On 1 March 2019 the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 received Royal Assent. The effect of this, amongst other changes, resulted in the removal of the three-month grace period relating to Superannuation Guarantee Charge (SGC) debts.
As a result, from 1 April 2019 SGC liabilities become personal liabilities of the director by operation of law if they remain unreported and unpaid on the due date for an SGC Statement. For most companies Superannuation (SG) contributions are payable on the 28th day of the month after the end of the quarter. An SGC Statement is due on the 28th day of the following month.
|Quarter Ended||Superannuation (SG) Contributions Due||SGC Statement Due|
|31 March||28 April||28 May|
|30 June||28 July||28 August|
|30 September||28 October||28 November|
|31 December||28 January||28 February|
Accordingly, a company is required to report and pay its Superannuation contributions to a complying superannuation fund for the quarter ended 31 March 2019 on or before 28 April 2019. If the company fails to report and pay its SG Contributions to a complying superannuation fund by this date, then the company is required to lodge an SGC Statement with the Australian Taxation Office (ATO) on or before 28 May 2019. If the company fails to lodge an SGC statement with the ATO by this date, the SGC liability becomes a personal liability by operation of law and a lock down director penalty notice (DPN) can be issued. Payments made in respect of SG are deductible expenses, SGC payments are not deductible to the company.
If the SGC liability is reported before the due date, a non-lock down notice may still be issued.
Notably this new amendment applies to amounts arising on or after 1 July 2018.
Notwithstanding that there is no deduction to the company for SGC amounts paid to the ATO when the company failed to pay its SG contributions on time, these new laws coupled with single touch payroll reporting means that directors must remain vigilant and ensure they are compliant with their taxation reporting obligations.
Watch this space for the proposed amendments to the director penalty regime contained in the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 which seeks to further extend this power to include GST, WET and LCT.
To understand more about the use of Director Penalty Notices see our previous blog – https://dyeco.com.au/director-penalty-notice-dpn/
In brief, however, a DPN is just one of the tools the ATO has in its armory for recovering taxation liabilities. Non-compliance with a DPN results in a director being personally liable for a company’s Superannuation and/or PAYG debts.
As detailed in our previous blog there are two types of DPN’s. A lock down notice and a non-lock down notice. A non-lock down notice is issued when directors have lodged their SGC, IAS and BAS’s within three months of their due dates and the debt remains unpaid. In these circumstances, directors have the option of paying the debt or appointing external administrators to avoid personal liability.
A lock down notice is issued to directors that have not lodged their SGC, IAS or BAS’s within the three-month period and the debt remains unpaid resulting in personal liability by operation of law and the only remedy is payment. Again note, the 3-month rule no longer applies to SGC. The impact of non-compliance can be devastating to directors, including non-executive directors who are now burdened with company debt due to their non-compliance.