Background
Sumit Bagga has been a registered tax agent since 2016 and, from January 2021, operated his practice through Auz Taxation Pty Ltd, of which he was the sole director and only registered tax agent. By the time of the proceedings, the firm served approximately 5,500 clients across six offices in Victoria and Queensland and lodged more than 20,000 returns annually. In April 2022, Bagga shared his personal myGovID login credentials with employee Amit Kumar, who could not obtain his own credentials after recently arriving in Australia. Kumar used those credentials to access the Australian Taxation Office’s online portal, where he fraudulently lodged business activity statements on behalf of two companies and directed GST refunds into a bank account he controlled. The ATO detected the fraud in June 2022 and notified Bagga.
Rather than dismissing Kumar, Bagga issued a warning letter and allowed him to remain employed. More significantly, he permitted Kumar to continue accessing the ATO portal using the login credentials of Kumar’s wife, who was not an Auz Taxation employee. Kumar exploited this access in November 2022 to register a taxpayer as a client of the firm without that taxpayer’s authorisation. Bagga also signed a Statement of Relevant Experience in connection with Kumar’s tax agent registration application, which contained erroneous information about Kumar’s employment start date and the services he had provided. Bagga maintained that he had directed Kumar to correct those errors before submission.
The Tax Practitioners Board (TPB) investigated and, on 24 January 2024, terminated the registrations of both Auz Taxation and Bagga under the Tax Agent Services Act 2009 (Cth) (TAS Act), finding multiple contraventions of the Code of Professional Conduct — including failures of honesty and integrity (s 30-10(1)), personal tax compliance (s 30-10(2)), acting in clients’ best interests (s 30-10(4)), competent service delivery and supervision (s 30-10(7)), and timely responses to Board requests (s 30-10(14)). The Board also found that Bagga was not a fit and proper person and that Auz Taxation lacked the minimum number of registered tax agents required for a corporate registrant under s 20-5(3)(d)(i). On review, the Administrative Review Tribunal set aside the termination decisions on 5 September 2025, instead issuing written cautions and a detailed suite of corrective action orders. The TPB appealed to the Federal Court on four questions of law.
The Court’s Holding
Horan J dismissed the appeal in its entirety, finding no legal error in any aspect of the Tribunal’s reasoning. On the first ground — that the Tribunal impermissibly conflated the corrective-sanction powers in Part 3 of the TAS Act with the termination powers in Part 4 — the Court found that the Tribunal was entitled to consider the full range of available sanctions when exercising its discretion under Part 4. The existence of lesser measures did not corrupt the Tribunal’s reasoning; on the contrary, their availability was a relevant factor in calibrating a proportionate response. On the second ground, the Court upheld the Tribunal’s finding that Bagga remained a fit and proper person at the date of the Tribunal’s decision. Fitness and propriety is assessed prospectively and must take into account the nature and severity of past misconduct, corrective steps taken, the likelihood of repetition, and the passage of time. The Tribunal was entitled to conclude that, while Bagga’s conduct had been ill-considered and had eroded trust, it was not fraudulent or intentionally deceptive, and that subsequent remediation — combined with an otherwise unblemished history of client service — was sufficient to satisfy the standard.
On the third ground, the Court rejected the submission that the Tribunal had taken into account an irrelevant consideration when it observed that suspension or termination would adversely affect more than 5,000 clients. The impact of a proposed sanction on innocent third parties who depend on a practitioner’s services was a legitimate factor in the discretionary exercise. On the fourth ground, the Court upheld the Tribunal’s construction of s 30-10(4), which requires a registered tax agent to act lawfully in the best interests of their client. The TPB had argued that the obligation extended to supervising staff in a manner that protected clients. The Tribunal found — and the Federal Court agreed — that the two companies whose activity statements Kumar fraudulently lodged were not in fact clients of Auz Taxation; they had been fictitiously linked to the firm by Kumar. There was therefore no duty owed to them under s 30-10(4), and no breach of that provision.
The Court affirmed the Tribunal’s corrective orders, which required Auz Taxation to appoint at least one additional director who is a registered tax agent, to place a registered tax agent at each branch, to mandate myGovID and portal-use training for all staff, and to require Bagga personally to complete specified courses in the TAS Act and human resource management — all within defined timeframes with Board reporting obligations.
Key Takeaways
- Termination of a tax agent’s registration is not the automatic or presumptive outcome even where the Code of Professional Conduct has been breached and past conduct has demonstrated a lack of integrity; the decision-maker retains a genuine discretion calibrated to the circumstances, including remediation and the absence of ongoing misconduct.
- The “fit and proper person” test under the TAS Act is assessed at the time of the decision, not solely by reference to historical conduct; evidence of corrective action, contrition, and a subsequent clean record can satisfy the standard despite earlier integrity failures.
- The adverse impact on existing clients of a firm is a legitimate — not irrelevant — consideration when a tribunal weighs suspension or termination against lesser corrective sanctions.
- Section 30-10(4) (best interests of clients) is limited to persons who are in fact clients of the registered agent; individuals fraudulently added to an agent’s client list without authorisation do not attract the statutory duty.
- Corporate tax agent registrants must maintain at minimum one registered tax agent at each branch location to satisfy the supervisory-sufficiency requirement in s 20-5(3)(d)(i) — a point the Tribunal found violated here and addressed through its corrective orders.
Why It Matters
This decision provides authoritative Federal Court guidance on the graduated sanction framework in the TAS Act and clarifies that regulatory tribunals may legitimately prefer corrective orders over registration termination where the practitioner has demonstrated genuine remediation and the broader client base would suffer disproportionate harm. The ruling reinforces that the “fit and proper” assessment is inherently forward-looking, giving practitioners who have committed past misconduct a pathway to retain registration through demonstrable corrective action — a significant counterweight to the Board’s preference for termination in cases involving integrity breaches.
For the profession more broadly, the case serves as a stark warning about credential-sharing and supervisory failures. Bagga’s decision to share myGovID credentials — and to permit their ongoing use even after fraud was detected — was found to be a fundamental breach of the trust placed in registered tax agents. The corrective orders imposed, including mandatory appointments of additional registered tax agents at every branch and compulsory training, signal that the regulatory framework will not accept structural under-resourcing of supervision as an acceptable operating model, regardless of a firm’s otherwise clean client service record.