What have the ATO done now?
Prior to 29 June 2012, directors could escape personal liability for unpaid PAYG if, within 21 days from being served with a Director Penalty Notice (DPN), the director did one of the following:
- Entered into a written agreement with the ATO to pay the amount stated in the DPN;
- Caused the company to enter into administration; or
- Caused the company to be wound up.
The new legislation no longer affords the above options. Instead, directors are personally liable if:
- There is PAYG that is older than three (3) months; and
- The debt was not reported to the ATO within 3 months of the lodgement date.
The director will also be liable for the company’s unpaid superannuation debt. Placing the company into liquidation or voluntary administration will not absolve a director from personal liability.
Before they can enforce liability upon the director personally, the ATO is required to issue a DPN.
Along with addressing the DPN to the director personally, the Commissioner will now also be able to send DPN correspondence to the company’s agent, for example a Registered Tax Agent, which will act as substituted service for the purposes of the 21 day notice period.
What are the implications for you?
In addition to being held personally liable for PAYG amounts, as a director you will also be held personally liable for your company’s unpaid superannuation guarantee charges.
If you have not lodged all returns and superannuation statements within 3 months of the due date, you are personally liable. Bringing all lodgements up to date before the ATO issues a DPN will not absolve you of personal liability.
What you need to do
If you are the Director of a company you should immediately review your PAYG and superannuation lodgement histories. To avoid personal liability you must ensure that any PAYG or superannuation debt is reported to the ATO within 3 months of the lodgement date.
For more information
To ensure you don’t get caught out under this new legislation, or for any enquiries regarding insolvency or corporations law, please contact us on 07 3223 6100.