Re EGULIAN and TAX AGENTS' BOARD OF NEW SOUTH WALES

Members:
BJ McMahon

Tribunal:
Administrative Appeals Tribunal

Decision date: 2 December 1991

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BJ McMahon (Deputy President)

This is an application to review a decision of the respondent Board, dated 19 February 1991, rejecting the applicant's application for registration as a tax agent pursuant to the provisions of sub-section 251JA(1) of the Income Tax Assessment Act and sub-regulation 154(3) of the Income Tax Regulations. These have since been replaced by sub-section 251J(1) of the Act and regulation 156(1). The Board rejected the application on the grounds that the applicant had not satisfied the Board that his work experience constituted substantial involvement over a broad range of income tax matters.

2. The legislative scheme and the regulations are set out in full in
Re Crowley and Tax Agents' Board (NSW) 90 ATC 2005 at pages 2007 and 2008. The relevant matters for consideration in the present application are to be found in regulation 156(1)(c) which is in the following terms -

``R156(1) For the purposes of subparagraph 251BC(1)(b)(ii) of the Act, the following qualifications are prescribed:

• ...

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• (c) the person:
  • (i) shall have completed the academic requirements for the award of a diploma or certificate from a college of technical and further education following a course of study in accountancy of not less than 2 years' duration of full-time study or 4 years' duration of part-time study;
  • (ii) shall have:
    • (A) been engaged in relevant employment on a full-time basis for not less than a total of 2 years 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; or...''

3. There is no question that the applicant has the academic qualifications referred to in the regulation. The only matters for determination are whether the applicant complies with sub-paragraph (ii)(A), or in the alternative (B) or (C). For the purposes of the regulation relevant employment is defined in sub-regulation 156(2) -

``R156(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 was born in Syria in 1957 and came to Australia in 1976. He is now an Australian citizen. Between 1976 and 1981 he was employed in various sales positions. Between 1982 and 1984 he studied accounting at North Sydney Technical College. While gaining his qualifications, he took up part-time employment with Ohanessian & Associates, accountants and tax agents, where he worked in 1982 and 1983. In 1984 he was employed full-time by that firm. In 1985 until May, he continued to work for that firm under contract.

5. He joined the Australian Taxation Office on 5 May 1985 as an Assessor, Class ⅔, and dealt with assessments in the non-business section. His duties involved the assessment of returns for current and previous years lodged by salary and wage earners, investors and property owners. He was called upon to determine objections, to process amendments, and to raise so-called arbitrary assessments. Figures tendered at the hearing indicated that during this period he was involved with a large number of returns, all of which were at the lowest level of complexity.

6. In November 1985, he was transferred to the assessment review unit where his job was to determine objections and amendments. He agreed in evidence that for the one-and-a-half years during which he served in this unit, he was restricted to salary and investment income returns.

7. In October 1986 he was deployed for one month to the Sydney Enquiries Section. There, he developed a knowledge of the legislation, in dealing with telephone and counter enquiries, to a level that has since been commented upon favourably.

8. In December 1986 he was deployed for one month to the Revenue Section dealing with withholding tax. During that time, he did not deal with returns but processed withholding tax documents and ensured that the relevant legislative provisions were complied with.

9. In July 1987 he was promoted to ASO3 and was deployed to the Desk Audit Section. His then supervisor, Mr Sampson, gave evidence on the hearing. The work which the applicant carried out with this unit for approximately one year involved relatively simple returns. He was called upon to carry out substantiation audits, either by requesting by telephone production of receipts or by going

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through substantiating documents face to face with the taxpayer. The duty statement for this position confirmed that the applicant was obliged individually, or as a member of a team, to undertake audits of ``specific items of the financial affairs of taxpayers (as prescribed) to obtain information to determine and substantiate taxpayer liability''. Basically, the prescribed items concerned returns of individuals and the occasional partnership, where it transpired that an individual was involved in a simple partnership. Mr Sampson confirmed that the applicant was restricted to returns of individuals and partnerships, but only where the affairs of the partnerships were simple such as owning rental properties and only when these partnerships emerged during an audit of an individual. He estimated that 95 per cent of the applicant's work would relate to individual returns. Although the applicant's abilities were of a high order, there was a time when his work output fell. The applicant considered that he was being restrained and that he was over qualified for the relatively simple tasks he was doing. Towards the end of his deployment in this unit, he was counselled by the manager in Mr Sampson's presence.

10. It is not clear whether his next move was made in May 1988 or May 1989. The applicant said that he was transferred to the Inspections Section in May 1988 in the statement which he furnished to the Board. In his evidence he thought it may have been May 1989. His recollection was that he was with Inspections for only about one month. This does not appear to accord with the records. His next recorded transfer was not until July 1989. The evidence of Mr Sampson, his supervisor, was that he was with the unit from mid 1988 to mid 1989 indicates that probably the estimate made by the applicant when he prepared his summary in November 1990 in connection with his original application would be more accurate.

11. While in the Inspections Section, his job consisted of inspecting group employers' wage books, cheque butts, cash books and so on, and comparing them to the employment declaration forms to ascertain the number of employees and wages paid against wages payable. The purpose of this was to detect any employees on cash payments or false names. In August 1988, training duties were added to his other duties.

12. In July 1989, he was promoted to the Business Audit Section. His supervisor in this section, Mr Booth, gave evidence on the hearing. He confirmed that during the one year that the applicant was with this unit, he was involved in auditing returns for individuals who were in business, for partnerships, and to some degree for trusts. His responsibility did not extend beyond returns for these tax paying entities. Although there was some dispute as to the duty statements applicable at the time, it is clear that the case selection panel referred to by Mr Booth kept the standard of cases dealt with by the unit at a fairly simple level. According to Mr Booth, the applicant completed three audits relating to the incomes of members of partnerships while he was with the unit. In the course of one of these audits, the taxable income of a company was amended as a result of a search of real estate records. This specific adjustment stood alone. The applicant did not undertake full company audits as he was not of a sufficiently high grade to comply with departmental practice. During this time, the applicant unfortunately fell ill and had leave, totalling some 18 weeks, over the period of one year. He also underwent serious surgery during this time.

13. On 1 July 1990, the applicant resigned from the Australian Taxation Office. The following day he commenced work under contract with Samuel Testa & Co, Public Accountants. Mr Testa gave evidence on the hearing. He said that in July 1990, the applicant came to him and said that he was looking for work experience to help with his tax agent application. Mr Testa informed him that he had only a small practice and that although he would like to help him there was probably only enough taxation work to keep the applicant going, at the most, for six months. It was agreed that he should come on that basis and be paid at an hourly rate. Mr Testa said that he provided the work for the applicant by giving him the query and answer sheets after he had interviewed the clients. The work extended beyond returns for individuals. Between 2 July and 1 November 1990, the date of the initial application, the applicant said that he had prepared six individual returns, 46 business returns, one superannuation return, two trust returns, nine partnership returns, 17 company returns and one fringe benefit return. The numbers were brought up to date in evidence

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given on the hearing. In addition to the above figures, during the balance of his association with Mr Testa, the applicant prepared 22 individual, one trust, seven partnership and six company returns. His association with Mr Testa ended on 6 December 1990. Documents were tendered giving the names of the various taxpayers concerned. Almost all of them were individuals.

14. Mr Testa said that the applicant's work was about average quality. He would check the returns, speak to the client about them and if both were satisfied, he would then sign as tax agent and lodge the returns in the normal way. The applicant would have averaged perhaps two days per week on his work over the six-month period.

15. The first question to be determined is the meaning of the phrase ``in the preceding 5 years'' referred to in the regulation. It was submitted on behalf of the applicant that the appropriate period should be an interval of five years concluding on the date of the hearing, namely 4 November 1991. The original application to the Board was made on 1 November 1990. The decision of the Board was given on 19 February 1991, and the application to this Tribunal was made on 3 April 1991. The applicant's circumstances have changed in the past 12 months. It was submitted on his behalf that the breadth of his experience had been considerably widened through his association with the two firms of accountants to which I have referred. It was submitted that the Tribunal should take into account this additional experience and that as the Tribunal stood in the shoes of the decision-maker, the preceding five years referred to in the regulation should mean the five years preceding the date of hearing. I cannot accept this submission.

16. It is true that the administrative decision-making process should be regarded as a continuum (as Davies J put it in
Jebb v Repatriation Commission (1988) 80 ALR 329). This does not however have the effect of moving the relevant date in all circumstances. In
Freeman v Secretary, Department of Social Security (1988) 15 ALD 671 at 674 the same judge observed that although the Tribunal was entitled to take into account facts subsequent to the date of the relevant application, the issue remained whether, having regard to those facts, the decision made as a result of the original application was the correct or preferable decision, not whether the applicant, in that case, had an entitlement as at the date of the Tribunal's decision. His Honour acknowledged that regard must always be had to the nature of the decision which is under review. In my view, the decision in the present case is analogous in its effect to the decision considered in Freeman, in that it does not have an ongoing effect but resolves an issue with a degree of finality.

17. It follows that the relevant period for consideration is the five years from 1 November 1985 to 1 November 1990. During almost all of that period, the applicant was employed by the Australian Taxation Office. From 5 May 1985 to 1 July 1990, his experience and involvement in income tax matters did not include the preparation or examination of a broad range of income tax returns. The meaning of ``broad range'' was considered in
Re Chenouda and Tax Agents' Board of NSW 91 ATC 2027 at 2030. The vast majority of returns with which the applicant was involved concerned individuals during the relevant period. In his last 12 months with the Australian Taxation Office, the applicant did have some ``exposure'' to partnerships but this was limited for a variety of reasons, including his health and the fact that he was excluded from complex audits. While at the Australian Taxation Office he had no experience in superannuation, fringe benefits or trust returns. All of these types of returns form part of the broad range referred to in the regulation.

18. The applicant sought to overcome this difficulty by pointing to the experience that he had with the two other firms, particularly Mr Testa's firm. It was submitted on his behalf that he needed only ``exposure'' to other types of returns in order to demonstrate his competence. It was submitted that it was not necessary that he should be involved in the preparation, or examination, of returns of all types, so long as he had a sample experience which demonstrated his competence.

19. In my view, this submission cannot succeed for two reasons. Firstly, the regulation requires ``substantial involvement'' including preparation or examination of a broad range of income tax returns. A demonstration of academic capacity or a passing acquaintance

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with the types of problems that might be thrown up with the preparation or examination of such returns is not, in my view, sufficient to satisfy the requirements of the regulation. Substantial involvement necessarily implies involvement to a substantial extent. To be substantially involved in one, or two, or three returns, is not what is intended by the regulation. What is required is involvement in a substantial number of returns which represent a broad range. Furthermore the ``relevant employment'' must be continuous over the relevant period. If it could be said to exist here, it would be over a mere six months.

20. The second reason for rejection of the applicant's submission arises from the nature of his relationship with Mr Testa and Mr Etmekdjian.

21. The regulation requires that an applicant shall have been engaged in ``relevant employment'' on a full-time basis for not less than a total of two years in the preceding five years. Clearly the arrangements made between the applicant and Mr Testa could not be said to be employment on a full-time basis. So far as Mr Etmekdjian was concerned, it did not amount to employment on any kind of basis, as no payment was made for the applicant's services. The applicant is therefore obliged to fall back on paragraph (B) and submit that the arrangements amounted to relevant employment to an extent which may be regarded as equivalent to that referred to in sub-paragraph (A). This argument was rejected by Pincus J in
Tax Agents' Board of Queensland v Seymour 90 ATC 4262; (1990) 21 FCR 357. In His Honour's view, a ``self employed'' person cannot be said to be either in employment or in any equivalent legal relationship. At ATC page 4266; FCR pages 361 and 362 His Honour said -

``It may be objected that it is unduly restrictive to preclude aspiring tax agents from qualifying by working on their own, rather than as an employee or partner under the supervision of a registered person. One hazard of that policy is that registered tax agents might tend so to arrange matters as to make it difficult for others to enter their vocation and compete with them. Considerations of that sort may suggest the desirability of applying para. (C) generously, but cannot, in my opinion, force a construction of the regulation which is, as a practical matter, irreconcilable with the intention of the Act.

The conclusion which I have come to, namely that the Tribunal was wrong in deciding that the respondent was in `employment' within the meaning of the relevant provisions, makes it unnecessary to consider the other points raised by Miss Wilson. Since I have a view about one of them, however, I have decided to express it. It is my opinion that the word `equivalent' in para. (C), read in context, does not connote precise equivalence to the qualification in para. (A). The question is what the Board regards as equivalent, and it may properly treat as equivalent to the work specified in subreg. (2), work which is of a different description, as long as the applicant has done the work while in `employment' in the sense I have explained.

In summary, it is my view that the word `employment' in reg. 58CA is used in the sense which excludes those simply working alone in their own business - the so-called `self-employed'. It follows that the respondent was not qualified under that regulation...''

22. It follows that the involvement with returns, under the associations with Mr Testa and Mr Etmekdjian cannot be said to be ``relevant employment'' for the period during which those arrangements were in existence. The applicant's experience with the Australian Taxation Office (where he was no doubt employed) also cannot be said to be ``relevant employment'', because of the narrowness of its range. The applicant therefore does not comply with the requirements of the regulation.

23. The decision under review is therefore affirmed.