Australia: Company Directors may be personally liable for unpaid PAYG tax and superannuation

Stephen Adrian, Partner at Moore Stephens Melbourne, today alerted company directors that they may now be personally liable for unpaid PAYG tax and superannuation, following the introduction of the Pay as You Go Withholding Non Compliance Tax Act 2012 on 1 July.

"To avoid a personal liability," said Mr. Adrian, "directors need to make sure that all their PAYG and SGC returns are lodged within three months of the due date."

The new legislation automatically extends personal liability to company directors who fail to either report or pay PAYG tax or Superannuation Guarantee Charge (SGC) amounts within three months of their falling due. In some cases, associates of directors may also be held liable.

If the PAYG and SGC amounts have been reported, but remain unpaid after three months, the ATO must issue a Director Penalty Notice before a Director becomes personally liable—and Director Penalty Notices can be issued on an estimated basis.

Directors can avoid personal liability in that case by paying the debt or placing the company into administration.

Previously, directors were not personally liable for unpaid PAYG tax amounts until they were issued with a Director Penalty Notice. Generally, that Notice allowed directors 21 days to remedy the default, or place the company into administration, and thereby avoid personal liability.

However, said Mr. Adrian, the new Act makes personal liability automatic. "Lodging a return after that three-month period will not release the director from personal liability under the new regime," he said.

He added that the ATO is considering applying this regime to other indirect taxes.

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