Unremitted PAYG withholding worth nearly $1m leads to 4 DPNs for one director

A director has failed to set aside four director penalty notices after he was made liable for unremitted pay-as-you-go (PAYG) withholding deductions totalling nearly $1 million.

Despite the director’s claim that the Director Penalty Notices (DPNs) were defective or invalid, Supreme Court of NSW Justice Peter Johnson determined that he remained liable for the director penalties, plus interest, at a sum of $982,626.80.

Under Kevin Patrick Power’s directorship, Oakdale Newcastle Formwork failed to remit the total of nearly $800,000 in PAYG deductions to the ATO, withheld on behalf of employees.

Power was issued with four DPNs in the early 2010s as a result of the seven periods in which the Company failed to remit withheld amounts.

While Power did not dispute that the company failed to remit the PAYG withholding, he contended that the DPNs were invalid because they did not abide by the requirement in s.269-25(2)(b) TAA 1953.

The court found that the company had made remittance payments in the sum of $136,922.23 out of the $774,965.00 in PAYG withholding to be remitted.

“The total unpaid liability of Oakdale is $896,663.77. This figure is comprised of the total amount of withheld deductions, as disclosed in the BAS and IAS lodged by Oakdale, which were not remitted in accordance with requirements,” the court found.

A company is required to remit PAYG withholding to the Commissioner by the due date, and failure to do so could lead to the director being personally liable to pay the Commissioner director penalties.

Power ceased directorship of the company on 23 May 2011, and the company went into administration on or about 29 July 2011.

Validity dispute

Power contended that the DPNs were invalid as they failed to state he was liable because of an obligation he was under when serving as a director.

Further, he asserted that since the final of the four DPNs was issued two days following his cessation as director, it was invalid as he was no longer in directorship.

The court rejected this claim.

“The search indicated that the Defendant was still a director at that time (it appears that the ASIC database had not yet been updated). The Court was informed that it is usual practice for changes to not appear on the ASIC database for a period of time,” the court said.

“[The plaintiff] was entitled to act upon those records for the purpose of issuing DPN 4. The submission of the Defendant does not demonstrate any defect in DPN 4, let alone a defect which affects its validity,” it added.

“The Plaintiff submitted that, therefore, a person who conducts an ASIC search is entitled to rely and act upon the accuracy of the information obtained. I accept that submission,” the court added.

In its submissions, the Commissioner of Taxation sought $896,663.77 for non-compliance with the four DPNs.

Upon consideration of all evidence, the court determined that on the balance of probabilities, the Commissioner demonstrated an entitlement to judgment against the Power, making orders for costs, and that the Commissioner calculate the quantum of judgment and interest.

The case citation: Deputy Commissioner of Taxation v Power [2012] NSWSC 995 (9 November 2012).