What is it?
It is a new objective from the ATO which puts the onus on company directors to ensure the compliance with certain taxation and superannuation obligations. If you are a company director and there are outstanding PAYG Withholding and SGC amounts, you will become personally liable for a penalty equal to these amounts.
How are the penalties issued?
The penalties are issued directly to the company directors by way of a Director Penalty Notice (DPN) from the ATO. A DPN will be sent to the address listed with the Australian Securities and Investment Commission (ASIC) and will advise the director of their available options to have the penalties remitted.
Yes, more than likely we as the tax agents will have been made aware of the penalties being issued.
Please also be aware the ATO have noted that where a company has entered and maintained a payment arrangement for the entire company debt, they will not proceed with the recovery for related director penalties. However, they may choose to recommence such actions if circumstances change.
Can the penalties be remitted?
Yes, there are certain actions which can be taken by the company or its directors to allow the penalty to be remitted.
Example – 1234 Company
Jane and Fred are directors of 1234 Company, which is required to pay amounts withheld under the PAYG Withholding provisions to the ATO on a quarterly basis. For the January to March quarter in the 2013-2014 income year, 1234 Company withholds $4,000 from payments made to its employees and directors.
1234 Company fails to pay or report any of the withheld amounts to the ATO by the due date (21 April 2014). From that day, Jane and Fred are both personally liable for a director penalty amount of $4,000 (the company’s unpaid PAYG withholding liabilities).
As at 22 July 2014, 1234 Company has still not reported nor paid the amounts withheld. As the amount has not been reported within three months of the due date, the only way Jane and Fred’s director penalties can now be remitted is by causing the company to pay the amounts withheld or to personally pay those amounts.
How does this apply to new and former company directors?
Yes, even as a new director you can become liable under this regime for unpaid liabilities of the company, which were due prior to being appointed to your position. It is up to you as the newly appointed director, to enquire as to whether or not there are any unreported or unpaid PAYG Withholding or SGC amounts.
Similarly, directors remain liable for penalties equal to the unpaid liabilities of the company which were due up to the date of resignation. This is also relevant to those liabilities which fell due after the resignation, but where the first withholding event in the reporting period which occurred prior to the director’s resignation.
Can you dispute a Director Penalty Notice?
Yes there are certain circumstances in which you can be found not liable for a directory penalty notice
Where to from here?
As a firm we pride ourselves on ensuring that clients are meeting their ATO obligations as best we can. As a company director, where you have staff who attends to the payment of your obligations as an employer, we strongly suggest you take the time to ensure that the payments are being made and the relevant obligations being reported.
Should you wish to gain further detail in respect of the Director Penalty Regime, please contact our office.