Summary of penalties, sanctions and terminations
Edition 5: October 2016
This is the fifth edition of the Summary of penalties, sanction and terminations. The cases reported reflect the Tax Practitioners Board’s (TPB) compliance strategy, and provide a summary of some of the recent compliance outcomes, including Federal Court, Administrative Appeals Tribunal (AAT) and Board Conduct Committee decisions.
The TPB strives to be fair, consistent and practical in the way we regulate tax practitioners and administer the Tax Agent Services Act 2009 (TASA). We want to protect the consumers of tax practitioner services by ensuring:
- tax practitioners have the appropriate skills and knowledge to provide tax agent services competently
- registered tax practitioners are aware of and understand their obligations
- we address the actions and behaviour of unregistered practitioners who should be registered.
The Board will take firm action if it determines that registered practitioners have not complied with their obligations under the TASA, including the Code of Professional Conduct (Code).
Education, communication and an effective complaints process strengthen the integrity of the tax practitioner profession.
Sources of complaints to the TPB in 2015–16
The TPB terminated the registration of a tax agent, Adrian Kelly, on the basis that he ceased to meet the ‘fit and proper’ eligibility requirement for registration under the TASA, for failing to comply with TPB orders.
The TPB imposed an order on Mr Kelly following a finding that he had breached the Code by failing to comply with the taxation laws in the conduct of his personal affairs. These orders required him to successfully complete a course of education/training on the Code in the TASA, and to lodge outstanding income tax returns for the 2006 to 2013 years within a certain period.
At the time the TPB decided to terminate Mr Kelly’s registration, he had not lodged any of the outstanding tax returns and had not commenced the course on the Code.
Mr Kelly sought a review of the TPB’s termination decision in the AAT. The AAT affirmed the TPB’s decision to terminate the agent’s registration on the basis that he was not a fit and proper person, notwithstanding the fact that Mr Kelly had lodged all outstanding tax returns and had also enrolled in an appropriate course.
The AAT determined that Mr Kelly’s failure to comply with the TPB’s orders, and his lack of appreciation of the statutory obligations of a registered tax agent and the role of the TPB, demonstrated that he was not a fit and proper person to be registered under the TASA.
The AAT and Federal Court affirm TPB’s decision to reject registration renewal applications by company and director – director not fit and proper
A registered tax agent company, Delis Enterprises Pty Ltd, and its sole director and supervising agent, Peter Delis (who was also a registered tax agent), each applied to the TPB for registration renewal under the TASA.
The TPB rejected Mr Delis’ renewal application on the basis that he did not satisfy the ‘fit and proper’ eligibility requirement for registration under the TASA. The TPB subsequently determined that the company was ineligible for registration as its sole director and supervising agent was not a fit and proper person.
In determining that Mr Delis was not a fit and proper person, the TPB noted:
- his failure to lodge his 2009 to 2011 personal income tax returns by their required due dates
- his failure, as the sole director and supervising agent of the company, to ensure that the company complied with its tax obligations
- his failure to ensure that another company he controlled complied with its tax obligations; and
- the fact that he had defaulted on numerous payment arrangements with the ATO in relation to his personal tax debt and those owed by the company.
Upon review, the AAT affirmed both of the TPB’s decisions. The AAT determined that Mr Delis’ non-compliance with his tax obligations was lengthy (extending over 14 years), and that although Mr Delis did make payments to the ATO from time to time, these amounts were always less than the amounts owing. The AAT also found that payments were only made following ATO threats of legal action or when Mr Delis faced the risk of losing his tax agent registration.
Mr Delis and the company appealed the AAT’s decision to the Federal Court, submitting that the AAT made numerous errors of law in its review. The Federal Court dismissed the appeal, finding the AAT’s decision contained no errors of law.
Lysa Gylman applied to the TPB for renewal of her tax agent registration. At the same time, the TPB had received a referral from the ATO advising that it had disqualified Ms Gylman as a trustee of a self-managed super fund (SMSF) under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
The TPB rejected Ms Gylman’s renewal application on the basis that she failed to meet the fit and proper person registration requirement due to her conduct while acting as a trustee of an SMSF.
The AAT affirmed the TPB’s decision, finding Ms Gylman was not a fit and proper person for:
- transferring funds from the SMSF’s bank account to her personal account
- improperly releasing superannuation funds early
- facilitating the rollover of superannuation entitlements into the SMSF for numerous people who were not members of the fund (contrary to restrictions under the SIS Act)
- preparing and submitting incorrect SMSF’s tax returns; and
- misunderstanding the audit requirements in the SIS Act, particularly those governing independence. The AAT regarded this as demonstrating a “misapprehension of basic and important concepts highly relevant to the competence of a taxation agent”.
The TPB terminated a tax agent’s registration for multiple breaches of the Code. It found that the agent had failed to:
- pass on tax refunds to clients
- prepare a tax return for a client
- comply with taxation laws in the conduct of his personal tax affairs; and
- respond to TPB enquiries.
The TPB also determined that the tax agent should be prohibited from applying for registration for five years. The TPB noted that at the time of making its decision, it was still receiving complaints from former clients of the agent.
The AAT upheld the TPB’s decision to reject a BAS agent registration application on the grounds that the applicant had failed to meet the relevant education qualification requirements.
Mr Walsh had applied for registration as a BAS agent, indicating he had completed a TPB approved course in basic GST/BAS taxation principles. Mr Walsh sought to rely on his attendance at seminars, engagement in continuing professional development activities as a Fellow of CPA Australia, and his previous employment as a finance and administration manager.
The AAT affirmed the TPB’s policy requiring independent assessment as part of an approved course (as set out in the TPB’s Information Sheet BAS agent education qualification requirements).
The AAT agreed with the TPB that the activities relied on by Mr Walsh did not involve the necessary requirements for an approved course, including independent assessment.
A tax agent application was rejected by the TPB as it was not satisfied that the applicant, Ms Oleshko had met the eligibility requirements for registration under the TASA.
In particular, it determined that Ms Oleshko had not satisfied the relevant qualification and experience requirements for registration. She was unable to provide sufficient evidence that she had worked under the supervision and control of a registered tax agent for the required period of time or had work of another kind that would satisfy the TPB.
Ms Oleshko applied to the AAT for a review of the decision. The Board’s decision was affirmed by the AAT.
A BAS agent partnership’s registration was terminated on the basis that it no longer had any registered individuals to provide BAS services to a competent standard and carry out supervisory arrangements.
The partnership’s two supervising BAS agents had failed to renew their individual registration, and despite numerous attempts by the TPB to advise the partnership of the consequences of not meeting their sufficient number requirements, the partnership failed to respond. The TPB consequently terminated the partnership’s registration.
Having a sufficient number of individual registered agents to provide services to a competent standard and to carry out supervisory arrangements is a legislative requirement for company and partnership agents. The TPB will take prompt action where an entity ceases to meet this requirement.
After an investigation, the TPB determined that a tax agent had breached the Code by failing to comply with the taxation laws in the conduct of their personal affairs. The tax agent also failed to:
- notify the TPB that they had become an undischarged bankrupt
- lodge income tax returns by their respective due dates for three financial years; and
- respond to correspondence and telephone messages from the TPB.
The TPB determined that based on the conduct of the agent, including their status as an undischarged bankrupt, the agent was not a fit and proper person to remain registered as a tax agent.
Based on evidence available to the TPB it was determined that a tax agent had ceased to be of good fame, integrity and character. The registered tax agent failed to act honestly and with integrity by:
- preparing false business activity statements without his clients’ knowledge
- failing to pass on ATO refunds to his clients
- misappropriating refunds from his trust account to his own personal account; and
- altering tax invoices and GST listings of clients without their knowledge.
The tax agent had also breached the Code by failing to:
- comply with the taxation laws in the conduct of his personal affairs by failing to declare his correct taxable income to the ATO
- account to his clients
- take reasonable care in ascertaining clients’ state of affairs.
Given the above, the tax agent registration was terminated and the agent was prohibited from applying for registration with the TPB for a period of five years.
The TPB’s key objective is to ensure public protection. In this instance, it determined that the agent’s conduct presented an unacceptable risk to the public.
The TPB will continue to monitor the tax agent, and work with the ATO to ensure there are no further breaches of the TASA.
A company tax agent was found to have an insufficient number of individual supervising agents to provide tax agent services to a competent standard and carry out supervisory arrangements.
The TPB received a complaint against the company tax agent for failing to advise its client that there had been a mistake in the draft tax return before the return was lodged. During its enquiries, the TPB found the company tax agent had 20,000 clients with only one supervising tax agent. It determined that the company did not have a sufficient number of individual tax agents to exercise appropriate supervision and control.
The company tax agent was directed to nominate at least two additional individual tax agents to supervise the services provided by the company. They were also directed to ensure that they had proper processes in place to reconcile any discrepancies.
- $81,500 penalty for providing and advertising tax agent services
- Tax agents' registration restricted by the AAT