Increased liability and responsibility for Directors in new legislative regime

By Ben Ryan, Lawyer at Hillhouse Legal Partners
| 3 min. read

Key takeaways

  • Directors may face significant penalties if they fail to heed the new legislative regime in relation to GST Liabilities, PAYG, Superannuation, Wine Equalisation Taxes (WET) and Luxury Car Taxes (LCT)
  • There will be a six month amnesty for directors to remedy any superannuation guarantee shortfalls before increased penalties will apply
  • The Government has recommended all directors review their historical obligations and contributions to ensure compliance

The Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 and Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 will introduce tougher penalties and reporting obligations commencing 1 April 2020 that will effect company directors.

From 1 April 2020, the Commissioner of Taxation will have new powers allowing them to declare GST liability estimates with directors only afforded 21 days to ensure an outstanding debt is paid. Should the directors fail to remedy these debts within the allotted time, they may face a personal liability for the outstanding GST. These new powers also apply to LCT and WET taxes (noting that they already apply to PAYG and Superannuation Guarantee charges). The extension introduced by these new laws will mean that a director can be issued with a DPN to cover a company’s liabilities in certain circumstances. Should a director fail to comply with the DPN the ATO may use debt recovery procedures against directors and issue garnishee orders or commence proceedings.

In addition to the ATO’s increased powers to recover through the DPN regime, directors are being afforded an extension to the amnesty period to remedy any shortfalls in relation to employee superannuation guarantees. The amnesty period for the purposes of this new regime is the period that started on 24 May 2018 and ends six months after the Treasury Laws Amendment (Recovering Unpaid Superannuation) Act 2020 receives the Royal Assent (an amnesty has been in place since 1 July 1992). The new laws are highly complex and if you are unsure of your liability we recommend speaking with us or your accountant to ensure all liabilities are paid.

To incentivise these remedies, the ATO is providing a potential tax deduction for those payments/contributions made during the amnesty period (as well as removing the administrative fees and penalties that may otherwise apply for non-compliance) it is advisable for all directors/employers to take advantage of this six month amnesty and clean the slate.

To use the amnesty, directors must pay all that is owing to their employees, including the higher rate of interest.

If directors do not take advantage of this amnesty and are caught, they may face a minimum 100% penalty in addition to the superannuation guarantee shortfall they owed, interest, an administration fee and a penalty of up to 200% in the most serious cases.

The Government has recommended that all directors review their historical obligations to ensure that they take advantage of this amnesty period before the harsher penalties apply.

If you want to find out more about these new laws, what they mean for you and how to proactively clean slate, please contact us.

The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.