Decision impact statement
Deputy Commissioner of Taxation v Soong
Venue: Miscellaneous - Australian
Venue Reference No: SC13826/08 (NSWCA); S122 of 2011 (High Court)
Judge Name: Allsop P, Giles JA, Hodgson JA, Tobias JA & Gzell J (NSWCA); French CJ and Crennan J (High Court)
Judgment date: 25 February 2011 (NSWCA); 12 August 2011 (High Court)
Appeals on foot: Not applicable.
Decision Outcome :Adverse. Special Leave refused.
Impacted Advice
Relevant Rulings/Determinations:- Not applicable
Subject References:
Director Penalty Notices
Presumption of delivery in course of post
Evidence
Notice
Service by post
Liability for failure to remit tax withheld from salary entitlements
'contrary intention' in statute
'give', 'serve', 'send' a notice
Précis
Outlines the ATO response to this decision which concerned the application of director penalty notices given pursuant to section 222AOE of the Income Tax Assessment Act 1936 and overturned the decision of D C of T v Meredith [2007] NSWCA 354 ("Meredith")
Facts
The defendant was a director of three companies which withheld amounts (being tax withheld from employees' wages) for purposes of Division 12 of Schedule 1 to the Taxation Administration Act 1953 ("TAA 1953"). The former s 222AOB of the Income Tax Assessment Act 1936 ("ITAA 1936") was not complied with on or before the due dates for each amount withheld. By virtue of the above and the former s222AOC of the ITAA 1936, the defendant was liable for a penalty equal to the unpaid amount of each amount withheld.
On 29 November 2007, the defendant was given a Director Penalty Notice ("DPN") for each company pursuant to sections 222AOE and 222AOF (being the date on which the DPNs were posted) which allowed her a further 14 days in which to potentially trigger remission of her penalty by causing each company to comply with s 222AOB. She did not comply with the DPNs within the requisite 14 days, placing each company into voluntary administration on the 15th day after the notices had been posted. In accordance with the decision in Meredith, the defendant remained liable for each penalty, the total being $1,059,520.67.
Issues decided by the NSW Court of Appeal
At first instance the trial judge followed the decision of Meredith in giving judgment to the Deputy Commissioner.
The NSW Court of Appeal ('NSWCA') constituted a special five member bench, to reconsider its own majority decision of a three member bench in Meredith. The NSWCA unanimously overturned its decision in Meredith, such that a DPN is taken to be 'given' when is delivered in the ordinary course of post, rather than when posted.
Issues decided by the High Court
The High Court subsequently refused the Commissioner's application for special leave as the Court of Appeal's decision in Soong was not attended with sufficient doubt to warrant a grant of special leave.
The High Court's decision affirmed the decision of the NSWCA in Soong.
ATO view of Decision
In accordance with the decision of the NSWCA in Soong, a DPN issued under s222AOE ("section 222AOE Notice") is, subject to the considerations below, taken to be given at the time that the DPN would have been delivered in the ordinary course of post. Consequently, the intended recipient would have 14 days after the day of delivery in the ordinary course of post to cause the company to comply with s222AOB and achieve remission of penalties.
However, the ongoing implications of the decision of the NSWCA in Soong need to be considered in light of the following:
- •
- Section 222AOE was repealed effective 1 July 2010. Therefore, the impact of the decision is limited to DPNs issued up to 30 June 2010 (inclusive).
- •
- Section 269-25 in Schedule 1 to the TAA 1953 applies to DPNs issued by the Commissioner on and after 1 July 2010 and provides that a DPN is taken to be given at the time the Commissioner posts it.
- •
- The passage of Schedule 7 to the Tax Laws Amendment (2011 Measures No. 7) Act 2011 ("TLA 2011"). TLA 2011 applies in circumstances where the Commissioner gave (or purported to give) a notice under the former section 222AOE on or after 10 December 2007 by sending it by pre-paid post in accordance with section 28A of the Acts Interpretation Act 1901 ("AIA"). In those circumstances, and for the purposes of the former section 222AOE, the legislative amendments prescribe that the notice is taken as being given at the time the Commissioner sent it by pre-paid post in accordance with section 28A of the AIA. The effect is that, retrospectively, the precedential view of the law under Meredith is restored.
The decision of the NSWCA in Soong will have limited future impact given:
- •
- the repeal of s222AOE ;
- •
- the passage of TLA 2011; and
- •
- the effect of Division 269 in Schedule 1 to the TAA 1953.
Prior to the passage of the TLA 2011, the Commissioner sought, as an interim measure, to put into abeyance all proceedings for the recovery of director penalty liabilities based on director penalty notices issued in reliance on the decision in Meredith and which were affected by the Soong decision.
As a result of the passage of TLA 2011, the Commissioner will now continue to recover director penalty liabilities that are based upon section 222AOE Notices, subject to ATO policies concerning the recovery of director penalty liabilities.
Tax Office view of Decision
Administrative Treatment
Implications for ATO Precedential documents (Public Rulings & Determinations etc)
Not applicable
Implications for Law Administration Practice Statements
Not applicable
Court citation:
NSW Court of Appeal
[2011] NSWCA 26
(2011) 278 ALR 538
(2011) 248 FLR 252
2011 ATC 20-245
(2011) 82 ATR 455
High Court of Australia
[2011] HCATrans 212
Legislative References:
Income Tax Assessment Act 1936
222AOB
222AOC
222AOE
222AOF
222AOG
Acts Interpretation Act 1901
28A
29
Taxation Administration Act 1953
Division 269
Evidence Act 1995 (Cth)
160
163
Case References:
Deputy Commissioner of Taxation v Meredith ("Meredith")
[2007] NSWCA 354
2007 ATC 5353
69 ATR 876
Soong v Deputy Commissioner of Taxation ("Soong")
[2011] NSWCA 26
2011 ATC 20-245