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Large withholders and DPNs - A bridge too far?

Published on 01 Sep 16 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE

Under the current administrative practice of the Australian Taxation Office (ATO) in relation to the PAYG withholding rules, an entity which is a large withholder according to those rules cannot notify the Commissioner of Taxation of amounts withheld unless it pays those amounts to the Commissioner at the same time. The consequence is that, if the entity is a company and a liability is not paid, the company’s directors run the risk of receiving a director penalty notice (DPN) for the amount of any unpaid liability.

This article considers the interaction between the general obligations for a company that is a large withholder to withhold, notify and pay under the Taxation Administration Act 1953 (Cth) (TAA), and the DPN provisions in the TAA. It also considers the ATO’s current administrative practice, and why that practice may be flawed . The article also examines a recent Supreme Court decision which considered these issues.

Author profiles

Arthur Athanasiou CTA-Life
Photo of author, Arthur ATHANASIOU Arthur Athanasiou CTA (Life) practises mainly in the area of taxation advisory, with an emphasis on dispute resolution, particularly in the SME sector, with both the ATO and the SRO. Arthur has many years experience in complex tax litigation and tax audit negotiations and settlements. He also has broad experience in the taxation of trusts and SME entities, with an emphasis on Div 7A and high wealth individuals and family groups. Arthur has qualified as a Chartered Accountant and also held senior taxation and management positions in the transport and motor vehicle industries. Arthur is a former President of The Tax Institute, has chaired the Law Institute’s Tax Law Advisory Committee for a decade and now serves on the Industry Advisory Board of the IPA-Deakin University SME Research Centre. Arthur is an Accredited Tax Law Specialist and a widely published writer on taxation issues. He regularly appears in the mainstream media and presents at tax seminars and discussion groups. - Current at 21 September 2018
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Mark Gioskos FTI
Mark specialises in tax advice, particularly in complex tax litigation and tax audit matters. He has extensive experience in negotiating and settling tax-related disputes, with an emphasis on achieving efficient and commercial outcomes for his clients. Mark regularly advises clients on various tax structuring and compliance issues in a range of areas, under both federal and state-based revenue laws. He also advises clients on various other legal issues, including financial and reporting obligations, and compliance with corporate and competition laws. Mark has been a member of The Tax Institute's Professional Development Committee in Victoria since February 2015. He holds a Bachelor of Laws and a Bachelor of Commerce from La Trobe University, and is currently completing a Master of Laws at the University of Melbourne. - Current at 26 July 2017
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