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30 Mar 15 Former tax agent ordered to pay pecuniary penalty – Kim

The Federal Court has found that a registered tax agent had acted recklessly in preparing and lodging a total of 79 false tax returns.

The returns were based on information supplied to the tax agent by unknown persons who asked him to prepare, in total, 79 income tax returns on the basis of information which they provided to him on behalf of identified taxpayers. For the purpose of allowing him to prepare the returns these individuals provided the tax agent with PAYG and bank account details. The summaries which the unidentified individuals provided to him for the 79 income tax returns were false documents and had resulted from an exercise in identity theft. The names of the individuals on whose purported behalf the returns were to be prepared belonged to real individuals and the tax file numbers shown for them were the tax file numbers for those individuals. Everything else about the summaries was, however, false. In effect, they recorded bogus amounts of income and tax retained, and claimed refunds. The bank account details were also false.

The scam and the lodgment of false returns resulted in substantial loss to the Commonwealth in fraudulently obtained refunds of $245,050.69.

The court made declarations of contravention of s 50-20 of the Tax Agent Services Act 2009 (Cth), and imposed a total penalty of $4,000, plus payment of the Board’s costs. The court considered the Board’s proposed penalty of $222,976 to be wholly disproportionate in circumstances where the tax agent had already been struck off the register, and in the light of the tax agent's personal circumstances.

The court made the following remarks about imposition of a civil penalty under s 50-20:

“Above all, the penalty which is imposed must be proportionate to the wrong which has been done. But it must also operate as a deterrent both for other registered tax agents, so that they may know the consequences of breaching s 50-20, and also for the respondent, so that he may be personally dissuaded from any repetition of the conduct. In fashioning an appropriate deterrent this Court has repeatedly emphasised that the penalty must be such that it is not merely to be seen as another cost of doing business. It will be relevant to note in that regard that a civil penalty cannot be claimed as a deduction against assessable income. The respondent is entitled to have any early admission of wrongdoing brought to account, together with the benefit this confers upon the community by averting the cost which might otherwise be expended in his pursuit. So too, whilst they may perhaps not always be of great weight, the respondent is also entitled to have his personal circumstances brought to account. His degree of contrition is also to be assessed. Of course, many of these factors pull in different directions and the process of assessing the appropriate penalty is a process, not of mathematical precision, but instead of impressionistic reaction in the light of all the available relevant material as an ‘instinctive synthesis’. Where, as here, multiple contraventions arise out of a single course of conduct, different approaches may be warranted. These will depend on an assessment of the facts in the case. Here the conduct was effectively one episode of misbehaviour spread over some three months arising from Mr Kim’s unwitting dealing with one group of criminals. On the other hand, it had two distinct features to it: the false certification and the false contents of the returns. It seems to me that it is properly characterised as two sets of wrongs. At the end of the process of assessment, one then needs to stand back and to ask whether the penalty at which the Court has arrived is just and appropriate in all the circumstances.”

Tax Practitioners Board v Kim (No 2) [2015] FCA 263 (Perram J, 27 March 2015).


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