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Summary of penalties, sanctions and terminations

Summary of penalties, sanctions and terminations

Edition 6: November 2017

Contents

The TPB’s compliance model

AAT affirms TPB decision to reject tax agent’s renewal application

Tax agent registration terminated

Written caution for breach of the Code

Sole company director fails to meet ongoing requirements

BAS agent individual application rejected

AAT review affirms termination decision

AAT review affirms TPB decisions regarding individual and company tax agents

Tax agent fails to meet ‘fit and proper’ requirement for renewal of registration

Other recent compliance cases
 

Foreword

This is the sixth 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 the TPB’s 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.

 

The TPB’s compliance model


Sources of complaints to the TPB in 2016–17


Make a complaint

Use our online form to make a complaint about a registered or unregistered tax practitioner. Please ensure you provide us with sufficient information to enable us to act on your concerns.

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AAT affirms TPB decision to reject tax agent’s renewal application

The AAT affirmed the TPB’s decision to reject the tax agent renewal application of Mr Philip Ham on the grounds he was not a fit and proper person.

The TPB was not satisfied Mr Ham was a fit and proper person given his:

  • conduct as the sole director of Canehire Pty Ltd (as trustee)
  • breaches of fiduciary duty and trust by Canehire
  • dishonesty in paying away proceeds of sale that lawfully belonged to beneficiaries of a trust.

The AAT determined that Mr Ham’s conduct, over an extended period, was ‘inconsistent with the qualities of moral soundness, uprightness and honesty that one would expect of a tax agent'.

For more information on this case refer to our media release

 

Tax agent registration terminated

The TPB terminated a tax agent’s registration and prohibited them from re-applying for registration for a period of five years.  

The tax agent was found to have breached the Code for engaging in the following conduct:

  • preparing and lodging documents on behalf of clients without their knowledge and authorisation
  • failing to account for ATO refunds and credits to his clients
  • altering tax invoices
  • failing to take reasonable care to ensure that taxation laws were applied correctly to the circumstances of his clients.

The tax agent’s conduct was so egregious that the TPB also determined that he was no longer a fit and proper person. The TPB was concerned that the tax agent posed an unacceptable risk to the public and consequently imposed the most serious sanction available by terminating his registration.

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Written caution for breach of the Code

The TPB found that tax agent Kamal Kishore had breached the Code by failing to act honestly and with integrity. Mr Kishore diverted business opportunities and solicited clients from his former employer to his own newly-established practice.

The TPB consequently decided to terminate his tax agent registration. Mr Kishore sought a review of the TPB’s decision. Upon review, the AAT found the tax agent had breached the Code, but decided to impose a written caution on the tax agent rather than terminate his registration.

The AAT reduced the sanction because the conduct was not likely to be repeated, no clients had suffered financial loss or financial disadvantage, and the tax agent had an otherwise unblemished professional history.

The AAT stated that ‘the receipt of such a caution, together with the ordeal of having endured this review proceeding, will serve as a sufficient reminder to Mr Kishore of his obligations under the Code.’

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Sole company director fails to meet ongoing requirements

The AAT affirmed the TPB’s decision to terminate a tax agent’s individual registration as he ceased to meet the ongoing registration requirement to be a fit and proper person.

Consequently, the AAT also affirmed the TPB’s decision to reject the tax agent’s company renewal application on the basis that the company had ceased to meet the registration requirement that each of its directors be a fit and proper person.

The tax agent was found not to be a fit and proper person due to his failures to ensure that his trust debt, which included a significant amount of public money ($562,182), was paid to the ATO when incurred. He also failed to have any payment arrangement in place to rectify the debt and attempted to place the blame on his work colleagues.

Upon review the AAT agreed with the TPB submissions and found the tax agent did not satisfy the three elements of what is required to be a fit and proper person:

  • competence;
  • character; and
  • contrition.

The tax agent was found to be an unreliable witness as his evidence often appeared to be false or misleading.

The decision confirms that a sole director of a company is required to ensure they meet their ongoing registration requirements.  

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BAS agent individual application rejected

The TPB rejected an application for BAS agent registration by Mr Mervyn Walsh under subsection 20–25(1) of the TASA.

This application was assessed under Item 102 in Schedule 2 of the Tax Agent Services Regulations 2009 (TASR) which requires an applicant to demonstrate, among other things, that they:

  • have successfully completed a Board approved course in basic GST/BAS taxation principles
  • have undertaken at least 1,000 hours of relevant experience in the past four years.

Mr Walsh sought to rely on his attendance at seminars, engagement in continuing professional development activities and previous employment as a finance and administration manager to demonstrate that he met these requirements.

Mr Walsh also did not provide a statement of relevant experience or other evidence to confirm the hours spent on providing BAS agent services and further information was needed to confirm whether he met the relevant experience requirement for BAS agent registration.

The TPB was not satisfied that Mr Walsh met these qualifications and experience requirements in the TASR. In relation to his qualifications, the TPB did not accept that the seminars and activities he had undertaken were equivalent to a Board approved course in basic GST/BAS taxation principles, as they only involved attendance at continuing professional development presentations without any independent assessment.

Accordingly, the TPB rejected Mr Walsh’s application for registration as a BAS agent under subsection 20–25(1) of the TASA.

Mr Walsh appealed to the AAT. The AAT affirmed the TPB’s decision to reject his application for BAS agent registration.

The AAT acknowledged that Mr Walsh had significant experience (more than 30 years) in the accounting profession, and had participated in extensive continuing professional development activities throughout his career. However, in upholding the TPB’s decision, the AAT noted the TPB’s requirements of a Board approved course in basic GST/BAS taxation principles as set out in its Information Sheet TPB(I) 04/2011 BAS agent education qualification requirements’ and considered it was clear that the seminars did not meet the requirements for an approved GST/BAS course. In particular, the AAT noted that even on Mr Walsh’s evidence, the courses attended required only that he sit and listen to presentations without any independent assessment being conducted on the content of the presentations.

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AAT review affirms termination decision

The TPB terminated the tax agent registration of Rudy Frugtniet, and prohibited him from re-applying for registration for a period of five years.

The TPB found that Mr Frugtniet had ceased to meet the fit and proper person registration requirement for a number of reasons, including:

  • his failure to disclose previous convictions to the TPB
  • that during TPB enquiries, it became apparent that Mr Frugtniet had a history of dishonest behaviour over a considerable period of time.

Mr Frugtniet applied to the AAT for a review of the TPB’s decision. Following the AAT’s decision which affirmed the decision of the TPB, Mr Frugtniet filed an appeal to the Federal Court of Australia. He raised various grounds of appeal, including the denial of natural justice. In setting aside the AAT’s decision, the Court found that Mr Frugtniet had been denied natural justice on the basis of apprehended bias as the presiding AAT member had previously made adverse findings about Mr Frugtniet in another proceeding in 2004 with connected factual circumstances. As such, the Court remitted the matter back to the AAT for reconsideration (to be heard by a different AAT member).

Following the reconsideration, the AAT affirmed the original findings by the TPB’s decision that Mr Frugtniet’s registration as a tax agent should be terminated on the basis that he is not a fit and proper person and that he should be prohibited from re-applying for registration for a period of five years. In making this decision, the AAT noted that Mr Frugtniet’s expressions of remorse were not matched by action on his part.

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AAT review affirms TPB decisions regarding individual and company tax agents

The AAT affirmed the TPB’s decisions to terminate the registration of an individual Gold Coast tax agent and to reject an application for renewal of registration by an associated company tax agent, on the grounds that the individual ceased to be a ‘fit and proper person’.

The AAT was not satisfied that Mr Gregory Brown, who was the sole director of GJ Brown & Co Pty Ltd (Company), was a fit and proper person. This was based on his repeated failures to comply with his personal tax obligations, as well as the tax obligations of the company as trustee of the GJ Brown Practice Trust (Trust) and two other companies of which he was the sole director.

The non-compliance issues found by the TPB and the AAT included failures to lodge income tax returns, fringe benefits tax (FBT) returns and BAS by the relevant due dates, and failures to pay significant tax liabilities as and when they fell due. Mr Brown had also been convicted of six tax offences for failing to lodge his personal income tax returns and income tax returns of the Trust, and had also subsequently failed to comply with court orders requiring him to lodge the Trust’s outstanding returns.

The AAT affirmed the TPB’s findings that Mr Brown was no longer a fit and proper person, and that in the circumstances his tax agent registration should be terminated under subsection 40–5(1) of the TASA. In concluding that termination of Mr Brown’s registration was the appropriate outcome, the AAT took into account:

  • that Mr Brown’s conduct involved breaches of the tax laws in both his personal and director capacities over a lengthy period of time
  • that although Mr Brown redressed a number of outstanding obligations by the time of the AAT final hearing, these steps were taken belatedly and only in response to action taken against him by the ATO and TPB
  • that some of the non-compliance issues still remained unresolved at the time of the hearing
  • the absence of a satisfactory explanation or supporting evidence for the circumstances that Mr Brown claimed contributed to the non-compliance issues
  • that the TPB had previously formally cautioned the company for breaching the TASA by failing to lodge income tax returns and BAS by the relevant due dates
  • the fundamental concerns to ensure public protection and preserve the community’s confidence in tax practitioners.

To be eligible for renewal of registration under the TASA, the TPB must be satisfied that a practitioner meets all of the eligibility requirements under section 20–5. These include, for a company tax practitioner, the requirement that each director be a fit and proper person.

As a result of its findings regarding Mr Brown, the AAT also affirmed the TPB’s decision to reject the company’s application for renewal of its registration under subsection 20–25(1) on the basis that its director was not a fit and proper person.

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Tax agent fails to meet ‘fit and proper’ requirement for renewal of registration

The applicant, an individual tax agent, applied to the AAT for review of the TPB’s decision to reject the application for renewal of his tax agent registration pursuant to subsection 20–25(1) of the TASA.

The TPB was not satisfied that the applicant was a fit and proper person and maintained PI insurance that met the TPB’s requirements.

In finding that the applicant was not a fit and proper person, the TPB took into account:

  • his status as an undischarged bankrupt during the previous five years, and his failure to notify the Board that he had become an undischarged bankrupt
  • his outstanding personal tax obligations
  • the judgement in a civil proceeding, in which the applicant admitted that he had used monies received by clients in order to pay tax liabilities for other purposes
  • his failure to respond to TPB requests in a timely manner.

The applicant withdrew his application to the AAT for review, and as a result the proceeding was dismissed.

 

Other recent compliance cases

 

Board Conduct Committee cases

Board Conduct Committee decisions – January - April 2017

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Last modified: 7 November 2017