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The court has upheld a decision by the AAT and Tax Practitioners Board to terminate an agent’s registration after she misused SMSF auditor numbers.
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Federal Court dismisses tax agent’s appeal against termination
28 May 2024
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A tax practitioner has lost an appeal to have an earlier decision by the Administrative Appeals Tribunal overturned after the agent was found to have breached the Code of Professional Conduct.
The applicant in the case had been registered since July 1987 and operated her practice as a sole practitioner since around 1988.
In February 2021, the ATO contacted the Tax Practitioners Board with concerns that annual returns for SMSFs lodged under the applicant’s registration number may have contained incorrect information.
The information given to the board also suggested that she may have failed to comply with the ATO’s requests for information relating to those SMSF annual returns, including requests for the provision of a copy of the approved SMSF auditor’s report.
The board requested that the applicant review the annual returns of two identified SMSF clients lodged for the 2018 financial year and advise whether the SMSF auditor number listed on those returns was correct, including by providing evidence to demonstrate that the SMSF annual return was audited or explaining why the annual return was not audited before lodgment.
The TPB’s letter also noted that the applicant may have outstanding personal taxation obligations. The ATO records available to the board indicated that she had an income tax debt of $193,522.07. The board requested that the applicant immediately address any outstanding personal tax obligations.
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The applicant's response to the board’s requests outlined some background to her circumstances.
She said that she had experienced serious illnesses since 2004 that had prevented her from working for some periods and that she had faced a range of challenges in her personal life in connection with the management of rental properties, their associated debt, and various serious family issues.
Regarding her personal tax liability, the applicant stated that she would have the debt cleared by the end of the financial year following the sale of her two rental properties.
Regarding the two annual SMSF returns with incorrect information, the applicant claimed that these were the only superannuation funds for which she had not obtained auditor reports before lodging the returns.
The applicant stated that one of the SMSFs was “quite complex” and that she had been emailing queries back and forth to the SMSF auditor for some time, but that she had not arranged for the audit report to be completed before lodging.
Following a meeting of the Board Conduct Committee in July 2022, the board decided to terminate the applicant’s registration as a tax agent on the basis that she had ceased to meet the tax practitioner registration requirement under s 20-5(1)(a) that she be a fit and proper person.
The committee determined per s 40-25 of the Tax Agent Services Act that the applicant should be prohibited from applying for registration under the TAS Act for two years from the date the termination of her registration took effect.
The AAT upheld the decision by the committee but varied the disqualification period from two years to 18 months to account for the period during which the applicant had been deregistered without the benefit of the stay orders.
The tribunal took into account the applicant’s ongoing health concerns and difficult personal circumstances, “whilst recognising the purpose of the TAS Act is the protection of the public”.
However, the tribunal found that the applicant’s health difficulties had existed over many years, as opposed to “isolated lapses of judgment or short-term difficulties”. It found that there was nothing that would excuse the applicant’s multiple breaches, especially in her dealings with the ATO and the board.
In her appeal of the tribunal decision, the applicant submitted that the AAT had erred by failing to take into account that she was winding down her practice, including by no longer accepting any new clients and that as a sole practitioner, her deregistration would cause prejudice to her existing clients.
The applicant said the fact she did not intend to accept any new clients was relevant to the protection of the public.
Justice Horan said he was not satisfied that the tribunal had failed to consider the effect of the termination of her registration on her existing clients and dismissed the appeal.
“The Tribunal clearly had regard to the protection of the public, in the light of its findings about the seriousness of the applicant’s conduct, and the expectation of members of the public that registered tax agents are persons of high integrity,” Justice Horan said.
“The Tribunal specifically referred to ‘protection of the clients who may engage the tax agent’s service’, together with protection of the revenue.”
Justice Horan noted that the Tribunal concluded that termination of the applicant’s registration was the appropriate sanction and, in determining the period for which the applicant should be prohibited from applying for registration, took all of these matters into account and gave “relevant weight to the applicant’s health, her age, and the other issues she has raised”.
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