FEDERAL COURT OF AUSTRALIA Ayles v Tax Practitioners Board [2014] FCA 675 Citation: Ayles v Tax Practitioners Board [2014] FCA 675 Appeal from: Ayles v Tax Practitioners Board [2014] AATA 112 Parties: RAYMOND FREDERICK AYLES v TAX PRACTITIONERS BOARD File numbers: QUD 111 of 2014 Judges: RANGIAH J Date of judgment: 26 June 2014 Catchwords: TAXATION – appeal against refusal of decision to register applicant as a tax agent – decision of Tax Practitioners Board affirmed by Administrative Appeals Tribunal – interpretation of Item 202(a)(i) of Part 2 of Schedule 2 of the Tax Agent Services Regulations 2009 (Cth) – whether the Tribunal erred in asking whether the appellant's degree "viewed as a whole" was relevant to the tax agent services to which the application for registration related – appeal dismissed Legislation: Tax Agent Services Act 2009 (Cth) ) ss 20-5, s 20-5(1), 20-20, 20-25, 50-5(1), 90-5(1) Tax Agent Services Regulations 2009 (Cth) Items 201, 202, 202(a)(i), 203, 204, 205, 206 of Pt 2 of Sch 2 Explanatory Memorandum for the Tax Agent Services Bill 2008 (Cth) Date of hearing: 17 June 2014 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 41 Counsel for the Appellant: The appellant appeared in person Counsel for the First Respondent: Mr M Hodge Solicitor for the First Respondent: Australian Government Solicitor IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 111 of 2014 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: RAYMOND FREDERICK AYLES Appellant AND: TAX PRACTITIONERS BOARD Respondent JUDGE: RANGIAH J DATE OF ORDER: 26 JUNE 2014 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the respondent's costs of the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 111 of 2014 ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: RAYMOND FREDERICK AYLES Appellant AND: TAX PRACTITIONERS BOARD Respondent JUDGE: RANGIAH J DATE: 26 JUNE 2014 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The appellant, Raymond Ayles, appeals against a decision of the Administrative Appeals Tribunal ("the Tribunal"), constituted by Deputy President P E Hack SC, given on 28 February 2014. The Deputy President affirmed a decision of the respondent, the Tax Practitioners Board ("the Board"), refusing Mr Ayles' application for registration as a tax agent. 2 In order to explain the issues that arise for decision, it is necessary to summarise the statutory scheme governing the registration of tax agents and the circumstances of this case. The statutory scheme 3 The legislative scheme for the registration of tax agents is set out in the Tax Agent Services Act 2009 (Cth) ("the Act") and the Tax Agent Services Regulations 2009 (Cth) ("the Regulations"). 4 The benefit of becoming a registered tax agent is that, pursuant to s 50-5(1) of the Act, such a person can lawfully charge a fee to provide a "tax agent service". A "tax agent service" is defined in s 90-5(1) to mean, inter alia, a service that relates to ascertaining liabilities, obligations or entitlements of an entity under a taxation law in circumstances where the entity can reasonably be expected to rely on that service to satisfy its liabilities or claim entitlements. Such services encompass the preparation of income tax returns. 5 Section 20-20 of the Act provides: (1) You may apply to the Board for registration, including renewal of registration, as a registered tax agent or BAS agent. (2) An application must be in a form approved by the Board … 6 Section 20-25 of the Act provides: (1) If you have applied to the Board for a type of registration, the Board must grant your application if you are eligible for registration of that type. Otherwise, the Board must reject your application. … (5) If the Board considers it appropriate to do so, the Board may impose one or more conditions to which your registration is subject. (6) If a condition is imposed, it must relate to the subject area in respect of which you may provide tax agent services. 7 The criteria for eligibility for registration as a tax agent are set out in s 20-5 of the Act. In relation to individuals, s 20-5(1) provides that the Board must be satisfied of the four criteria set out in paragraphs (a) to (d). The only criterion in issue in this case is in paragraph (b), which provides: [T]he individual meets the requirements prescribed by the regulations (including, but not limited to, requirements relating to qualifications and experience) in respect of registration as a registered tax agent. 8 The requirements prescribed under the Regulations are set out in Pt 2 of Sch 2. An individual must meet one of six requirements. The six requirements in Pt 2 of Sch 2 are, in summary: Item 201 Tertiary qualifications in accountancy Item 202 Tertiary qualifications in another discipline – specialists Item 203 Diploma or higher award Item 204 Tertiary qualifications in law Item 205 Work experience Item 206 Membership of professional association 9 Item 202 is in issue in the present case. It provides: Tertiary qualifications in another discipline – specialists 202 A requirement is that: (a) the individual has been awarded: (i) a degree or a post-graduate award from an Australian tertiary institution in a discipline other than accountancy that is relevant to the tax agent services to which the application relates; or … (b) if the Board considers it relevant to the tax agent services to which the application relates—the individual has also successfully completed as many of the following courses as the Board considers necessary: (i) a course in basic accountancy principles that is approved by the Board; (ii) a course in commercial law that is approved by the Board; (iii) a course in Australian taxation law that is approved by the Board; and (c) the individual has been engaged in the equivalent of 12 months of full-time, relevant experience in the past 5 years. 10 Of the six requirements in Pt 2 of Sch 2, three apply, or may apply, where the applicant for registration has tertiary qualifications (Items 201, 202 and 204). Those items each contain three criteria that must be satisfied: (a) a relevant degree or postgraduate award; (b) the completion of courses required by the Board; (c) work experience equivalent to 12 months of full-time relevant experience in the preceding five years. 11 Item 203 has three requirements, namely: (a) a diploma or higher award from a registered training organisation or an equivalent institution in the discipline of accountancy; (b) the completion of courses required by the Board; (c) work experience equivalent to two years of full-time relevant experience in the preceding five years. 12 Item 205 does not require any tertiary qualification or diploma or higher award in accountancy, but does require: (a) the completion of courses approved by the Board; (b) work experience in the equivalent of eight years of full-time relevant experience in the past 10 years. 13 Item 206 does not require a tertiary qualification or diploma or higher award in accounting or the completion of courses, but requires that: (a) the individual is a voting member of recognised tax agent association; (b) has been engaged in the equivalent of eight years of full-time relevant experience in the preceding 10 years. 14 It may be seen that in the requirements for registration there is a trade-off between the level of the academic qualification obtained and the amount of work experience that is required. For example, an individual with a relevant tertiary qualification requires only the equivalent of 12 months of full-time experience in the last five years, whereas an individual with no relevant academic qualification must have the equivalent of eight years of such experience in the last 10 years. Background 15 Mr Ayles was awarded the degree of Bachelor of Arts (Humanities) from Deakin University in May 1997. Between 1991 and 1996, he completed the following subjects: The Australian City A Religious Experience A Religious Experience B Religious Systems A Religious Systems B Religious Investigations A Religious Investigations B Regionalism and Australia A Lifespan Development Regionalism and Australia B Physiology of Ageing Accounting 1 Health Policy & Administration Contemporary Australia A Income Taxation Law & Practice 16 Mr Ayles achieved a high distinction for Accounting 1 and a credit for Income Tax Taxation Law & Practice. He has also completed a postgraduate Diploma of Social Science at James Cook University, which was conferred in March 2002. He has undertaken other certificate level courses. 17 Mr Ayles has an extensive work history involving completing income tax returns as an employee of registered tax agents. He described, for example, having completed some 2,700 income tax returns in one year alone. 18 Mr Ayles lodged his application for registration as a tax agent in October 2012. The application form asked whether he was applying for registration that limited the services that he would provide to a particular type of service. Mr Ayles answered "Yes" and his answer seemed to indicate that he would limit his services to individuals, partnerships, small businesses and small trusts. 19 On 14 March 2013, the Board decided to reject Mr Ayles' application for registration. The Board decided that he had not met the requirements of Item 202(a) of Pt 2 of Sch 2 of the Regulations because it was not satisfied that Mr Ayles' degree was relevant to the tax agent services to which the application related. 20 Mr Ayles then sought review of the Board's decision by the Tribunal. The Tribunal's decision 21 The Deputy President noted that Mr Ayles now sought registration on the basis that his services would be confined to the preparation of income tax returns for individuals, and not for companies or trusts. The Deputy President approached the application on the footing that the services to which Mr Ayles' application related were confined in that way. 22 The Deputy President concluded: 9. It is also pertinent to note the wording of Item 202. It does not refer, expressly, to the subject matter content of the degree or post-graduate award, it refers instead to a degree or award "that is relevant to the tax agent services to which the application relates", in this case the preparation and lodgement of individual returns. The question then becomes whether Mr Ayles' degree was one relevant to those services. In my judgement, it was not. 10. The wording of the regulation requires a judgement to be made about the overall nature of the degree or award. Mr Ayles' degree was in the humanities with a strong emphasis on the study of religion. I do not doubt that successfully undertaking that course of study made Mr Ayles a better person but I am unable to see how it could be regarded as being relevant to the provision of services as a tax agent, even on the limited basis proposed by Mr Ayles. The present case is not one where it is necessary to consider the breadth of the meaning of the expression "relevant to the tax agent services to which the application relates" but it must mean, at least, that the degree or award, viewed as a whole, has an evident bearing on the work to be performed in undertaking those services. That connection is entirely absent in the case of Mr Ayles despite the degree including one subject (Income Taxation Law & Practice) that is, in itself, relevant to that work and another (Accounting 1) having arguable relevance. But those two subjects do not satisfy me that the degree was relevant in the manner specified in Item 202. 23 As I understand his case, Mr Ayles submits that the errors of law made by the Tribunal were: (a) misconstruing Item 202(a)(i) as requiring that a degree "viewed as a whole" must be relevant to the tax agent's services to which the application relates; (b) failing to take into account his experience and qualifications, other than his degree, in considering eligibility for registration. The submissions and consideration 24 Mr Ayles submits that the Tribunal's interpretation of Item 202(a)(i) as requiring that "the degree or award, viewed as a whole, has an evident bearing on the work to be performed in undertaking those services" is wrong. He argues that no degree, other than accountancy, could be said to be relevant "viewed as a whole" to tax agent services. He points to the example given in the Explanatory Memorandum for the Tax Agent Services Bill 2008 (Cth) of quantity surveyors who may be eligible for registration as tax agents because they provide specialist advice concerning tax deductibility of depreciating assets to clients. He argues that quantity surveyors would normally undertake a degree in urban planning and that no more than a few subjects would relate to quantity surveying itself. He said that such a degree could not be relevant to the taxation services to which the application relates if "viewed as a whole". He argues that, therefore, Item 202(a)(i) should be construed such that if the degree is to any extent related to the taxation services, that is enough. He argues that as he had completed two subjects in his degree that were relevant, namely accounting and income tax, he had satisfied the requirement. 25 The respondent submits that the Tribunal's interpretation is correct for the reasons it gave and is consistent with the natural language and purpose of the provision. 26 It is true that the construction given by the Deputy President that the degree "viewed as a whole" must be relevant to the tax agent services to which the application relates, is consistent with the natural language of the section. The degree must be one "other than accountancy". Any such degree is likely to involve some subjects that are relevant to tax agent services and some that are not. An assessment of whether the degree is relevant to the tax agent services can only be undertaken by examining the component subjects of the degree, and deciding whether the number and nature of those subjects relevant to the taxation services means that the degree is one that is relevant to such taxation services. It is the degree that must be relevant, and the natural language of the section suggests that the degree is to be viewed "as a whole". 27 However, that does not dispose of Mr Ayles' example of a quantity surveyor. The respondent points out that the words "that is relevant to the tax agent services" are qualified by the words "to which the application relates" in Item 202(a)(i). It submits, firstly, that an application can be made for registration as a tax agent limited to the provision of particular tax agent services, so a quantity surveyor can apply for registration for the purpose of providing tax services limited to the speciality of a quantity surveyor. It argues, next, that an urban planning degree "viewed as whole" can then be seen as relevant to those taxation services. 28 At least the second step in the respondent's submission is not consistent with the language of the regulation and I do not find it convincing. 29 Sections 20-20 and 20-25 of the Act do not, in terms, provide for an application to be made for a limited form of registration as a tax agent. However, when ss 20-20 and 20-25 are read as a whole, it is possible to interpret them as allowing an application to be made for registration as a tax agent limited to a particular area of tax agent services. The form approved by the Board provides for such a limited application to be made. If an application for registration to practice in only a limited area can be made, that would assist the Board in determining the conditions to be attached to the registration. A construction of ss 20-20 and 20-25 that allows for a limited application would assist in the practical operation of the provisions and, in that sense, can be said to be consistent with the likely intention of the legislature. I therefore consider that an application can be made for limited registration. 30 The second step in the respondent's argument is that if a quantity surveyor, to use that example again, applied for registration limited to the speciality of a quantity surveyor, the degree "viewed as a whole" would be seen to be relevant to those particular services. I am unpersuaded by that argument. It would not change the fact that in, for example, an urban planning degree, only a few subjects might have anything to do with the particular tax agent services which are to be provided by a quantity surveyor. It is difficult to see how the degree "as a whole" could be said to be relevant to those services. 31 There are two possible explanations. One is that Item 202(a)(i) is not intended to apply to specialists such as quantity surveyors. Mr Ayles' submission is inconsistent with such a construction and the respondent argues directly against it. Given that the heading to Item 202 is "Tertiary qualifications in another discipline – specialists", I accept that argument. Item 202(a)(i) is intended to apply to specialists. 32 The second possibility is that Item 202(a)(i) should be construed such that it operates in a flexible way so that where a specialist seeks registration to allow him or her to practice in a confined area of tax services, merely examining the degree "as a whole" is not enough; it is also necessary to compare what particular subjects undertaken as part of the degree related to the specialist's area of proposed practice. Viewed in this way, where the proposed tax agent services are confined to a specialist area, even if the degree contains only a few relevant subjects, that may be sufficient for the Board to conclude that the degree is "relevant to the tax agent services to which the application relates". On the other hand, the question of whether the degree "viewed as a whole" is relevant may be important where what is applied for is "non-specialist" registration without significant limitations on the proposed areas of practice. 33 I consider that such an interpretation is warranted by the following considerations. 34 In my opinion, the underlying question to which Pt 2 of Sch 2 is directed is whether the subjects undertaken as part of the degree adequately contribute to the person's ability to provide tax agent services. It will not necessarily be required that a majority of subjects undertaken in the degree be relevant. It may be, in appropriate cases, that more weight is given to postgraduate subjects than undergraduate subjects. It will be relevant for the Board to bear in mind that the criteria in Item 202(b) and (c) will also have to be satisfied. Thus, to return to the quantity surveyor example, it may not be essential that the degree includes subjects in accounting, commercial law and taxation law because those are subjects that the Board may require to be separately completed. 35 The aim of the criteria in Pt 2 of Sch 2 is to allow only persons who have an appropriate mix of academic qualifications, successful completion of courses required by the Board and work experience to be registered as tax agents. In that context, it seems unlikely that it was intended that, for example, someone with an arts degree who had completed two subjects relevant to services provided by a tax agent would be able to be registered as a tax agent with only 12 months full-time experience in the preceding five years, the same amount of work experience as for someone who has a degree in accountancy. It seems more likely that this applicant would be in the category of an individual who seeks to qualify on the basis of work experience and would require the equivalent of eight years full-time relevant experience in the past 10 years (in addition to the completion of courses required by the Board). 36 On the other hand, a specialist may have undertaken a degree containing some subjects directly applicable to the limited, specialised area of tax advice that the specialist wants to work in. It seems unlikely to have been intended that such a person should have to acquire the same amount of work experience as someone without any degree who intends to practice in the full range of tax agent services. 37 It is important to emphasise that whether the criteria are met is ultimately a question for the judgment of the Board based on the particular facts of the application before it. 38 Although Mr Ayles limited his application to the preparation of income tax returns for individuals, that was still a very wide area of tax agent services. He had only completed two subjects relevant to taxation services as part of that degree. It is difficult to see how his degree could be relevant to the broad range of tax agent services to which his application related. I consider that the Deputy President was correct to ask whether Mr Ayles' degree "viewed as a whole" was relevant to the tax agent services to which his application related. 39 However, it will not usually be appropriate to assess the degree "as a whole" where a specialist applies for registration to perform only a limited range of tax agent services in the specialist's area. The Deputy President was considering only Mr Ayles' case and, in my opinion, did not purport to examine the appropriate questions to be asked in the case of, for example, a quantity surveyor. The Deputy President did not misconstrue Item 202(a)(i) of Pt 2 of Sch 2 of the Regulations. 40 The second error of law alleged by Mr Ayles was that the Tribunal ought to have taken into account his experience and qualifications, other than his degree, in considering whether he met Item 202(a)(i). In my opinion, the plain language of the provision does not permit the Board, or the Tribunal, to take such a course. Item 202 has three distinct criteria, namely a relevant degree or postgraduate award, completion of courses required by the Board and work experience. Mr Ayles' work experience could not be taken into account in deciding whether he had met the degree or postgraduate award criterion. 41 My Ayles has not demonstrated any error of law on the part of the Tribunal. The appeal must be dismissed with costs. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah. Associate: Dated: 26 June 2014