The Federal Government have passed legislation on 29 June 2012 extending a director’s potential personal liability for unpaid PAYG and superannuation.  This legislation is retrospective in that it applies to the PAYG and superannuation returns for the quarter ending 30 June 2012.

In essence the changes are as follows:

  • Both unpaid superannuation guarantee and PAYG amounts are covered by the new legislation.

  • If the director does not cause the company to report outstanding PAYG or superannuation guarantees within 3 months after the due date, e.g. for the quarter ended 30 June 2012, the lodgement date is 28 August 2012; then the director will be automatically liable without the ATO having to issue any director penalty notice.

  • Once that occurs the director cannot discharge or extinguish their personal liability by placing the company into administration or liquidation.

  • It is possible that associates of the director such as spouses, could be held personally liable for unpaid PAYG and superannuation on their own personal tax accounts if they do not either influence the director to report and pay outstanding tax to the ATO, appoint a liquidator or administrator or inform or report the director for non-payment of tax to the ATO, ASIC, the police or the Minister.

 

What you need to do now

 

Get all outstanding returns for the company up to date and ensure that all returns are lodged within the 3 months of the date due for all future requirements.

 

If you do lodge a return on time and do not pay it then the ATO knows of the debt and is required to first issue you a director penalty notice before any personal liability can apply and you have the opportunity within 14 days to then place the company in administration or liquidation to avoid that personal liability.

 

 

The pebble effect

 

This legislation may well force a number of companies to bring forward consideration of their solvency and the possibility of more companies being placed in administration or liquidation. This will mean for any company to whom you consider extending credit, the consideration of obtaining a director’s guarantee is even more important given the effective priority the ATO now have against the directors for the PAYG debt.

 

If you have questions please do not hesitate to give me a call.

 

Brad Heydon

6685 6188