You may have seen the article in the Australian Financial Review today (24 April 2013) warning directors that the Tax Office is now pursuing an aggressive policy of sending penalty notices to directors making them personally liable for their company’s unpaid PAYG and superannuation. The article alerts readers to the fact that since 30 June 2012 the ATO has much expanded powers in relation to director penalty notices and that the means to escape liability have been tightened.
We wrote an article in July 2012 alerting clients to these changes in the law.
There are some circumstances in which a director served with such a notice will have no option other than to pay the liability or face bankruptcy, in particular, where the PAYG or super reporting obligations are more than 3 months overdue.
In many other circumstances, however, there are steps that a director can take to avoid personal liability. Those steps may include coming to a payment arrangement with the ATO, or putting the company into administration or liquidation.
There are also some defences available for directors, including where the director could not take part in the management of the company because of illness or where a director took all reasonable steps to ensure that the company met its obligations. It should be noted however that these defences are quite limited as they are notoriously difficult to establish.
The most important thing you can do for your clients is to act immediately. Failure to do so can have dire consequences.
Craig Healy (Senior Associate) is available to assist directors who have been served with a penalty notice by the Tax Office or who are simply concerned about their exposure for unpaid company PAYG or super.