Out of date ASIC records can affect tax

How can ASIC records affect anything to do with tax? What’s ASIC got to do with tax?

Well, the tax law contains a regime that enables the Commissioner of Taxation to recover a penalty from a director of a company that fails to remit Pay As You Go tax deductions made from the salary or wages of its employees to the ATO. The penalty is equal to the non-remitted deductions.

To enable all this to happen, the Tax Commissioner needs to serve a notice (known as a director’s penalty notice – DPN) on the company director at his or her last known address. Sounds simple enough, but complications can arise.

In a recent case before the NSW Court of Appeal (Robertson v DCT), the Court dismissed a director’s appeal and held that the Tax Commissioner could rely on the ASIC database to determine a director’s last known address for the purpose of serving a DPN. That was the case even if ASIC’s records were not up-to-date, which is what happened in this case.

The Court found the Commissioner was entitled to rely on the records in the ASIC database, and was not required to go behind that to ascertain the last known address of the director.

The director had argued that she had not received the DPN (for the purpose of the tax laws) because it had been sent to the wrong address. The company of which she was a director had failed to give notice to ASIC of her change of address, although it had informed ASIC that she had recently ceased to be a director.

The director’s tax return contained details of her change of address, and she contended that the Commissioner could not rely on ASIC records as they were unreliable.

In order to get an address to send out the notice, a Tax Officer obtained a company extract from ASIC’s national database (called MASCOT) for the company in question. It showed Ms Robertson as a director at her Botany address. The DPN was sent by prepaid post by the Tax Officer to the address of the place of residence of Ms Robertson last known to the Commissioner, ie. Botany. This was despite the director living at an address in Glenning Valley.

However, in finding for the Tax Commissioner, the Court of Appeal held that total reliance could be placed on an ASIC extract to establish an address last known to the person making the search (ie. the Tax Commissioner in this instance), and that there was no need to go behind the relevant extracts.

In this regard, the Court said: “What is the point of having a national ASIC database available to the public to search and obtain extracts there from if one must go to the original document from which the information was extracted?”

In arriving at its decision, the Court also noted that ASIC was under a statutory duty to keep the database up-to-date and that the onus was on the company director to inform ASIC of any changes in personal details. It also noted that the particular extracts contained the recent change in her directorship status and that therefore it was entitled to be assumed the records were reliable.

The Court said there was no reason for the Commissioner to go behind the ASIC extracts and search the document related to Ms Robertson. The Tax Officer had obtained two extracts that stated Ms Robertson’s address at Botany. The second extract indicated a very recent change in Ms Robertson’s status. The Court said the Officer was entitled to take at face value the Botany address and he was also entitled to assume that if there had been a change of address, it (like the termination of her directorship), would have been notified to ASIC and stated in the extracts.

This case is a salutary reminder of the need for company directors to be particularly careful to ensure their address, records, etc are up-to-date with ASIC, and not just on their tax return.

Terry Hayes is the senior tax writer at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.