Non payment of Pay As You Go witholding tax and the implications for company directors

Patricia Blazey

    Research output: Contribution to journalArticlepeer-review


    On 1 July 2000, the Australian Federal Government replaced the Pay As You Earn system (PAYE) and various other tax systems with the Pay As You Go (PAYG) system. The PAYG legislation contains the PAYG withholding system and the PAYG instalment system. The PAYG withholding system is comprised of a single set of rules that applies to all withholding tax payments. This article examines a number of recent Australian court decisions in which the Commissioner of Taxation (Commissioner) has taken legal action against directors in their personal capacity for nonpayment of PAYG withholding tax. The case law demonstrates that the Courts narrowly interpret the relevant statutory defences with directors being held personally liable for their company’s debts. This article addresses the PAYG withholding tax providing an overview of the obligations placed on company directors to remit PAYG withholding tax on time. In sections II and III it provides and overview of the legislative provisions. Sections IV and V examine the penalty provisions which can be invoked by the Australian Taxation Office (ATO) when directors fail to comply with their obligations and also provides an overview of the approach taken by the courts when the ATO institutes proceedings against company directors who have breached the withholding tax provisions. Section VI sets out the conclusions.
    Original languageEnglish
    Pages (from-to)70-83
    Number of pages14
    JournalJournal of the Australasian Tax Teachers Association
    Issue number3
    Publication statusPublished - 2005


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