We have blogged this before – you may recall the liability that a director or directors can face for not lodging and paying BAS’s on time and also for not paying employee compulsory (9%) superannuation on time.
The latest sting in the tail for company directors is that the ATO no longer has to issue a Directors Penalty Notice. You will recall that this gave the company 21 days to pay outstanding employee superannuation and tax withheld (PAYG Withholding) from employee’s wages.
With the recent changes, if a company were to miss a BAS lodgement date by three months or fail to pay its PAYG Withholding tax within three months of the due date, then the directors become immediately liable for the debt and there is no requirement for the Tax Office to issue a Directors penalty Notice.
Similarly – if employee compulsory superannuation (the 9%) is not paid within three months of its due date, then once again the directors become personally liable for the debt.
What’s the difference now?
- The ATO does not have to issue a Directors Penalty Notice.
- If a company is wound up after the three months, the Directors are still personally liable for the unpaid PAYG Withholding and the unpaid compulsory superannuation.
- Directors become personally liable after three months whereas in the past personal liability only arose if the company/directors failed to comply with the Directors Penalty notice.
- The ATO can choose when it wants to pursue the directors for payment – this could be months or even years later.
Suffice to say that this is a significant “sleeping” power that has been granted to ATO – Directors have to know of and ensure that you fulfil your obligations otherwise you may well end up selling personal assets such as your home, to pay the debt and associated penalties. Worse case scenario, you could end up being bankrupted.