With the Jobkeeper subsidy having now ended, it is a timely reminder for directors to understand the personal liability they 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 ATO can also impose a 200% penalty on employers who do not lodge their Superannuation Guarantee Charge (“SGC”) statement on time. Given the draconian effects that these laws can have on the company and the directors’ personal financial position we set out below a short summary of the laws which should be required reading for all directors and their advisors.

1.   Immediate Personal Liability – The Lockdown liability

1.1 PAYG and GST

If a company fails to report;

PAYG;
Net GST (inclusive of LCT and WET) (hereafter referred to collectively as “GST”),
within 3 months from the due date for lodgement, then the director(s) will be held personally liable for the outstanding PAYG and/or GST.

1.2  Superannuation

Superannuation must be reported by the due date (ie within 28 days of the end of each quarter for most companies) otherwise the director(s) will be held personally liable.

1.3  Which director(s) are liable?

Current directors will be liable.

New directors will become personally liable for any PAYG, GST and/or Superannuation incurred and unpaid prior to their appointment unless within 30 days starting on the date of their appointment, the company

Pays the debt; or
Appoints a Voluntary Administrator; or
Begins to be wound up (within the meaning of the Corporations Act 2001).
Retiring directors will remain personally liable for any PAYG, GST and/or Superannuation incurred and unpaid before their retirement, even if not due as at the date of their retirement.

1.4  Avoiding Personal Liability

Once the deadlines in points 1.1 and 1.2 above 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 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 PAYG, GST and/or Superannuation unless within 21 days from the date on which the ATO posts the DPN to the director(s), the company:

Pays the debt;
Appoints a Voluntary Administrator; or
Begins to be wound up (within the meaning of the Corporations Act 2001).

3.   200% Penalty on Employers for late lodgement of Superannuation

Separately to a directors’ personal liability, following the end of the SGC Amnesty in September 2020, if an Employer lodges its Superannuation Guarantee Charge (“SGC”) statement late, the Employer will be liable for a penalty of up to 200% of the SGC.  Remember also that SGC liabilities are not tax deductible.

4.   Seek professional Advice Early

Jobkeeper has ended – act early.  A DPN will have extremely serious ramifications for the recipient, their business, family home and personal relationships.  Recipients of a DPN who are unable to pay the amount due should immediately seek advice from a qualified professional advisor.  This allows the recipient to properly understand their position and make informed decisions as to the most appropriate course of action.  Rodgers Reidy has offices in all States and Territories of Australia, our Directors are readily available to discuss any DPNs received and the alternative courses of action that may be available.  There is no charge for the initial consultation.

Disclaimer: This material is intended to provide general information in summary form on legal and accounting topics, current at the time of first publication. The contents do not constitute legal or accounting advice and should not be relied upon as such. You are strongly recommended to seek specific professional advice before taking any action based on the information contained herein. No warranty expressed or implied is given in respect of the information provided and accordingly no responsibility is taken by Rodgers Reidy (International) Pty Ltd or any affiliated Rodgers Reidy firms or any member of any affiliated firm for any loss resulting from any error or omission contained within this material.