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Company Directors Personal Liability for GST

Company directors can now be personally liable for unpaid GST.

The new laws takes effect from 1 April 2020. It does not apply to GST liabilities that have accrued prior to that date. The new laws follow the current Director Penalty Notice Regime that apply to PAYG and Unpaid Superannuation.

The law can be summarised as follows:

  • If a company fails to lodge their ATO obligations (i.e. BAS or IAS) within three months of the due date, the directors are automatically personally liable for the outstanding obligation (PAYG & GST).
  • In relation to unpaid superannuation, if a company fails to lodge an SGC Statement within one month of the due date to the ATO, the directors are automatically personally liable.
  • If the obligations are lodged within the applicable time frame, but not paid, the ATO can still issue a Director Penalty Notice to the directors (at their address as detailed on the ASIC Register) requiring either payment within 21 days or the placing of the company into liquidation or administration to avoid personal liability.
  • The ATO now also has the ability to estimate the amount of unpaid GST and pursue this debt pursuant to the Director Penalty Regime. This also applies to any amount due in respect of Wine Equalisation Tax and Luxury Car Tax.
  • Resigning as a director does not avoid liability to any debt incurred whilst a director.
  • New directors have 30 days to review company records to determine the company’s financial position. After this time frame, if they remain as a director, they will be subject to the Director Penalty Notice Regime in respect of liabilities that accrued prior to their appointment.
  • The ATO also has the ability to retain refunds due to the company in circumstances where not all lodgments are up to date.

These laws were introduced as part of the Anti-Phoenix Legislation.

Other amendments relate to:

  • The preventing of backdating directors’ resignations or ceasing to be a director where it would leave the company with no director and,
  • The introduction of the concept of creditor defeating dispositions which relate to the transfer of assets from an insolvent company for less than market value.
  • Penalties can be either criminal or civil and can apply to advisors that facilitate the transaction.

Our next blog will address these other changes in more detail.

Should you require any further information in relation to the contents of this blog or any other insolvency related matter, do not hesitate to contact any of the five registered liquidators at Dye & Co.

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