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With the end of Jobkeeper and a growing $53 billion debt book, the ATO has announced that from the end of March 2021 it will be focussing on recovering taxation debts, including “taking debt and lodgement compliance action”.
Now is the time for Directors and their advisors to ensure they fully understand the tax laws and resulting potential personal liability that Directors can face for Company tax debts.
In April 2020, the ATO added GST, Luxury Car Tax (“LCT”) and Wine Equalisation Tax (“WET”) to the list of taxation debts for which a Director can be held personally liable.
The Director’s personal liability for a Company’s taxation debts can arise in two (2) ways:
1. Immediate Personal Liability – The Lockdown Liability
PAYG, GST, LCT and WET
If a company fails to report PAYG, GST, LCT and WET within 3 months from the due date for lodgement, then the Director(s) will be held personally liable for the outstanding taxation debts.
Superannuation
Superannuation must be reported by the due date (i.e. within 28 days of the end of each quarter for most companies) otherwise the director(s) will be held personally liable.
Once the above reporting deadlines have expired, the ATO can serve a Director Penalty Notice (“DPN”) on the director(s). The associated personal liability under these lockdown liabilities cannot be avoided by placing the company into Administration, restructuring or Liquidation. It can only be satisfied by paying the debt.
2. Potential Personal Liability – The Non-Lockdown Liability
Where PAYG, GST, LCT, WET and/or Superannuation are reported within the timeframes set out above, but the associated debt is not paid by the due date, then the ATO can serve a DPN on the Director(s). This DPN has the effect of making the director(s) personally liable for the taxation liabilities and/or Superannuation unless within 21 days from the date on which the ATO posts the DPN to the director(s), the company:
200% Penalty on Employers for late lodgement of Superannuation
Employers also need to note that the ATO can now also impose a 200% penalty on employers who do not lodge their Superannuation Guarantee Charge (“SGC”) statement on time. And the SGC liabilities are not tax deductible!
If you would like to know more or your Company has outstanding taxation debts and lodgements, then please get on the front foot and seek advice from a qualified professional advisor. Hamilton Murphy can provide you with a no-obligation assessment of all the options available to you.
Should you have any queries regarding the above information or any related matters, please do not hesitate to contact our team via our website Hamilton Murphy or send us an email at info@hamiltonmurphy.com.au.
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