FEDERAL COURT OF AUSTRALIA Tax Practitioners Board v Zada Dedic [2014] FCA 307 Citation: Tax Practitioners Board v Zada Dedic [2014] FCA 307 Parties: TAX PRACTITIONERS BOARD v ZADA DEDIC File number(s): VID 1028 of 2013 Judge(s): DAVIES J Date of judgment: 31 March 2014 Catchwords: TAXATION – application by the Tax Practitioners Board for declaratory and injunctive relief arising out of alleged contraventions of s 50-5(1) of the Tax Agent Services Act 2009 (Cth) – applicant prepared and filed income tax returns – applicant was not a registered tax agent – applicant charged or received other reward for the provision of tax agent services Legislation: Tax Agent Services Act 2009 (Cth) ss 2-5, 50-5(1), 90-05, 90-10 Taxation Administration Act 1953 (Cth) sch 1, s 388-70 Cases cited: Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378; [2012] FCAFC 56 Tax Practitioners Board v Campbell [2012] FCA 1153 Tax Practitioners Board v Hogan [2012] FCA 642 Tax Practitioners Board v Munro [2012] FCA 1338 Date of hearing: 24 March 2014 Date of last submissions: 24 March 2014 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 12 Counsel for the Applicant: D Star Counsel for the Respondent: The respondent did not appear IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1028 of 2013 BETWEEN: TAX PRACTITIONERS BOARD Applicant AND: ZADA DEDIC Respondent JUDGE: DAVIES J DATE OF ORDER: 31 MARCH 2014 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. On 86 separate occasions detailed in Schedule A to this Order, between about July 2010 and October 2012 and in relation to the persons respectively described in the Schedule A to this Order in respect of a particular occasion, the respondent by providing to that person a service: 1.1. that involved the respondent doing one or more of the following: 1.1.1. preparing the person's income tax return in preparation for lodgement; 1.1.2. lodging the person's income tax return with the Australian Taxation Office (ATO); 1.2. for which the respondent charged or received a monetary payment, or other reward, for providing the said service; 1.3. which knowledge of the matters referred to in subparagraphs 1.1 and 1.2 above; 1.4. while the respondent was not a registered tax agent pursuant to the Tax Agent Services Act 2009 (Cth) (the Act); 1.5. which was not a service relating to a business activity statement; and 1.6. which was not provided as a legal service, in each case: 1.7. by reason of the matters referred to in subparagraphs 1.1 and 1.2 above, provided a service that the person could reasonably be expected to rely upon to satisfy liabilities or obligations, or claim entitlements, that arise, or could arise, under a taxation law; and 1.8. by reason of the matters referred to in subparagraphs 1.1 to 1.7 above, supplied a tax agent service in contravention of s 50-5(1) of the Act. THE COURT ORDERS THAT: 2. For a period of 3 years from the date of this Order, if the respondent is requested to provide to another person or entity a service relating to: 2.1. giving advice concerning entitlements, liabilities or obligations that arise or could arise under a taxation law; or 2.2. preparing for another person or entity a return or statement in relation to an Australian taxation law; or 2.3. lodging for another person or entity a return or statement in relation to a taxation law with the ATO, the respondent must, before providing or agreeing to provide the said service, and unless then registered as a tax agent pursuant to the Act, inform the person or entity of the matters referred to in paragraphs 1 to 6 in Form A in Schedule B to this Order and, if the person or entity still requests the service be performed by the respondent: 2.4. have the person or entity complete and sign Form A in Schedule B to this Order; 2.5. retain a copy of the completed and signed form for a period of 3 years; and 2.6. provide any such completed and signed form to the applicant within 14 days of its request. 3. A hearing of paragraph 3 of the applicant's Amended Application be listed for 10:15am, 5 May 2014. 4. The respondent pay the applicant's costs of the proceeding to the date of this Order, including reserved costs, to be taxed in default of agreement. TAKE NOTE: the failure to comply with these orders may render the respondent liable to imprisonment, sequestration of property or punishment for contempt. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. SCHEDULE A TO THE ORDER No. Taxpayer name Financial year in respect of which tax return prepared and lodged Date or approximate date on which return lodged Andres Ruz Year ended 30 June 2009 10 October 2011 Andres Ruz Year ended 30 June 2010 13 September 2010 Andres Ruz Year ended 30 June 2011 30 August 2011 Bernarda Ruz Year ended 30 June 2010 21 September 2010 Bernarda Ruz Year ended 30 June 2011 30 August 2011 Tu Huynh Year ended 30 June 2010 21 October 2011 Tu Huynh Year ended 30 June 2011 18 October 2011 Pera Thompson Year ended 30 June 2010 13 August 2010 Pera Thompson Year ended 30 June 2011 18 October 2011 Yancy Murillo Year ended 30 June 2010 26 July 2010 Yancy Murillo Year ended 30 June 2011 23 August 2011 Yancy Murillo Year ended 30 June 2012 10 August 2012 Mary Orfanidis Year ended 30 June 2010 26 July 2010 Mary Orfanidis Year ended 30 June 2011 1 September 2011 Mary Orfanidis Year ended 30 June 2012 10 August 2012 Maria Herrera Year ended 30 June 2011 10 December 2012 Maria Herrera Year ended 30 June 2012 31 July 2012 Victor Herrera Year ended 30 June 2011 10 December 2012 Victor Herrera Year ended 30 June 2012 31 July 2012 Dragan Nedanovski Year ended 30 June 2012 14 August 2012 Symbol Plastering (a partnership) Year ended 30 June 2012 20 August 2012 Kire Tasevski Year ended 30 June 2012 14 August 2012 Amir Krupic Year ended 30 June 2010 23 August 2013 Amir Krupic Year ended 30 June 2011 15 August 2011 Amir Krupic Year ended 30 June 2012 30 October 2012 Amir and Pasa Krupic (a partnership) Year ended 30 June 2010 23 August 2010 Amir and Pasa Krupic (a partnership) Year ended 30 June 2011 15 August 2011 Amir and Pasa Krupic (a partnership) Year ended 30 June 2012 29 October 2012 Pasa Krupic Year ended 30 June 2010 26 August 2010 Pasa Krupic Year ended 30 June 2011 15 August 2011 Pasa Krupic Year ended 30 June 2012 30 October 2012 Vanessa Tomelden Year ended 30 June 2012 12 October 2012 Adam Rowell Year ended 30 June 2010 29 July 2010 Adam Rowell Year ended 30 June 2011 19 July 2011 Adam Rowell Year ended 30 June 2012 23 July 2012 Kristin Rowell Year ended 30 June 2010 29 July 2010 Kristin Rowell Year ended 30 June 2011 19 July 2011 Kristin Rowell Year ended 30 June 2012 23 July 2012 Stephanie Palmer Year ended 30 June 2010 20 July 2010 Stephanie Palmer Year ended 30 June 2011 4 August 2011 Stephanie Palmer Year ended 30 June 2012 16 August 2012 Bernard Petrucelli Year ended 30 June 2012 3 August 2012 Donna Petrucelli Year ended 30 June 2012 3 August 2012 Lisa Orfanidis Year ended 30 June 2010 13 August 2010 Lisa Orfanidis Year ended 30 June 2011 25 July 2011 Lisa Orfanidis Year ended 30 June 2012 17 July 2013 Malcolm Basaure Year ended 30 June 2010 6 August 2010 Malcolm Basaure Year ended 30 June 2011 21 July 2011 Malcolm Basaure Year ended 30 June 2012 2 August 2012 Carlos Ramirez Year ended 30 June 2011 28 May 2012 Carlos Ramirez Year ended 30 June 2012 29 October 2012 Marcela Acevedo-Lainez Year ended 30 June 2011 20 August 2011 Marcela Acevedo-Lainez Year ended 30 June 2012 6 August 2012 Rebecca Cottier Year ended 30 June 2011 19 July 2011 Rebecca Cottier Year ended 30 June 2012 14 August 2012 Mauricio Urbina Year ended 30 June 2010 6 August 2010 Mauricio Urbina Year ended 30 June 2011 23 August 2011 Mauricio Urbina Year ended 30 June 2012 31 August 2012 Natalia Alvear Year ended 30 June 2011 23 August 2011 Stephen Borg Year ended 30 June 2010 8 October 2010 Stephen Borg Year ended 30 June 2011 9 August 2011 Stephen Borg Year ended 30 June 2012 2 August 2012 Theodora Borg (Monoyioudis) Year ended 30 June 2010 8 October 2010 Theodora Borg (Monoyioudis) Year ended 30 June 2011 9 August 2011 Theodora Borg (Monoyioudis) Year ended 30 June 2012 2 August 2012 Trudy Chator Year ended 30 June 2009 10 December 2010 Trudy Chator Year ended 30 June 2010 10 December 2010 Trudy Chator Year ended 30 June 2011 1 September 2011 Edward Chator Year ended 30 June 2009 10 December 2010 Edward Chator Year ended 30 June 2010 10 December 2010 Edward Chator Year ended 30 June 2011 1 September 2011 Lilly Jovanovski Year ended 30 June 2010 28 September 2010 Lilly Jovanovski Year ended 30 June 2011 10 October 2011 Lilly Jovanovski Year ended 30 June 2012 29 October 2012 Peco Jovanovski Year ended 30 June 2010 28 September 2010 Peco Jovanovski Year ended 30 June 2011 10 October 2011 Peco Jovanovski Year ended 30 June 2012 29 October 2012 P & L Jovanovski Family Trust Year ended 30 June 2010 27 October 2010 P & L Jovanovski Family Trust Year ended 30 June 2011 13 October 2011 P & L Jovanovski Family Trust Year ended 30 June 2012 23 October 2012 Montana Unit Trust Pty Ltd Year ended 30 June 2010 15 September 2010 Montana Unit Trust Pty Ltd Year ended 30 June 2011 3 August 2011 Montana Unit Trust Pty Ltd Year ended 30 June 2012 23 October 2012 Montana Caravans Pty Ltd Year ended 30 June 2010 6 September 2010 Montana Caravans Pty Ltd Year ended 30 June 2011 22 July 2011 Montana Caravans Pty Ltd Year ended 30 June 2012 16 October 2012 SCHEDULE B TO THE ORDER FORM A I, [print full name] ……………………………………………………………..………………, having requested ZADA DEDIC to provide a service (i) to me / (ii) to the entity named ……………………………………………………………… [delete whichever inapplicable] relating to one or more of the following: (a) giving advice concerning entitlements, liabilities or obligations that arise or could arise under a taxation law; (b) completing a return or statement in relation to a taxation law; or (c) lodging a return or statement in relation to a taxation law with the Australian Taxation Office, and having been informed that: 1. she is not a registered tax agent; 2. she may not meet the eligibility requirements for registration as a tax agent under the Tax Agent Services Act 2009 and the Tax Agent Services Regulations 2009 and could only finally ascertain whether she currently meets these eligibility requirements if she were to apply to the Tax Practitioners Board for registration as a tax agent; 3. a person or entity should seek assistance from a registered tax agent for matters that relate to such services or for such services; 4. she does not wish to receive, and will not accept, any fee, benefit or reward of any kind for providing such a service; 5. she is likely to be contravening the Tax Agent Services Act 2009 if she receives a fee, benefit or reward for providing such a service; and 6. she is required by order of the Federal Court of Australia to inform me of these matters; still request her to provide the service. SIGNED………………………………………….. DATE………………………………….. ……………………………………………………………………………………………….... print full address IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1028 of 2013 BETWEEN: TAX PRACTITIONERS BOARD Applicant AND: ZADA DEDIC Respondent JUDGE: DAVIES J DATE: 31 MARCH 2014 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The Tax Practitioners Board ("the Board") has applied to the Court for the imposition of pecuniary penalties and related declaratory and injunctive relief against the respondent ("Ms Dedic") for contraventions of s 50-5(1) of the Tax Agent Services Act 2009 (Cth) ("the Act"). Section 50-5(1) relevantly provides as follows: You contravene this subsection if: (a) you provide a service that you know, or ought reasonably to know, is a *tax agent service; and (b) the tax agent service is not a *BAS service; and (c) you charge or receive a fee or other reward for providing the tax agent service; and (d) you are not a *registered tax agent; … 2 The Board alleged that Ms Dedic contravened s 50-5(1) on 86 separate occasions between July 2010 and October 2012. The Board has alleged that Ms Dedic, who has never held registration as a tax agent, prepared and lodged income tax returns for clients of her accounting business for which she charged a fee or received some other reward. Ms Dedic has admitted 55 of the alleged 86 contraventions of in a statement of agreed facts that she signed on 17 February 2014. Ms Dedic has challenged the other 31 alleged contraventions, claiming that she had not charged for the preparation and lodgement of those tax returns. She did, however, admit that she had prepared and lodged them. 3 Ms Dedic did not appear at the hearing to contest her liability. She had, however, prepared a response to the Board's fast track application and made a written statement that she attached to an affidavit which I accepted into evidence. 4 I am satisfied on the strength of the evidence before the Court, including having regard to Ms Dedic's evidence, that Ms Dedic contravened s 50-5(1) of the Act with respect to the remaining 31 contested contraventions. 5 First, the preparation and lodgement of tax returns was unquestionably a "tax agent service" as defined (and not a BAS service): see ss 90-5 and 90-10 of the Act. This was not challenged by Ms Dedic. 6 Secondly, I have no difficulty in finding that Ms Dedic knew, or ought reasonably to have known, that the preparation and lodgement of the income tax returns in question was a tax agent service, having regard to the fact that she completed the tax agent's declaration in each of the tax returns required by s 388-70 of Schedule 1 to the Taxation Administration Act 1953 (Cth) – certifying that she had prepared the tax return in accordance with information supplied by the taxpayer, that the taxpayer had given her a declaration stating that the information provided to her was true and correct and that the taxpayer had authorised her to lodge the tax return. By making the declarations, Ms Dedic held herself out as a tax agent, providing tax agent services. 7 Thirdly, Ms Dedic's claim that she did not charge a fee for preparing the tax returns in question was no more than an assertion by her to that effect, but more particularly that assertion is contradicted, and cannot be accepted, in the face of tax invoices rendered by Ms Dedic for the preparation of those tax returns. In each tax invoice, the services provided by Ms Dedic are described as being for, or including, the preparation of tax returns. These descriptions refute Ms Dedic's claim that the charges were for the preparation of "financials", not tax returns. Ms Dedic sought to bolster her claim that she did not charge a fee for preparing the tax returns in question by producing an undated letter from one of her clients, Lilly Jovanovski on behalf of Montana Caravans Pty Ltd, addressed to "To whom it may concern" in which Ms Jovanovski stated that Montana Caravans had only been charged for the preparation of its financials and not for its tax returns. I do not accept that letter as a correct or reliable statement of the fact as in evidence are the particular tax invoices rendered to Montana Caravans Pty Ltd, which contradict that statement and show that Ms Dedic did in fact charge for the preparation of its tax returns. 8 In respect of the five contested transactions where tax invoices are not available there is other and sufficient evidence to show that charges were also made for the preparation of those returns. Apart from the tax returns which are in evidence, there are bank statements showing payments made by the relevant taxpayers to Ms Dedic's account in amounts that equate to $80 per tax return, which was the standard fee charged by Ms Dedic. 9 I therefore find that Ms Dedic contravened s 50-5(1) of the Act with respect to the remaining 31 contested contraventions. 10 I am satisfied that the declaration should be made. It is well settled that the Court has the power in circumstances such as the present to grant declaratory relief and I consider that it is appropriate to exercise that power in the present case: Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378; [2012] FCAFC 56. In Tax Practitioners Board v Campbell [2012] FCA 1153 Emmett J observed at [8] that: The purpose of s 50-5 of the Tax Agents Act is to protect the public by preventing unregistered persons from providing tax agent services for a fee. The object is to protect members of the public who may not be sophisticated in matters of business and commerce and who are in need of protection from persons who hold themselves out as being able to provide tax agent services but are not qualified to do so. The declaration serves the public interest by re-affirming that persons who provide tax agent services for a fee or reward without registration are contravening the provisions of the Act and that such conduct will not be tolerated. 11 I also consider that the injunctive relief sought by the Board should be granted. The granting of the injunction also serves to protect the public by requiring Ms Dedic to disclose to persons who seek to engage her to provide taxation services that she is unregistered. The requirement of disclosure will serve to ensure that potential clients will be aware that she does not have appropriate and suitable qualifications as a registered tax agent to provide tax agent services and that she cannot charge a fee for the provision of such services. The time proposed for the length of the injunction is three years, which I consider is appropriate having regard to the period of time over which, and the numerous occasions when, she engaged in the contravening conduct and to the need to protect the public from the possibility of future contravening conduct. I note that in other cases three years was also considered an appropriate length of time for similar injunctive relief in other cases: see Tax Practitioners Board v Hogan [2012] FCA 642: Tax Practitioners Board v Munro [2012] FCA 1338; Tax Practitioners Board v Campbell [2012] FCA 1153. 12 Finally there is the question of the appropriate penalty to be imposed. No submissions were advanced at the hearing on the appropriate penalty as the question of the appropriate penalty was stood over until the determination by the Court on the contested contraventions. Accordingly I propose to re-list the matter for further hearing on the question of penalty. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies. Associate: Dated: 31 March 2014