When are directors liable for unpaid superannuation?

Under the ATO’s Director Penalty Notice regime, company directors can be personally liable for a company’s unpaid superannuation.  The unpaid superannuation is (after three months) payable to the ATO as superannuation guarantee charge (SGC) and the ATO can issue a Director Penalty Notice for unpaid SGC.

There are two types of Director Penalty Notice which the ATO can issue for unpaid SGC.

21-Day Director Penalty Notice

A company is required to pay superannuation contributions for its employees by due dates. If the company fails to pay superannuation contributions by due dates, it must lodge a Superannuation Guarantee Charge Statement (SGC statement) with the ATO.

If a company fails to pay superannuation, but it lodges its SGC Statements by the SGC Statement due dates, the ATO is able to issue a Director Penalty Notice to the company’s directors. The directors can become liable to the ATO for the amount of SGC claimed in the Director Penalty Notice, however, they can avoid personal liability if:

  • The SGC is paid; or
  • The company is placed in liquidation within 21 days of the date of the Director Penalty Notice; or
  • The company is placed in  voluntary administration within 21 days of the date of the Director Penalty Notice.

“Lockdown” Director Penalty Notices

If a company fails to pay superannuation and it also fails to lodge SGC statements by the SGC Statement due dates, the directors are automatically personally liable for unpaid superannuation. In these circumstances:

  • The ATO can estimate unpaid superannuation if needs be.
  • The ATO can and will issue a Director Penalty Notice to recover superannuation from the directors.
  • Placing the company in liquidation or voluntary administration will not avoid liability.
  • The ATO can and will issue Director Penalty Notices after a company is already in liquidation or voluntary administration.

What are the SGC statement due dates?

In May 2019 new legislation was passed to change the date upon which company directors become automatically liable for SGC amounts.  The new date is the date which SGC Statements are due which are:

Quarter Period Super Due for Payment SGC Statement Due Date
1 1 July – 30 September 28-Oct 28-Nov
2 1 October – 31 December 28-Feb 28-Feb
3 1 January – 31 March 28-April 28-May
4 1 April – 30 June 28-Jul 28-Aug

What should you do to avoid liability

If your company cannot pay superannuation the best thing to do to avoid liability is to lodge SGC statements within three months of them being due.  If this is done, then you will be able to avoid liability under any Director Penalty Notice issued by placing your company in liquidation, if this is the best option available.  The ATO will also not be able to issue you with a Director Penalty Notice after your company has been placed in liquidation.

Naturally, if your company is unable to pay superannuation within three months of it being due then it probably has some underlying financial problems and you should seek advice regarding the company’s circumstances, strategies which may be put in place and risks to you as a director personally.

Further information about Director Penalty Notices

We have prepared a further more detailed article on Director Penalty Notices including information on Director Penalty Notices which can apply for unpaid PAYG Tax and tips for avoiding or minimising liability.

Contact us for a confidential, no cost and no obligation discussion

If you have received a Director Penalty Notice, or if your company is facing financial difficulty why not get in touch with us. We can preliminarily discuss any issues which you have in an initial no-cost, no obligation, confidential discussion.

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