Last month a bill was introduced that could see the commissioner be allowed to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities.
This follows on from the current director penalty regime which makes directors personally liable for PAYG withholding amounts and SGC obligations.
A large portioned of debt to the ATO is comprised of PAYG withholding tax and GST. At present, a Director's penalty notice (DPN) cannot be issued in respect of unpaid GST; however, if the director penalty regime is extended as proposed to include GST, this will increase the extent to which directors’ assets may be at risk in the event of an insolvency.
Directors need to be are aware of what they are guaranteeing when obtaining credit from financiers and suppliers. What commonly happens is directors are not aware of what they have personally guaranteed and that they are personally liable for PAYG Withholding tax and SGC.
New company directors should always conduct some due diligence in respect of a company’s unpaid statutory obligations before consenting to be appointed; otherwise, they may find themselves personally liable for past company debts. Conversely, exiting directors should ensure that they are released from any personal guarantees which they may have provided for a company’s obligations.
We recommend that all taxation lodgements are lodged with the ATO even if the associated debt cannot be paid, as this may offer some protection in the future if things go awry.
Contact us for more information.
Melbourne Tax Advisory
1300 942 230
48 Bertie Street, Port Melbourne
42 Villiers Street, North Melbourne