Deputy Commissioner of Taxation v Dick

The appeal concerned the Deputy Commissioner of Taxation and a former director, Mr Dick, of Northern Spirit Football Club 2000 Pty Ltd. The dispute arose from the company's failure to remit PAYG income tax deducted from employee wages between June 2002 and March 2003. The Deputy Commissioner sought to recover a penalty from Mr Dick, equivalent to the withheld amounts, pursuant to section 222AOB of the *Income Tax Assessment Act 1936* (Cth). Mr Dick had successfully argued in the primary court that he ought fairly to be excused from liability under section 1318 of the *Corporations Act 2001* (Cth), a discretion the Deputy Commissioner challenged on appeal.

The Court of Appeal was required to determine two principal issues. Firstly, whether the relief available under section 1318 of the *Corporations Act 2001* extended to excusing a director from liability for penalties imposed under Divisions 8 and 9 of the *Income Tax Assessment Act 1936* for failing to remit withheld tax. Secondly, if section 1318 was applicable, whether the primary judge had erred in exercising that discretion in Mr Dick's favour.

The Court considered whether the legislative scheme of the *Income Tax Assessment Act 1936* regarding the recovery of unpaid tax constituted an exhaustive code that precluded the operation of section 1318 of the *Corporations Act 2001*. It was argued that section 1318 was intended to apply only to defaults or breaches of duty arising under the *Corporations Act 2001* itself, and that the tax provisions were inconsistent with the dispensing power granted by section 1318. The Court examined the legislative history of section 1318 and its predecessors, noting its purpose was to allow courts to relieve individuals from harsh or unfair operation of penal provisions.

The Court allowed the appeal, setting aside the primary judge's order and entering judgment for the appellant, the Deputy Commissioner of Taxation, in the sum of $141,259.19. The Court found that section 1318 of the *Corporations Act 2001* did not apply to obligations imposed by statutes outside that Act, and therefore could not be invoked to relieve Mr Dick from his liability under the *Income Tax Assessment Act 1936*. Consequently, the second issue concerning the exercise of discretion did not need to be determined.