Deputy Commissioner of Taxation v Lee; Deputy Commissioner of Taxation v Silverbrook (No. 2)

The Deputy Commissioner of Taxation brought proceedings against Lee and Silverbrook, directors of a company that had failed to pay withholding tax, estimates, and superannuation guarantee charges. The plaintiff sought recovery of these amounts under the Taxation Administration Act 1953 (Cth). Director penalty notices were issued to the defendants in relation to the company’s liabilities. The court had to determine whether the defendants had a defence to the plaintiff’s claim. The court examined the ‘all reasonable steps’ defence under section 269-35 of Schedule 1 of the Taxation Administration Act. The defence requires that a director must have taken all reasonable steps to ensure the company complied with its tax obligations.

The court found that the defendants' reliance on the company’s voluntary liquidation, which occurred outside the time allowed by section 269-30 of Schedule 1, could not be considered as evidence of steps taken. The evidence provided by the defendants was largely inadmissible, consisting of conclusions, statements of belief, and statements of intention. The evidence did highlight the inadequacy of the company’s tax compliance framework and referenced seeking external professional advice and the establishment of trusts. However, the evidence was insufficient to prove that all reasonable steps had been taken. The court concluded that the defence was not made out, and the plaintiff was entitled to judgment.