Wegner v Deputy Commissioner of Taxation; Reardon v Deputy Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Miscellaneous - Australian (HCA B17 and B18 of 2013; QCA No 3597 and 3598 of 2012)
Date published: 31 July 2013

Summary of decision:
Outlines the ATO's response to this case concerning whether Director Penalty Notices (DPNs) issued under former s 222AOE of the Income Tax Assessment Act 1936 were required to be re-issued under s 269-25 of Sch 1 to the Taxation Administration Act 1953.

Overview of facts:
On 27 April 2010, the ATO issued a Director Penalty Notice (DPN) to each of the taxpayers in respect of unpaid pay as you go withholding (PAYGW) for the company of which they were directors. Each DPN was drafted in conformance with the decision in DCT v Meredith (2007) 245 ALR 150, which is authority for the proposition that a DPN is served at the time it is posted and the date for compliance runs from that date. In this case, the taxpayers alleged they did not receive the DPNs. | On 1 July 2010, as a result of the Tax Laws Amendment (Transfer of Provisions) Act 2010 , section 222AOE of the ITAA 1936 was repealed and Division 269 was enacted as part of Schedule 1 to the TAA 1953. Transitional provisions provided that the new Division 269 applied in respect of directors' penalties payable under the former provisions in the ITAA 1936 as though they were payable under Division 269, excluding section 269-20 which provides for the raising of the penalty (in order to avoid a double penalty). [1] | The taxpayers argued unsuccessfully on appeal, and at their application for special leave, that the transitional provisions had the effect of revoking the Commissioner's power to recover the penalty that arose after the expiration of the 14 day period for compliance under former section 222AOE on 11 May 2010, as from 1 July 2010 when the new provisions became effective. | Issues decided by the court | The Queensland Court of Appeal held that the original DPNs enabled the Commissioner to recover the penalty because his accrued right was preserved by former section 8(c) of the Acts Interpretation Act 1901 (Cth) (now in section 7 of that Act) (per McMurdo J and McMeekin J). [2] Alternatively, Schedule 7 to the Tax Laws Amendment (2011 Measures No 7 ) Act (Cth) (which retrospectively validated the DPNs sent to the taxpayers after the NSW Court of Appeal decision in Soong v DCT (2011) 278 ALR 538 overturned their earlier decision in Meredith , with the effect that all DPNs issued with the wording used in the present case became invalid) operated as a retrospective repeal or modification of the transitional provisions and avoid any inconsistency, such that a new notice under Division 269 was not required (per Holmes J). [3]

Issues decided:
The Queensland Court of Appeal held that the original DPNs enabled the Commissioner to recover the penalty because his accrued right was preserved by former section 8(c) of the Acts Interpretation Act 1901 (Cth) (now in section 7 of that Act) (per McMurdo J and McMeekin J). [2] Alternatively, Schedule 7 to the Tax Laws Amendment (2011 Measures No 7 ) Act (Cth) (which retrospectively validated the DPNs sent to the taxpayers after the NSW Court of Appeal decision in Soong v DCT (2011) 278 ALR 538 overturned their earlier decision in Meredith , with the effect that all DPNs issued with the wording used in the present case became invalid) operated as a retrospective repeal or modification of the transitional provisions and avoid any inconsistency, such that a new notice under Division 269 was not required (per Holmes J). [3]

ATO view of decision:
The decision of the Court of Appeal, which the High Court determined was not attended with sufficient doubt to warrant granting the taxpayers Special Leave to Appeal, is consistent with the Commissioner's view and current procedures.

Administrative treatment:
Implications for ATO precedential documents (Public Rulings & Determinations etc) | Not applicable

Legislative references: Taxation Administration Act 1953 (Cth) Section 269-25 of Schedule 1 Income Tax Assessment Act 1936 (Cth) Former Division 9 Tax Laws Amendment (Transfer of Provisions) Act 2010 (Cth) Schedule 1 section 10 Part 3, Division 5 Tax Laws Amendment (2011 Measures No 7) Act 2011 (Cth) Schedule 7
Case references: Deputy Commissioner of Taxation v Woodhams (2000) 199 CLR 370 [2000] HCA 10 43 ATR 757 2000 ATC 4141 Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354 (2007) 245 ALR 150 2007 ATC 5353 69 ATR 876 Soong v Deputy Commissioner of Taxation [2011] NSWCA 26 (2011) 278 ALR 538 2011 ATC 20-245 82 ATR 455 Deputy Commissioner of Taxation v Zammitt [2012] NSWDC 135
Subject references: Validity of Director Penalty Notices Interaction between the former section 222AOE Income Tax Assessment Act 1936 (ITAA 1936) and section 269-25 of Schedule 1 of the Taxation Administration Act 1953 (Schedule 1, TAA53))