TAX AGENTS - termination of registration as tax agent - applicant prohibited from applying for registration for period of three years - contraventions of the Code of Professional Conduct - where applicant failed to disclose convictions for failing to comply with requirements under taxation law -applicant failed to disclose previous regulatory action -applicant failed to manage personal tax affairs - applicant failed to account to clients for monies received on trust - applicant failed to respond to requests and directions from the Board - whether action should be taken against the applicant - whether three year ban was appropriate - decision to terminate affirmed - decision to ban varied to two years

Tax Agent Services Act 2009 (Cth) ss 2-5, 30-10, 30-20, 30-30, 40-25

Kishore and Tax Practitioners Board [2017] AATA 271

Li and Tax Practitioners Board [2014] AATA 299

Rent to Own (Aust) Pty Ltd and Australian Securities and Investments Commission [2011] AATA 689

Sovereign Capital Limited and Australian Securities and Investments Commission [2008] AATA 901

1. Tax agents play an important role in our community. They assist ordinary taxpayers and businesses to manage their (sometimes complex) tax affairs. Tax agents deal with the Commissioner of Taxation on a client's behalf. Tax agents must exhibit a high level of competence and skill if Australia's self-assessment system is to work efficiently as intended. They must also be trustworthy. There is a strong public interest in ensuring that tax agents are properly regulated.
2. To that end, Parliament established a regulatory regime for tax agents. That regime is now found in the Tax Agent Services Act 2009 (Cth) (the TAS Act). At the heart of the regime is a requirement that a person providing tax agent services for reward must be registered by the Tax Practitioners Board (the Board).
3. A registered tax agent enjoys a privileged position relative to others who are not registered. The privileges associated with registration come with expectations. For example, a person must have appropriate qualifications in order to be registered. The person must also conform to certain rules and standards in order to maintain their registration.
4. Heather Ridden was a registered tax agent. She failed to comply with a number of the rules and standards prescribed in the TAS Act. On 22 August 2019, the Board decided:[1]
   • Ms Ridden had contravened the Code of Professional Conduct in s 30-10 of the TAS Act - specifically, ss 30-10(1), (2),(3) and (14);
   • her registration as a tax agent should be cancelled with effect from 27 September 2019 pursuant to s 30-30; and
   • she was prohibited from applying for registration for a period of three years pursuant to s 40-25.
5. Ms Ridden is effectively subject to a three year ban. While the ban is in effect, she cannot work as a tax agent. She has asked the Tribunal to review the Board's decision. At the hearing, her counsel made clear she did not dispute the findings made against her that she had contravened the Code of Professional Conduct. The applicant's evidence and submissions were directed towards demonstrating she regretted what had occurred. She made clear things would be different if she were allowed to resume her registration, and agreed to give undertakings as a condition of her registration in that event. Her counsel submitted a brief period of suspension would be a more appropriate response to the contraventions in light of the applicant's personal circumstances.
6. The decision under review should be varied. I explain my reasons below.

1. Ms Ridden has practised as a registered accountant since 1999. She has been a sole practitioner for most of that period. She employed an administrative assistant but did not have any other tax agents or qualified accountants working for her.
2. The applicant has been in trouble before the events which gave rise to the current proceedings. She experienced difficulty in managing her own taxation affairs in 2011, 2012 and 2013. She failed to file income tax returns and a number of business activity statements (BAS). The delay was such that Ms Ridden was charged with failing to comply with requirements under taxation law in contravention of s 8C of the Taxation Administration Act 1953 (Cth). She was convicted and orders were made against her on 5 March 2014.[2]
3. Ms Ridden was also subject to regulatory action in 2013-2014. Following an investigation, the Board concluded she had breached ss 30-10(1), (2), (3), (7) and (13) of the Code of Professional Conduct in the TAS Act. The Board decided to terminate the applicant's registration on 12 March 2014.[3] After review proceedings were commenced in this Tribunal, the Board agreed to issue a written caution and order the applicant to complete a course of study in relation to trust accounting and the Code of Professional Conduct.[4]
4. The applicant has not complied with the orders that were made as part of the resolution of the 2014 disciplinary proceedings. She said in her evidence at the hearing in this matter that she intended to enrol in the appropriate courses but prioritised other work. She insists she would definitely (if belatedly) undertake the course of study if she is allowed to resume practicing.

1. The Board made a number of adverse findings against Ms Ridden that led to the reviewable decision in this case. She accepts those findings but I must still briefly describe what happened because the nature and seriousness of the contraventions is a relevant factor in determining what regulatory action should be taken. I will deal with each of the findings in turn.

The applicant did not act with honesty and integrity in contravention of s 30-10(1) of the Code of Professional Conduct

1. Ms Ridden failed to disclose the fact of her convictions or the regulatory action taken against her in annual declarations she completed in connection with her 2016 and 2018 registration, and in her tax agent renewal form in 2017. All of those documents asked the applicant to declare any 'matters that may affect your good fame, integrity and character' including, for example, instances where the applicant has been subject to any disciplinary action by a regulator or professional association. Ms Ridden now accepts she should have disclosed the convictions and the 2014 decision. She says it did not occur to her that she should disclose those matters because she regarded them as concluded. She insists she did not try and keep those matters a secret. She just did not mention them.
2. The applicant's claim at the hearing that she was not being dishonest when she failed to disclose the obviously disclosable is hard to square with her acknowledgment that she had contravened s 30-10(1). In ant event, the failure to disclose is serious, if only because the Board requires tax agents to be completely candid if the regulatory scheme is to work. I am satisfied the applicant either knew or should have known that the matters in question should have been disclosed, and her failure to do so reflects poorly on her honesty and integrity.

The applicant failed to comply with the taxation laws in the conduct of her personal affairs in contravention of s 30-10(2) of the Code of Professional Conduct

1. Ms Ridden fell into bad habits after the earlier disciplinary proceedings. She repeatedly failed to lodge her income tax returns and BASs in a timely way. She says she knew her affairs had to be put in order but she allowed other work to take priority. She also said she was distracted by other events that were taking place in her personal life. (I will have more to say about those things below.) Ms Ridden confirmed all of her taxation affairs are now in order. She says she has kept things under control for at least 12 months (albeit she was not practicing for part of that time following cancellation of her registration).
2. The applicant's dilatory approach to her own taxation affairs over a long period is a matter of concern. Her good record in recent times has occurred against the backdrop of the ongoing regulatory action. It is not good enough to demonstrate compliance once the regulatory action has commenced and once you have been relieved of other obligations.

The applicant failed to account to clients for monies received on trust in contravention of s 30-10(3) of the Code of Professional Conduct

1. This contravention may be the most serious. The applicant accepts she received taxation refunds for three different taxpayers that were paid into her personal account. She did not operate a separate trust account; the refunded monies were mixed with her other business and personal funds. Worse still, that account was in deficit at various points after the refunds were received. In each case, there was a delay in remitting those refunds to the taxpayers.
2. It is worth quoting from the complaints that two of the taxpayers lodged with the Board in relation to the hold-up in remitting the funds. One of them is reported as saying:

My tax return was lodged on the 5th of November 2018. ATO Processed and transferred to Heathers (Mountains Financial services) account on the 15 of November 2018. As of today [28 February 2019] after numerous face to face and phone requests I have still not been paid my return of $10,414. I have been struggling financially and this return would assist me to clear most of my debts. My children had a very sad Christmas as I could not afford the presents I promised them. I cannot afford to engage a solicitor to chase this money. I just want my money.[5]

1. The second taxpayer's record of complaint says:

I got my tax assessment notice on 10 December saying I was entitled to a $3700 refund. My tax agent had the money deposited to her account (I confirmed with the ATO by phone). However despite frequent representations I have not managed to contact the actual person who did my tax (Heather). Her colleague (Deborah) says she cannot give me any information except that Heather says DO NOT WORRY ALL IS OK. I suspect that this Tax Agent is attempting to abscond with my tax refund. I have been into their office today again 22 Jan and again got stonewalled.[6]

1. Ms Ridden admitted there were delays in making the refunds occasioned by problems with her internet connection and the office being closed for an extended period. She suggested in each case it was an oversight. That is not good enough. She also says the monies were ultimately refunded in each case, and that no harm was done. But the complaints make clear there was harm: at least one of the taxpayers thought she was being swindled, which undermines faith in the entire regulatory system, and the other talked about hardship he experienced while waiting for his money. I do not derive much comfort from the fact the money was ultimately paid out: if it had not been, the applicant would be in even more serious trouble.
2. The sentiments expressed in the complaints are understandable and alarming. They reflect badly on the applicant, and on the profession as a whole. It is cold comfort that Ms Ridden now says she has opened separate business and trust accounts which she will utilise if she is permitted to resume practice.

The applicant has failed to respond to requests and directions from the Board in contravention of s 30-10(14)

1. I have already mentioned Ms Ridden was ordered to undertake a course of training as part of the resolution of the 2014 proceedings. That did not occur. I accept she had a serious car accident in January 2015, and that her husband also experienced ill health following a workplace injury, and had other health problems that prevented him from working and caused stress at home. I also note the applicant and her husband took care of an infant grandchild while their daughter was indisposed. I note most of those challenges arose during 2015 and 2016; the order was made in 2014. I would have thought the applicant might enrol in the required courses at the earliest opportunity after the proceedings were finalised on relatively favourable terms in 2014. But she did not because she chose to prioritise other work.
2. Ms Ridden says she is willing to comply with the orders now if she is permitted to resume practice. That offer might have more weight if she had used the time after the cancellation decision to make a start on what she should have done in 2014.

1. Section 2-5 of the TAS Act explains that the object of the Act "is to ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct". I must keep that object in mind as I make my decision. In doing so, I must consider a range of matters that were conveniently summarised in Kishore and Tax Practitioners Board [2017] AATA 271. In that case, DP Frost explained (at [19]):

In deciding on the appropriate sanction, a decision-maker should take into account the following:

• the seriousness of the conduct warranting the sanction;
• the likelihood that the conduct will be repeated and the potential harm to the public if it is;
• the impact of a particular sanction on the individual (and especially where the sanction may inhibit or prevent the individual's capacity to earn a living);
• the interest of the public in seeing appropriate sanctions applied;
• the extent to which the individual has acknowledged the breaches and the seriousness of them; and
• the extent to which the individual has demonstrated genuine contrition or remorse.

1. I agree with that approach. I will address each of those matters below.
2. The contraventions - especially the conduct with respect to the taxation refunds - are serious and reflect worrying shortcomings in Ms Ridden's approach to the management of her practice.
3. The lax approach Ms Ridden exhibited in dealing with her own tax affairs over a long period is perplexing given the prosecution and disciplinary action in 2014. She has not demonstrated the capacity to change her conduct in the wake of what should have been two painful lessons, nor has she exhibited much insight into what went wrong. It follows there is a good chance the conduct may yet be repeated. It is difficult to predict the consequences for taxpayers dealing with the applicant if further mishaps occur; if the applicant's approach does not change, those consequences might be quite serious.
4. I have mentioned Ms Ridden's personal circumstances. They include serious injuries sustained in a car accident. She was off work for a long period following the accident, and she experiences ongoing problems that were described by her treating general practitioner in a letter dated 20 November 2019.[7] She also experienced issues following the death of her mother. Ms Ridden continues to support her husband who is now in receipt of Centrelink benefits; he had earlier experienced a workplace accident and other health issues. The accounting practice was the principal source of income for the couple, and Ms Ridden has a mortgage and a personal loan that must be serviced. I note she was born in 1963; changing careers at this juncture would be a challenge. I accept that being excluded from her chosen career at this stage of her life would involve significant hardship.
5. Ms Ridden also provided two personal references. One was from a member of the law firm that represented her at the hearing whom I understand had personal experience of her services. The reference said the applicant, in his experience, acted in a "professional, diligent and honest manner".[8] Another was from a former employer. While the reference is positive, it is difficult to know what to make of the reference since it does not indicate the referee was specifically aware of the applicant's current travails.[9]
6. There is a strong public interest in regulatory action. The Board will be compromised in the performance of its function if it cannot rely on applicants for registration being scrupulous in their communications with the Board. The declarations made in connection with registration must be seen to have teeth. Misrepresentations to the Board - even when inadvertent - have the potential to undermine confidence in the registration process, which undermines the self-assessment system operated by the Commissioner. There is also a compelling public interest in ensuring that tax agents handle refunded amounts with scrupulous honesty. Ms Ridden's mishandling of the refunded amounts warrants a stringent response - because that response will serve as a deterrent to others and because it will reassure the public that the Board takes these matters very seriously indeed.
7. Ms Ridden has acknowledged the contraventions. She also made clear in her oral evidence and in her statement that she sincerely regrets what occurred.[10] It is less clear that she appreciates the seriousness of the mishandling of the refunded amounts.
8. It is clear that regulatory action is justified in the circumstances. But should that involve termination of the applicant's registration, or some lesser form of administrative action - such as counselling or a suspension? I note the Tribunal observed in Kishore (at [20]):

Termination of registration should be reserved for the most serious cases of wrongdoing. That is because, except in the most serious cases, the public and the regulated industry can generally be adequately protected, and the public interest adequately served, by a sanction less severe than termination, or by no sanction at all.

1. That approach is consistent with the Tribunal's observations in Sovereign Capital Limited and Australian Securities and Investments Commission [2008] AATA 901. In that case, DP McPherson and SM McCabe considered whether an Australian Financial Services Licence should be cancelled. After reviewing the objects of the regulatory regime, the Tribunal said (at [84]):

A licence should only be suspended or cancelled if it is necessary to do so in order to accomplish the objects of the legislative scheme. A suspension will ordinarily be preferable if there is a reasonable prospect that the licence-holder can remedy the defects which prompted the concern. If there is no reasonable prospect of the issues being resolved, cancellation may be the appropriate course. The power to suspend or cancel should not be used merely to punish the licence-holder for transgressions: see Story v National Companies and Securities Commission (1988) 13 NSWLR 661.

1. Ms Ridden's counsel accepted regulatory action was probably inevitable. He argued that action short of termination was more appropriate given the challenges Ms Ridden faced in her personal life and in light of her contrition. He suggested a suspension for 12 months would be acceptable, provided the applicant in the meantime complied with conditions requiring her to complete appropriate courses of study and remain compliant with respect to her personal tax affairs.
2. While the consequences of being excluded from practice even for a short period would cause significant upheaval for the applicant, it is not clear that a period of suspension - much less counselling or issuing a formal warning - would have an appropriate deterrent effect. She has already been the subject of regulatory action and criminal proceedings, but she thereafter engaged in problematic conduct. I also question how much the Tribunal should rely on conditions (presumably in the form of orders made under s 30-20 of the TAS Act) as a response to unsatisfactory conduct given the observations in Rent to Own (Aust) Pty Ltd and Australian Securities and Investments Commission [2011] AATA 689. In that case, Downes J and DP Hack observed (at [47]):

In our opinion there is little scope for the use of a regulatory role for rehabilitation. Having said that, there will be cases where circumstances will cause a decision-maker to opt for the alternative of the imposition of conditions or the acceptance of an undertaking as a basis for declining to cancel a licence of some kind. The central consideration remains, however, good regulation and good administration, not an overanxious desire to permit regulated activity wherever possible.

1. One could argue that the express power to make orders that a tax agent undertake a course of education or training in s 30-20 does contemplate a rehabilitative function for conditions. Yet the observations in Rent to Own serve as a reminder that it is a privilege to participate in a regulated occupation. The regulator (or the Tribunal standing in its shoes) should not bend over backwards to facilitate an individual's entry into the profession if that individual is unable to meet the appropriate standards.
2. General deterrence is also a factor in this case. It would be appropriate to take more stringent action to send a message to other tax agents that failing to be scrupulous in their communications with the Board - especially when making declarations in connection with registration - is a very serious matter. Other tax agents also need to understand that mishandling clients' funds will have significant consequences.
3. Having decided that termination of registration is the appropriate response, it remains for me to decide how much time must elapse before the applicant is permitted to apply for re-registration. Section 40-25(1) provides the Board may "determine a period, of not more than five years, during which you may not apply for registration." It stands to reason that a five year ban would be reserved for the most serious cases of misconduct that result in termination. That would include cases of out-and-out dishonesty, persistent and serious bad behaviour, or gross incompetence. That is not suggested here. The Board says a three year ban is appropriate. The Board referred in particular to the Tribunal's decision in Li and Tax Practitioners Board [2014] AATA 299, which it suggests is similar to this case. In Li, SM Redfern (as she then was) observed in relation to the tax agent (at [77]):

There have been numerous breaches of the Code. Those breaches are serious and there has been loss and inconvenience to taxpayers. While there is no evidence of dishonesty, there is evidence of incompetence and negligent, if not wilful, breach. Mr Li has expressed remorse but has also sought to minimise his role and the extent of his responsibility for the fraud. Specific deterrence is therefore a relevant consideration in this case. General deterrence and the importance of maintaining standards are also relevant. Against this, it should be noted that Mr Li will suffer hardship if he is unable to practice as a registered tax agent and is disqualified from re-applying for three years. Mr Li was employed as a tax consultant from 2006 until 2010 and one of his character witnesses was a former employer. It is possible, and there was no evidence to suggest otherwise, that Mr Li will be able to find alternative employment until his period of disqualification expires in just over two years' time.

1. There are some differences between Li and this case. While I have accepted there was certainly harm and inconvenience to taxpayers, the taxpayers in this case did not experience actual loss. The failings of the tax agent in Li were more serious and had more far-reaching consequences. The tax agent in that case was also more inclined to shirk his responsibility for what had occurred, and the personal hardship visited upon the tax agent in Li might be less serious than the consequences for the applicant.
2. If the Board regards the decision in Li as a benchmark - and there may be good reason for doing so - it seems to me the contraventions in this case are less serious, and the public interest concerns are less pressing. That suggests a ban of shorter duration than three years.
3. There is some danger in rifling through reported cases in search of comparisons. (I note there is no considered survey of the cases like that which is embodied in Regulatory Guide 98 A_SIC's powers to suspend, cancel and vary AFS licences and make banning orders_.) Consistency is an important virtue in justice, as well as in public administration, but there is a danger of becoming lost in a forest of single instances. There is no substitute for making an objective assessment of what occurred, and what the regulatory regime appears to require, and then having regard to the individual circumstances of the case.
4. The objective seriousness of the conduct, the need for specific and general deterrence and the public interest in a ban that would promote confidence in tax agents need to be considered against the serious adverse consequences for the applicant. In all the circumstances, I think an effective ban of two years strikes the appropriate balance. During that time, the applicant will be able to undertake courses of study that might demonstrate to the Board when she becomes eligible to seek registration that she is a fit and proper person.

1. The decision to terminate the applicant's registration is affirmed, but the decision to prohibit her from applying for registration is varied so that she will be permitted to seek registration after two years from the date of termination.

I certify that the preceding 42 (forty -two) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

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