Tax Litigation Update

At Cove Legal we are very active in the tax litigation space and two recent decisions particularly caught our eye.

Firstly in Arbuckle v Commissioner of Taxation [2019] WASC 7 Martin J dismissed Mr Arbuckle’s Appeal against the sentence imposed by the Magistrate’s Court.

The Court found that Mr Arbuckle’s long-standing failure to meet his tax obligations did warrant a 6- month suspended prison term. He was released on the undertaking to be of good behaviour for a period of two years.   

In handing down the sentence, Magistrate Huston said he needed to “send a message very clearly to Mr Arbuckle that he needs to be discouraged from engaging in this form of unlawful behaviour ever again.” 

“I also need to send a message to the broader community that the expectations in the legislation for lodging income tax returns and business activity statements is not something to fit in when life is convenient. They have to be prioritised because it’s a legislative requirement to do those things.” 

The second decision is Deputy Commissioner of Taxation v Nore [2019] WADC 27 which saw the District Court dismiss an ATO summary judgment application against Mr Nore on the basis that there was sufficient uncertainties in the ATO’s case (despite the ATO claiming Mr Nore had no defence to the claim) to justify the matters being aired in court. 

Mr Nore had been issued with a Director Penalty Notice with respect to a company that failed to remit superannuation guarantee charges.  There are a number of steps a Director can take in order to avoid personal liability in that scenario. Some of those actions were undertaken by Mr Nore with the Court observing “In the circumstances … I am struggling to see what the defendant could have done.”

The two decisions perhaps sit at opposite ends of the true litigation scale: the Supreme Court showing a willingness to endorse custodial sentences for more serious personal tax omissions whilst the District Court is resisting the Commissioner’s attempts to rely upon his procedural/legislative advantages so as to prevent arguable defences from being properly considered by the Courts.  Both show that tax disputes can very much turn on their own particular facts and circumstances and require specialist guidance.

Roger Blow

P: +61 8 6381 0326 or e:

 This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.



* Verb
1 decorate or embellish
2 serve notice on a 3rd party to seize money  

A garnishee notice is served on a third party that owes you money (or holds money on your behalf), requiring that the third party pays some or all of that money direct to the entity issuing the notice.  In recent years it has increasingly become one of the ATO’s favourite weapons to enforce the payment of outstanding tax debts.

This can include the diversion of wages owed to you by your employer, the contents of your bank accounts, proceeds of sale held by a property settlement agent or amounts owed by trade debtors.

Unlike your average creditor, the ATO does not need to seek a court order to issue and enforce a garnishee notice.  You do need to be served with a copy of the notice.

If you are in the process of a court or AAT appeal in which you are disputing the assessment under which you owe the tax debt, then the ATO is required to consider whether garnishing funds would prejudice your ability to pursue the appeal.  Recent case law suggests that this assessment by the ATO is at times open to challenge, as the taxpayer (and the Courts) may not always agree with the ATO’s assessment as to what will or will not prejudice the taxpayer’s capacity to address their tax appeal.  We have also seen cases where garnishee notices have been improperly issued against joint bank accounts concerning individual debts – so the issue of a notice is not always the end of the story.  Call us if you would like any further help in addressing a garnishee notice.

Cove Legal are experts in assisting clients with contentious tax matters and insolvency proceedings.  We provide advice on ATO payment plans, director penalty notices, winders and all other aspects of ATO debt recovery action.  Practice Director Roger Blow has acted extensively on behalf of the ATO in Perth and has specific expertise in tax related disputes. 


Roger Blow

P: +61 8 6381 0326 or e:


This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.


What to do if you have been served a Director Penalty Notice by the ATO?

If you are a Director of a company and your PAYG and Superannuation Guarantee Charge Obligations are not up to date, you could find yourself the subject of an ATO Director Penalty Notice (DPN) and incur personally liability for those outstanding debts.   

The ATO issues DPNs as part of its debt recovery actions and once issued you have 21 days to either: 

  1. cause the Company to pay the debt (or pay it yourself); or

  2. appoint a voluntary administrator; or

  3. put the Company into liquidation.

A failure to comply within 21 days will automatically make you personally liable for the unpaid super/PAYG, subject to the limited defences discussed below. 

You should also be aware that if the company’s BAS returns are more than 3 months old, the serving of the DPN can give rise to personal liability for the directors for Company tax debts EVEN IF they then put the company into liquidation or voluntary administration within the 21 day period. 

Where no returns have been lodged, the ATO can undertake an audit and simply issue an estimate of the debt and then issue a DPN based on that estimate, so a failure to report does not necessarily provide any protection to personal liability. 

Under the legislation a director cannot avoid liability under a DPN by claiming they did not receive it – the ATO merely needs to prove that it was properly posted by normal post to evidence receipt. 

There are some limited defences to liability arising under a DPN.  A Director is not personally liable if they can prove: 

  1. they were not capable of acting as a Director of the company during the relevant period that the debts arose and were not paid due to sickness or some other good reason;

  2. they took all reasonable steps to ensure that:

    • the directors caused the company to comply with its obligations;

    • the directors caused an administrator of the company to be appointed;

    • the directors caused the company to begin to be wound up, and

    • there were no reasonable steps that could have been taken to ensure that any of the above happened.

Whether a course of action is 'reasonable' and whether there is sufficient evidence to support the argument will vary on a case-by-case basis and requires advice. 

Cove Legal are experts in assisting our clients with contentious tax matters and insolvency proceedings and provide advice on ATO payment plans and all other aspects of ATO debt recovery action.  Roger Blow acted extensively for the ATO in Perth for over 5 years and has specific expertise in tax related disputes.   

If you would like advice or assistance with any legal matters involving the ATO, we would be keen to hear from you.   Please contact: 

Roger Blow, Principal, Ph: +61 8 6381 0327 or

This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents. 

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ATO Calling: Enforcement and Tactics

Cove Legal’s Roger Blow and Tennille Provost were two of the presenters at the Leaker Partners Continuing Professional Development Seminar on Friday 27 October 2017.  Roger and Tennille’s presentation entitled ATO Calling: Enforcement and Tactics, gave the audience strategies on ways to deal with ATO debt enforcement action as well as outlining some of the significant powers held by the ATO.  A copy of the presentation is available by emailing

If you or any of your clients need help with disputed or outstanding tax debts, we encourage you to speak to the team at Cove Legal.  

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