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On 29 June 2012 the Tax Laws Amendment (2012 Measures No. 2) Act
2012 received royal assent. The legislation has been introduced to
expand the director penalty regime; making directors now personally
liable for their company's unpaid superannuation guarantee
amounts in addition to unpaid Pay As You Go ("PAYG")
withholding tax obligations. In addition, the legislation removes
the ability for directors to discharge their director penalties by
placing their company into administration or liquidation where
unpaid PAYG withholding or superannuation guarantee amounts remain
unpaid and unreported three months after their due date.
Under the former director penalty regime, directors were
personally liable for their company's unpaid PAYG withholding
amounts. However before commencing proceedings to recover that
liability, the Commissioner of Taxation ("the
Commissioner") was required to first issue a director penalty
notice. Only after 21 days had passed from the issuing of that
notice could the Commissioner commence proceedings against the
director for the recovery of the liability. This gave directors the
opportunity to have the liability remitted if, within 21 days of
receiving a director penalty notice (or before receiving the
notice), any of the following things happened:
The company complied with its obligation;
An administrator of the company was appointed; or
The company began to be wound up
From 29 June 2012, directors will now be personally liable for
their company's unpaid superannuation guarantee amounts in
addition to unpaid PAYG withholding tax obligations. Importantly
though, the ability of a company director to have that liability
remitted by placing the company into administration or beginning to
wind it up has been removed, where three months have lapsed after
the due day for the company liability and the liability remains
unpaid and unreported.
Whilst a director can defend a claim by the Commissioner for the
recovery of a director penalty, those defences are limited. In the
ordinary course, a director would need to demonstrate that he or
she had an illness that prevented them from participating in the
management of the business or that they had taken all reasonable
steps to ensure compliance. For newly appointed directors, they
will have three months from the date of their appointment before
the restricted remission provisions apply.
For existing directors, these amendments make it crucial for
them to ensure that their company's PAYG and superannuation
obligations are reported to the Commissioner within 3 months of the
due day. Even if the disclosed debt is not remitted by the due
date, by reporting these obligations to the Commissioner, directors
will still be able to have their liability remitted by placing
their company in administration or commencing a winding up within
21 days of receiving a director penalty notice. For new directors,
it is crucial that they satisfy themselves the company has complied
with its PAYG and superannuation guarantee reporting obligations
within 3 months of commencing their directorship.
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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