The WA District Court recently found in favour of the Commissioner in a case involving the non-remittance of withholding taxes by the Defendant Director, and the alleged issue of a promissory note payable to the Deputy Commissioner to satisfy the liability.

The unrepresented defendant ran several novel arguments, all of which failed.

The defendant raised the constitutional card arguing that the taxation law upon which the Deputy Commissioner bases its case was unconstitutional. The Court wholeheartedly rejected this argument referring to several other cases on the same issue.

The Defendant argued that the District Court had no jurisdiction to hear the matter. Bowden DCJ held that the Court had been properly established under the District Court Act of Western Australia.

The defendant also argued that, as a British citizen, the tax law did not apply to her. His Honour found that argument absurd, and said that just as persons enjoy the benefits of that country’s laws, they must also accept the burdens of those laws.

The central taxation issue was the Director’s liability for unpaid penalty as a result of the failure of her company to remit withholding tax. The Defendant pleaded a statutory offence that due to illness it would have been unreasonable to expect her to take part in the management of the company. However, although the ATO conceded that the defendant suffered from an illness, the defendant did not provide any evidence to establish that she did not take part in the management of the company, or the extent of the illness or that it would be unreasonable to expect him to take part in the management of the company due to that illness.

The taxpayer’s final defence was the issue of a non-negotiable promissory note by the Director to the Commissioner.  His Honour stated that the ‘the idea that a promissory note can simply be prepared by a taxpayer who promises to pay the Deputy Commissioner a sum of money, and then delivered to the ATO thereby extinguishing the debt when the ATO fails to either present the note or respond to it is nonsense.’

Message:  The taxpayer would have been well advised to engage legal representation so that evidence of her illness could have been put to the Court.  She may have then made out her statutory defence.