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The Federal Court has found that the registration of a tax agent who was caught up in, and facilitated, a scam involving identity theft and lodgment of false tax returns claiming refunds, should be cancelled. The court, however, rejected the Tax Practitioners Board’s application for a substantial pecuniary penalty.

The tax agent was a sole practitioner. He lodged tax returns, including claims for work-related expense deductions, on behalf of a large number of taxpayers whose identities had, in fact, been stolen, though there was no allegation that he was aware of that fact. The returns claimed refunds in the total amount of some $445,917.27.

The TPB cancelled the agent’s registration, and sought the imposition of a penalty amounting to approximately $223,000.

On the evidence, the court found that the agent had recklessly made false, incorrect or misleading statements to the Commissioner, but that those statements were not deliberately or knowingly false. It was appropriate that his registration be terminated. However, having regard to the seriousness of the agent’s conduct and his personal and family circumstances, no further penalty should be imposed.

Tax Practitioners Board v Li [2015] FCA 233 (Edmonds J, 17 March 2015).

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