Background
Ostwald Bros. Pty Ltd failed to pay superannuation guarantee contributions to employees’ superannuation funds by statutory deadlines for three quarters: September 2016, December 2016, and March 2017. Although the company ultimately remitted the superannuation guarantee amounts (albeit late), it failed to lodge the required superannuation guarantee statements by the prescribed due dates. The Commissioner of Taxation issued default assessments of superannuation guarantee charge (SGC)—which comprises the shortfall plus nominal interest and administration components—and subsequently issued director penalty notices to three company directors: Brendan, Matthew, and Daniel Ostwald.
The applicants submitted defences relying on the “all reasonable steps” provision in section 269-35(2) of Schedule 1 to the Taxation Administration Act 1953 (Cth), arguing they had taken reasonable steps to ensure the company complied with its obligations or had pursued alternative paths such as placing the company into administration or liquidation. On 22 May 2025, the Commissioner rejected these defences and confirmed the director penalties remained payable. The three directors then filed separate applications for judicial review in the Federal Court.
The Court’s Holding
Justice Downes dismissed all three applications. The Court upheld competency objections to the applications filed by Matthew and Daniel Ostwald, finding those proceedings were not procedurally competent. As to Brendan’s application, the Court found that none of the four grounds of review—failure to consider relevant matters, consideration of irrelevant matters, rigid adherence to policy without regard to individual merits, or Wednesbury unreasonableness—had been established. The Commissioner’s reasoning adequately addressed the applicants’ contentions regarding whether they took all reasonable steps to ensure compliance, including consideration of the timing of director actions, the eventual (though late) payment of superannuation contributions, the company’s efforts to secure financing, and the ultimate placement of the company into external administration on 25 August 2017.
The Court noted that while the company did eventually pay the superannuation obligations and the Commissioner later reduced the SGC assessments following an objection, these facts did not demonstrate that the directors took all reasonable steps within the meaning of section 269-35(2). The statutory framework requires directors to cause their company to comply promptly; late payment does not discharge the directors’ penalty liability, and the reasonableness of steps must be assessed against how long obligations remained outstanding.
Key Takeaways
- Director penalties for superannuation guarantee charge deficiencies remain enforceable even where a company eventually pays the underlying superannuation obligations, if payment is late and the required statements are not lodged by statutory deadlines.
- The “all reasonable steps” defence requires directors to act promptly; spending time negotiating with financiers or seeking payment arrangements may be reasonable for a limited period, but steps toward administration or liquidation must follow promptly once payment attempts fail.
- Late payment of superannuation contributions does not retroactively eliminate the superannuation guarantee charge assessment or director penalty, as SGC comprises not only the shortfall but also nominal interest and administration components accruing from the original due date.
- Procedural compliance with statutory notice requirements and timely objection procedures is essential to the competency of judicial review applications challenging director penalty decisions.
Why It Matters
This decision reinforces that Australian directors face genuine personal financial liability for their company’s failure to remit superannuation guarantee contributions on time, regardless of whether the company later makes payment. The ruling clarifies that the statutory “all reasonable steps” defence is narrowly construed: directors cannot rely on eventual payment or attempts to secure financing if those attempts consume excessive time or delay the critical decision to place the company into administration or liquidation. The decision will influence how corporate directors assess and manage superannuation compliance obligations and how promptly they escalate financial difficulties to insolvency solutions.
For the tax profession, the judgment confirms that the Commissioner’s discretionary assessment of whether directors have satisfied the all reasonable steps defence is subject to judicial review but enjoys substantial deference; the Court will intervene only on traditional administrative law grounds. The decision also clarifies the interplay between objection to underlying SGC assessments (which can succeed and reduce liability) and director penalty proceedings (which proceed independently under the statutory framework governing director conduct).