It has been a big week in parliament. This update is important for any directors as their personal liability for company activities has increased.
From 1 April 2020, company directors will be personally liable for any unpaid GST, luxury car tax (LCT) and wine equalisation tax (WET), in addition to the pay as you go withholding (PAYGW) and superannuation guarantee contributions (SGC) debts already captured under the current Director Penalty Notice (DPN) regime.
Another twist to this is that the legislation will now cover new directors, as well as old directors.
New directors can be held personally liable 30 days after their appointment where historical liabilities remain unpaid after the due date.
If a director resigns after the quarter end, but prior to the date the debt is due, they remain liable for the penalty.
What does this mean for you?
- If you are considering an appointment to an existing company, you should undertake due diligence to confirm all returns have been lodged on time and there are no outstanding tax liabilities.
- If you are already a director of existing companies, you should check that there are no outstanding debts and ensure there are robust compliance systems in place – particularly for material / abnormal transactions.
- For material transactions where no GST is payable (e.g. the sale of a business or property as a GST-free going concern), it would be prudent to ensure that a professional opinion is on file to act as a defence. In some cases, obtaining a GST private ruling from the ATO confirming that the transaction is GST-free, will provide the certainty required about the status of the transaction.
- If you are concerned about this or other director risks, you should ensure you have D&O insurance in place which can cover tax related liabilities.
If you have any questions, please contact your accountant or email us at [email protected]