On 27 June 2012, Parliament approved legislation that makes directors liable for missed company Pay As You Go (PAYG) and superannuation guarantee (SG) payments.
The Tax Laws Amendment (2012 Measures No.2) Bill 2012, which amends the Taxation Administration Act 1953, aims to strengthen directors’ obligations to ensure their company complies with its existing PAYG withholding and SG requirements by:
· Extending the director penalty regime to make directors personally liable for their company’s unpaid SG amounts;
· Ensuring that directors cannot discharge their director penalties by placing their company into administration or liquidation when PAYG withholding and SG amounts remain unpaid and unreported 3 months after the due date; and
· In some instances, making directors and their associates liable to PAYG withholding non-compliance tax where the company has failed to pay amounts withheld to the Commissioner of Taxation.
These measures were announced in the 2011-12 Budget, based on a 2010 election commitment, and will come into effect when the Bill receives Royal Assent.
The director penalty regime provisions in the Bill have been modified from those in an earlier 2011 Bill on the recommendation of the House of Representatives Standing Committee on Economics, which was concerned to ensure adequate defences are available for innocent directors. An Exposure Draft of the legislation was released on 18 April 2012.
A director is not liable for a director penalty where they can establish that:
1. Because of illness or for some other good reason, the director was not involved in the management of the company and it was reasonable for that director not to be involved; or
2. The director took all reasonable steps to ensure the directors caused one of these three things to happen (or no such steps were available):
– The company to meet its obligation to pay
– An administrator of the company to be appointed; or
– The company to begin to be wound up.
These amendments are not expected to increase compliance costs or operating costs for companies or company directors who are already causing their company to comply with its existing tax or superannuation obligations.
The revenue impact of this measure to the 2012-13 budget is estimated at $40 million.
The Bill and Explanatory Memorandum are available HERE.© Guerdon Associates 2023 Back to all articles