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GST Director Penalty Notices

This article has been updated to reflect recent developments.

In July 2019, the Federal Government introduced the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 to seek to introduce GST Director Penalty Notices.  The legislation has now been passed by both houses of Parliament and will likely commence operation from 1 April 2020.

The legislation amends director penalty provisions so that Director Penalty Notices can be issued for GST, as well as Luxury Car Tax and Wine Equalisation Tax. As most businesses are liable for GST, this article focuses on the amendments as they relate to GST. 

Former Provisions Relating to Director Penalty Notices

The  provisions relating to Director Penalty Notices are explained here. But in summary Director Penalty Notices could previously be issued for unpaid PAYG Tax and superannuation and they couldn’t be issued for other types of taxes.

Amendments to Director Penalty Notice Provisions

A company must lodge Activity Statements and pay GST by required due dates. Previously the only recourse which the ATO had if a company failed to pay GST was to take action against the company itself. This included issuing a Garnishee Notice (commonly to a company’s bank) or commencing action to liquidate the company.

However, when, the ATO will now be able to issue Director Penalty Notices for unpaid GST from 1 April 2020. The notices will apply in a similar manner in which they apply to PAYG Tax. The effects of this will be that:

  • If a company fails to pay GST but it lodges its BAS within three months of being due, the ATO will be able to issue Director Penalty Notices to the company’s directors. The directors can avoid liability if the GST is paid or if the company is placed in liquidation  or voluntary administration within twenty-one days of the date of the Director Penalty Notice.
  • If a company fails to pay GST and it also fails to lodge its BAS within three months of being due, the directors will be automatically personally liable for unpaid GST. The only way the directors can avoid personal liability is if the company ultimately pays the outstanding GST.

Estimates of GST Liabilities

The legislation also allow the ATO to estimate GST liabilities and issue Director Penalty Notices based on estimates. These types of Director Penalty Notices will most likely be Lockdown Director Penalty Notices, as the GST will not have been reported to the ATO within three months.

Advice and Assistance

If your company has a tax debt, you should urgently seek advice about your and your company’s circumstances. So please contact the Pearce and Heers’ Brisbane or Gold Coast office for an initial, obligation free consultation.

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