The ATO can make company directors personally liable for unpaid GST, PAYG Tax and superannuation. The ATO does this by issuing directors with Director Penalty Notices.

If the ATO issues a Director Penalty Notice, directors can avoid liability by appointing a Liquidator or other form of external administrator within 21 days of the date of the Notice by making lodgements within the periods set out below. Where lodgements are made outside these periods, directors are automatically liable for GST, PAYG Tax and superannuation and appointing a Liquidator, other form of external administrator or deregistering the company will not avoid liability.

The timeframes for lodgements to avoid automatic liability for unpaid debts are:

• Activity statements must be lodged within three months of their due date; and
• If superannuation is not paid, SGC statements must be lodged within one month of superannuation being due for payment.

What can you do to avoid Director Penalty Notices

It is therefore important to make activity statement lodgements on time and if superannuation is not paid on time, lodge SGC statements. It is also important to:

• Ensure your address as a director is up to date with ASIC, as Director Penalty Notices are sent to director’s personal addresses. If your company has a tax or superannuation debt you should also check any mail you receive from the ATO as it may be a Director Penalty Notice.
• If your company has a tax or superannuation debt, negotiate a payment arrangement with the ATO, as the ATO has a policy of not issuing Director Penalty Notices when a payment arrangement is in place and being complied with.
• Consider how your business and personal financial positions are structured as there are various financial risks involved in being a director of a company.
• Obtain professional advice early about the risks of Director Penalty Notices and other risks facing you and your business.

Complete details of Director Penalty Notice provisions

For complete details of how the ATO’s Director Penalty Notice provisions apply please refer to our detailed article here.

How we can help 

Given the serious consequences a Director Penalty Notice may have, it is important that you urgently obtain advice if your company is unable to pay PAYG Tax, GST or superannuation.

So, if you need assistance, please contact our Brisbane or Gold Coast office.