Re CHENOUDA and TAX AGENTS' BOARD OF NEW SOUTH WALES

Members:
BJ McMahon

Tribunal:
Administrative Appeals Tribunal

Decision date: 13 May 1991

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BJ McMahon (Deputy President)

This is an application brought to review a decision of the Tax Agents' Board of New South Wales, made on 28 August 1990 pursuant to the provisions of sub-section 251J(1) (formerly sub-section 251JA(1)) of the Income Tax Assessment Act 1936 (``the Act'') and Regulation 156(1) (formerly Regulation 58CA) of the Income Tax Regulations. The Board refused to register the applicant as a tax agent because it was not satisfied that his practical and relevant work experience met the current legislative requirements.

2. These requirements, and the legislative basis for the requirements, are set out in full in
Re Crowley and Tax Agents' Board (NSW) 90 ATC 2005 at pages 2007 and 2008. Section 251BC(1) of the Act defines a person as fit and proper to be registered as an agent only if he holds such qualifications (whether academic, by way of experience, or otherwise) as are prescribed. The present applicant was admitted to the degree of Bachelor of Business at the New South Wales Institute of Technology on 13 May 1987. There was no dispute that this constituted sufficient academic qualifications. The question to be decided was whether his experience was such as to fall within the terms of the prescribed standards.

3. Regulation 156(1) prescribes qualifications for the purposes of s 251BC(1)(b)(ii). Apart from setting out academic achievement requirements, the regulation prescribes that the applicant must have been engaged in ``relevant employment'' on a full time basis for not less than a total of 12 months in the preceding five years, or has been otherwise engaged in relevant employment to an extent that the Board regarded as equivalent. The crucial part of the regulation for the purposes of this application defines ``relevant employment'' in the following terms -

``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.''

4. The applicant worked in the Australian Taxation Office between 3 July 1978 and 13 October 1986. Evidence was given by way of letter dated 23 February 1988 setting out the details of this experience. Some of the details were corrected by the applicant in oral evidence. However, as the experience occurred principally more than five years prior to the relevant date (4 June 1990) only that experience with the Australian Taxation Office from 4 June 1985 to 13 October 1986 can be regarded as relevant employment, if it qualifies in all other respects.

5. From 25 September 1985 to 30 June 1986, the applicant performed higher duties in the Australian Taxation Office on a short term basis as a Clerical Administrative Class 7. His duties were ``to examine methods and procedures in the instalment area with a view to resource savings and improvements in operational efficiency and to devise improvements and oversight the assimilation of approved procedures''. On 16 July 1986, the applicant progressed to the position of Clerical Administrative Class 7 in the User Developed Computing Centre. His duties were -

``either individually or as a team member to undertake UDC projects, assist in the

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development and control of User Developed Computing in the Australian Taxation Office, plan technical computer resources for users and consult with users on application systems and problems and assist in the evaluation, development and implementation of user developed systems.''

He held that position until his resignation.

6. None of the duties of the applicant during the relevant period appear to fall within the definition of ``relevant employment''. The applicant's experience with the Australian Taxation Office therefore should be disregarded in considering the Board's decision.

7. After leaving the Australian Taxation Office, the applicant took up a position as accountant (taxation) with Toyota Motor Sales (Aust) Limited on 27 October 1986. He remained in that position for two years, resigning on 7 December 1988. According to the unverified statistical form accompanying his application (which was later confirmed in evidence), he completed a total of four income tax returns in that period. In evidence, however, he explained the work that was involved in his position and in compiling these particular returns.

8. He said it was true that he had prepared only two annual income tax returns for his company and two returns for private individuals. However, the preparation of the company returns involved looking at the accounts of each branch throughout Australia, analysing the separate businesses and consolidating the results in the final returns. One return, he said, was equivalent to the preparation of seven or eight returns.

9. In addition to the preparation of these returns, he advised Toyota from a taxation point of view on the acquisition program it had embarked upon. In the course of this program, he liaised with bankers and lawyers. In the ordinary course of his work he prepared procedures for other accountants in the organisation, gave advices on certain transactions, gave advice from a taxation point of view to some of the dealer networks in connection with their relationship with the company and formulated education procedures and advices to ensure that the company prepared and submitted an accurate taxation return. The research, organisation and other executive work was a necessary part of the preparation of the relevant returns.

10. He then moved to Pioneer International Limited on 12 December 1988 where he was to remain until September 1990. He was engaged as senior taxation officer and later as assistant tax manager for the Ampol Group of 30 companies, superannuation schemes and joint ventures. In that position, he prepared draft returns for each of the tax paying entities. They were, of course, finally vetted by outside tax agents. The applicant insisted that these agents did no more than ``rubber stamp'' the documents that he prepared.

11. His group expanded with the acquisition of a further 70 companies in the Solo Group in April 1990. Although he was not involved in the preparation of returns for the year ended 30 June 1990, work had started beforehand and he had been involved in drafting instructions for those returns.

12. The Ampol Group provided wider experience than he had received at Toyota. The Holding Company alone was engaged in a variety of enterprises, such as running service station joint ventures, dealing with oil and mining interests, financing and the like. As the applicant said on a number of occasions the preparation of one tax return involved looking at dozens of businesses, talking to people around Australia and checking primary records of all the businesses involved. Another company in the group was involved in refining oil. The size and magnitude of that company's assets were reflected in the complications of its accounts. In the course of advising that company, he had occasion to advise staff travelling overseas, and to monitor the company's overseas activities.

13. The company had been subject to a tax audit. Over a period of two years, the applicant said that he was called upon to liaise with officers from the Australian Taxation Office. He illustrated his assertion that the taxation affairs of the company were complex by reference to the fact that it had taken two years to investigate only one return.

14. In September 1990, he moved to Caltex Oil Australia Limited as taxation manager for the group. Basically, his duties were the same as they were at Ampol, although his new company was much larger. Being part of a multi-national group, he was called upon to

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consider other problems relating to staff, expatriates' residency status and thin capitalisation. Again, he pointed out that the preparation of one return would involve a consideration of some 13 businesses. In addition to his work leading up to the preparation of these returns, he was constantly called upon for advice, to address the board, to prepare manuals, to institute reviews of procedures and to lay the ground for an expected tax audit to which all oil companies were being subjected. Although he said that 90 to 95 per cent of his time was spent on income tax matters, he agreed that he also had an involvement in land tax and stamp duties for both of the oil companies. He agreed that he had never been involved in the preparation of returns for an unincorporated small trader or for a corporate partnership. He said that he had been involved in the preparation of one return for a trading trust in the Ampol Group. He had prepared only a few returns for individuals.

15. The reasons for his application were, he said, firstly to satisfy a need by his present employer to have a tax agent inhouse, and secondly, to improve his own personal prospects. He said that the company by which he is presently employed spends a great deal of money on tax agents, although most of the work done in the preparation of the tax returns is done inside. It would be a convenience to the company to have a tax agent inhouse because it could then benefit from extensions of time available to agents. Presently, the company has to comply with lodgment arrangements of outside tax agents. In addition to the company's own needs, the company pays the expenses of preparation of taxation returns for expatriate employees. The applicant said that if he was a registered tax agent, then this service could be provided by the company at a greatly reduced cost.

16. The applicant also had personal reasons for seeking registration. He said that many people wanted him to prepare their personal income tax returns and that he would be able to do this on weekends and in his spare time if he were registered. If his practice grew, he considered that he might leave his present employment and start his own business. He also considered it a reflection on his ability, when applying for jobs, to be obliged to say that he had been rejected by the Taxation Agents Board. He had previously been rejected shortly after he left the Australian Taxation Office, on grounds that he lacked relevant employment experience.

17. The applicant referred to a passage in Crowley at page 2010. The Tribunal there said -

``In addition there is no requirement that the substantial experience must be gained in the taxation section of a public accountant's office. It is not difficult to envisage factual situations where such substantial experience would be gained outside such employment, for example, experience gained in the taxation section of a large corporation or a trust company.''

18. I respectfully agree with the observations of the Tribunal and agree that there is no requirement in the regulations that relevant employment should be confined to the practice of a public accountant. Nevertheless, the employment gained in companies must be ``relevant'' as defined.

19. The general considerations to be addressed in applications of this nature were set out by Deputy President Forrest in
Re Civiti and Tax Agents' Board of Victoria 90 ATC 2039 at page 2042 -

``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 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.''

20. The regulation requires ``substantial involvement'' in ``the preparation or examination of a broad range of income tax returns''. It does not refer to income tax returns with a broad range. The adjective ``broad'' governs the noun ``range'' rather than ``returns''. The returns prepared by the applicant may have been the result of a broad

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range of enquiries and research. A few specialised returns resulting from such a broad range of enquiries does not, however, constitute a broad range of returns. What is contemplated by the phrase is a range of income tax returns, spreading over the spectrum of potential taxpayers. A large group of taxpayers consists of small businesses, individual traders and partnerships. If, as the evidence showed, the applicant has not been involved in the preparation or examination of tax returns for any of these classes of taxpayers, then he cannot be said to have had a substantial involvement in the preparation or examination of a broad range of income tax returns.

21. In Civiti, Deputy President Forrest said at page 2043 -

``... 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 wideranging 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.''

22. Having regard to the evidence I have come to the conclusion that the applicant, whilst clearly experienced in a specialised area, lacks experience as defined in the regulation. As was pointed out in Civiti, once registration is granted the agent is not limited in the taxation work he or she may undertake. It is not possible to grant restricted or limited registration. Consequently, it is essential that the substantial involvement in the broad range of returns must always be present. An agent must be capable of being entrusted with any type of return or any income tax business. That capability must be illustrated by relevant experience in ``relevant employment'' as defined. It is not present in the applicant's circumstances.

23. The applicant viewed both refusals of the Board as, in some way, a reflection of his competence as a corporate taxation executive. They are, of course, nothing of the sort. Obviously the applicant is skilled at his work, otherwise he would not have been engaged in senior positions by important companies. The Board does not purport to examine general competence. It merely administers the Act and regulations. It may well be that an inhouse tax agent is not considered by the legislature to be a desirable concept unless such an agent comes to a company already qualified. It may be policy that companies who, in effect, would be sole clients of particular agents, should not have lodgment privileges different from those of any other corporate taxpayers. Whatever policy lies behind the regulations, their words are clear enough. Mr Chenouda should feel no more aggrieved than a doctor who is refused registration as a dentist. His skills and experience are simply not those that are prescribed as necessary for the accreditation he seeks.

24. The decision under review is therefore affirmed.