The ATO has had the ability to issue Director Penalty Notices in respect of unpaid GST since 1 April 2020. The powers are not retrospective and only apply for GST incurred and unpaid after 1 April 2020.
How do GST Director Penalty Notices work?
GST Director Penalty Notices apply in the same way as Director Penalty Notices which can be issued for unpaid PAYG Tax in that they can make a director liable for a company’s unpaid GST. There are two types of GST Director Penalty Notice which apply as follows:
- 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 ATO has also been given the power 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.
When will the ATO start issuing GST Director Penalty Notices?
We understand from discussions with the ATO that as at 30 June 2021 they had not issued any GST Director Penalty Notices. It would appear this is because the ATO has taken a softer approach to recovery action since the Covid-19 pandemic. However, as total collectable tax debt has now climbed to nearly $39 billion and the ATO appears to be taking a firmer stance on debt recovery there is a risk that the ATO will start issuing GST Director Penalty Notices in the future, which can cause problems for you and your company.
What can you do if your company has a tax debt?
The best thing you can do is speak to a professional. A qualified professional will be able to review the financial affairs of your business and provide you with options to deal with your tax debt, including negotiating a payment arrangement with the ATO.
Contact us for assistance
We at Pearce & Heers have had experience negotiating with the ATO for more than 20 years. Our aim to is to assist businesses in dealing with debts before it is too late. So, if you have unmanageable debts, contact our Brisbane or Gold Coast Offices for a free no obligation discussion about your circumstances.