FEDERAL COURT OF AUSTRALIA Tax Practitioners Board v Su [2014] FCA 731 Citation: Tax Practitioners Board v Su [2014] FCA 731 Parties: TAX PRACTITIONERS BOARD v TSU CHIEN SU File number(s): NSD 12 of 2014 Judge(s): JAGOT J Date of judgment: 10 July 2014 Catchwords: CIVIL PENALTIES – quantum – applicant contravened Tax Agent Services Act 2009 (Cth) s 50-20 by recklessly making false, incorrect or misleading statements to Commissioner of Taxation – relevant considerations in fixing appropriate penalty – statements not deliberately or knowingly false – no intention to mislead Commissioner – tax agent registration terminated as result of conduct – loss caused to Commonwealth – inconvenience to taxpayers – specific deterrence – general deterrence – early admission of contraventions – totality principle – proportionality of penalty to objective seriousness of contravening conduct – parity principle Legislation: Tax Agent Services Act 2009 (Cth) ss 40-5(1)(b), 40-25(1), 50-5, 50-20, 50-35, 60-125(2) Cases cited: Attorney-General (SA) v Tichy (1982) 30 SASR 84 Australian Building & Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2010] FCA 977 Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336 Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] ATPR 42-070; [2005] FCA 683 Australian Competition and Consumer Commission v Marksun Australia Pty Ltd [2011] FCA 695 Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) [2011] FCA 382 Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238; [2010] FCA 790 Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 Barbaro v The Queen (2014) 305 ALR 323; [2014] HCA 2 Cameron v The Queen (2002) 209 CLR 339; [2002] HCA 6 Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25 Mill v The Queen (1988) 166 CLR 59 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65 R v Thomson; R v Houlton (2000) 49 NSWLR 383; [2000] NSWCCA 309 Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 Tax Practitioners Board v Dedic [2014] FCA 511 Tax Practitioners Board v Munro [2012] FCA 1338 Wong v The Queen (2001) 207 CLR 584; [2001] HCA 64; Date of hearing: 23 June 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 25 Counsel for the Applicant: Mr C O'Donnell Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr L Fermanis Solicitor for the Respondent: Hancock Alddis & Roskov IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 12 of 2014 BETWEEN: TAX PRACTITIONERS BOARD Applicant AND: TSU CHIEN SU Respondent JUDGE: JAGOT J DATE OF ORDER: 10 July 2014 WHERE MADE: SYDNEY THE COURT DECLARES THAT: 1. Between about 6 July 2011 and 9 August 2011, in relation to the 25 taxpayers named in Schedule A in the statement of claim the respondent, by lodging income tax returns in the name of each of the taxpayers, while a registered tax agent, which lodgements were either: 1.1 accompanied by explicit acknowledgments to the effect that; or 1.2 made subsequent to a prompt that the return should not be lodged unless: 1.2.1 the return had been prepared in accordance with the information supplied by the taxpayer; 1.2.2 he had received a declaration from the taxpayer stating that the information provided to him was true and correct, and 1.2.3 he was authorised by the taxpayer to lodge the return on behalf of the taxpayer, when in fact, in respect of each return, none of those things in 1.2 above was the case, in each case made a statement to the Commissioner of Taxation reckless as to whether the statement was false, incorrect or misleading in a material particular, in contravention of section 50-20 of the Tax Agent Services Act 2009 (Cth). 2. Between about 6 July 2011 and 9 August 2011, in relation to the 25 taxpayers named in Schedule A in the statement of claim the respondent by preparing and lodging income tax returns in the name of each of the taxpayers, while a registered agent: 2.1 which returns contained false, incorrect or misleading statements about material facts relating to employment and income tax withheld amounts; and 2.2 in circumstances where: 2.2.1 the respondent had no dealings with any of the taxpayers regarding the preparation of any tax return and had not received declarations from the taxpayers stating that the information provided to the respondent was true and correct; 2.2.2 the information provided to the respondent for the purpose of preparing the returns included amounts for tax withheld amounts that were significantly more than would in fact be the case given the applicable taxation rates, and 2.2.3 the respondent had access to but did not take steps to access information held by the Australian Taxation Office by which he could have checked the veracity and accuracy of information supplied to him for the purpose of preparing the returns, in each case recklessly made a statement to the Commissioner of Taxation that was false, incorrect or misleading in a material particular, in contravention of section 50-20 of the Tax Agent Services Act 2009 (Cth). AND THE COURT ORDERS THAT: 3. In respect of the 50 contraventions of the Tax Agent Services Act 2009 (Cth) the respondent pay one pecuniary penalty in the amount of $70,000. 4. The respondent pay the pecuniary penalty to the Commissioner of Taxation on behalf of the Commonwealth of Australia, such penalty to be paid in instalments of $10,000 over seven (7) years on or before 1 November in each year. 5. The respondent be granted liberty to apply in respect of the extension of any of the times provided for payment of the pecuniary penalty. 6. The respondent pay the applicant's costs of the proceeding as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 12 of 2014 BETWEEN: TAX PRACTITIONERS BOARD Applicant AND: TSU CHIEN SU Respondent JUDGE: JAGOT J DATE: 10 July 2014 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By an originating application filed on 8 January 2014 the applicant, the Tax Practitioners Board (the Board), seeks two declarations against and the imposition of a pecuniary penalty on the respondent, Tsu Chien Su, in respect of contraventions of s 50-20 of the Tax Agent Services Act 2009 (Cth) (the Act or TASA). 2 Section 50-20 provides that: You contravene this section if: (a) you are a * registered tax agent or BAS agent; and (b) you: (i) make a statement to the Commissioner; or (ii) prepare a statement that you know, or ought reasonably to know, is likely to be made to the Commissioner by an entity; or (iii) permit or direct an entity to do a thing mentioned in subparagraph (i) or (ii); and (c) you know, or are reckless as to whether, the statement: (i) is false, incorrect or misleading in a material particular; or (ii) omits any matter or thing without which the statement is misleading in a material respect. Civil penalty: (a) for an individual – 250 penalty units; and (b) for a body corporate – 1,250 penalty units. 3 In his defence filed on 27 February 2014 the respondent admitted that he had contravened s 50-20 by, as a registered tax agent, making statements to the Commissioner reckless as to whether the statements were false, incorrect or misleading in a material particular. 4 The statement of agreed facts records that: 1. Mr Tsu Chien Su ("the Respondent") has been a registered tax agent since 1 December 2005. The Respondent was a registered tax agent under the Tax Agent Services Act (2009) ("TASA") from 1 March 2010 to 9 September 2013. Between 1 December 2005 and 28 February 2010 the Respondent was a registered tax agent under predecessor legislation that provided for the registration and proper conduct of suppliers of tax agent services. … 5. The Respondent has engaged in conduct that contravened s50-20 of the TASA (making false or misleading statements). The conduct took place over the period between about 6 July 2011 and 9 August 2011. 6. Between 6 July 2011 and 9 August 2011, three persons (the "intermediaries") attended on the Respondent and asked him to prepare a large number of income tax returns on the basis of information they provided to him. The intermediaries said they were acting on behalf of a number of taxpayers that included the taxpayers referred to in Schedule A below ('the Schedule A taxpayers'). The information provided by the intermediaries included information that purported to relate to the taxation affairs of the Schedule A taxpayers. The intermediaries gave their names as follows: 6.1. Mr Zahirul Alam; 6.2. Mr Jamilur Rahman; and 6.3. "Sunny". 7. The information provided by the intermediaries relating to each of the Schedule A taxpayers included a false type-written payment summary and, in many cases, handwritten information purporting to relate to the Schedule A taxpayers. The intermediaries only provided 2 hand written authorisations from the Schedule A taxpayers (purportedly from Adam Muller and Seggie Naidoo) that the intermediaries were claiming to represent. 8. At the time he lodged the returns the Respondent either knew that there was a real risk or was grossly indifferent as to whether or not the intermediaries had that authority. 9. In a 5 week period - 6 July 2011 to 9 August 2011 - the Respondent lodged with the Commissioner of Taxation 164 income tax returns based on information provided by the intermediaries, all of which were compromised because the actual taxpayers whose Tax File Numbers (TFNs) were used by the Respondent without their knowledge. This conduct caused the ATO to cancel the 164 TFNs and the returns. 10. Of the 164 returns lodged in the 5 week period between 6 July 2011 and 9 August 2011, 25 income tax returns were prepared in the name of each of the Schedule A taxpayers. The returns were for the tax year ending on 30 June 2011 ("the 2011 tax year"). The Respondent lodged each of these income tax returns (hereinafter referred to individually as a "Schedule A return" and collectively as "the Schedule A returns") using the Electronic Lodgement Service ("ELS"). The Schedule A returns: (a) contained information relating to wages, salaries and tax instalment deductions (tax withheld), which did not accord with the payment summary details reported to the Australian Taxation Office ("ATO") by the relevant employers of the taxpayers; and (b) claimed excessive tax instalment deductions ("TIDs"). 11. Some time after the lodgement of the Schedule A returns, some of the Schedule A taxpayers received letters from ANZ Stadium, where they had been employed, stating that they should contact the ATO because their TFN had been compromised. … 15. In accepting information from the intermediaries and preparing the Schedule A returns, the Respondent never did anything to attempt to verify the identities of the taxpayers or the accuracy of any of the information provided to him and included in the returns. He did not have any contact or meet with any of the Schedule A taxpayers directly. The Respondent relied on the representations of the intermediaries that they had the authority to act on behalf of the Schedule A taxpayers for the purposes of preparing and lodging the Schedule A returns using the ELS. 16. Mr Alam and Mr Rahman each gave the Respondent business cards which stated that they were 'Recruitment Consultants' for Adecco; they told the Respondent they were Adecco Recruitment Consultants, and payroll personnel. The Respondent did not receive or obtain any proof that the intermediaries were legitimate. He accepted the business cards given to him as proof of their identity, and made no attempt to verify their identity. The Respondent acknowledges that he should have checked the identification of the intermediaries, but, when questioned about this, stated: "don't you think they would have show (sic) me a fake id if I did ask for it". Had the Respondent contacted Adecco he would have discovered that the two intermediaries Mr Alam and Mr Rahman did not work for Adecco. … 18. Each of the Schedule A taxpayers has stated in an affidavit that the Schedule A returns included statements that were false, incorrect or misleading in that they incorrectly stated the name, identity or details of the Schedule A taxpayer. 19. The Respondent charged Mr Alam $120 for the preparation and lodgement of the returns, which included a component for a "referral fee". The Respondent in his interview with the ATO compliance officer said that his normal fee was $60, but that he charged $120 to cover a kickback of between $50 and $60 which he paid to the intermediary. … 21. The Respondent did not use the pre-filling on the Portal or use the Portal to check the PAYG Payment Summaries and other information such as prior year return information, for the Schedule A taxpayers prior to lodging income tax returns on their behalf . In his 14 June 2013 letter, the Respondent referred to a network of professional con artists as being involved in this matter, and said that Mr Alam and Mr Rahman were aware that employers were not required to update payment information on the Portal until 14 August. He further stated that Mr Alam and Mr Rahman took advantage of him by going to see him before that date. It is correct that 14 August is the date that employers are required to report payment summaries of their employees to the ATO. However, that does not mean there would have been no information available on the Portal relating to the Schedule A taxpayers prior to 14 August 2011. Knowing that employers did not have to report until 14 August is a circumstance that the Respondent was aware of and yet he nevertheless lodged the Schedule A returns. 22. The Schedule A returns prepared by the Respondent: a) largely returned assessable income between $30,000 to $34,000; b) which would normally lead to $3,380 to $4,108 tax payable; but c) included tax instalment deductions/tax withheld ("TIDs") of between $6,000 and $8,000 . 23. The Respondent stated that the excessive TIDs caused him concern but he accepted the responses from the intermediaries without making any independent inquiries. He stated that Mr Alam told him: "his clients want a high refund for savings purpose and some of them are on casual rate and some might be non-residence (sic)." The Respondent became aware of the ATO's investigation into the Schedule A taxpayers income tax returns on or about 1 September 2011 when he was contacted by Mr Run Gong. 24. On each of the 25 occasions the Respondent lodged a Schedule A return, the Respondent on or about the lodgement date set out in Schedule A for that return, recklessly made false, incorrect or misleading declarations in the tax agent certificate in respect of that return because: 24.1. The Schedule A return was not prepared in accordance with information supplied by the corresponding Schedule A taxpayer; 24.2. The Respondent had not received a declaration from the Schedule A taxpayer stating that the information provided to the Respondent was true and correct; and 24.3. The Respondent was not authorised by the Schedule A taxpayer to lodge the corresponding Schedule A return on behalf of that Schedule A taxpayer. The 25 false tax agent certificates constitute 25 contraventions of s50-20. 25. Apart from the declarations made in the tax agent certificate for each of the Schedule A taxpayers, the Respondent also admits that he was reckless in making statements to the Commissioner in each of the 25 Schedule A returns that were that were false, incorrect or misleading in that they falsely stated the name, identity or details of the taxpayer as set out in paragraphs 22 to 46 of the Statement of Claim, based on the information provided to the Respondent by the intermediaries, relating to each Schedule A taxpayer. At the time that the Respondent lodged the income tax returns relating to each Schedule A taxpayer, the Respondent, although he did not have actual knowledge of the falsity of the information in the returns, he recklessly made false statements to the Commissioner about the content of the returns. These additional false statements constitute a further 25 contraventions of s50-20, making a total of 50 admitted contraventions. … 26. The Respondent has received a financial benefit (the fees charged) in respect of each of the 25 occasions he prepared and lodged the Schedule A returns, as set out in the Statement of Claim. The Respondent obtained a total financial benefit by virtue of the contraventions of $3,000 ($120 for each return x 25). For these returns he charged twice his usual fees. 27. The Respondent's conduct, in lodging false returns, has resulted in loss being occasioned to the Commonwealth of Australia ("the Commonwealth), and the Schedule A taxpayers. The Respondent's conduct resulted in the affairs of genuine taxpayers having been compromised by the fraudulent use of their TFNs. The Schedule A taxpayers were required to obtain new TFNs, and in some cases were required to make several visits to an ATO shopfront to verify their identity and to obtain a new TFN. In some cases the Schedule A taxpayers faced delay in receiving their new TFN, as a return had already been lodged in their name by the Respondent on the basis of the fraudulent information provided to him by the intermediaries. This resulted in delays in their refunds being issued. 28. One of the Schedule A taxpayers, Ms Jenelle Kerry Smith, did not lodge an income tax return in the 2011 tax year as she did not earn enough income. As a result of the fraudulent return being lodged in her name by the Respondent, she was investigated by Centrelink for a $30,000 debt for claiming benefits whilst working. This was because Centrelink wrongly thought she was working as the return lodged in her name by the Respondent declared income for the 2011 tax year. The Respondent's conduct, in lodging the Schedule A returns containing false information, resulted in a loss to the Commonwealth in the amount of $133,754.47, through the payment of excessive refunds which were not, in fact, payable. The details of these excessive refunds and, therefore, the consequent loss to the Commonwealth, are set out in the Loss Schedule below. However, the loss may be $123,085.28 as refunds may not have issued in the amount of $10,669.19. 29. On 5 August 2013, the Respondent was informed by the Tax Practitioners Board that: 29.1. In accordance with subsection 60-125(2) of the Tax Agent Services Act 2009 (Cth) ("the Act"), the Respondent's registration as a tax agent was terminated under paragraph 40-5(1)(b) of the Act; and 29.2. Pursuant to subsection 40-25(1) of the Act, the Respondent may not apply for registration under the Act for a period of three years from the date the termination of his registration took place. … 30. On 9 September 2013, the Respondent's registration as a tax agent ceased. 31. The respondent has filed an application in the AAT seeking a review of the termination decision. 5 The respondent gave evidence in an affidavit to the following effect (taken from the submissions for the respondent): From the time Mr Run Gong, an ATO Compliance Officer, contacted him in September 2011, the Respondent, having realised the error of his ways, had changed his work practices. The Respondent adopted the following procedure: New Clients a. The Respondent insisted that all new clients attended his premises so he could meet them face-to-face; b. The Respondent required that his new clients provided at least one piece of photo identification to him, such as a passport, driver's license or governmental student identity card; c. In addition, the Respondent required at least one further identifying piece of documentation from the following categories: – i. the previous year's income tax Notice of Assessment; ii. Birth certificate; iii. Medicare card; iv. A recent bank statement (excluding credit cards). d. If the new client was a temporary restraining resident, the Respondent required a current valid passport and also documentation in relation to their visa, to verify the extent of his or her work rights; e. The Respondent took steps to ascertain whether the individual was a resident for taxation purposes; f. If the new client had previously lodged tax returns, the Respondent asked for their tax file number and then accessed the tax office portal to verify the accuracy of the information given to him. ("the New Procedure") Existing Clients a. In respect of existing clients, the Respondent adopted the New Procedure in circumstances where personal information was altered or he was given information that was inconsistent with information previously held by him. In those circumstances, the Respondent asked his existing clients to confirm the following: i. Tax file number; ii. The person's full name; iii. Date of birth; iv. Current residential address; v. Contact telephone numbers; vi. Current bank details; vii. Current employment details; and viii. If the client is a temporary resident in Australia, a copy of a valid current passport 6 The respondent also gave oral evidence in respect of his current financial position. He said that he is living at his parents' house for which he pays about $150 per week. He is currently working and earning about $600 to $650 per week after tax. He has no dependents. However, he owes about $80,000 on various credit cards. He is paying off his credit card in an amount between $1500 and $2000 per month (or $375 to $500 per week). He owns a car, a 1998 BMW, worth about $3000 but has no other assets apart from a small amount (about $1000-2000) of cash in a savings account, from which he must pay his legal representatives. 7 The parties agreed that the respondent's conduct involved 50 contraventions of s 50-20. As a penalty unit was $110 at the time of the contraventions, the maximum penalty for each offence is $27,500 (or a total, for the 50 contraventions, of $1,375,000). It is apparent from paragraphs 24 and 25 of the statement of agreed facts that the contraventions relate to the same 25 tax returns. In respect of each tax return the respondent both recklessly made false, incorrect or misleading statements in the tax agent certificate he signed (paragraph 24) and recklessly made false, incorrect or misleading statements in each of the tax returns about the taxpayer (paragraph 25). 8 It appears that although other cases have dealt with conduct by persons who are not registered tax agents in contravention of s 50-5 of the Act (which proscribes the provision of tax agent services by a person who is not a registered tax agent), this is the first occasion on which a civil penalty has been sought in respect of a contravention of s 50-20. 9 The parties both included in their submissions a range of penalties each of them contended would be appropriate. In this regard, I accept the submission put by both parties to the effect that it is not inappropriate they do so in the context of these civil penalty proceedings for the reasons given by Middleton J in Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336 at [114] – [152] (which considers and distinguishes the decision of the High Court arguably to the contrary in Barbaro v The Queen (2014) 305 ALR 323; [2014] HCA 2). 10 Despite this common ground, the views of the Board and respondent about the appropriate penalty range were vastly different. The Board contended that a total penalty of between $200,000 and $250,000 would reflect the seriousness of the contraventions and all relevant circumstances. The respondent contended that a total penalty of between $30,000 and $40,000 would be appropriate with time being granted to pay over five years. 11 The Board emphasised these considerations: (1) "Conduct that involves a registered agent recklessly making false statements to the Commissioner causing significant loss to the revenue and personal gain to the agent is significantly more serious than unregistered agent cases. The Respondent as a registered agent breached the trust that the privilege of registration required him to honour". (2) "The primary objective of imposing a pecuniary penalty upon the Respondent is deterrence with a view to putting a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the TASA [Tax Agent Services Act]". (3) "The Respondent obtained a total financial benefit by virtue of the contraventions of $3,000 ($120 for each return x 25). For these returns he charged twice his usual fees". (4) "The contraventions of section 50-20 by the Respondent were not isolated or aberrant. They were deliberate". (5) "In acknowledging that he recklessly made false statements to the Commissioner, the Respondent admits that he either knew that there was a real risk or was grossly indifferent as to whether the intermediaries had authority from the taxpayers and, accordingly, that the returns contained the alleged false information". (6) "…this formulation of recklessness is equivalent to the definition in the [Criminal Code 1995 (Cth)] which, in respect of a circumstance (here the falsity of the statements in the returns), involves a person being aware of a substantial risk that the returns contained false information and that the respondent, having regard to the circumstances known to him, was not justified in taking the risk". (7) "The loss to the revenue by reason of the contraventions is $133,754.47. The loss and inconvenience caused to the taxpayers is set out more fully in the Agreed Statement of Facts". 12 The respondent emphasised these considerations: (1) The respondent should receive a substantial discount for admitting the contraventions at the first opportunity given the rationale for such a discount in analogous criminal proceedings applies here, being "the recognition that some remorse or contrition is offered" and "the utilitarian value in admitting to the contraventions at the earliest possible occasion (for the purposes of these proceedings) thus not putting the Commonwealth of Australia to additional expense in prosecuting these proceedings and reducing the amount of court time in disposing of these proceedings" (R v Thomson; R v Houlton (2000) 49 NSWLR 383; [2000] NSWCCA 309 ("Thomson") at [160]). (2) "…the term "recklessness" will take its common law meaning and not the meaning contained within the Criminal Code 1995 (Cth)". (3) "There is no suggestion that the Respondent acted with dishonesty, nor could there be". (4) The respondent changed his work practices as soon as he was contacted by the Australian Taxation Office about the returns. (5) "The Respondent received $3,000 as his total gross financial benefit without deducting any amounts paid by him to the intermediaries. It goes without saying that the Respondent received little reward". (6) "On 9 September 2013, the Respondent's registration as a tax agent ceased. Pursuant to Section 40-25(1) of the TASA, he cannot apply for registration under TASA for a period of three years from the date the termination of his registration took place. Whilst the Respondent has sought a review of the termination decision in the Administrative Appeals Tribunal, the review is in respect of duration of the ban under Section 40-25(1) of the TASA… There is no guarantee that should the Respondent re-apply to become a registered tax agent under the TASA after the period of the ban has expired that he will be successful". (7) "The Respondent has not previously come under the scrutiny of the Tax Practitioners Board. Other than the contents of the pleadings and the Statement of Agreed Facts, there are no other complaints against him in respect of his former practice as a registered agent." 13 The parties were not in dispute about the applicable principles. The submissions for the respondent identified those principles by reference to the summary provided by Barker J in Australian Building & Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2010] FCA 977 as follows: [5] The overriding principle is to ensure that the sentence is proportionate to the gravity of the contravening conduct: Attorney-General (SA) v Tichy [(1982) 30 SASR 84] at 92–93. [6] The purpose to be served by the imposition of penalties is at least threefold: (1) Punishment, which must be proportionate to the offence and in accordance with prevailing standards; (2) Deterrence, both personal (assessing the risk of re-offending) and general (a deterrent to others who might be likely to offend); and (3) Rehabilitation. See [Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65] (Ponzio) Lander J at [93]–[94]. [7] The task which a sentencing judge is faced with is one of "instinctive synthesis": Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560 (Australian Opthalmic Supplies), Gray J at [27] and Graham J [55]. Such a process requires that a court take into account all relevant factors and to arrive at a single result which takes due account of them all: see Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584 at [74]–[76]; Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357… Gleeson CJ, Gummow, Hayne and Callinan JJ at [37]–[39]. The penalty must not be so great as to crush the person upon whom the penalty is imposed or reveal the person as a scapegoat: Ponzio at [93] (Lander J); McDonald v R (1994) 48 FCR 555 at 563. The maximum penalty is reserved for only the most serious of contraventions: Markarian at [31]. Proportionality and consistency commonly operate as a final check on the penalty assessed: Australian Ophthalmic Supplies at [53]. 14 The parties also agreed that the principle of totality must be applied in the present case. In Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70 ("Mornington Inn") Gyles J explained that: [5] In Mill v The Queen (1988) 166 CLR 59 the High Court said (at 62–63): The totality principle is a recognized principle of sentencing formulated to assist a court when sentencing an offender for a number of offences. It is described succinctly in Thomas, Principles of Sentencing, 2nd ed (1979), pp 56–57 as follows (omitting references): The effect of the totality principle is to require a sentencer who has passed a series of sentences, each properly calculated in relation to the offence for which it is imposed and each properly made consecutive in accordance with the principles governing consecutive sentences, to review the aggregate sentence and consider whether the aggregate is "just and appropriate". The principle has been stated many times in various forms: "when a number of offences are being dealt with and specific punishments in respect of them are being totted up to make a total, it is always necessary for the court to take a last look at the total just to see whether it looks wrong["]; "when … cases of multiplicity of offences come before the court, the court must not content itself by doing the arithmetic and passing the sentence which the arithmetic produces. It must look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all the offences". See also Ruby, Sentencing, 3rd ed (1987), pp 38–41. Where the principle falls to be applied in relation to sentences of imprisonment imposed by a single sentencing court, an appropriate result may be achieved either by making sentences wholly or partially concurrent or by lowering the individual sentences below what would otherwise be appropriate in order to reflect the fact that a number of sentences are being imposed. Where practicable, the former is to be preferred. … [6] L Vogel & Son Pty Ltd v Anderson (1968) 120 CLR 157 concerned the imposition of pecuniary penalties pursuant to the Customs Act 1901 (Cth). The trial judge (Kitto J) held that each step in importation was a separate and distinct piece of conduct, each being a contravention. The Full Court approved that reasoning, adding (120 CLR at 168): … we agree that, in determining the appropriate penalties to be imposed in respect of the numerous offences, it was material to take into consideration — as his Honour did — that, though the offences in each group were separate offences in law, they were substantially contemporaneous and connected. 15 Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238; [2010] FCA 790 ("ACCC v Telstra") at [231]-[235], [250]-[251] (quoted with approval by the Full Court in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 ("Singtel Optus")) is also relevant. That case concerned contraventions of the Telecommunications Act 1997 (Cth) and Trade Practices Act 1974 (Cth) by a telecommunications provider, Telstra. The contraventions consisted of the refusal by Telstra of numerous requests for interconnection, and therefore competitive carriage services from access seekers in relation to seven telecommunications exchanges. At [250]-[251], Middleton J said: [250] A number of different approaches in this proceeding could be taken to imposing a penalty. The Court could look to each contravention, consider the appropriate penalty taking into account the totality principle, and then apply any appropriate discount. … The Court could group together each exchange or each State, or focus on each period of inability to gain access, and view the contraventions included within those groups as appropriately to be treated together for the purpose of assessing the appropriate penalty. Alternatively, the Court could treat the admitted contraventions as all following from the same cause, and with the maximum penalty being $10 million, and then consider the appropriate discount. … Another approach would be to look at the capped sites and uncapped sites, and treat that as a basis for grouping the contraventions. [251] There is no scientific approach or arithmetic formula to be applied in determining the appropriate penalty. The circumstances of each contravention need to be looked at, taking into account all the circumstances pertaining to the contravention. I have already indicated what I regard as important and significant considerations, but the other matters I have raised are taken into account. 16 I have two particular concerns about the Board's submissions. First, they appear to proceed by way of a comparative analysis between contraventions of s 50-5 and contraventions of s 50-20, the latter being regarded as inherently more serious than the former. The danger in such an approach was highlighted in Markarian v The Queen (2005) 228 CLR 357 (at [30]-[33]) ("Markarian") (applied on numerous occasions in the context of a civil penalty provision: see Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] ATPR 42-070; [2005] FCA 683 at [68]; Australian Competition and Consumer Commission v Marksun Australia Pty Ltd [2011] FCA 695 ("Marksun") at [90]-[91]; Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) [2011] FCA 382 at [73]; Tax Practitioners Board v Munro [2012] FCA 1338 at [29]). This is especially the case where the two provisions in question target different categories of harmful conduct. The specific submission that the contravention is particularly serious because of the respondent's status as a registered tax agent fails to have regard to the fact that s 50-20 is a provision which may only be contravened by a registered tax agent. Accordingly, it is difficult to understand how being a registered tax agent can be an aggravating factor. While I accept that registration involves the reposing of trust in the agent so that, in this sense, the contravention of the provision involves a breach of trust, that factor must be common to all contraventions of s 50-20. It is to be understood that the legislature was aware of this fact when it fixed the maximum penalty for contravention of the section. 17 The same problem arises with respect to the applicant's reliance on recklessness as an aggravating factor. Section 50-20 necessarily involves either knowledge or recklessness as to the making of false, incorrect or misleading statements by a registered tax agent to the Commissioner. Accordingly, while it may be accepted that, in the ordinary course, knowledge involves a contravention of a higher level of objective seriousness than recklessness, it is difficult to accept that the existence of recklessness is itself any form of aggravating factor. Again, it must be taken that the legislature understood the mental elements of the provision, knowledge or recklessness, in fixing the maximum penalty. This is reflected in the lesser maximum penalties for contraventions of the strict liability provisions ss 50-10 and 50-15. 18 I also reject the applicant's implicit submission that decisions in respect of s 50-5 fall within the parity principle, that assessments of penalty in cases of contravention of s 50-5 may provide guidance to ensure parity of treatment in similar circumstances (ACCC v Telstra at [211]), in respect of s 50-20. Such a submission fails to have regard to the substantially different nature of the conduct targeted by each provision and the statement of principle in Markarian (at [37]) that the sentencing discretion may only properly be exercised by weighing all of the relevant factors to reach a conclusion that a particular penalty is the one that should be imposed (applied in a civil penalty context in Marksun at [90]-[91]). It also fails to have regard to the fact that a number of the decisions cited by the applicant involved either agreed pecuniary penalties or deliberate contraventions of s 50-5. In this respect, the observations of Middleton J in ACCC v Telstra at [215] (quoted with approval in Singtel Optus at [60]) are particularly apposite. 19 Second, the 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. This approach appears to give no material weight to a number of factors of importance which must be taken into consideration along with the matters emphasised by the Board, being: - (1) The respondent did not knowingly make the false statements. While he "either knew that there was a real risk or was grossly indifferent" as to the intermediaries' authority, this is a significantly different state of mind from intentionally misleading the Commissioner. (2) The respondent's submission, uncontradicted by the applicant, is that he has not previously been the subject of scrutiny by the applicant and that no other complaint is made against him in respect of his former practice as a registered tax agent. I accept this submission. The presence or absence of prior contraventions may be taken into account as a relevant consideration (see Singtel Optus at [68]). (3) The respondent received little reward for what he did. While the applicant submits that the penalty imposed should "significantly exceed" the total benefit obtained from the contravention, the range for which the applicant contends is in the order of 70 to 80 times the gross amount the respondent received. (4) The respondent has lost his registration as a result of what he did and may well never receive it back. Consequently, he has lost his livelihood and has been forced to take work in other, lesser, capacities. (5) The respondent has little, if any, capacity to pay a substantial fine. Further, the respondent will be ordered to pay the applicant's costs as well as the fine, it being likely the costs will be not insignificant. 20 As to the matter of capacity to pay, I accept that, as stated in Tax Practitioners Board v Dedic [2014] FCA 511 at [8]: …capacity to pay a pecuniary penalty is of lesser importance than the need for a pecuniary penalty of appropriate deterrent value to be imposed: Australian Communications and Media Authority v Clarity 1 Pty Ltd (No 2) (2006) 155 FCR 377; [2006] FCA 1399 at [43]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at [9] and [11] per Merkel J. As Emmett J in Tax Practitioners Board v Campbell [2012] FCA 1153 at [9] stated: The penalty should be such as will demonstrate to the community generally that the consequences of a contravention outweigh the cost of adopting a culture of compliance. 21 In this respect, it is significant that, unlike many other civil penalty cases, a pecuniary penalty is not the only deterrent to operate in relation to contraventions of s 50-20. Loss of registration is also a possibility, as this case discloses. The general deterrent effect of that potential consequence should not be underestimated. In the present case, the respondent's loss of registration also ensures the requirements of specific deterrence are satisfied. The respondent's capacity to pay remains a relevant factor to be weighed in the balance and, here, the small reward the respondent achieved from having recklessly allowed himself to be duped means that the benefits of contravention could never have been of much significance to his conduct. When regard is had to the loss of the respondent's registration as a tax agent, it cannot be suggested that a penalty in the range advanced by the applicant is necessary or appropriate in order to promote general deterrence. 22 I also consider an allowance should be made in this case for the early admission of the contraventions which, as the respondent submitted, evidence contrition and have substantial utilitarian value. No submission to the contrary was made by the applicant. The considerations enunciated in Thomson in the context of criminal sentencing are relevant. In Mornington Inn, which considered in a civil penalty context the High Court sentencing decision in Cameron v The Queen (2002) 209 CLR 339; [2002] HCA 6, Stone and Buchanan JJ said (at [74]-[[76]): [74] It is important to note that it is not a sufficient basis for a discount that the plea has saved the cost of a contested hearing — that would discriminate against a person who exercised a right to contest the allegations. A discount may be justified, however, if the plea is properly to be seen as willingness to facilitate the course of justice. Remorse and an acceptance of responsibility also merit consideration where they are shown. [75] A conventional consideration in assessing a discount in a criminal case for a plea of guilty is the stage in the proceedings at which the plea is entered. Normally, the maximum discount for this factor, sometimes thought to be 25%, is reserved for a plea made at the first reasonable opportunity although, as was indicated in [Cameron v The Queen (2002) 209 CLR 339] at [23]-[24] there is no obligation to make an early plea to a charge which wrongly particularises the substance to which the charge relates. [76] As Branson J has pointed out (see Alfred v Walter Construction Group Ltd [2005] FCA 497) the rationale for providing a discount for an early plea of guilty in a criminal case does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron 209 CLR 339, that a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice. 23 In ACCC v Telstra, Middleton J (at [180]) observed that "[c]ourts do not always identify the specific discount given for co-operation" but that "from the instances in which a specific discount has been identified discounts for cooperation are generally between 20% and 50%". At [241], his Honour considered the respondent's cooperation, admission of contraventions and voluntary adoption of corrective measures to be relevant factors in assessing penalty. 24 I am satisfied that the respondent's early admissions express both contrition and a willingness to facilitate the course of justice. Consistent with the approach in Mornington Inn and ACCC v Telstra, I consider that the penalties for each individual offence should be 25% less than would otherwise be the case on account of the respondent's early admission of the contraventions. 25 Having regard to all of the factors set out above other than the principle of totality, in the context set by the maximum penalty, I consider that a penalty of $3000 per contravention would be appropriate. On this basis the total penalty would be $150,000. In my view, even with a discount of 25% applied for the respondent's early admission, this would remain a crushing penalty for the respondent and would fail to give weight to the fact that the 50 contraventions relate to 25 tax returns which were all prepared and lodged in similar circumstances over a short period of time. The sentence the arithmetic would produce in the present case is disproportionate to the objective seriousness of the contraventions notwithstanding the importance of general deterrence given the material losses to the revenue and significant (but nevertheless largely rectified) inconvenience to the third party tax payers whose tax file numbers were compromised. I consider that an appropriate maximum penalty in all of the circumstances is $70,000 payable over time. I also accept that declarations should be made as the Board sought, save that (as agreed between the parties) they should be amended to reflect the fact that the respondent did not knowingly make the false, incorrect or misleading statements but was reckless as to this fact. I make orders accordingly. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 10 July 2014