Re Civiti and Tax Agents' Board of Victoria

Members:
BM Forrest DP

Tribunal:
Administrative Appeals Tribunal

Decision date: 23 October 1990.

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B.M. Forrest (Deputy President)

On 2 April 1990 the applicant applied to the respondent for registration as a tax agent pursuant to sec. 251J of the Income Tax Assessment Act 1936 (``the Act'').

The respondent refused the application and by letter dated 11 May 1990 notified the applicant of its decision.

This application is for review of that decision. Jurisdiction of the Tribunal arises pursuant to sec. 251QA(a) of the Act.

The requirements for registration are set out in sec. 251JA which 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;
  • ...

251JA(2) The Board shall refuse to register the applicant in any other case.

251JA(3) Where a Board makes a decision refusing to register an applicant as a tax agent, the Board shall cause to be served on the applicant a notice in writing setting out that decision and giving the reasons for that decision.''

In declining registration, the respondent found that the applicant did not possess an acceptable level of ``relevant employment'' as required by reg. 156 of the Income Tax Regulations. The respondent found as follows:

``Your work with:

• AUSTRALIAN TAXATION OFFICE and GENERAL MOTERS [sic] HOLDEN did not have `substantial involvement' in income tax matters. In relation to your work with the Australian Taxation Office the Board was not satisfied that your work included company and trust returns. Your work was limited to salary and wage returns, sole traders, and partnerships and the supervision of staff in these areas. On this basis you would not have gained experience on a broad range of returns for a full 12 months.''

The definition of a ``fit and proper person'' to prepare income tax returns is contained in sec. 251BC(1) which relevantly provides:

``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;

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    ATC 2041

• (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.''

Save for the requirements of para. (b) above, it is not in dispute the applicant satisfied all other criteria of sec. 251BC(1) for registration as a tax agent.

The prescribed qualifications for the purposes of sec. 251BC(1)(b)(ii) are contained in reg. 156 (formerly reg. 58CA but renumbered from 1 July 1990 by Statutory Rule No. 192 of 1990), which relevantly reads:

``156(1) For the purposes of subparagraph 251BC(1)(b)(ii) of the Act, the following qualifications are prescribed:

• (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 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;
  • ...

156(2) In this regulation `relevant employment' means 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 returns; and
• (c) the provision of advice in relation to income tax returns, assessments or objections.''

The issue before the Tribunal concerned whether the applicant had substantial involvement in income tax matters, in particular whether her employment included the examination of a broad range of income tax returns as required by subreg. 156(2).

As a first step it is necessary to examine the applicant's relevant employment history. She commenced employment in the Australian Taxation Office on 12 September 1985, assessing salary and wages returns. In January 1986 she moved to a specialist area assessing and reviewing returns which included eligible termination payments. From January 1987, she dealt with ``special'' returns, which included those of members of parliament, judges and also taxation office staff, but still in the category of salary and wage returns. In March 1987 the applicant was promoted to a position where she specifically assessed business returns of primary producers and sole traders, including determining amendments and objections.

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ATC 2042

From July 1987 the applicant performed desk audits in the categories of taxpayers who lodge S, A and B returns. In April 1988 she became an assistant supervisor and later a supervisor in desk audit; performed case selection and assessed partnership returns. She also prepared a staff training package on the substantiation rules. In October 1988 she resigned from the Taxation Office to accept a position as a graduate trainee accountant in the accounts payable section at General Motors-Holden's. In August 1989 she was promoted to her current position of accountant within the operations analysis group, which is responsible for budgeting, forecasting and analysis work.

The requirements of para. (a), (b) and (c) of subreg. 156(2), are cumulative. The applicant has had no involvement in the ``preparation'' of income tax returns, so the question for determination is whether her work experience could be said to amount to ``examination'' of a broad range of returns to satisfy the test in para. (a). Only if it does will it be necessary to examine para. (b) and (c).

Mr Di Battista, who represented the applicant, submitted:

• (a) the applicant's employment with the Australian Taxation Office satisfied the test of ``relevant employment'' as the legislation does not specify the types of returns required to be prepared or examined in order to satisfy sec. 251BC(1);
• (b) in reaching the decision it did, the respondent exceeded its power as it is outside the scope of the legislation to decide that a person who had not examined company and trust returns was not a fit and proper person to be registered as a tax agent;
• (c) the term ``broad range'' is ambiguous, in the same way as the word ``substantial'' in subreg. 156(2) was described by Mr Beddoe Senior Member, in
  Re Seymour and Tax Agents' Board (Qld) 90 ATC 2001 as, ``notorious for its lack of precision of meaning'', and could well be construed to mean an exposure to a broad range of returns within a particular category of taxpayer. The purpose of the legislation is to ensure that competent persons are preparing returns and a person who otherwise satisfies the criteria, notwithstanding the lack of experience in company and trust returns, is still competent to prepare returns and proper taxation advice in the areas in which experience has been gained;
• (d) the respondent failed to take into account that a person of good fame and integrity could reasonably be expected to exercise judgment in only accepting work within his/her area of expertise.

Data produced by Mr Pietka, the secretary of the respondent, disclosed that trust and company returns comprised approximately 7 per cent of the number of returns lodged throughout Australia during 1988-89, of which 96 per cent were lodged by agents. A similar percentage of partnership returns which comprised 5.5 per cent of total lodgments were lodged by agents.

Individual returns comprise some 88 per cent of lodgments. Of these 86 per cent in the A/AB category were lodged by agents, as were 50 per cent of S returns.

The substantial amendments to the Act introduced by the Taxation Laws Amendment Act (No. 2) No. 78 of 1988, which came into force from 1 November 1988, reflect the objective that persons who prepare income tax returns or transact business in income tax matters for reward have appropriate knowledge of income tax law and practice. The respondent has the responsibility of assuring that objective. In the present circumstances it must be satisfied that the applicant has had substantial involvement in income tax matters, including the preparation or examination of a broad range of returns. That necessarily involves an objective assessment of the applicant's experience.

The applicant's experience in the taxation office was predominantly in the field of taxpayers who are salary or wage earners, sole traders or in partnerships. In answer to Mr Frost, solicitor for the respondent, the applicant agreed that her experience was with returns at the ``lower level'' of complexity. The evidence disclosed that in the areas of her experience she reviewed a significant number of returns, examined objections and answered taxpayers' queries in the course of her duties. Her experience did not extend to any company, trust or superannuation returns. Her work since October 1988 at General Motors-Holden's has not included any involvement in taxation matters, it being purely of an accounting nature.

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ATC 2043

The qualifying adjective ``broad'', is a word of plain meaning and common understanding. It has a similar meaning to ``wide''. An appeal from the decision in Seymour (supra) was allowed by the Federal Court but on grounds not relevant to this application (see Tax Agents'
Board of Queensland v. Seymour 90 ATC 4262; (1990) 94 A.L.R. 635). I do not accept the ``ambiguity'' argument, or that it is open to put on the word ``broad'' the construction urged by the applicant. The word ``broad'' is not one of similar meaning to ``substantial''. In the context in which they are used, both terms are used as qualifying adjectives. ``Broad range'' does not mean the same thing as ``substantial involvement'' and vice versa. There may be one without the other. The respondent has to be satisfied the applicant has acquired both in order to have been engaged in relevant employment within the meaning of reg. 156.

Subregulation 156(2) cannot, in my opinion, be construed as applying to a particular category of returns. It is not the experience within a category of returns but rather the scope of the returns which is the test to be applied.

It is not a relevant consideration that reg. 156 does not specify the categories of returns in defining ``relevant employment''. It is explicit in the language used, that wide-ranging experience is required. A lack of experience in the areas of returns referred to, in my opinion, precludes satisfaction of the test of relevant employment. Nor is there any issue that in arriving at its decision the respondent exceeded its powers. Clearly, the Act empowers the respondent to decide, initially, who is entitled to become registered as a tax agent.

Turning finally to what I may term the ``good faith'' submission, that the applicant could reasonably be expected to confine her taxation work to the areas in which she has experience, that submission is to some extent an acknowledgement that her experience is limited to particular areas, but it presents an insurmountable difficulty for the applicant. The respondent is not empowered to grant restricted or limited registration. Once registration is granted, the agent is not limited in the taxation work he or she may undertake. With the best of intentions it is not an easy thing, more so when establishing a practice, to decline a potential client outside one's sphere of experience. The respondent has to ensure as best it can, that the person entrusted with any type of return or income tax business is fit to undertake the work.

It was common ground that other than the extent of her experience the applicant was a fit and proper person to be registered. Her experience to date does not meet the requirement of relevant employment or its equivalent as provided in reg. 156.

For these reasons the decision under review will be affirmed.