Decision impact statement

Power v Deputy Commissioner of Taxation

Venue: Miscellaneous - Australian
Venue Reference No: 2012/368875; S104/2014
Judge Name: Hayne and Crennan JJ (High Court of Australia)
Emmett JA, Barrett JA, Ward JA (New South Wales Court of Appeal)
Johnson J (New South Wales Supreme Court)
Judgment date: 15 October 2014 (High Court of Australia)
12 December 2013 (New South Wales Court of Appeal)
9 November 2012 (New South Wales Supreme Court)
Appeals on foot: No.
Decsion Outcome: Favourable

Impacted Advice

Relevant Rulings/Determinations:

• Not Applicable

Subject References:
Validity of director penalty notices
Requirements of paragraph 269-25(2) (b) of Schedule 1 to the TAA 1953

Précis

Brief summary of facts

The ATO issued four DPNs to the taxpayer in respect of seven periods of unpaid pay as you go withholding (PAYGW) of Oakdale Formwork Pty Ltd (Oakdale), of which he was a director. Two notices were sent on 8 February 2011, one on 11 April 2011 and one on 25 May 2011.

The DPNs set out the provision pursuant to which notice was given (section 269-15), the particular source of the recipient's liability by reference to their status as a director of the relevant company, the provision that gave rise to the Oakdale's liability (section 16-70), and consequently the recipient's liability to make payments to the Commissioner, and the periods in respect of which the notice was being given.

On 30 June 2011, the Commissioner filed a Statement of Claim against the taxpayer in the Supreme Court of New South Wales seeking to recover the director penalty liabilities.

The taxpayer sought to defend the proceedings on the basis that the Commissioner was not entitled to recover the director penalties liabilities on the basis that the DPNs were invalid as they failed to comply with the following specification in paragraph 269-25(2)(b) of Schedule 1 to the TAA 1953:

must...state that you are liable to pay to the Commissioner, by way of penalty, an amount equal to that unpaid amount because of an obligation you have or had under this Division.

On 9 November 2012, Justice Johnson of the Supreme Court of New South Wales rejected the taxpayer's argument and entered judgment against the taxpayer. The taxpayer appealed the decision to the NSW Court of Appeal and subsequently filed an application to the High Court seeking special leave to appeal.

Issues Decided by the Court

The NSW Court of Appeal rejected the taxpayer's argument that paragraph 269-25(2)(b) requires that a DPN must expressly state that the taxpayer's liability arises because of an obligation they have under Division 269 of Schedule 1 to the TAA 1953.

The Court held that the notice satisfied the requirements of s 269-25(2)(b) because it informed the director he was liable because of statutory provisions associated with s 269-25. The notice effectively called attention to Division 269. There was no separate requirement that the recipient be expressly informed that the source of the obligation was Division 269.

The High Court determined that the NSW Court of Appeal decision was plainly right and accordingly dismissed the special leave application

ATO view of decision

The decision of the Supreme Court and the Court of Appeal, which the High Court stated was plainly right, is consistent with the Commissioner's view and current procedures.

Administrative Treatment

Implications for impacted ATO precedential documents (Public Rulings & Determinations etc)

Not applicable

Implications for impacted Law Administration Practice Statements

Not applicable

Court citation:
Power v Deputy Commissioner of Taxation
[2014] HCASL 198
[2014] NSWCA 77
[2013] NSWCA 428
Deputy Commissioner of Taxation v Power
[2012] NSWSC 995
(2012) 273 FLR 356
(2012) 91 ATR 316

Legislative References:
Taxation Administration Act 1953
Section 269-15 of Schedule 1
Subsection 269-25(2) of Schedule 1
Paragraph 269-25(2)(b) of Schedule 1

Case References:
Deputy Commissioner of Taxation v Woodhams
(2000) 199 CLR 370
2000 ATC 4141
(2000) 43 ATR 757

Robertson v Deputy Commissioner of Taxation
[2010] NSWCA 58
239 FLR 29
2010 ATC 20-174
78 ATR 850

Deputy Commissioner of Taxation v Di Florio (No. 2)
[2012] WADC 70