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Director penalty notice changes enacted

23 July 2012

It seems that every week there is news of another company in financial trouble, the latest being the iconic Australian confectionary manufacturer and retailer Darrell Lea. In such challenging economic times it is imperative to be aware of your obligations as a company director. 

The Tax Laws Amendment (2012 Measures No. 2) Bill containing significant changes to Director Penalty Notice (DPN) arrangements passed through Parliament and received Royal Assent in late June 2012, bringing these new laws into operation. 

The changes are aimed at reducing the occurrence of fraudulent Phoenix Activity and the ability of company directors to avoid their obligation to collect and remit PAYG Withholding (“PAYG”) and Superannuation Guarantee Charge (“SGC”) liabilities on behalf of their employees. 

KEY POINTS 

Under the new legislation, a director will no longer be able to avoid personal liability if their company has a PAYG debt when the following applies:

  • The debt is older than three (3) months; and
  • The debt was not reported to the ATO within three (3) months of the lodgement date. 

In addition, the DPN legislative changes also: 

  • Impose penalties on directors for a company’s unpaid superannuation liability; and 
  • Cause directors and associates of directors (the definition of which is very broad) to be liable for a new personal income tax liability for a company’s unpaid PAYG withholding liability subject to certain limits. 

The new rules significantly increase director obligations and liability and bring with them serious consequences for company directors who are negligent, or simply unaware of these changes. 

All company directors, including directors of not-for-profit organisations that operate through companies, must make sure they are aware of their own personal liability risks, and take appropriate steps to ensure that company tax liabilities are properly managed. 

If you would like further information please contact your Boyce Director. 

Source: Gadens Lawyers ; The Quinn Group 

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