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An unregistered tax agent that had over 500 clients on her books has now been fined $40,000 by the Federal Court.
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Federal Court imposes $40k fine on unregistered tax agent
05 November 2020
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10 minute read
Arlene Caolboy of Melbourne told the Federal Court in an affidavit that she had begun acting as an unregistered tax agent in December 2015, eventually growing her client list through word of mouth and advertising through Facebook.
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By 2018, her client book had swollen to 534 clients, with preparation and lodgement of income tax fees averaging between $110 and $165 per person.
She told the court she had received a total amount of $81,000 for her services across the three years.
Ms Caolboy, who had been previously employed by companies in bookkeeping roles, registered the business name “ABC Accounting Firm” to her name and offered her services on the internet, including LinkedIn, and Places to go in Melbourne.
The Tax Practitioners Board notified Ms Caolboy in June 2017 of its concerns around her unregistered services, to which she replied confirming that she would not advertise or charge for tax agent or BAS services while unregistered.
However, Ms Caolboy continued to provide such services and eventually admitted to the TPB in 2019 to all the contraventions that they had identified.
She also made a voluntary disclosure to the ATO regarding the cash income that she received from her unauthorised tax agent services for the years 2014 to 2018.
The TPB sought penalties for 519 contraventions, including maximum penalties of $45,000 for each contravention up until June 2017 and $52,500 for each further contravention.
The regulator noted that Ms Caolboy’s conduct was “deliberate, organised, systematic, sustained, and protracted” but conceded that she had eventually ceased providing such services, made full admissions, and had shown “appropriate contrition”.
In deciding on the appropriate penalty, Justice Michael Wheelahan of the Federal Court agreed that the contraventions were towards the serious end of the spectrum but made note of Ms Caolboy’s co-operation in the matter and her personal circumstances, which currently include debts of $16,642 to the ATO and $70,303 to Centrelink.
The court eventually imposed a penalty of $40,000 to be paid in eight annual instalments starting from 2023.
“I take particular account of the fact that the respondent’s co-operation and admissions have saved considerable costs and court time, and I have given them substantial weight,” Justice Wheelahan said.
“Were it not for the respondent’s co-operation, an appropriate penalty would reasonably have to be much higher than the $40,000 proposed having regard to the objective seriousness of the contraventions.
“The imposition of penalties totalling $40,000 should be seen as a substantial burden on the respondent, and therefore a significant price to pay for the contraventions, but without being crushing.
“Against the context of the respondent’s personal circumstances, the burden of the proposed penalty on her is in my estimation sufficiently high that others will be liable to be deterred from engaging in contraventions of a similar kind.”
The TPB had previously noted that the only compliance action it has with dealing with unregistered tax practitioner behaviour is to apply to the Federal Court — a time-consuming and costly process.
It has since suggested new sanctions, including issuing infringement notices and enforceable undertakings, as well as naming and shaming unregistered tax agents in the independent review of the TPB.
The independent review was completed in October last year but has yet to be released by the government.
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