GST component now included in Director’s Penalty Notice regime, from 1 April 2020.
For several years now, outstanding amounts of PAYG and Superannuation Guarantee Charge can be declared by the ATO to be a personal liability of the directors of a company. Legislation that received Royal Assent on 17 February 2020 now includes GST debts in the so called, Director’s Penalty Notice regime.
This change will be in effect from 1 April 2020.
As part of the government’s ongoing focus on illegal business practices, the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019, includes significant related measures with these additional GST collection measures being just one taxation facet of the law.
The rules require the ATO to issue a Director’s Penalty Notice (DPN) and for 21 days to elapse. However they also allow the ATO to make an estimate of GST owing in cases where the company is behind in its Business Activity Statement lodgments.
This is a significant expansion to the DPN regime as there are many more companies with outstanding net GST components to their tax debts. Additionally, any delay in lodgment will now no longer prevent the liabilities from arising due to the power to estimate.
The effect is to greatly enhance the ATO’s collection options as it can short circuit the usual delays in a court driven insolvency process, a process that will often end in there being no assets available at the conclusion. Bringing personal assets of directors into play gives the ATO much greater leverage and a higher percentage of recoveries no doubt.
Importantly, new directors appointed after the due date become subject to the rules after 30 days and directors who resign after the DPN is issued remain liable. Another reason to consider any acceptance of an appointment as a Company Director very carefully and to be certain of the state of its financial affairs prior to accepting the position.
Also note that debts that are part of an approved payment arrangement are not caught by the DPN rules, so long as they are adhered to.
The above is a very brief and general summary so if you would like more detailed and tailored advice please contact your Ulton advisor. If you need advice on your duties and responsibilities as a company director please contact your legal advisor.