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A tax agent who demonstrated a cavalier attitude towards his own tax affairs and the incorrect preparation of over 500 clients’ income tax returns has had his registration termination decision backed by the Administrative Appeals Tribunal.
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Tax agent’s ‘cavalier attitude’ leads to registration termination
30 September 2019
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Australia Fortune Financial Group Pty Ltd (AFFG) and Feng Gao, the sole director and controlling mind of AFFG, had their tax agent registrations terminated by the Tax Practitioners Board from 27 August 2019.
Mr Gao and AFFG had both filed a stay application with the AAT, but was ultimately refused by the tribunal after it found that Mr Gao had not shown “awareness of the significance and consequences of the misconduct or wrongdoing”.
The case
Mr Gao was the sole director and controlling mind of Meihua Australia Pty Ltd, a client of AFFG.
After undergoing an ATO audit in 2017, the ATO determined that Meihua had not correctly reported GST in relation to some property transactions between 1 January 2014 and 30 June 2016.
The ATO determined the property sale was a mixed supply and that GST was payable on the land component. Meihua was found to have owed $445,485 in GST and had a tax shortfall penalty of $68,180.75.
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The Tax Office also commenced an audit of AFFG, finding that it consistently lodged its own income tax returns and business activity statements late, alongside late lodgements of superannuation guarantee charge statements.
To compound that, the ATO found that AFFG had prepared the tax returns of 535 workers in the meat industry who had made large work-related expense claims.
All those meat workers were required to amend their ITRs, with the ATO reducing the work-related expense claims by $1,789,638, with an ultimate shortfall of $616,050.29.
As a result, both Mr Gao and AFFG had their registrations terminated by the TPB.
Mr Gao’s defence
Mr Gao reasoned that AFFG fell behind on its lodgements due to the fact that operating a small company was “time-consuming” and that he ultimately rectified the situation by paying all money with interest.
However, AAT member Dominique Grigg said that was not a satisfactory response, noting Mr Gao’s “somewhat cavalier attitude” to the issue.
“As a registered tax agent, he should know what his tax obligations are and comply with them. More is expected of tax agents. It is not satisfactory to simply say the returns have now been lodged and outstanding liabilities paid, with interest,” Ms Grigg said.
Mr Gao also defended claims made by the meat workers, believing those claims to be legitimate.
“The tribunal is concerned with the probability that Mr Gao does not understand his responsibility for the false and misleading ITRs lodged by AFFG on behalf of his clients. In addition, he shows a substantial lack of understanding of relevant tax laws,” Ms Grigg said.
Finally, in response to AFFG’s conduct as tax agent for Meihua, the AAT found that Mr Gao “knew Meihua had claimed interest incorrectly and again demonstrated a cavalier attitude to the seriousness of the breach”.
“This raised a real and significant concern regarding whether ‘TPB and the commissioner can have confidence in the practitioner’s continued ability to honestly and competently discharge the functions of the profession’,” Ms Grigg added.
“Taxpayers have a right to expect that the advice they are receiving from their tax agents is competent and that they are not being led into danger of breaching their tax obligations by claiming deductions which cannot be maintained.”
Mr Gao and AFFG will still be allowed to apply for a review, and if successful, the termination decisions will be set aside or varied and the applicants will be able to recommence the provision of tax agent services as registered tax agents.
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