Director penalty notices valid

A director of a company has been unsuccessful before the New South Wales Court of Appeal in arguing that director penalty notices issued to him for some $1 million (including interest) were invalid.

The Court of Appeal heard that the company had failed to pay withheld tax amounts to the Commissioner. The Commissioner then issued notices to the director, which sought to recover penalties alleged to be owing by the director in respect of the company’s failure to pay the withheld tax amounts to the Commissioner.

The director essentially argued that the notices were invalid as they did not state expressly that his liability arose “because of an obligation that he has or had under” the provision in the Taxation Administration Act that deals with directors’ obligations, and that the Commissioner was therefore not entitled to prosecute the proceedings against him. It was argued that because the notice did not make that specific reference, it did not meet all the requirements to be a valid notice under the law. The notices only referred to a specific legislative section concerning director penalty notices.

The Court of Appeal found that while the notices failed to refer expressly to the fact that the obligation arose under the relevant provision, as contended by the director, the notices clearly informed him that he was liable because of statutory provisions associated with the section concerning director penalty notices.