Important changes in the law governing a director's
liability for company debts have been forecast. The anticipated
changes will mean that a company director's personal liability
for company debts will be extended to include unpaid superannuation
guarantee contributions for their companies.
Directors are currently required to cause their company to pay
deduction taxes, such as PAYG. If they fail to do so and receive a
director penalty notice issued by the Australian Taxation Office,
they may become personally liable for the amount of the
indebtedness if the taxes are not paid within the time prescribed
within 21 days from when the notice was issued. The only option
available to directors in order to avoid personal liability for the
debt is to place the company into voluntary administration or
alternatively have it wound up in liquidation.
Each director of the company that is a director at the time the
tax liability is incurred may be served with a director penalty
notice and become subject to personal liability. This is the case
even if the director resigned as a director from the company prior
to the issuance of the director penalty notice.
The current law excludes a director from personal liability for
unpaid superannuation guarantee contributions. It is anticipated
however that changes will soon be made to extend the liability of
directors to include a personal liability for 9% of each
employee's total salary, interest and administration
Additionally, the proposed changes will give the Deputy
Commissioner of Taxation power to immediately commence recovery
proceedings against directors personally for outstanding PAYG and
superannuation guarantee contributions of the company that have
been outstanding and unreported for a period of three months. These
proceedings can be commenced against directors without a director
penalty notice first being issued.
A director may avoid personal liability if they can establish
due to illness or other good reason the director was unable to
take part in the management of the company; or
the director took all reasonable steps to comply with their
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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