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Company directors liable for unpaid PAYG amounts
Article Type: News, Tax News
Product Title: Income Tax, Tax and Accounting Headlines
Publication Date: 31/7/2019
Jurisdiction: Commonwealth of Australia
Article – DCT v Lee & Anor (No 2) – 31/7/2019
Two company directors have failed in their challenge to director penalty notices (DPNs) totalling almost $10.3m.
The DPNs were for unpaid PAYG withholding amounts, estimates of unpaid PAYG withholding amounts and unpaid superannuation guarantee charge amounts. Although the directors caused the relevant company to go into liquidation, that happened after the expiry of the 3-month period specified in s 269-15 in Sch 1 TAA. Accordingly, the only defence available to the directors was that they took all reasonable steps to ensure that they caused the company to comply with its obligations (under s 269-35(2)(a) Sch 1 TAA).
The NSW Supreme Court had little trouble disposing of the directors’ defence. In particular, the Court said that making external solicitors the sole arbiters of when money should be paid from a trust, setting up another trust for payroll administration and believing others would be responsible for the company’s tax obligations did not constitute taking reasonable steps to ensure that they caused the company to comply with its obligations.
The main problem for the directors was that they did not appear at the hearing, nor were they represented. As a result, the NSW Supreme Court had to rely on their affidavits, but most of the material in them was “irrelevant” and “in inadmissible form”. (DCT v Lee & Anor (No 2)  NSWSC 954, NSW Supreme Court, Davies J, 31 July 2019.)
Date of Issue: 5 August 2019