On Thursday 14.7.2016, the NSW Supreme Court gave a judgment in favour of a Deputy Commissioner for a director’s penalty notice (DPN) in the sum of $1,965,485, which was the amount the company deducted from employees salary and wages (PAYG withholding) and failed to remit to the Commissioner.

The Commissioner has the power though, to recover the amount, the company should have remitted, from any person who was a director of the company, at any time from the beginning of the withholding period. This is a personal liability of the director and is imposed under Division 269 of the First Schedule to the Taxation Administration Act 19539 (‘TAA‘). This style of liability is known as ‘directors’ penalty notice’ or ‘DPN’ because the Commissioner cannot proceed against the director until having given the director notice that he will do so.

The Court heard arguments from the director that he did not receive the DPN and was therefore not given the opportunity to appoint an administrator of the company to enable a defence to be made to the issue of the DPN. The Court said the director admitted receiving the DPN, but submitted that the DCT had not provided proof of service of the DPN. Although the director said he instructed his accountant to change his address on the ASIC register, the Court said there was no change so recorded.

Although the director actually received the DPN on 7 May 2015, the Court noted that he was deemed to have received the notice at the time the Commissioner posted it: on 20 March 2015 (the date on the notice) under s269-25(4) of the First Schedule to the Taxation Administration Act 19539 (‘TAA‘).

In the Court’s view, service of the DPN on the director complied with s269-50 of Sch 1 to the TAA, which allows the Commissioner to rely on the director’s residential or business address in ASIC’s records for that company.

The Court concluded that the director did not have a defence to the claim (under s269-35 of Sch 1 to the TAA).

(DCT v Fitzgerald [2016] NSWSC 971, NSW Supreme Court, Harrison AsJ, 14 July 2016.)

[LTN 134, 1/7/16]