Deputy Commissioner of Taxation v George [2002] NSWCA 336

Reported Decision : (2002) 55 NSWLR 510

New South Wales Court of Appeal

CITATION : Deputy Commissioner of Taxation v George [2002] NSWCA 336 FILE NUMBER(S) : CA 40139/02 HEARING DATE(S) : 2/10/02 JUDGMENT DATE : 14 October 2002

PARTIES : Deputy Commissioner of Taxation - Appellant Ian Douglas George - Respondent JUDGMENT OF : Handley JA; Giles JA; Gzell J

LOWER COURT JURISDICTION : District Court LOWER COURT 9129/00 FILE NUMBER(S) : LOWER COURT Boyd-Bolland ADCJ JUDICIAL OFFICER :

COUNSEL : Mr M Aldridge SC with Mr P Rodionoff - Appellant Mr C J Bevan - Respondent SOLICITORS : Australian Government Solicitor - Appellant Searle & Associates - Respondent CATCHWORDS : TAXES AND DUTIES - Income tax and related legislation - Liability of directors to penalty for PAYE deductions not remitted to Commissioner of Taxation - Construction of penalty and defence provisions - Continuing obligation - Incumbent upon Commissioner to exercise powers expeditiously - Income Tax Assessment Act 1936 (Cth) s 222AOB, s 222AOC, s 222AOD, s 222AOJ Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953) (Cth) LEGISLATION CITED : Corporations Law (Cth) Insolvency (Tax Priorities) Legislation Amendment Bill 1993 Suitor's Fund Act 1951 DECISION : Appeal allowed with costs

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40139/02

MONDAY 14 OCTOBER 2002

HANDLEY JA GILES JA GZELL J DEPUTY COMMISSIONER OF TAXATION v IAN DOUGLAS GEORGE Judgment 1 HANDLEY JA: I agree with Gzell J. 2 GILES JA: I agree with Gzell J. 3 GZELL J: An employer of labour was obliged to make a deduction from salary or wages payable to an employee before 1 July 2000 at prescribed rates under a pay as you earn ("PAYE") system (Income Tax Assessment Act 1936 (Cth), s 221C(1A)). After that date the PAYE system was consolidated with other withholding arrangements into a pay as you go ("PAYG") system (Taxation Administration Act 1953 (Cth), Sch 1). This appeal is concerned with the former PAYE system. 4 An employer was classified as a large remitter, a medium remitter or a small remitter upon the basis of the total deductions made under the PAYE and other withholding systems (Income Tax Assessment Act 1936 (Cth), s 220AAB, s 220AAJ and s 220AAQ). Hereafter all section references are to the Income Tax Assessment Act 1936 (Cth) unless otherwise indicated. 5 From 1 July 1998, a small remitter was required to pay to the Commissioner of Taxation any deductions made under the PAYE system in a month not later than the seventh day after the end of the quarter in which the month occurred (s 220AAR(1)). A medium remitter was required to pay to the Commissioner the amount of any PAYE deductions in a month not later than the seventh day after the end of the month (s 220AAM(1)). A large remitter was required to pay the amount of any PAYE deductions during a month within a specified number of days of the deduction (s 220AAE(1)). With effect from I July 1999, the above times to remit were respectively altered to 21 days after the end of the quarter, 21 days after the end of the month and an increased number of days after the deductions. 6 First Netcom Pty Ltd ("Netcom") was an employer which made PAYE deductions from the salary and wages of its employees. It failed to remit deductions to the Commissioner. Part VI, Division 9 contained provisions exacting penalties from the directors of companies which failed to remit PAYE deductions to the Commissioner. At the times relevant to this appeal, s 222AOB and s 222AOC were in the following terms: " Directors to cause company to remit or to go into voluntary administration or liquidation