In Deputy Commissioner of Taxation v Thomas Wilson  NSWDC 302, the New South Wales District Court rejected a director’s (Director) defences to a Director Penalty Notice (DPN) for $111,798, comprising the Pay-As-You-Go withholding (PAYGW) debts of the corporate taxpayer.
The DPN was upheld by the Court on the grounds that the Director had failed to take all reasonable steps to ensure the company complied with its PAYGW obligations, or had sought to have an administrator appointed or have the company wound up.
The Court stated that the Director of the corporate taxpayer had a duty to ensure that an appropriate system was in place to manage its tax liabilities. The Court considered that it was not reasonable for the Director to delegate such responsibilities or to simply not inform themselves of these matters.
Further, the Court noted that the Director’s attempt to appoint a liquidator was insufficient to demonstrate that he had taken all reasonable steps, as there should have been appropriate steps taken prior to such action including calling an additional board meeting and applying for leave to wind up the company.
This case shows the difficulty for directors in demonstrating that they have taken all reasonable steps to ensure that the company complies with its taxation obligations, and the need to stay informed of all the company’s dealings regardless of the degree of the director’s actual involvement with the day-to-day operations of the company.