Solution
Robert answered on
Dec 29 2021
As per the facts of the case, when I was employed as an accountant for Dragon Taxation
Services Pty Ltd, I assisted Pamela to prepare her income tax return in year 2009. Pamela
mentioned a transaction which involved a sum of $220,000 as income and was paid from a
usiness in India to a bank account in Hong Kong. The supervisor told to ignore this
transaction and not include it in the tax return. I was of the view that the same should be
included as taxable income as Pamela was living in Australia at that time. However, after the
instructions of the boss, I did not mention it again and nor did not I talk to Pamela about it.
Thereafter, I signed the tax return and lodged it with the Australian Taxation Office (ATO).
Shortly afterwards, I resigned from that company and started my own accounting business,
which is still being operated by me. Another important fact is to be considered is that I am
and have been all through a registered tax agent.
A while ago, I was contacted by Pamela‟s solicitors, who informed that she has been
contacted by the ATO which has made an amendment to her assessment for 2009 and also
made an inclusion of $220,000. This has resulted in her being required to pay an extra income
tax of $105,000 and penalties plus interest totalling $195,000. Besides, she has incu
ed legal
and accounting fees totalling $15,500 for the purpose of negotiating with the ATO about this
issue. Further, the solicitors are claiming that this is entirely my fault and have demanded that
I pay all the monies owing to the ATO on this account and at the same time, reimburse
Pamela for all the legal and accounting costs incu
ed by her. Now, we need to determine the
liabilities of Dragon Taxation Services Pty Ltd and also those of my former supervisor and
myself as they are applicable in this case.
In order to analyse and determine the liabilities of Dragon Taxation Services Pty Ltd, me and
the former supervisor, we need to discuss the responsibilities and liabilities under the
common law in negligence and contract, the vicarious liability of the employer and the
liabilities that arise because of the specific laws that cover tax agents. Further, let us also
discuss the impact, of a possibility whereby a successful argument has been made with the
ATO about the amended assessment and also the penalties and interest, on my liability.
The common law refers to the principles, rules and doctrines which have developed over the
years through various court decisions and rulings under the common law doctrine of agency,
and include vicarious liability which is the liability of the superior for the acts done by their
subordinates. In the case of an employer employee relationship, an employer is vicariously
liable for the acts of his employees performed during the course of their employment in so far
as those are within the scope of the employment and authorised by the employer. This is an
implied term in all employment contracts. It must be noted that another characteristic of
vicarious liability is that it is a strict liability, or a liability which does not require a proof of
fault.( Eisenberg,1991). Further, included in the common law is the tort liability of
negligence. Such a liability arises where a duty of care or negligence is owed by the
defendant. There was a
each of that duty, and as a result of such
each, harm had been
caused to the plaintiff. This duty of care has been very clearly explained in the leading case of
Donoghue v Stevenson. As per the three step...