ATO Reminder Regarding Director Penalty Notices

|by Steve Payne|Taxation and Compliance

The ATO has recently issued a reminder to current and former directors of companies, that if the company does not meet its Pay As You Go (PAYG) withholding, Goods & Services Tax (GST) or Super Guarantee (SG) obligations, the ATO may recover these amounts from the director personally.

We have previously covered this topic in more detail last year, when it became a focus point, however it is timely to ensure that Directors continue to be fully aware of their obligations.

This is also relevant for people who are about to become a director of a company and looking to take on that responsibility.

Before you become a Director, you need to check for and ensure that you are comfortable with any unpaid or unreported liabilities, because if you become a director and the company has such outstanding liabilities, you will become personally liable for a penalty equal to these amounts – even if incurred before your time.

As a new Director, you may not be liable for director penalties for amounts due before your appointment, if within 30 days of your appointment the company:-

  • pays any outstanding PAYG, GST or SG in full
  • appoints an administrator
  • appoints a small business restructuring practitioner
  • begins wind up procedures

If you are no longer a Director, then you remain liable for director penalties equal to the unpaid amounts incurred by the company which:-

  • were due before the date of your resignation
  • fell due after the resignation date, but the withholding event occurred, or the super became payable before your resignation

The ATO seeks to recover any outstanding amounts from directors using a parallel liability mechanism, whereby all of the directors are each liable until the debts are extinguished, with any reductions being paid by one director, reducing the accounts of the other directors for the same reporting period.

As such, we recommend that directorships are not entered into lightly, or without a full understanding of the company operations and your role in those day to day activities.

As always, if you require further information or advice on your obligations as a Director, or if you are looking to become a Director, please do not hesitate to contact our team members who can provide some guidance for you.

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