Taxsmart to Repay Franchise Fees for Misleading Conduct

Thursday 29 May 2014 @ 10.47 a.m. | Trade & Commerce

The Federal Court of Australia has ordered by consent that Taxsmart Group Pty Ltd, Taxsmart Franchising Pty Ltd and Resultsmart Pty Ltd (together, Taxsmart) repay $260,400 in franchise fees to five former Taxsmart franchisees following proceedings brought by the Australian Competition and Consumer Commission (ACCC).

The Court also declared that Taxsmart engaged in misleading or deceptive conduct when it represented that Taxsmart was offering a graduate program and 12 months of employment to accounting graduates that would enable them to satisfy the requirements for registration as a tax agent.

The Court declared that Taxsmart did not have reasonable grounds for making this representation because:

  • Taxsmart had not made proper enquiries or adequately considered whether the graduate program would enable graduates, with no prior experience in tax accounting, to satisfy the legal requirements for registration as a tax agent; and
  • the graduate program was not capable of enabling graduates with no previous work experience in tax accounting to satisfy the legal requirements for tax agent registration.

ACCC Commissioner Sarah Court said:

“This outcome should remind all businesses of their obligation to ensure that they have reasonable grounds for making any representations about future matters … A tax agent licence is lucrative to accountants as it allows them to complete tax returns for a fee without relying on a supervising agent to authorise the return … These graduates paid significant franchise fees, relying on the representation made by Taxsmart that they would satisfy the requirements for registration as a tax agent, when in fact they would not meet those requirements through the graduate program.”

The Court also declared that Taxsmart’s sole director at the time of the conduct, Mr Scott Andrews, aided and abetted Taxsmart in engaging in the misleading and deceptive conduct and is jointly liable for the repayment of the franchise fees.

The Court accepted undertakings from Taxsmart and Mr Andrews that they would not, for a period of three years, make the same or similar representation or make offers of employment contingent on the payment of a fee and also ordered that Taxsmart and Mr Andrews pay a contribution to the ACCC’s costs in the amount of $10,000.

Proposed Changes To Franchising Regulations

In April 2014, the Federal Government released a Draft Competition and Consumer (Industry Codes-Franchising) Regulation 2014 (Cth), which is hoped, will address some key areas of change for small businesses and the franchising industry and help protect against.

Some of the proposed outcomes from the 2013 Wein Review would be to:

  • Refine the national Franchising Code;
  • Promote growth in the sector;
  • Reduce red tape;
  • Ensure that all participants in the industry follow best practice principles; and
  • Improve conduct in the sector and the overall effectiveness of the Code.

Submissions and comments on the Draft legislation closed on 30 April 2014.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

ACCC Release NR 112/14

[Draft] Competition and Consumer (Industry Codes-Franchising) Regulation 2014 and supplementary materials available from TimeBase's LawOne Service

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