From 1 April 2020 the commissioner of taxation will be able to hold directors personally liable for their company’s GST liabilities, Luxury car tax and wine equalisation tax.
The Director Penalty Notice (DPN) for a company’s unpaid Pay as You Go withholding (PAYG) and superannuation guarantee liabilities are already law.
It is important for all directors, especially passive directors who are not actively involved in the business, to be aware of their accounting systems and the GST. Cashflow in small business is often lumpy and meeting their GST liabilities is often a struggle.
Right now, we would be recommending all directors review the accounting systems their businesses are using to identify any systemic or processing errors which may lead to GST liabilities. Directors can’t escape a liability be resigning, as the ATO takes the position that if you resign as a director before the due date, you will still be liable. 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.
Worrells Solvency and Forensic Accountants partner Stephen Hundy previously said that ‘this new law could potentially see the end of the corporate veil”.
The majority of tax debt owed to the ATO comprises PAYG withholding tax and GST. If you are having difficulties in paying any of your tax liabilities, or you would like a better understanding of these issues with regard to your business please contact us. If you are a passive director then visit the ASIC website for directors duties and responsibilities or for more information visit the ATO Website.