Deputy Commissioner of Taxation v Solomon; Deputy Commissioner of Taxation v Muriwai

The appeals before the New South Wales Court of Appeal concerned the liability of directors for unremitted Pay As You Earn (PAYE) deductions. The Deputy Commissioner of Taxation sought to recover penalties from the directors of two companies, Solomon and Muriwai, for their failure to ensure that the companies remitted PAYE tax liabilities to the Commissioner. The central dispute revolved around the interpretation of specific penalty and defence provisions within the *Income Tax Assessment Act 1936* (Cth).

The Court was required to determine whether the directors had a continuing obligation to ensure that their companies remitted PAYE deductions, and if so, whether they had taken all reasonable steps to prevent the contravention, which would constitute a defence. The interpretation of sections 222AOB, 222AOC, 222AOD, and 222AOJ of the *Income Tax Assessment Act 1936* was central to these determinations.

The Court held that the obligation imposed on directors under the relevant provisions was a continuing one. It reasoned that the defence provisions required directors to demonstrate that they had taken all reasonable steps to prevent the company from incurring the liability in the first place, or, if the liability had already been incurred, to ensure that the company discharged its obligation. The Court found that the directors in these cases had failed to establish this defence.

Leave to appeal was granted, and the appeals were allowed with costs.