Sentencing principles
59 Set out at [60]-[73] below are submissions made on behalf of Mr Li as to the relevant sentencing principles to be applied in the present case; the consequences of their intersection and the weight to be attached to them.
60 There are four relevant principles here, being deterrence, parity, totality and capacity to pay. The Court's task is one of "instinctive synthesis", taking into account all relevant factors then arriving at a result which takes all factors into account: Australian Ophthalmic Supplies at [27], [55]; Wong v The Queen (2001) 207 CLR 584 at [74]-[76]; Markarian v The Queen (2005) 228 CLR 357 at [37]. Retribution and rehabilitation have no part to play in civil penalties of this kind, and nor is there any compensatory element in the penalty-fixing process: Trade Practices Commissioner v CSR Ltd (1991) ATPR 41-076 at 152-153 per French J (as his Honour then was).
61 There is no room for specific deterrence as a factor in the present case. The respondent is unable to practice as a tax agent, and will be unable to do so until he is 59 years old. At that point, having regard to the period of his disqualification, which is publicly-available information, and the limited period during which he practised, it is unrealistic to think that he might possibly practise as such again: Ex A [56].
62 General deterrence is a significant matter, at least in cases of calculated contraventions where commercial profit is the driver of the conduct: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [65]. In the context of such a deliberate series of contraventions of s 50-5(1) comparable in number with the present matter but involving three times as much commercial gain, Davies J observed that capacity to pay is of lesser importance than the need for a penalty of appropriate deterrent value, and imposed a total penalty of $43,000 for deliberate contraventions to be paid by instalments with provision for liberty to vary payment dates: Tax Practitioners Board v Dedic [2014] FCA 511 at [4]-[8]. In that case the Board, which was represented by experienced counsel, sought a total penalty in the range of $40,000-$50,000. The maximum penalty for breach of that provision is the same as for s 50-20, and although the conduct implicit in breach of the latter provision may often be more serious, deliberate contraventions of s 50-5 such as that in Dedic cannot be so described. But statements in trade practices and industrial cases about the need for general deterrence must be read in context: they relate to deliberate, calculated conduct undertaken for significant economic gain: See e.g., Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [41] and [62]-[64]; General Manager of Fair Work Australia v Health Services Union [2013] FCA 1306; Australian Competition and Consumer Commission v AGL Sales Pty Ltd (No 2) [2013] FCA 1360 at [9]. While they might have some application to systemically reckless conduct by a corporate group of tax agents or financial planners, they have little or no application to a single course of reckless conduct undertaken by an individual.
63 The second principle is parity. The seriousness of the contraventions in the present case is significantly lower than it was in Su, and that case lacked any of the significant subjective mitigating features that loom large in the present case. The facts in Su describe a similar fraud, occurring at about the same time. Fewer contraventions were charged there but the overall conduct reflected in the statement of facts was similar, with some particular aggravating features.
64 As reflected in para 19 of the agreed facts set out at [4] in Su, the respondent in that case charged double his normal fee, and paid a kickback to the intermediary. The objective seriousness of that conduct is much higher, involving as it does intrinsic impropriety of a kind that should have alerted a tax agent to the need to make further enquiries.
65 The subjective features were fundamentally different. The respondent in the Su case, a relatively young man, lived at his parents' house, was working at the time of the hearing and earning about $600-$650 per week after tax, and had no dependants. The Board in that case submitted for a penalty of between $200,000 and $250,000 but Jagot J, after expressing particular concerns about the Board's submissions at [16], and quoting the passage of Dedic referred to above, imposed a penalty of $70,000, payable over seven years and with liberty to apply for an extension of time to pay.
66 The parity principle clearly applies in respect of the decision of the court in Su. The objective conduct there was much more serious, and the difference in number of offences irrelevant given that in each case a single course of conduct was involved. And as will be seen, the point that the decision in Su establishes is that it is impermissible to impose a crushing penalty that the respondent would have no realistic hope of paying except by selling his family home, which would impose a responsibility for general deterrence grossly disproportionate to the objective seriousness of what he has done, and would impose a penalty on members of his immediate family of an unconscionable kind.
67 The totality principle can be briefly dealt with. The matters in question are part of a single course of conduct, and must be treated as such in the same way as they were treated by Jagot J in Su at [14]-[15] and [25]. The totality principle is designed to ensure that aggregate penalties are not oppressive or crushing: Kelly v Fitzpatrick [2007] FCA 1080 at [30]; Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2011] FCA 810 at [119]-[123]. Moreover, "where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality": Construction, Forestry, Mining and Energy Union & Anor v Cahill (2010) 269 ALR 1 at [39] (Middleton and Gordon JJ). Where the principle is applied such that multiple contraventions are, in substance, treated as one course of conduct, the result is that the course of conduct is treated as one contravention for sentencing purposes: e.g., Construction, Forestry, Mining and Energy Union & Anor v Williams (2009) 262 ALR 417 at [31] (Moore, Middleton and Gordon JJ). It is not the case that, because contraventions were of distinct statutory provisions, they must be treated as multiple courses of conduct: see, e.g., BHP Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2014] FCA 193 at [15].
68 The critical factor in the present case is, apart from parity, capacity to pay. The reasoning of Jagot J in Su on this question is, with respect, unimpeachable. It is axiomatic that in imposing penalties on individuals the capacity of the individual to pay a fine must be considered, and the impact of the penalty upon the individual must be considered. Jagot J set out the principles at [13], [20]-[21]. Those principles have long been settled. They overlap with the principle of totality, referred to above, in requiring that an oppressive or crushing penalty not be imposed.
69 For example, in Rahme v R (1989) 43 A Crim R 81 at 86-87, Finlay J, with whom Studdert J agreed, stated that it was clear that in contemplating a financial penalty a decision is required as to "whether or not the appellant has the means." His Honour quoted from the judgment of Scarman LJ in R v Jamieson ( 1975) 60 Cr App R (S) 318, in respect of a prevalent offence requiring general deterrence, as follows:
But there are two principles to be observed when imposing a sentence such as this. The first is that a sentence must always be linked to the particular circumstances of the offender as well as the particular circumstances of the offence. Indeed, a sentence derives its character of justice or injustice from a combination of those two sets of factors.
70 Those principles were affirmed in Environment Protection Authority v Barnes [2006] NSWCCA 246 at [64]-[70] (per Kirby J, Mason P and Hoeben J agreeing). That case involves similarities to the present, in that the appellant was contending that a substantial penalty should be imposed based on the significant equity that the respondent and his wife had in their home.
71 Applying those principles to the present case, Mr Li's capacity to pay is extremely limited. There is one feature of particular significance here: any penalty which is imposed upon Mr Li beyond his capacity to pay will in substance be a penalty upon his wife, the co-owner of the house that Mr Li will be forced to sell. It will also be an indirect penalty of a severe kind upon other members of Mr Li's family. His mother and his wife's parents will be put through a forced relocation into some form of rented accommodation, or into a much less expensive area. His children, at sensitive stages of their secondary schooling, will also endure that process.
72 These submissions do not involve any attempt to excite the Court's sympathy. Mr Li accepts responsibility for what he has done, and the consequences, including for his children. But the consequences of the penalties for which the Board contends are matters to which the Court, in accordance with long-settled principle, must have regard.
73 To balance the competing factors of general deterrence with parity and capacity to pay, the Court should state the penalty which it would have imposed if Mr Li had had sufficient capacity to pay. But the penalty that is actually imposed, if any, should be limited to one which Mr Li has some realistic possibility of paying along with costs if the Court is minded to so order. The Court is not bound to impose any penalty: the penalty must reflect the whole of the circumstances, including those of the contravener.
74 There follows at [75]-[96] below a critique on behalf of Mr Li, of the Board's submissions on penalty.
75 It was submitted on behalf of Mr Li that the Board's submissions on penalty contain a number of factual statements that are unsupported by evidence, and are contrary to the evidence; and that they also contain inflammatory assertions of a kind that are inappropriate to a party in the position of the Board. The submissions on matters of law, except to the extent to which they state general principles apparently derived from general submissions in other cases, are also replete with error. It was submitted that the Court will derive little assistance from them, with respect, and should not accept any proposition of fact or law contained therein without analysis.
76 To give but two examples at this point, in [3] (see [19] above) the assertion that "the contraventions were motivated by greed" must be read in light of the agreed fact that Mr Li charged his usual fee for the preparation of a tax return, $60 per return, and received "a total financial benefit by virtue of the contraventions of $5,400" (SAF [41]). Read in light of that evidence, and of "the agreement between the parties that the relevant state of mind was recklessness and not knowledge" ([10.1]), the Board's assertion must be that those who provide services at their usual professional rate are "motivated by greed".
77 Secondly, the assertion in [15] (see [22] above) that "the contraventions were not isolated or aberrant ... They were deliberate" must be read in light of the uncontradicted evidence that prior to these incidents, Mr Li had "never been the subject of any complaint or investigation before the Tax Practitioners Board or any other professional association" (Ex A [58]), the agreement that recklessness not knowledge is the relevant state of mind, and the fact that the contraventions occurred in a 5 week period ([3]) in what is effectively a single course of conduct. Reckless conduct is different from deliberate conduct, by definition.
78 Other factual matters are dealt with below. As a general matter, the Board's submissions substitute assertion (such as that the conduct was "very serious indeed" at [13]) for analysis of the underlying seriousness of the conduct within the framework of possible contraventions.
79 Though most of the primary facts are not in dispute, Mr Li takes issue regarding the accuracy of the following factual assertions that are raised in the Board's written submissions.
80 First, the statement at [24] that Mr Li "claimed deductions on the returns, without question, because he was told that the expenses had been incurred" requires clarification. Mr Li's evidence is that he did in fact request supporting documentation in some instances for claimed deductions that exceeded the value of $300, and if the requested receipts were not provided, he accordingly reduced the relevant deductions to nil or less than $300 before lodging the returns (Ex A [25]).
81 Second, the assertion that Mr Li was "motivated by greed" (see [19] above) finds no support whatsoever in the facts or evidence in this case. There is no dispute between the parties that Mr Li charged his regular fee of $60 for each tax return and there is no suggestion in the evidence that he engaged in any form of conduct that was intended to inflate or maximise his profit. The Board's contention on this issue is improper and should not have been put.
82 Similarly, the statement that Mr Li "deliberately refrained from asking questions and making inquiry, lest he learn matters he did not want to know" (see [25] above) should also be rejected. There is simply no basis in the evidence to support that conclusion.
83 Third, the facts concerning co-operation are not fairly stated at [31] above. Mr Li co-operated fully with the Board's investigation, as Ex A at [30]-[52] and Annexure CCL4 reflects. The defence was lodged by solicitors he then had engaged at a time when the AAT decision was reserved. The decision was handed down on 14 May 2014. The Court offered to appoint counsel by letter dated 10 July 2014 and confirmed acceptance by letter dated 23 July 2014. On 8 August 2014, counsel and Mr Li met with the Board's representatives and legal representatives. There was nothing unreasonable in a person in the position of Mr Li reserving his position in those circumstances while awaiting the outcome of the AAT hearing.
84 Fourth, the reference at [31] above to prolonged negotiations over the facts is unsupported by evidence, and misstates the true position. Lest the Court be misled by the assertion, the basic and incontrovertible facts should be set out. The Board was provided with a draft statement of agreed facts drafted by counsel for Mr Li at a meeting on 8 August 2014. The Court gave directions by consent on 19 August 2014, including for the filing of a statement of agreed facts by 15 September 2014. On 10 September 2014, the Board supplied a draft responding to that Mr Li supplied on 8 August 2014 (but without changes marked up) on 10 September 2014, leaving four clear working days before the agreed statement was due. The Board's draft had not been settled by counsel then retained by it. A further version was sent by the AGS on 12 September 2014 after discussion between counsel for the respective parties. After further discussion between counsel another version was sent by AGS on 15 September, and another on 17 September. The facts signed by senior counsel for Mr Li upon instructions was sent to the AGS on 9 September 2014. It is simply wrong to suggest that "protracted negotiations" over the facts are somehow a matter to be attributed as a matter of criticism to Mr Li.
85 Fifth, the first sentence at [31(3)] above, in referring to a "lack of candour", is without any foundation in the evidence. Filing a defence at a time when related proceedings are reserved cannot fairly be so described; and the evidence is that Mr Li co-operated fully with the ATO's inquiries.
86 Sixth, as to [31(4)] above, Mr Li had rights of merit review conferred by Parliament. In circumstances where his only source of earning capacity was destroyed by the decision, and where no dishonesty was alleged against him, it cannot be a matter of aggravation of penalty that he exercised his rights to seek review. Again, it is a submission that should not have been put.
87 Turning to Mr Li's capacity to pay a pecuniary penalty, it was submitted on his behalf that, for the reasons set out below, the submission at [28] above that "[i]t is clear that capacity to pay will ordinarily be of limited relevance" is not an accurate statement of legal principle.
88 Among the authorities that the Board relies upon in support of its contention is Australian Competition and Consumer Commission v High Adventure Pty Limited (2005) ATPR 42-091. In that case, the Full Federal Court (Heerey, Finkelstein and Allsop JJ) observed at [11] that the principal purpose for the imposition of penalties for a contravention of the anti-trust provisions in Part IV of the Trade Practices Act 1974 (Cth) is deterrence, both specific and general. The Full Court went on to state that the possibility that a pecuniary penalty may be so high as to cause the offender to become insolvent must not prevent the Court from fulfilling its duty to determine the appropriate penalty in the circumstances of each individual case. Their Honours also noted at [12] that, in assessing the amount of any penalty, the Court is required to take into account a variety of other factors beyond deterrence, including mitigating factors such as the likelihood of the culpable party reoffending.
89 High Adventure is authority, therefore, for the proposition that, in weighing all of the relevant factors, a court must not ignore the seriousness of offending conduct and the need to deter future contraventions by placing undue emphasis on the potentially ruinous financial consequences of imposing a substantial penalty on a guilty corporate party. The case does not support an argument that an offending party's capacity to pay will "ordinarily be of little relevance".
90 Another case relied upon by the Board, Clarity1, contains the following statement by Nicholson J at [43]:
… I accept that the issue of capacity to pay is, although a relevant factor, of less relevance when balanced against the necessity of imposing a penalty that satisfies the objective of general deterrence[.]
91 In support of the proposition extracted above, his Honour referred to the decision of Merkel J in Leahy at 284-285, at [9] and [11]. In that case, the ACCC brought proceedings against three companies, Apco Service Stations Pty Ltd, Brumar (Vic) Pty Ltd and Balgee Oil Pty Ltd, for contraventions of s 45(2)(a)(ii) of the Trade Practices Act. The additional respondents comprised three natural persons who were alleged to have been involved in the contraventions.
92 In considering the principles to be applied in respect of determining an appropriate penalty under s 76(1) of the Trade Practices Act, Merkel J said at [9]:
The size of the contravening companies and their respective capacities to pay a penalty were relied upon as factors in mitigation in the present case. Plainly, such factors can be relevant to the penalty that is necessary to deter the company from contravening the Act in the future. Size may also be relevant to general deterrence because other potential contraveners are likely to take notice of penalties imposed on companies of a similar size. However, a contravening company's capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future. Thus, general deterrence will depend more on the expected quantum of the penalty for the offending conduct, rather than on a past offender's capacity to pay a previous penalty. I therefore respectfully agree with the observation of Smithers J, referred to by Burchett and Kiefel JJ in NW Frozen Foods, to the effect that, a penalty that is no greater than is necessary to achieve the object of generally deterrence, will not be oppressive. I have approached the issue of corporate penalties on that basis. The penalties in relation to the individuals may need to be tempered by personal considerations.
(Emphasis added, internal citations omitted.)
93 His Honour's observations regarding general deterrence were thus clearly directed toward the imposition of penalties against the corporate respondents in Leahy, as opposed to the individual offenders. As regards the latter category, his Honour expressly stated that "personal considerations" were relevant to the assessment of penalties. The distinction drawn by Merkel J is not reflected in the summary of Leahy that appears at [43] of Nicholson J's judgment in Clarity1, and does not appear to have been discussed in subsequent cases in which the relevant passages in Clarity1 and Leahy have been cited with approval.
94 Moreover, Merkel J went on to explain in Leahy (at [11]) that, in the circumstances of that case, the giving of undue weight to the corporate respondents' capacity to pay would "not only produce anomalous outcomes, such as the most culpable offender receiving the lightest penalty, but would also reward companies for carrying on business in a manner that resulted in those companies having few, if any, assets available to pay a penalty when it is imposed". Those circumstances are clearly distinguishable from the facts of the present case.
95 In any event, the object of deterrence should be given less weight in the circumstances of this case, because of the termination in August 2013 of Mr Li's registration as a tax agent. This approach was taken by Jagot J in Su at [21] (see [125] below).
96 Su is the only available authority regarding the determination of a pecuniary penalty in respect of contraventions of s 50-20 of the Act. As such, it is directly apposite to the task that must be undertaken by the Court in these proceedings, and binding in parity by way of a ceiling on questions of objective seriousness, given that the conduct there was clearly more serious. Although the penalty imposed was about one third of the bottom end of the range for which the Board there contended, no appeal has apparently been brought.
97 The submissions on behalf of Mr Li then addressed at [98] and [99] below what was described as mitigating factors in his case.
98 Applying the principles examined by Jagot J in Su, in particular at [19], the following factors should be afforded substantial weight in determining whether Mr Li should be liable to any pecuniary penalty under s. 50-35 of the Act:
(1) Mr Li did not knowingly make the false statements in the relevant tax returns (SAF [28], [29], [38] and [40]; Ex A [53], [54]). While he "either knew that there was a real risk or was grossly indifferent" as to the intermediaries' authority to arrange for the preparation and lodgement of the tax returns, this is a significantly different state of mind from intentionally misleading the Commissioner. The Board's repeated assertion that the contraventions of s 50-20 by Mr Li "were not isolated or aberrant" and were "deliberate" is unfair and misleading for two reasons. First, it does not accurately reflect the relevant facts in this case, including that the contraventions took place over a five week period in what was effectively a single course of conduct and that Mr Li had not been the subject of any previous complaint to the Board. Second, the Board's repeated use of the term "deliberate" in this context wrongly implies knowledge of falsity, which muddies the distinction between recklessness and knowledge that is evident in the structure of s 50-20(c). To the extent that the lodgement of the tax returns by Mr Li with the ATO was deliberate in the sense that it was not some involuntary act, so much may clearly be accepted. But the relevance of any concept of "deliberate" conduct to the culpability of Mr Li in the circumstances of this case ends there. As stated earlier in these submissions, reckless conduct is different from deliberate conduct, by definition.
(2) Mr Li has little, if any, capacity to pay a substantial fine. As discussed in greater detail below, the evidence demonstrates that, in light of Mr Li's dire financial circumstances, the penalty proposed by the Board would be so great as to have a crushing impact not only upon Mr Li but also the members of his family who are dependent upon him for their economic livelihood. The capacity of Mr Li to pay a fine is a factor that must be taken into account in determining the appropriate penalty": Rahme at 86-87; Barnes at [64]-[70]; Su at [19].
(3) Mr Li has not previously been the subject of any investigation by the Board or disciplinary proceedings in relation to his former practice as a registered tax agent: Ex A [58]; SAF [3]. The presence or absence of prior contraventions may be taken into account as a relevant consideration, and was accepted as a mitigating factor in Su (at [19]). There was no pattern of conduct by Mr Li that demonstrates a repeated course of dishonesty or a general propensity to offend beyond the admitted contraventions, which further reduces the need for specific deterrence in this case.
(4) Mr Li received little reward for his contravening conduct. He was paid a total of $5,400 for preparing and lodging the relevant tax returns: SAF [14]. The fact that the penalty proposed by the Board is over 40 times the gross amount that Mr Li received further demonstrates its arbitrary and disproportionate character. The Board refers to cases establishing the principles by which an appropriate penalty is to be ascertained, but then plucks from the air the amount of the Commonwealth's loss as the appropriate figure. The randomness of such an approach, and its inconsistency with fundamental principle, hardly needs emphasis. On that approach, if the ATO had detected the frauds early and suffered no loss, no penalty would be appropriate.
(5) Mr Li charged his ordinary rate of $60 for each tax return, unlike the respondent in Su, who charged double his usual fee and paid kickbacks to the intermediaries who supplied him with draft returns. There is no basis for the Board's contention that Mr Li was motivated by greed or some more culpable purpose beyond conducting his business in the ordinary manner. The conduct of the respondent in Su was objectively more serious and deserving of greater sanction, in that the inflated fee suggested some consciousness of irregularity or elevated risk on the part of the tax agent. Those circumstances are not applicable to this case.
(6) Mr Li has lost his registration as a result of his actions and has little prospect of being successful should he ever apply to be re-registered. He will be 59 years old by the time he is eligible to seek readmission to the profession. He has accordingly lost his livelihood and the ability to work in a profession for which he has trained for many years in order to acquire the necessary expertise and experience: Ex A [55]. The loss of his registration has also left Mr Li unemployed and unable to find any work, as discussed in more detail below.
(7) Mr Li was deliberately and carefully targeted by the perpetrators of a sophisticated and calculated scam, who exploited his limited language skills and status as a sole practitioner. Whilst the respondent's conduct admittedly fell below the standard of diligence that may be expected of a registered tax agent, it never rose to the level of colluding with the perpetrators of the fraud or knowingly advancing their fraudulent ends. Contrary to the Board's bald and baseless assertion that "the circumstances of the contravening conduct put it at the most serious end of the spectrum" (at [21] of the Board's submissions), Mr Li's carelessness is more appropriately located towards the lower end of the scale, which should be reflected in a modest sum for any penalty that the Court decides to impose.
(8) Finally, though Mr Li's actions contributed to a loss to the revenue and significant inconvenience to the taxpayers whose tax file numbers were compromised, that inconvenience has been largely rectified, as new tax file numbers have been issued and refunds paid to the affected taxpayers: SAF [43]. Similar circumstances were regarded by Jagot J as a mitigating factor in Su.
99 It was submitted on behalf of Mr Li that in his case there are further mitigating factors, above and beyond those in Su, that are directly relevant to his capacity to pay any penalty that may be imposed:
(1) Unlike the offending party in Su, who lived with his parents and earned $600 to $650 per week in net wages, Mr Li is currently unemployed and has no regular source of income beyond welfare payments from Centrelink: Ex A [67], [72]. He has tried, unsuccessfully, to find work as an accountant or bookkeeper; such efforts having been further hampered by the cancellation of his membership of the Institute of Public Accountants: Ex A [68], [69]. Mr Li's attempts to find other work, including menial jobs such as cleaning, have also proved fruitless: Ex A [70], [71]. It is unlikely that, at 56 years of age, Mr Li will be able to find gainful employment that would materially alter his financial circumstances.
(2) In further contrast to the respondent in Su, Mr Li has several dependants, all of whom reside with him in the family home and are reliant upon Mr Li as their sole source of financial income: Ex A [66]. These include Mr Li's teenage children who are attending public high schools and whose educational expenses Mr Li is barely able to cover: Ex A [57], [60]. Mr Li also lives with his wife, who provides full-time care to her father (who has recently been diagnosed with terminal lung cancer in addition to a number of serious illnesses) and Mr Li's elderly parents, who suffer from dementia and Alzheimer's disease: Ex A [61]-[65]. The imposition of a substantial penalty on Mr Li would therefore have a devastating impact not only on Mr Li's financial condition, but also the lives and well-being of his numerous dependents.
(3) Mr Li provided his full co-operation to the ATO and attempted to investigate and rectify the situation when he became aware that something was wrong with the returns that he had lodged. Upon first being informed by an ATO officer that there was a problem with one of the returns, Mr Li attempted to contact the employers of the relevant taxpayers and sought further assistance from the ATO: Ex A [31]-[36]. After being rebuffed by several ATO representatives, he eventually spoke to Ms Luini D'Souza. Mr Li stopped lodging any further returns and sent Ms D'Souza three facsimile messages containing the names and tax file numbers of taxpayers whose returns he had processed. It is suggested in the Board's submissions at [54] that Mr Li's decision to stop processing returns in September 2011 came too late as the "the contraventions had already occurred". There is no evidence, however, that refunds generated by the scam had already been paid to some or all of the affected taxpayers at that point - in fact, the evidence suggests that a significant number of the tax returns were stopped by the ATO's systems prior to being processed: Affidavit of Run Gong affirmed 30 May 2013 at [8]-[9]. There is, accordingly, no basis to argue that the timing of Mr Li's co-operation disqualifies its relevance as a factor in mitigation. He also followed Ms D'Souza's directive to seek further information from the fraudsters, despite a genuine fear for his personal safety: Ex A [39]-[48]. When Mr Li was later interviewed by the ATO as part of its formal investigation, he provided all documents and information that were requested: Ex A [50], [51]. Mr Li's assistance was formally acknowledged in writing by the ATO and stands as a mitigating factor that should be taken into account in the circumstances of this case.
100 Mr Li has already paid a very high price for his offending conduct and is genuinely remorseful for his part in the scam that was perpetrated against the Commonwealth: Ex A [54]-[57]. In this regard, the assertion at [87] of the Board's submissions that "there is nothing of any substance to indicate that Mr Li has 'learnt his lesson'" is utterly false. His predicament stands in stark contrast to the real perpetrators of the fraud - the men who called themselves Messrs Islam and Rahman - who have escaped any form of sanction in relation to their conduct.
101 As canvassed above, Mr Li's inability to find work following his deregistration as a tax agent has meant that his only source of income is unemployment benefits from Centrelink, which currently amount to approximately $238.50 per week: Ex A [74]. His wife and mother also receive modest sums in the form of weekly welfare and pension payments. His parents-in-law are ineligible to receive similar benefits on account of their immigration status: Ex A [65]. Mr Li has estimated his family's total weekly income as being approximately $1,170: Ex A [79], Annexure CCL11.
102 The family's weekly income is inadequate to cover mortgage repayments, general household costs, utilities, food, medical and schooling expenses totalling approximately $1,285 per week: Ex A, Annexure CCL11. Mr Li also owes $8,748 in legal fees to his former solicitors and $1,087.10 in unpaid taxes to the ATO: Ex A [79].
103 The Board's submission that "any medical conditions of the respondent's mother and father-in-law are subject to change that might vary the impact of any such condition on the respondent's financial circumstances (and capacity to pay a penalty)" (at [55]) does little to advance its case. The advanced ages of Mr Li's mother and father-in-law, and the irreversible and degenerative nature of their respective ailments (Alzheimer's disease, dementia and terminal lung cancer) mean they are likely to get worse, not better, thereby putting greater strain on the family's resources and further reducing the respondent's capacity to pay a substantial penalty.
104 Mr Li has also deposed to his limited financial assets, chief among which is the home that houses his immediate and extended family. Mr Li and his wife still owe approximately $137,000 in mortgage repayments on that property and their attempts to refinance the loan have been rebuffed on the basis that their income is insufficient to make repayments: Ex A [75]. Mr Li's assets are limited to his motor vehicle, approximately $10,000 worth of shares, and less than $1,000 in cash deposits at various banks: Ex A [76].
105 The evidence demonstrates that Mr Li has little, if any, capacity to pay a substantial fine. It is, moreover, misleading to characterise Mr Li as being under "temporary adverse financial circumstances" (at [57] of the Board's submissions) given the nature of his parents' prognoses and the fact that he is unlikely to ever practise again as a tax agent. The reality of Mr Li's financial situation means that, even if he were permitted to pay a penalty by instalments, it would do little to ameliorate the crushing impact of the penalty that is sought by the Board. The allowance of time to pay or payment by instalments does not justify the imposition of a penalty that is disproportionate to the objective seriousness of Mr Li's conduct: Kaye v Vagg (No 2) (1984) 11 A Crim R 127 at 129 per Cox J; Su at [19].
106 Under s 50-35 of the Act, the Court may order an offending person to pay the Commonwealth a pecuniary penalty, but is not obliged to do so.
107 Mr Li's primary submission is that the circumstances of this case, including the significant mitigating factors discussed in [98] and [99] above, could support a finding that he should not be required to pay any penalty to the Commonwealth.
108 In the alternative, should the Court be of the view that the imposition of a penalty is appropriate, it is submitted that the amount of any such penalty should be significantly less than the $70,000 that the offending party was ordered to pay in Su.
109 In Su, the Tax Practitioners Board submitted that a total penalty of between $200,000 and $250,000 should be imposed upon the respondent. In relation to that contention, Jagot J said at[19]:
[T]he total penalty the Board seeks would be crushing to the Respondent. He would have no realistic hope of paying such a penalty even if a lengthy period to pay were given to him. The effect of such an approach would be to make the respondent bear a responsibility for general deterrence grossly disproportionate to the objective seriousness of what he has done, which is impermissible.
110 It was submitted on behalf of Mr Li that the $222,958.64 penalty contended for by the Board in this case is also grossly disproportionate: taking into account all of the relevant factors, it was further submitted that the amount of any penalty to be imposed upon Mr Li should be limited to the range of $10,000 to $20,000.