been removed from the register for that reason only. However, plainly they were an indication that there were problems which warranted investigation.
At the hearing before me, no evidence was called on behalf of the Tax Agents' Board that there had been any default or neglect by the applicant with respect to the income tax returns or affairs of any of his clients. Furthermore, Mr. Su gave evidence that his clients' returns had been lodged in accordance with his lodgement programmes and that the number of queries received with respect to clients' returns were few. At the same time, it is notable that no evidence has been called on behalf of the applicant that he is a person of competence and good standing. And the fact is that his practice has reduced from the middle 1970s to the present time, so that, whereas he had at one time 200 members of staff, he now requires only five. This suggests that there has been dissatisfaction with the quality of his work.
On this aspect, I think that the evidence must be regarded as neutral. There is no evidence of any incompetence with respect to the affairs of a particular client and little enquiry as to the reason for the ``scaling down''. Thus, it would not be right for me to form any view that Mr. Su had been incompetent or neglectful in relation to the affairs of a client. On the other hand, there is no evidence from any other practitioner that Mr. Su is competent and of good standing and the reduction in the size of his practice at least raises doubts about this. Thus, these aspects stand neither for nor against Mr. Su's registration.
The failure to lodge his personal income tax returns and the failure to pay on time the group tax instalments suggest incompetence on Mr. Su's part. In his evidence before me, Mr. Su placed the blame on other persons. As to his personal income tax return he said that Mr. Bishop, who was at one time a salaried partner, ``... was charged with the responsibility of getting together all the books and records of our operations in
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different states in Australia together with any adjustment there may have been and have the tax return ready for me to peruse and review as one would do in an audit review''. In answer to the question, ``Did you leave that matter entirely to him other than signing your return as you were required to do?'' Mr. Su responded, ``Yes''. He said, as to his return for the year ended 30 June 1980, that when Mr. Bishop left the firm towards the end of 1980, other employees ``... reported to me that the prime books and records of my practice were missing from my office...'', with the result that the preparation of that return was delayed.With respect to his convictions, he said that he did not know about them and had not been informed about them by persons in his office. He said, ``... I would expect to be told some time but not immediately following conviction''. He said that Mr. Campbell, Mr. Bishop or Mr. Pender would have instructed the persons who appeared for him in Court when pleas of guilty on the charges were taken. As to the group tax instalments, he said that Mr. Bong ``... was responsible to make sure that the funds were available for the payment of those amounts...''. As to Mr. Bong, he said:
``He called himself financial controller. More accurately his functions comprised the cash flow of the business, to ensure, firstly, that the cash into the firm matches the timing of the cash going out of the firm and, secondly, that any overdue accounts were paid. Generally he was supposed to keep us out of any trouble in the financial sense.''
He said, as to the May and June 1981 group tax instalments, that he assumed at the time that the amounts that should have been paid to the Department had in fact been paid. As to his 1982 annual notice to the Tax Agents' Board, which was incorrect as I shall later mention, he said, ``I signed the form and dated it, gave it to my administrator and instructed her to complete the form as she had done for the last several years. It was exactly the same form''. With respect to all these matters, therefore, Mr. Su has laid the blame upon other persons in his practice. But all these matters were matters with respect to which Mr. Su had ultimate responsibility and the duty to take a personal interest. The problems that arose reflect upon his competence.
A further matter reflecting upon Mr. Su's competence is that, early this year, Mr. Su, who had been a registered company auditor and a registered liquidator, was struck off the register of liquidators and fined $750 with $500 costs in relation to a number of matters arising in the course of the liquidation of a private company of which he was the official liquidator. The Companies Auditors' Board did not remove Mr. Su's name from the register of company auditors.
These matters raise serious doubts as to Mr. Su's capacity to handle other people's affairs. Obviously, he did not have the capacity to handle his own affairs in a proper manner and his failure to do so did not occur on one occasion alone but on a number of occasions. It is not necessarily the case that a practitioner who does not look after his personal affairs does not properly attend to the affairs of his clients. But incompetence in relation to one's own affairs more often than not has an effect sooner or later in relation to the affairs of a client. This occurred in relation to the private company of which Mr. Su was an official liquidator. In relation to that company, he failed to carry out the duties which were imposed upon him as official liquidator and, as a result, his registration as a liquidator was cancelled and he was fined.
I turn now to the group tax instalments. Section 221C(1A) of the Income Tax Assessment Act provides:
``221C(1A) Where an employer pays to an employee salary or wages, the employer shall, at the time of paying the salary or wages, make a deduction from the salary or wages at such rate (if any) prescribed in accordance with sub-section (1) or (1AA) as is applicable.
Penalty: Forty dollars.''
Section 221F(5)(a) and (b) provide:
``221F(5) A group employer shall -
- (a) not later than the seventh day of the month next succeeding a month in which he has made deductions (including deductions under a State income tax law or under section 78 of the Income Tax (Arrangements with the States) Act 1978), pay to the
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Commissioner the amount of the deductions (including deductions under a State income tax law or under section 78 of the Income Tax (Arrangements with the States) Act 1978) so made;- (b) not later than the fourteenth day of July in each year, issue to each employee a group certificate setting out the total of the amounts of the deductions (including deductions under a State income tax law or under section 78 of the Income Tax (Arrangements with the States) Act 1978) made by him as a group employer from the salary or wages of that employee during the period of twelve months which ended on the thirtieth day of June in that year, other than amounts which have been included in a group certificate previously issued to that employee:''
Section 221H(2) provides:
``221H(2) Where the Commissioner receives from an employee a tax stamps sheet or a group certificate, or both, in respect of deductions made in any year of income from his salary or wages, and the tax payable by the employee in respect of that year of income has been assessed, the Commissioner shall -
- (a) if the sum of the amount represented by the face value of the tax stamps duly affixed to any such tax stamps sheet and the amount of the deductions shown in any such group certificate does not exceed the tax payable by the employee in respect of that year of income - credit that sum in payment or part payment of that tax;
- (b) if that sum exceeds that tax - credit so much of that sum as is required in payment of that tax and any other tax payable by the employee, and pay to the employee an amount equal to any excess; or
- (c) if he is satisfied that there is no tax payable by the employee - pay to the employee an amount equal to that sum.''
As can be seen from the information I have set out above, Mr. Su was consistently late in paying the amount of the group tax deductions to the Commissioner during the year ended 30 June 1981 and no payment was made with respect to the current year of income save as to the month of March 1982. Mr. Su gave two explanations. First, he said, as to the deductions with respect to May and June 1981, that he had assumed that these sums had been paid and that he did not realise they had not been paid until he ascertained that Mr. Bong had misappropriated a considerable amount of money from the firm. This explanation does not sit well with the fact that Mr. Bong did not leave Mr. Su's employ until March 1982 and that the final report to the South Australian Police Department concerning the alleged defalcation was made in that month. As to the failure to pay the amounts of the deductions made during the current year. Mr. Su said that he had overpaid the Commissioner of Taxation $20,000 with respect to the year ended 30 June 1981. He said:
``I discovered that we should not have paid the group instalments for April, May and June of 1981 financial year because included in the instalment deductions were people who were not employees of Stephen Su and Co.... What I am saying is that if we had paid the proper amount of group tax we need not have paid the April, May or June group tax of 1981, or July. A credit would have been allowed to me if I had known of this error of over-payment to the Commissioner of nine months previously.''
The first point to be noted is that, during the current year of income, Mr Su has continually deducted sums from his employees' salaries pursuant to the authority given to him by sec. 221C(1A) of the Income Tax Assessment Act. He has not forwarded the amount of those deductions to the Commissioner of Taxation. He has sought to use the amount of those deductions which he has made from the salaries of the employees who have been with him during the current year for the purpose of offsetting a debt which he alleges that the Commissioner of Taxation owes to him by virtue of sums he paid to the Commissioner of Taxation with respect to other employees during a prior year of income. This course breaches sec. 221F(5)(a) of the Act. Mr. Su was required
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not later than the seventh day of the month next succeeding a month in which he made deductions to pay to the Commissioner the amount of the deductions so made. He neither did this nor purported to do it. On each occasion, when he failed to do so, he committed an offence. His actions were offences which a man of integrity would not have committed. He made deductions from the salaries of his employees. Having made those deductions, it was his clear duty to pay the amount of those deductions to the Commissioner within seven days of the close of the month in which the deductions were made. This duty was not merely a legal duty, it was a moral duty. Mr. Su was the conduit for the payment by the employees of their tax to the Commissioner of Taxation. It was both legally and morally indefensible for Mr. Su to appropriate for his own purposes the amounts of those deductions.Moreover, the explanation which Mr. Su gave for the course which he took shows that there was incompetence in the handling of his affairs. His explanation was that sums were paid to the Commissioner of Taxation during the year ended 30 June 1981 with respect to persons who were not his employees. But the question as to whether or not they were his employees is only part of the issue. A question which is just as significant is whether he made deductions from their salary or wages. If he did, it was proper that the amount of those deductions should have been paid to the Commissioner of Taxation. If he did not make those deductions, how did it come about that the sums were included in the amount of the group tax instalments which Mr. Su paid to the Commissioner of Taxation? If Mr. Su did not employ the persons with respect to whom the instalments were paid to the Commissioner, who did employ them? Who, if anyone, made deductions from their salary or wages, and who gave them a group certificate? How could the Commissioner of Taxation have confidence in a man whose affairs are in such a state?
The next matter of concern is that the last three annual notices lodged by Mr. Su with the Tax Agents' Board of South Australia under sec. 251JA were incorrect. In each, Mr. Su was asked, ``Have you been convicted during the previous 12 months of any offence against the law of Australia, a State or any other law?'' In each annual notice the answer should have been, ``Yes''. In each, the answer given was, ``No''. Each annual notice was signed by Mr. Su personally. Whatever one may say about the convictions of the two first years with respect to which Mr. Su has given evidence that he was not aware of them, the fact is that, with respect to the notice signed on 5 April 1982, Mr. Su knew that the answer to be given was, ``Yes''. The transcript shows that Mr. Su said in the course of his evidence, ``... I was informed by the taxation, when it brought convictions against me... Of course, I was familiar with them''. Mr. Su put the blame for this return on a member of his staff. But he was perfectly familiar with the form for it was a form which each tax agent must lodge annually. And he was aware of the significance of the form and of his duties in relation to it. The annual notice which a tax agent is required to lodge with the Tax Agents' Board is a clear and simple notice but nevertheless an important one. Mr. Su's failure to correctly complete the last three annual notices which he has lodged with the Tax Agents' Board of South Australia is, in my view, of itself, probably sufficient to warrant his removal from the register. A person who does not complete such a form accurately is not a person of sufficient competence and integrity to hold the privilege of acting for clients in the preparation and lodgement of their income tax returns.
Finally, it is necessary that I add, though distasteful that I should have to do so, that I think that some of Mr. Su's evidence before me was either untruthful or misleading. I refer, for example, to the fact that the evidence as to the May and June 1981 deductions, in respect of which Mr. Su laid blame upon Mr. Bong's misappropriation of money, was inconsistent with the evidence later given that Mr. Bong remained with Mr. Su as his employee until March 1982. And, further, I think that the extent to which blame for Mr. Su's problems was placed on others belies credulity. Perhaps some of Mr. Su's evidence was not deliberately untruthful. But I think that at least Mr. Su's problems have reached such a stage that he is no longer able to think clearly about them.
In all the circumstances of the case, I am of the opinion that Mr. Stephen Tien-Ping
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Su is not a fit and proper person to be registered as a tax agent. Although the power to remove a name from the register is discretionary, this is not a situation where personal hardship can be allowed to prevail over community interest. As was said in relation to legal practitioners by Blackburn S.J., Connor and Davies JJ. inRe Guild (1978) 32 A.C.T.R. 13 at pp. 35-36:
``The object of disciplinary proceedings is the protection of the public and the maintenance of proper standards in the legal profession. Disciplinary proceedings are not taken by way of punishment, per Barwick C.J. in
Harvey v. Law Society of New South Wales (1975) 49 A.L.J.R. 362 at 364; 7 A.L.R. 227 at 230, or to exact retribution, per Fox, Blackburn and Woodward JJ. in Ex parte Attorney-General (Cth.);
Re a Barrister and Solicitor (1972) 20 F.L.R. 234 at 244. In the former case, Barwick C.J. said that the function of the Court was `... to examine the material proffered to it in order to determine whether that material establishes that the solicitor has failed, by action or inaction, to maintain in his conduct the standards required of him as a member of the profession. The Court's duty is to ensure that those standards of the profession are fully maintained...'. In the latter case, Fox, Blackburn and Woodward JJ. said that the object of disciplinary action is `... to protect the public and the reputation of the profession'. Their Honours discussed the principles to be applied in determining whether conduct of the practitioner has been of such a nature as to justify the intervention of the Court. We respectfully adopt the principles enunciated by their Honours. At p. 243 their Honours said: `When it is a question of removal from the roll, there is, in the end, a single question, namely, whether the legal practitioner who has been charged is a fit and proper person to remain a member of the profession (see per Latham C.J. in
Re Davis (1947) 75 C.L.R. 409 at 416). In
Ziems v. Prothonotary of the Supreme Court of New South Wales (1957) 97 C.L.R. 279 at 293, Kitto J. said that the issue is not capable of more precise statement.''
In making an order in this review, I think it is appropriate first to set aside the decision under review. As I have said, I doubt that the convictions which the Tax Agents' Board took into account of themselves warranted the removal of Mr. Su's name from the register. Moreover, the Board failed to take into account information which Mr. Su had communicated to its Chairman and Secretary. Therefore, the decision of the Tax Agents' Board may be void. It was held in
Ridge v. Baldwin (1964) A.C. 40 that a decision affirming an earlier decision is itself of no effect if the earlier decision is void. Therefore, the decision of this Tribunal should set aside the decision of the Tax Agents' Board and should substitute therefor a decision to the same effect.
The decision of the Tribunal will be that the decision under review is set aside and that in substitution therefor the Tribunal decides that the registration of Mr. Stephen Tien-Ping Su be cancelled. The decision of the Tribunal will come into operation on 1 August 1982.
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