31/05/2013

The ATO now has an increased ability to make company directors more accountable for the PAYG withholding and super guarantee charge obligations of their company. These are additional disincentives for directors to allow their companies to avoid their tax and super guarantee obligations, and are also intended to deter directors from engaging in fraudulent phoenix activity.

Recent changes also mean that directors can't avoid their director penalties by placing their company into administration or liquidation when PAYG withholding or super guarantee charge amounts were not reported within three months of the due date. These are sometimes referred to as 'lockdown' director penalties.

The director penalty and estimates regimes have been extended to super guarantee. Directors of a company that doesn't comply with its super guarantee obligations can now be penalised. An estimate of unpaid super can be used as a basis for determining the super guarantee charge payable, and the estimated amount may then give rise to director penalties.  The aim is to protect employee entitlements by giving another avenue for collection of super guarantee.

It's also more difficult for directors to avoid liability for penalties by placing the company into voluntary administration or winding up, if the company hasn't been reporting its obligations to the ATO. This legislation encourages directors to promptly put the company into liquidation or voluntary administration if the company is unable to meet its tax or superannuation obligations.

Under the new rules, the ATO can estimate a company's super guarantee charge liability (in circumstances where it cannot access an employer's books and records) using information provided by various other sources including third parties. Where an estimate is issued, the director can be liable for a penalty equal to the estimate.

The ATO can then commence proceedings to recover the penalty 21 days after a notice is sent to the director. Recovery of the penalty from the director can occur in a number ways, including garnisheeing bank accounts, offsetting any refunds against the liability, or by court proceedings.

Once the outstanding super guarantee charge is paid, the personal liability for the director penalty will be remitted. So, it's important that directors take steps to pay the amount of super guarantee charge that is owed, as and when it falls due.

So if a company hasn't paid any super guarantee and hasn't reported its unpaid super guarantee to the ATO for over three months, it should take immediate steps to lodge the company's super guarantee charge statement for the quarter and pay the super guarantee charge that's due. If it can’t, or simply doesn't, do this, the company should contact the ATO as soon as possible.

If a company can't pay, it can enter into a payment arrangement with the ATO. Whilst a payment arrangement is in place, the ATO won't seek to recover the penalty from the director.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.