Changes to Director Penalty Notice regime
CHANGES TO THE DIRECTOR PENALTY REGIME – COMPANY INCOME TAX
As of 29 June 2012 the tax laws have strengthened Directors obligations to cause their company to comply with its existing Pay as You Go (PAYG) withholding and superannuation guarantee requirements by:
- extending the Director Penalty Regime to make Directors personally liable for their company’s unpaid superannuation guarantee amounts;
- ensuring that Directors cannot discharge their Director penalties by placing their company into Administration or Liquidation when PAYG withholding or superannuation guarantee remains unpaid and unreported three months after the due date; and
- in some instances, making Directors and their associates liable to PAYG withholding non-compliance tax where the company has failed to pay amounts withheld.
The key changes to note are that:
- Directors are personally liable for their company’s unpaid superannuation guarantee charge under the Director Penalty Regime;
- in addition to estimated unpaid PAYG withholding liabilities, the Commissioner can estimate the unpaid superannuation guarantee charge;
- the previous law in respect of Director Penalty Notice continues, however, where three months has lapsed after the due date for the company liability and all liability remains unpaid and unreported the Director Penalty is not remitted as a result of placing the company into Administration or beginning to wind it up;
- company Directors and their associates who are entitled to a credit attributable to a payment made by a company that has failed to pay amounts withheld under PAYG withholding to the Commissioner can be liable to pay PAYG withholding non-compliance tax.
The new Director Penalty Regime will have the following implications:
- From 29 June 2012 Directors will be personally liable for their company’s unpaid superannuation guarantee charge including for superannuation relating to the quarter ended 30 June 2012 which has a Superannuation Guarantee Statement lodgement date of 28 August 2012.
- PAYG withholding liabilities outstanding as at 29 June 2012 which were not reported within three months of the due date will result in a Director Penalty that cannot be remitted by placing the company into Administration or beginning to wind it up. The only way these penalties can be discharged is by causing the company to pay the amounts withheld or the Directors personally paying the amounts.
- All PAYG withholding liabilities due after 29 June 2012 will be subject to the New Regime
To avoid a Director Penalty that is unable to be remitted by appointing a Voluntary Administrator or causing the company to be wound up, it is important to ensure that all returns – Activity Statements and, where applicable, Superannuation Guarantee Statements are lodged by the due date.