Tax System Integrity and Directors’ Obligations under the Corporations Act – A Tale of Two Systems

The article examines the approach of various regulators and the law for corporations to have functional and effective corporate governance systems in operation for tax purposes. This includes an evaluation of the current corporate tax environment; and the approach of the ATO and ASIC to corporate governance processes. It finds the ATO has no direct remedies if such processes are not in place. This leads to a review of the duties of care and diligence and good faith under the Corporations Act to determine if breaches of these duties caused through no or inadequate governance processes that result in serious breaches of the tax laws can give rise to civil remedies under the Corporations Act. The conclusion is affirmative. Part of this review includes a determination as to whether the Commissioner should be given similar remedies as are available to ASIC under the Corporations Act and concludes this is not an optimal result.