Issues for Company Directors

|by Michael Courtin|Business Advisory

Directors may be personally liable for certain actions by the company including situations of insolvent trading and failure to meet employee (PAYG and superannuation guarantee), or GST obligations.

Directors have been provided with COVID-19 temporary relief and are not personally liable for debts incurred while a company is trading insolvent between 25 March 2020 and 24 September 2020. A company is trading insolvent if it cannot pay its debts when they fall due and, as a director you may be personally liable if the COVID-19 temporary relief or safe harbour exceptions do not apply.

What are the indicators of insolvent trading?

  • History of trading losses, cash flow problems, difficulties in selling stock or collecting outstanding debts.
  • Not complying with creditor payment terms.
  • Not paying taxes and superannuation obligations when due.
  • Inability to produce accurate financial information on a timely basis.
  • Concerns about the company’s ability to meet its financial obligations.
  • Not having sufficient liquid assets.
  • Unable to obtain appropriate further finance.

What is a Director penalty notices (DPN) and what actions can be taken?

A DPN is generally issued by the Australian Taxation Office (ATO) prior to recovering debts from the director personally.

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If the reporting deadlines are missed, the only way to remit the DPN is by making full payment or entering into payment arrangements. If this is not done, the director would become personally liable for the unpaid amounts, where the ATO could start recovery action, including issuing garnishee notices. It is essential that directors continue to meet reporting obligations with the ATO and organising payment arrangements if necessary.

If you have questions on any of the above, or other matters relating to your tax or financial affairs, please do not hesitate to contact our office on (07) 5504 5700 to speak to one of our trusted advisors.

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