In our last newsletter we covered the changes to the Director Penalty Notice regime that were introduced on the 29th June 2012. These changes affect all directors of companies and associates (including spouses) of directors. Due to the seriousness of the changes and the widespread use by the ATO we have summarised the changes.
THE MAIN CHANGES
1. Directors can be made personally liable for not only unpaid PAYG withholding tax (ie tax withheld on employee wages) but now also unpaid employees’ superannuation;
2. Directors can no longer remove their personal liability by placing the company into administration where the PAYG or superannuation guarantee remains unpaid and unreported for three (3) months after the due date;
3. In some cases a director and associate (including a spouse) will not be able to claim PAYG credits listed on their PAYG summaries in their personal tax return where the company has failed to remit those amounts withheld;
4. Associates (including spouses) can now be held personally liable for a company’s unpaid PAYG and super where the ATO is satisfied that, due to the relationship with the director, the associate knew or could reasonably be expected to have known, that the company failed to pay the amounts to the ATO and also, then having that knowledge, the associate (spouse) did not take reasonable steps to influence the director to cause the company to act or, alternatively actually report the director themselves to a relevant authority (ie ATO, ASIC or the police!).
WHAT TO DO?
1. All outstanding BAS and superannuation guarantee returns MUST be lodged and brought up to date regardless of whether they can be paid or not.
2. It is CRITICAL to ensure that ALL future returns are lodged within three months of the due dates.
3. If the returns are prepared and lodged but not paid then at least the ATO will know of the debt for the company and therefore the ATO must issue a formal Director Penalty Notice BEFORE any personal liability can apply. Therefore, if a company is placed into administration before the Director Penalty Notice expires, personal liability will be avoided.
If you have any concerns about the above or require any further information, please contact our office.