New Tax Laws – Changes To Director Penalty Regime
The recent passing of the Tax Laws Amendment (2012 Measures No.2) Act has seen significant increases in director liabilities and obligations. Because of this it is essential that all Directors be aware of these changes in order to avoid personal liability for various company tax payments, most specifically any PAYG instalments are usually lodged with the ATO through the company BAS statement.
(i) Directors can no longer be discharged from personal liability for unpaid company tax debts by appointing a voluntary administrator or liquidator where three (3) months has lapsed after the due date of the company debt;
(ii) The period before a new Director can become liable for unpaid company tax debts has been extended from 14 days to 30 days;
(iii) The Director penalty regime has been extended for any unpaid superannuation guarantee debts owing by the company.
What this means for you as a Director:
As a director, you will no longer be able to avoid personal liability for a PAYG tax debt if the following applies:
- The company tax debt is older than 3 months; and
- The debt was not reported to the ATO within three (3) months of the lodgement date.
This means that Directors should ensure that there are adequate controls in place to ensure timely lodgement of Monthly or Quarterly BAS Statements. Provided that the relevant return is lodged by the due date, or failing this that the debt is reported to the ATO within 3 months of that date, Directors will still be able to discharge their obligations by either appointing either a voluntary administrator or voluntary liquidation within the time specified in the Director’s Penalty Notice.
An example using a timeline is as follows:
We recommend that Directors ensure that all company BAS statements are up to date in terms of lodgement, in particular the March 30 2012 quarter as the 3 month deadline in which to report this debt to the ATO will be at the end of July. Should any BAS statements be outstanding then we suggest the directors take immediate steps to ensure that all outstanding liabilities are reported to the ATO as soon as possible in order to avoid any personal liability.
Going forward Directors should ensure that adequate controls are in place to comply with the timely lodgement of Monthly or Quarterly BAS statements. If Directors do not have confidence in the reporting controls of their company then a review of the BAS statement should be undertaken either personally by the directors, or included in board meeting agendas where possible. Alternatively directors may consider having access to the ATO portal so they can ensure that lodgements have been made. Directors should also be aware that they can no longer claim PayG withholding credits in their personal tax returns where these amounts have not been remitted to the ATO.
The recent changes further add to the positive obligations on directors to ensure that company tax liabilities are properly managed. The removal of the Voluntary administration as a means of avoiding personal liability in certain circumstances provides the ATO with an even bigger stick to wield its powers over directors. If you have any concerns about your companies compliance with taxation obligations you should act quickly to gain comfort over these liabilities as you can no longer rely on receiving a warning in advance.
If you would like further information in relation to Director Liabilities or have a specific query about this topic, our consultants can provide professional advice in relation to your circumstances.
"For more information and advice about this topic, please call our office to speak with one of our experts in this area".
By Shanan John Ramsden Lawyer and Managing Partner of Ramsden Lawyers.
25 Jul 2012