TAX AGENTS - tax practitioners board - registration as a tax agent - whether applicant satisfied relevant experience criteria - decision under review affirmed

Tax Agent Services Act 2009 ss 20-25, 90-5

Tax Agent Services Regulations 2009 r 8, items 201 & 207 of Schedule 2

1. Mr Jayaretnam is a former fellow of the Chartered Institute of Management Accountants (London) and has been a fellow of the Australian Society of Certified Practising Accountants for over 20 years. In various employment capacities he has held senior accounting roles in Sri Lanka, New Guinea and Australia. From March 1995 to June 2012 he was employed by the University of Sydney as a finance manager.
2. Mr Jayaretnam has twice applied, so far unsuccessfully, for registration as a tax agent. Each application has been rejected by the Board, most recently in its September 2015 decision, because the Board did not accept that Mr Jayaretnam satisfied the 'relevant experience' qualification to permit his registration. That is the only reason for his applications being refused. The Board accepts that, apart from this single issue of experience, Mr Jayaretnam is otherwise eligible for registration.

1. The Board must grant a registration application where the applicant satisfies the eligibility criteria - and must otherwise refuse an application: Tax Agent Services Act 2009 ("TASA") s 20-25(1).
2. One of the criteria for registration eligibility is the Board's satisfaction that the applicant meets the requirements prescribed by the Tax Agent Services Regulations 2009 ("TASR"): see TASA s 20-5(1)(b).
3. The prescribed, and cumulative, eligibility requirements are set out in TASR (in reg 8 and Schedule 2 Part 2 Item 201). They are:-
   • (a) a tertiary qualification in accountancy: Item 201(a);
   • (b) successful completion of an approved course in commercial law: Item 201(b);
   • (c) successful completion of an approved course in Australian taxation law: Item 201(c); and
   • (d) engagement in "the equivalent of 12 months full-time, relevant experience" in the 5 years preceding the application: Item 201(d).
4. The concept of "relevant experience" is defined - in TASR Schedule 2 Part 2 Item 207. The part of the definition that applies to Mr Jayaretnam's circumstances is in the following terms:

207 For Division 1, relevant experience means work by an individual:

...

(c) under the supervision and control of a tax agent registered under the Act; ....

in the course of which the individual's work has included substantial involvement in 1 or more of the types of tax agent services described in section 90-5 of the Act, or substantial involvement in a particular area of taxation law to which 1 or more of those types of tax agent services relate.

1. The types of tax agent services described in TASA s 90-5 are any services provided to an entity likely to rely on them for the purpose of satisfying liabilities, or claiming entitlements under taxation laws, where the services relate to:-
   • (a) ascertaining those kinds of taxation law liabilities, obligations or entitlements:- TASA s 90-5(1)(a)(i);
   • (b) advising about those kinds of taxation law liabilities, obligations or entitlements:- TASA s 90-5(1)(a)(ii); or
   • (c) representing an entity in their dealings with the Commissioner:- TASA s 90-5(1)(a)(iii).
2. In the circumstances relevant to Mr Jayaretnam (where he has worked under supervision only in the preparation of tax returns lodged by registered tax agents) the concept of "relevant experience" means work:-
   • (a) under the supervision and control of a registered tax agent;
   • (b) including substantial involvement in ascertaining, and perhaps advising about, taxation law entitlements and obligations.
3. The concept of work done under supervision and control for "the equivalent of 12 months of full-time, relevant experience" (the TASR Item 201(d) requirement) is not one amenable to precise delineation. The requirement would of course be satisfied if the person's work involved a period in which their activities were exclusively involved in the provision of tax services of an advisory or representational kind. But the actual definition of "relevant experience" in TASR Schedule 2 Item 207 does not impose that actual requirement. The period of supervision and control need only include "substantial involvement in" the provision of "tax agent services". The term "substantial involvement" is used in several places within TASR Schedule 2, but it has no defined meaning. Necessarily the concepts of "relevant experience" (when required to be assessed against a criterion of "substantial involvement") and experience that is "the equivalent of 12 months full-time" involve impressionistic assessments.

1. The Board publishes various statements about its understanding of the concept of "relevant experience".
2. Some of those statements appear on the Board's website. They are addressed to potential registration applicants, and are in the following terms:

What is considered relevant experience

Your relevant experience must include substantial involvement in one or more types of tax agent services, or substantial involvement in a particular area of taxation law to which one or more of those types of tax agent services relate.

Tax agent services include services that relate to ascertaining or advising about the liabilities, obligations or entitlements of an entity under a taxation law or representing an entity in their dealings with the Commissioner relating to a taxation law. In addition, the service must be provided in circumstances where an entity can reasonably be expected to rely on the service for taxation purposes.

Demonstrating relevant experience for a new registration

If you are making an application for registration as an individual tax agent for the first time, you will need to complete and attach a Statement of relevant experience for tax agent to your application.

The information contained in the Statement of relevant experience (SRE) should provide evidence of your substantial involvement in one or more types of tax agent services. 'Substantial involvement' means ample or considerable involvement.

Independent verification

Independent verification may include a reference from a registered tax agent or two separate references from individuals who are able to verify the type and amount of your experience. These other individuals may include colleagues or clients. If you are providing a statutory declaration it would assist us if you also provide independent verification from colleagues or other individuals who are in a position to comment on your experience. As the verification must be independent it should not be provided by family members.

1. The Board's rejection decision letter of 24 September 2015 set out a policy statement that purported to be more specifically directed to the circumstances of Mr Jayaretnam's application. That statement was in the following terms:

13. The Board considers that relevant experience must include substantial involvement in one or more types of tax agent services. As outlined above, tax agent services include services that relate to ascertaining or advising about the liabilities, obligations or entitlements of an entity under a taxation law or representing entity in their dealings with the Commissioner relating to taxation law.

14. It is unlikely that experience which only includes general accounting work will constitute relevant experience for the purposes of registration as a tax agent. For example services such as auditing and insolvency generally will not meet the relevant experience requirement.

1. As the passages set out in paragraph 11 indicate, the Board's policy is to require an applicant to provide a "Statement of relevant experience". The Board has a standard form which it requires to be completed. The relevant features of the form (the "Statement of relevant experience - tax agent") include the following:-
   • (a) completion of the form by the applicant's supervising tax agent;
   • (b) description of the type of experience (whether as a lawyer, or as a supervised person);
   • (c) the area of the applicant's "substantial involvement" in relation to "tax agent services";
   • (d) the experience period;
   • (e) the supervisor's opinion about the applicant's competence;
   • (f) a summary of the tax returns or statements completed by the applicant; and
   • (g) any additional relevant experience (other than as an employee or a supervised person).
2. The categories of information required in the standard "Statement of relevant experience" form suggest a policy where the details of the number of returns or statements an applicant has provided, is relevant to, but not necessarily determinative of, the question of the sufficiency of an applicant's experience. This apparent policy is consistent with the TASR Item 207 definition - which only requires that an applicant's experience include "substantial involvement" in tax agent services.

1. Mr Jayaretnam relies principally on two "statements of relevant experience" provided by tax agents in relation to his work in the 2014 and 2015 tax years. He also relies on some additional statements, and oral evidence, those two agents provided for the purpose of either his second application or the present proceedings. Those various statements are confined to "relevant experience" in the period ending in June 2015. Mr Jayaretnam has not had any period of relevant supervised "tax agent services" experience since that time.
2. The two agents on whose statements Mr Jayaretnam relies are Ms Li and Mr Singh. Ms Li's statement and her oral evidence relate to the tax year ending June 2014. Mr Singh's statement and his evidence relate to the tax year ending June 2015.
3. Mr Jayaretnam had an arrangement with Ms Li in which he made himself available for 30 hours per week. She was to allocate tax return work to him, at her discretion, and he was paid on a piecework basis, according to the number of returns he completed (and the agent's fee income in relation to the particular returns). Mr Jayaretnam estimated that he spent most of his working time (75%) actually in her office, and had regular contact with her in relation to the tax returns he prepared. Typically she would review and discuss his completed returns, prior to approving and lodging them. Ms Li substantially confirmed Mr Jayaretnam's claims - except for the proposition that he spent most of his time in her office. Ms Li said she worked from her home, and Mr Jayaretnam did not work there.
4. Mr Jayaretnam made a similar kind of arrangement with Mr Singh. His intention was to get a broader range of work than the individual tax returns he worked on under his arrangement with Ms Li. Under his arrangement with Mr Singh, Mr Jayaretnam attended Mr Singh's offices for about 30 hours a week, did whatever tax return work Mr Singh allocated to him, and was again paid on a piecework basis for completed returns.
5. In the present case Mr Jayaretnam has pointed to the fact of his periods of supervision and control, by the two tax agents, in the 2014 and 2015 tax years. He has also relied on the actual time he estimates he spent on tax related work. He said that work included preparing relevant tax returns and statements, familiarising himself with Ms Li and Mr Singh's offices' practices and procedures, and attending meetings with each of Ms Li and Mr Singh, where they either reviewed or discussed his work.
6. Mr Jayaretnam prepared a work sheet that set out his estimate of the times he spent on various activities, including the various tax returns on which he worked, during the 2014 and 2015 tax years. The broad general effect of his work sheet is that Mr Jayaretnam claims to have done relevant work for a period that is much greater than the equivalent of the 12 month period required by TASR Schedule 2 Item 201(d). However, a notable feature of Mr Jayaretnam's work sheet is that he only completed a small number of returns.
7. Mr Jayaretnam's work sheet does not include the time he spent completing four Business Activity Statements for one of Ms Li's clients in the 2014 tax year. This client had a computerised accounting system. Ms Li's recollection is that when she did the work it took her up to three hours. On that basis, this work is of only marginal significance in assessing Mr Jayaretnam's application.
8. After Mr Jayaretnam prepared his work sheet, Mr Singh provided a further statement, dated 22 February 2016, commenting on it. In that statement Mr Singh agreed with the activity item descriptions given by Mr Jayaretnam, but expressed no opinion on Mr Jayaretnam's time estimates. In his oral evidence Mr Singh supplemented an earlier email he had provided (estimating the hours per tax return) that he would expect to have spent on the kinds of returns on which Mr Jayaretnam had worked. He expressed the view that in some respects Mr Jayaretnam's time estimates were overstated.
9. Ms Li also provided a similar statement, and oral evidence, commenting on Mr Jayaretnam's work sheet. In the end she broadly agreed with, or at least did not strongly disagree with, Mr Jayaretnam's estimates. Although it is fair to say that she thought she would not herself have allocated quite the same amount of time as Mr Jayaretnam had estimated in undertaking the work that he did.
10. Both Ms Li and Mr Singh estimated that the bulk of Mr Jayaretnam's work on tax returns would have been in the period from July to October. In the 2014 tax year Mr Jayaretnam did 17 completed returns up until the end of April 2014, and only two more after that. Mr Singh estimated that up to 70% of Mr Jayaretnam's tax return work would have been done in the period from July to October 2015. Indeed Mr Singh recalled that at other times during the 2015 tax year, Mr Jayaretnam would have been doing supervised tax work for only 2 to 3 hours per week. Mr Jayaretnam completed most of his tax returns for Mr Singh prior to April 2015. After April 2015 he completed another four individual tax returns. But by that time Mr Singh (for reasons that are not presently material) was no longer registered as a tax agent.

1. The Schedule to these Reasons sets out the basic elements of Mr Jayaretnam's work sheet estimate, and attempts to contrast them with the estimates given by Ms Li and Mr Singh (in their respective Statements of relevant experience), and with the findings I make about the effect of their oral evidence commenting on Mr Jayaretnam's estimates. In that Schedule I have identified the notes to which regard should be had in understanding the findings I have made. Those notes are set out below.
2. Note 1:- Mr Jayaretnam assumed 4 weeks annual leave, 1 week sick leave and 4 weeks spent on non-tax agent services (such as professional development and general familiarisation). I regard this additional 4 week reduction from full-time work as inappropriate in assessing the "equivalence" of the work he did. I would regard the reasonable equivalence period, if it is to be evaluated on the basis of hours worked, as one involving a figure of at least 1,500 hours per year.
3. Note 2:- Mr Jayaretnam assumed a 29 hour productive working week, because his arrangements with Ms Li and Mr Singh only required him to be "available" for 30 hours a week. This is an inappropriate allowance to make in assessing the "equivalence" of his work period. I have assumed a 35 hour working week. It is the more appropriate estimate from which to assess "equivalence".
4. Note 3:- The different values for assumed available total working hours per annum relate to the adjustments described in Notes 1 & 2.
5. Note 4:- Mr Singh said in cross examination that he would have expected that the time involved in preparing individual tax returns might have increased by up to a total of 2.5 hours in the case of some individual tax returns, and up to the values shown in the Schedule for company and SMSF returns. I have used Mr Singh's personal "maximum" value in the revised comparison of hours per completed individual tax return. However, I have excluded the tax returns that Mr Jayaretnam completed in the period after Mr Singh ceased to be a registered tax agent.
6. Note 5:- I have made a similar adjustment to the "maximum" estimate for company tax returns to reflect Mr Singh's additional evidence.
7. Note 6:- I have made a similar adjustment to the "maximum" estimate for SMSF tax returns to reflect Mr Singh's evidence.
8. Note 7:- I have made an adjustment to reflect (a) Mr Singh's maximum estimate for individual returns, and (b) Mr Jayaretnam's estimate of the proportion of the work he completed.
9. Note 8:- I have allowed Mr Jayaretnam's estimate - on the basis that it was incidental to his work in completing tax returns and may reasonably be accepted as a minor part of his work under the control and supervision of a tax agent.
10. Note 9:- I have revised this estimate downwards to reflect Mr Singh's evidence about (i) the real amount of time spent in weekly and daily meetings, and (ii) the very limited number of tax returns with which Mr Jayaretnam was involved after October 2014. I have revised the estimate to substantially the same as that for the 2014 year.
11. Note 10:- I have accepted the maximum number of hours that Ms Li accepted as possibly the time that Mr Jayaretnam spent on his tax return work - on the basis that she accepted his estimate of the total time he spent on her work, and her recollection that it was consistent with her general understanding and estimate of the time. I have not reflected the same value for the 2015 year, because (i) Mr Jayaretnam was relevantly more experienced and familiar in the 2015 year, and (ii) I regard Mr Singh's estimates of the maximum time he would spend, as a more reliable guide to the actual time spent by Mr Jayaretnam.
12. Note 11:- I have accepted Ms Li's maximum estimate and Mr Jayaretnam's estimate of the proportion of the work he completed.
13. Note 12:- I have accepted Ms Li's general agreement with Mr Jayaretnam's total estimate of the time he spent.
14. In the light of the analysis reflected in the Schedule, as explained by the Notes I have set out above, I am not at all satisfied that it would be proper to conclude that Mr Jayaretnam's relevant experience is properly quantified in the way he has done in his work sheet. He had no time or other records from which he prepared the work sheet. It was entirely an estimate, based on the number of tax returns he had completed, or partially completed, and a reconstruction of what he regarded as a reasonable estimate. I do not dispute that Mr Jayaretnam's work sheet reflects an honest attempt on his part to make a reasonable estimate. But I am unable to accept many of the estimates he made in compiling various parts of the work sheet. (The matters I have adjusted in the Notes set out above identify the matters I have not accepted.) Once one makes the adjustments that I regard as appropriate, the better estimate of Mr Jayaretnam's "relevant experience", assuming it is properly quantified by tallying the hours worked on relevant tasks, does not go close to the approximately 1,500 hours of work that I consider is reasonably equivalent to the required period of full-time experience under supervision and control.
15. In addition, I am sceptical that comparisons of hours worked provide an appropriate way of making sound judgments about "relevant experience" and "substantial involvement" relevant to an assessment whether a period of supervision and control is relevantly equivalent to 12 months full-time such activity. The reason for my scepticism is highlighted by the limited number of tax returns with which Mr Jayaretnam has had "substantial involvement". The total number of completed individual returns is 40 (I exclude the individual returns completed after Mr Singh's registration ceased). The number of partially completed returns is 18. Thus the total number of returns (both completed and partial) is (40 plus 18 plus 10 =) 68. In effect, therefore, Mr Jayaretnam's "relevant experience" amounts to fewer than one tax return per week over a period of 20 months. I do not accept that this level of experience is equivalent to 12 months full-time relevant experience.
16. For the preceding reasons, I find that the preferable decision is to affirm the decision under review.

1. Mr Jayaretnam, whose personal competence and qualifications other than that of the required period of "relevant experience" are not in question, committed himself to two years of arrangements with Ms Li and Mr Singh in the expectation that they would, at least cumulatively, satisfy the "relevant experience" qualification requirement. He emphasised in his submissions that there is no specific requirement to have completed any particular number of returns. Nor is there any specific requirement to identify and characterise the hours worked. He said that the literal requirement appeared only to emphasise the quality of supervision and control by a registered tax agent. He said that he had met that requirement. He also said that if he worked more slowly than other, more experienced tax advisers, or more slowly than the Board expected, that was because he was treating the experience as an opportunity to learn and to ensure that he was going about the work in a fully informed and conscientious manner. Had he been apprised of the emphasis that has been placed in these proceedings on the number of hours worked, he may have approached his work in a different way, or at least with a different set of priorities.
2. There is, as it seems to me, some validity in Mr Jayaretnam's complaint. I have observed above that the judgement required by the "equivalent" requirement in Item 201(d) is essentially impressionistic. It is made more difficult because there is no articulated hypothesis (so far as I am aware) about what kind or extent of experience would be reflected by "12 months of full-time, relevant experience". That difficulty is not, in my view, really resolved by the general statements of policy that I have set out in paragraph 11 above. Neither is it resolved by the contents of the standard questions in the "Statement of relevant experience - tax agent". Questions 7 and 8 in that form suggest that the Board will regard as relevant the number of completed statements or returns. But there is not, on my current understanding, anything to indicate the potential parameters of a reasonable judgment as to what is likely to constitute an acceptable level of activity to qualify as acceptably equivalent relevant service.
3. In other contexts, parameters for relevant experience sometimes include the provision of a journal or logbook, a target range of hours spent in particular categories of activity, completion of specific number of activities of a particular kind, or certification of compliance with the relevant criterion by the applicant or candidate's supervisor. General examples of these different kinds of assessment criteria can be found in the Australian Qualifications Framework. I hesitantly, and respectfully, commend to the Board consideration of developing a more informative policy than currently appears to exist for the assessment required by TASR Schedule 2 Item 201(d).

I certify that the preceding 43 (forty-three) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member

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