Catching the Pheonix (UPDATE)
Further to our previous post re: Director Penalty Notices to cover their company’s unpaid superannuation obligations (see below for details), on 18 June 2012, the economics committee proposed that the legislation regarding PAYG Withholding and Superannuation making Directors personally liable for unpaid or unreported amounts be passed as written. Once passed, directors with unreported or unpaid PAYG and Superannuation can be made personally liable without the issue of a Directors Penalty Notice.
On 24 May 2012 Tax Laws Amendment (2012 Measures No 2) Bill 2012 was introduced into Parliament, which includes a proposal to change personal liability of directors after issue of Director Penalty Notices s to cover their company’s unpaid superannuation obligations, as well as PAYG. The draft legislation is designed to better protect workers’ entitlements to superannuation and strengthen director obligations. It is also intended to assist in countering phoenix behaviour.
Phoenix activity is the act of “recreating a liquidated firm under a new name and the evasion of official responsibilities by the directors of a company that has had to cease doing business, by leaving liabilities in the liquidated business so that the underlying business activity can be immediately resumed under another name free of such liabilities” (QFinance).
Under the proposed new legislation:
- the director penalty regime will be extended to superannuation guarantee amounts, making directors personally liable for their company's failure to pay employee superannuation
- the ATO will be given the power to commence recovery against directors under the director penalty regime, without providing a 21 day grace period, for certain unpaid company liabilities that remain unreported after three months of becoming due
- in certain circumstances directors and associates of directors will be prevented from obtaining credits for withheld amounts in their individual tax returns where the company has failed to pay withheld amounts to the ATO.
The proposals would also see the Commissioner estimate both the amount of unpaid PAYG withholding liabilities and the unpaid superannuation guarantee charge. Service of a director penalty notice could also be made at the director’s home or at the address of their tax agent.
The effect of these changes may have serious ramifications for a number of business operators and are also likely to lead to a significant increase tax & super prosecutions by the ATO. If you are struggling with your business taxes and superannuation obligations it will become more important than ever that you seek professional help sooner rather than later. To get sound legal and business advice and access to our extensive network of accountants, financiers and solvency management professionals don’t hesitate to call us on 1300 306 335 or make an enquiry online.Back