The Government has recently introduced legislation into Parliament that proposes to make directors personally liable for unpaid super for their employees, and to bring forward liability for unpaid tax.
Currently directors are provided 21 days’ notice before they become personally liable for various unpaid taxes (known as a “director penalty notice”). However the new legislation is intended to remove this notice period, so that directors will become personally liable for superannuation guarantee liability and PAYG withholdings that are unpaid and unreported 3 months after the due date.
The move is part of the focus on ‘phoenix activity’, which has been under the radar of the ATO in recent years. ‘Phoenix activity’ is the name used to describe the situation in which companies build up large debts, are wound up before paying taxes or super to their staff, and then resurface in a new entity, with the same name and with essentially the same owners, but free of the debts of the old entity. Like a phoenix rising from the ashes.
However some of the proposed changes could have an impact on directors more broadly than just the “phoenix activities’ that they are designed to tackle.
Some of the danger areas for all directors to be wary of include liability for superannuation deficits due to innocent errors in accounting for over time, or failing to include contractors who may be deemed to be employees for the purposes of superannuation.
We will keep you advised on the legislation as it passes through Parliament and will be publishing a series of items reminding directors about their duties, and what you should be doing to keep risk at a minimum. But for now, this is just a reminder to keep in mind the importance of getting into good habits in relation to the reporting and payment of your tax and super obligations.
If you have any questions at all in relation to your duties as a director, drop us a line. [email protected] or 02 8006 0830.