Director Penalty Law Extended to GST

Company directors have been personally liable to employee PAYG withholding tax and superannuation for some time now, but there has been a recent extension to that law, and it has been a bit of a sleeper, because effective 1 April 2020, directors are also liable to GST.

Director penalty notices (DPNs) have existed for some years now to recover unpaid PAYG withholding and superannuation. This law means that if a company did not pay PAYGW and superannuation obligations on time, company directors could become personally liable for the amount owing, as well as penalties.

The new law started on 1 April 2020 and extends the penalty regime to allow recovery of unpaid GST, wine equalisation tax (WET) and luxury car tax (LCT). The new provisions significantly increase the personal risk that directors take in committing to pay ATO obligations.

The DPNs have narrow time limits in which to be addressed – directors must contact the ATO within 21 days of the issue date. While the new law is aimed at capturing illegal and fraudulent activity by directors, there may be legitimate operators with cash flow difficulties who are caught out by this law. In this case, the director is advised to contact the ATO to discuss the situation.

If you are considering taking on a new position for an existing company, check the status of financial obligations of that company before accepting the position, as new directors may become liable for existing debts.

Talk to us About Your Director Duties

Are you clear about your legal responsibilities as a company director?
Are you aware of the extent and financial implications of your personal liability?
Have you given director guarantees to any suppliers that might increase your personal liability?
Are your company’s ATO lodgements up to date? Check that forms have been submitted by the due date even if payment cannot be made. Having payment plans in place reduces the likelihood of a DPN being issued.
Are your ASIC details correct? If a notice is issued to an earlier address listed on ASIC, and the director does not act on the notice within 21 days, legal recovery will go ahead regardless.

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