DCT v Kafer: ATO certificates stand unless the director answers them with evidence

On 20 October 2026 the District Court of NSW gave judgment for the Deputy Commissioner of Taxation in Deputy Commissioner of Taxation v Kafer [2026] NSWDC 370. The defendant, who had been a company director, was ordered to pay $788,618.96 plus interest and costs. He did not attend the hearing and led no evidence.

What happened

The defendant was a director of a company that withheld PAYG amounts from payments to employees in the September 2016 quarter. By the due date, 25 November 2016, the company had not paid, entered administration or started winding up (at [10] to [11]). The ATO posted a director penalty notice on 25 February 2019 (at [41]).

In July 2025 the ATO sued for a director penalty of $90,053, personal income tax, late lodgment penalties and a running balance account (RBA) deficit debt. The last three included general interest charge (GIC) (at [7] to [8], [14] to [17]).

The filed defence denied liability but did not challenge the validity of any assessment, certificate or notice (at [21] to [22]). The ATO relied on its officers' affidavits and evidentiary certificates (at [23]).

The defendant did not attend, so the hearing went ahead undefended (at [4] to [5]). His affidavit was not tendered (at [24]), but the judge still considered it (at [33]). It said the company could not pay because a major customer had not paid, and that no steps were available to him to have it pay by the due date (at [34]).

What the court decided

• Certificates. A Commissioner's certificate that an amount is payable is prima facie evidence that it is payable and that its details are correct (Taxation Administration Act 1953 (TAA), Sch 1 ss 350-10(3) and 350-12). Once produced, the burden shifts to the defendant to bring evidence capable of displacing it. None was produced on the income tax, the lodgment penalties or the RBA debt (at [36]).
• Director penalty. The notice does not create the liability. It is a procedural step required before recovery proceedings start (at [39]). It is taken to be given when posted (s 269-25(4)) (at [41]).
• Lockdown. The company's activity statement was lodged outside the three-month period in the lockdown provisions (s 269-30(2)). The later winding up could not remit the penalty, whatever the explanation for the company's financial difficulties (at [43]).
• All reasonable steps. Evidence of cash-flow difficulties and the later liquidation, even if tendered, did not provide a defence, let alone raise the "all reasonable steps" defence in s 269-35 (at [42]). The defendant remained liable for the penalty (at [47]).
• Income tax. An assessment can be challenged only through objection and review under Pt IVC of the TAA, and recovery may continue while review rights are pursued (at [50]). In the debt claim, the notices of assessment were conclusive evidence that the assessments were correct (at [52], [59]). No tentative or provisional assessment, or bad faith, was alleged (at [58]).
• RBA debt and interest. Citing earlier decisions, the court said the ATO may recover an RBA deficit debt as a single debt, without proving each underlying component, if the evidentiary provisions are satisfied (at [64] to [66]). No evidence displaced the RBA statement and certificate (at [68]). GIC accrues automatically on an RBA balance (at [67]). The judgment included it up to 6 May 2026, plus interest under the Civil Procedure Act 2005 (NSW), s 100, and costs (at [71] to [74]).

Why it matters

• ATO certificates need an answer in evidence. The defence did not admit several amounts, but with no evidence led the certificates were not displaced (at [20], [36], [70]).
• Late reporting can close off liquidation. Because the activity statement was lodged outside the three-month period, winding up the company could not remit the penalty (at [43]). See lockdown DPNs.
• Cash-flow trouble alone was not a defence. The "all reasonable steps" defence turns on the steps a director took to have the company pay, appoint an administrator or restructuring practitioner, or begin to be wound up, or on no reasonable steps being available (at [42]). See defences to a director penalty notice.
• Disputes about an assessment belong in an objection. In the debt claim the notices of assessment were conclusive, and recovery can continue while review rights are pursued (at [50], [59]). See tax debt lawyers.
• The RBA debt was accepted as one figure here. With no evidence against the certificate, the court gave judgment on the RBA deficit debt without the ATO proving each component (at [64] to [68]). Compare DCT v Sibai, decided three weeks later, where the Supreme Court ordered the Deputy Commissioner to give particulars of the primary tax debts behind an RBA deficit debt.

Read the decision

Deputy Commissioner of Taxation v Kafer [2026] NSWDC 370

Next step

If you've received a director penalty notice or a statement of claim from the ATO, send us every page and the date it was posted or served. In a first call we'll tell you which defences are open, what evidence they need and how long you have.