As of 29 June 2012 directors may now be personally liable for their company's unpaid pay as you go (PAYG), withholding tax and superannuation guarantee obligations
1. Changes to the Director Penalty Regime
- Directors penalties are now extendedto unpaid PAYG and superannuationguarantee amounts;
- Directors can no longer discharge adirector penalty by placing the company into administration or liquidation when PAYG or superannuation guarantee amounts are unpaid and unreported three (3)months after the due date;
- In some instances, directors and theirassociates may be liable for a PAYG withholding non-compliance tax where the company has failed to pay amounts withheld to the Commissioner.
Impact on Spouses and Relatives associated with the Company
An associate as defined under the Income Tax Assessment Act includes relatives, partners, a spouse and children of the natural person.
For an associate to be personally liable for unpaid PAYG withholding non-compliance tax, the Commissioner must be satisfied that:
- The associate has a credit that is attributable to an amount withheld from a payment made to the associate by the company;
- The associate knew, or could have reasonably be expected to have known, that the company was withholding amounts payable, in light of their relationship with the director or the company.
Obligations on Associated Person
In addition, associated persons to the directors or the company are obligated to take positive steps to report their spouse or relative to the relevant authorities such as the Minister, police, and regulatory bodies including the Australian Securities and Investment Commission (ASIC) of any amount withheld by the company that is payable to the Commissioner.
How the New Regime Works
We note that a Director Penalty Notice (DPN) will be issued before a director or associated person is found to be personally liable and if the company is placed into liquidation before the DPN expires then personal liability will be avoided. However, where three months have lapsed after the due date and there is an unpaid liability the director's penalty cannot be avoided by placing the company into administration.
What You Should Do
- Make sure you have all outstanding returns (including Superannuation Guarantee Statements) up to date; and
- Keep returns up to date – ensuring they are lodged within three (3) months of the due date.
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