FEDERAL COURT OF AUSTRALIA

Tax Practitioners Board v Campbell [2012] FCA 1153

THE COURT DECLARES THAT:

1. On the 18 separate occasions detailed in Schedule A and Schedule B to this judgment, between about April 2010 and about November 2011, and in relation to the persons respectively described in Schedule A and Schedule B, the respondent, by providing to those persons a service:

1.1.    that involved the respondent doing one or more of the following:

1.1.1.    preparing a request for amendment of income tax return for individuals for each of a number of tax years for the person and forwarding them to the person with instructions to sign them and lodge them with the Australian Taxation Office (ATO);

1.1.2.    requesting and receiving from the person information that was potentially relevant to the preparation of the person's income tax return, completing details of the person's income tax return in preparation for lodgement and forwarding the person's income tax return to the person with instructions to sign it and lodge it with the ATO;

1.2.    for which the respondent received a monetary payment for providing the said service;

1.3.    with knowledge of the matters referred to in sub-paragraphs 1.1 and 1.2 above;

1.4.    while the respondent was not a registered tax agent pursuant to the Tax Agent Services Act 2009 (Cth) (the Tax Agents Act);

1.5.    which was not a service relating to a business activity statement; and

1.6.    which was not provided as a legal service;

on each occasion:

1.7.    by reason of the matters referred to in sub-paragraphs 1.1 and 1.2 above, provided a service that the person could reasonably be expected to rely upon to satisfy liabilities or obligations, or claim entitlements, that arise, or could arise, under a taxation law; and

1.8.    by reason of the matters referred to in sub-paragraphs 1.1 to 1.7 above, provided a tax agent service in contravention of s 50-5(1) of the Tax Agents Act.

THE COURT ORDERS THAT:

2.    In respect of each of the 13 contraventions declared in paragraph 1, which related to the preparation of requests for amendment of income tax returns to the persons and on the dates set out in Schedule A, a pecuniary penalty of $4,000 be imposed on the respondent.

3.    In respect of each of the 5 contraventions declared in paragraph 1, which related to the preparation of income tax returns for the persons and on the dates set out in Schedule B, a pecuniary penalty of $2,500 be imposed on the respondent.

4.    The total of the pecuniary penalties payable by the respondent referred to in paragraphs 2 and 3 above is $64,500.

5.    For a period of 3 years from the date of this order, if he is requested to provide to another person or entity a service relating to one or more of:

5.1.    advising another person or entity in relation to their entitlements, liabilities or obligations in relation to an Australian taxation law;

5.2.    completing for another person or entity a return or statement in relation to an Australian taxation law; or

5.3.    lodging for another person or entity a return or statement in relation to a taxation law with the ATO;

the respondent must, before providing or agreeing to provide the said service, and unless then registered as a tax agent pursuant to the Tax Agents Act, inform the person or entity of the matters referred to in paragraphs 1 to 8 in Form A annexed hereto and, if the person or entity still requests the service be performed by the respondent:

5.4.    have the person or entity complete and sign Form A annexed hereto;

5.5.    retain a copy of the completed and signed form for a period of 3 years; and

5.6.    provide any such completed and signed form to the Tax Practitioners Board within 14 days of its request.

6.    The respondent shall pay the costs of the applicant on a party and party basis, to be taxed if not agreed.

7.    This order may be served on the respondent by emailing it to:

     mal-accountings@hotmail.com

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

1    The applicant, the Tax Practitioners Board (the Board), is established under s 60-5 of the Tax Agent Services Act 2009 (Cth) (the Tax Agents Act). The Board seeks relief against Mr Malcolm Campbell in respect of contraventions of the Tax Agents Act. The proceeding was commenced by originating application and statement of claim filed 22 March 2012.

2    Notwithstanding that the originating process and the statement of claim have been served on Mr Campbell, he has not appeared and has not filed a defence to the statement of claim. Both were served on him not later than 21 May 2012. On that day, Mr Campbell telephoned the Board’s solicitor and confirmed that he had received the documents. The Board also, through its solicitor, informed Mr Campbell by email that the proceeding was listed for hearing today, and that the Board would seek to have the matter heard in the absence of Mr Campbell if he chose not to appear. There was no appearance when the matter was called on for hearing at 10.15 today.

3    The evidence before me indicates that between April 2010 and November 2011, Mr Campbell, on 18 occasions, committed contraventions of s 50-5(1) of the Tax Agents Act. A person contravenes that provision if the person provides a service that the person knows or ought reasonably to know is a tax agent service, it is not a BAS service, the person charges or receives a fee or other reward for providing the tax agent service, and the person is not a registered tax agent. I am satisfied from the evidence that Mr Campbell was not, at any relevant time, a registered tax agent, and that on 18 occasions he provided to individuals a relevant tax agent service, for which he charged or received a fee or other reward.

4    On 13 occasions, Mr Campbell provided a tax agent service to individuals (the Taxpayers) by providing for them tax return amendment requests to forward to the Commissioner of Taxation (the Commissioner), in respect of tax returns that had already been furnished to the Commissioner by the Taxpayers. On five other occasions, Mr Campbell provided to individuals income tax returns for the individuals to furnish to the Commissioner.

5    The functions of the Board include the administration of the system for the registration of registered tax agents. Section 50-5(1) of the Tax Agents Act is a civil penalty provision. It provides that, within four years after a contravention, the Board may apply on behalf of the Commonwealth to the Federal Court for an order that the contravener pay a pecuniary penalty to the Commonwealth. If the Court is satisfied that a contravention has occurred, the Court may order the contravener to pay to the Commonwealth, for each contravention, the penalty that the Federal Court determines is appropriate, but not more than the maximum amount specified in relation to each contravention. In the present case, the maximum pecuniary penalty that might be imposed in each case is $27,500. The overall maximum pecuniary penalty, therefore, that could be imposed in relation to the 18 contraventions is $495,000.

6    The Board seeks declarations that Mr Campbell has contravened s 50-5(1) of the Tax Agents Act, an injunction restraining him from providing tax advisory services and an order that he pay a pecuniary penalty in respect of each of the contraventions. The Board also seeks its costs.

7    In considering the relief that is claimed in a proceeding such as this, the Court must have regard to whether or not the relief granted will have utility, whether the proceeding involves a matter of public interest and whether the circumstances of the contraventions call for the marking of disapproval of the conduct.

8    The purpose of s 50-5 of the Tax Agents Act is to protect the public by preventing unregistered persons from providing tax agent services for a fee. The object is to protect members of the public who may not be sophisticated in matters of business and commerce and who are in need of protection from persons who hold themselves out as being able to provide tax agent services but are not qualified to do so.

9     In considering the imposition of a penalty in circumstances such as these, both general and specific deterrence are relevant. Not only is it necessary to deter Mr Campbell from repeated contraventions, it is also desirable to indicate to the community generally that there are serious consequences for committing contraventions of legislation such as the Tax Agents Act. The penalty should be such as will demonstrate to the community generally that the consequences of a contravention outweigh the cost of adopting a culture of compliance.

10    As I have said, Mr Campbell charged or received a fee for the services that he purported to provide. The total fees received were $6385. The contraventions occurred over an extended period of time. It is fair to describe them as deliberate and systematic. There were multiple breaches of s 50-5(1). The contraventions were committed in circumstances where Mr Campbell had been informed in clear and explicit terms of the provisions of s 50-5(1). One can conclude, therefore, that his contraventions were knowing and intentional. He was specifically informed of the provisions by a letter of 28 June 2010, which was written in connection with proceedings previously commenced against Mr Campbell in relation to 23 alleged breaches of s 251L of the Income Tax Assessment Act 1936 (Cth), a predecessor of s 50-5(1). Those proceedings were discontinued by reason of the death of a prosecution witness.

11    A number of Mr Campbell’s contraventions resulted in tax audits of individual Taxpayers, which, in turn, resulted in the imposition of significant penalties on some of the Taxpayers. Those factors are relevant in assessing the penalty that is appropriate in the circumstances of the contraventions presently before me. Each of the contraventions, but one, resulted in a tax mischief, in that the conduct of Mr Campbell led to Taxpayers making unsubstantiated claims for deductions to which they were not entitled. One of the Taxpayers to whom he provided taxation services suspected that the amendment request was false, and, therefore, did not lodge it with the Commissioner. Rather, the Taxpayer complained to the Commissioner. Mr Campbell has shown no cooperation with the Board in seeking to address his conduct.

12    The Board has prepared a statement of facts upon which it invites penalties to be assessed. The statement of facts, prepared from statements signed by each of the Taxpayers, demonstrates that Mr Campbell engaged in a deliberate and systematic course of conduct. His conduct involved meeting with the Taxpayer and advising the Taxpayer to obtain notices of assessment for prior years’ income tax returns from the Commissioner. He then advised that amendment requests should be made to the Commissioner and provided general advice as to the amount of tax refunds that could be expected to be received.

13    He received notices of assessment from the Taxpayers and completed or arranged for the completion of requests for amendment for each taxpayer. He then arranged for the preparation of a document to be signed by the Taxpayers and gave advice as to the forwarding of the document to the Commissioner with their amendment requests. Mr Campbell also prepared letters addressed to the Commissioner for the Taxpayers to sign, which objected to the Commissioner’s refusal to consider amendment requests that were out of time. In some of the cases, Mr Campbell advised the Taxpayers as to income tax obligations and entitlements before income tax returns were furnished. In those cases, he completed or arranged for the completion of income tax returns on behalf of the Taxpayers.

14     The service purportedly provided by Mr Campbell involved making claims for deductions in amendment requests and returns without instructions to do so. In doing that, Mr Campbell was aware that the Taxpayers were relying on his specialist knowledge in relation to taxation matters. Mr Campbell was not, at the relevant times, a registered tax agent. The Board has no evidence that he has the required educational qualifications or relevant experience to be registered and the Board has no basis for concluding that he is a fit and proper person to be registered.

15    In all of the circumstances, I consider that it is appropriate to grant declaratory relief and injunctions in relation to the conduct of Mr Campbell. In relation to the 13 contraventions where amendment requests were prepared for a taxpayer, I consider that the appropriate penalty is $4,000 for each contravention. In relation to the five instances where the Taxpayers were provided with income tax returns, which is regarded by the Board as a less serious offence, I consider that the appropriate penalty is $2,500 for each contravention. It is also appropriate that Mr Campbell be ordered to pay the Board’s costs of this proceeding.

Associate:

Dated:    23 October 2012

SCHEDULE A

SCHEDULE B

FORM A

I, [print full name] ……….………………………….………..…………………….…………, having requested Malcolm Campbell to provide a service (i) to me / (ii) to the entity named: ………………………………………………..….….………. [delete whichever inapplicable] relating to one or more of the following:

(a)    giving advice concerning entitlements, liabilities or obligations that arise or could arise under a taxation law;

(b)    completing a return or statement in relation to a taxation law; or

(c)    lodging a return or statement in relation to a taxation law with the Australian Taxation Office;

and having been informed that:

1.    he is not a registered tax agent;

2.    he may not have the educational qualifications to be a registered tax agent and could only finally ascertain whether he is eligible in terms of those qualifications to be registered if he were to apply to the Tax Practitioners Board for registration as a tax agent;

3.    he may not have the relevant experience as required by the Tax Agent Services Regulations 2009 to become a registered tax agent;

4.    he may not be a fit and proper person to be a registered agent so as to be able to provide a service relating to one or more of items (a), (b) or (c) above for a fee or other reward;

5.    a person or entity should seek assistance from a registered tax agent for matters that relate to such services or for such services;

6.    he does not wish to receive, and will not accept, any fee, benefit or reward of any kind for providing such a service;

7.    he is likely to be contravening the Tax Agent Services Act 2009 if he receives a fee, benefit or reward for providing such a service; and

8.    he is required by order of the Federal Court of Australia to inform me of these matters;

still request him to provide the service.

SIGNED: …………………………………………………..……    DATE: …………..………….

………………………………………………………..………………………………………..

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