Further extensions to director penalty notice regime

On 5 July 2019, the Government introduced Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill 2019.

Contained within the Bill are new provisions which will extend the Director Penalty Notice (DPN) regime to unpaid GST liabilities. These provisions will further pierce the corporate veil by enabling the ATO to seek recovery of the unpaid GST of a company from its directors. The inclusion of unpaid GST into the DPN regime will significantly extend the scope of the DPN provisions by allowing the ATO to now seek recovery of unpaid PAYG withholding, unpaid superannuation guarantee and unpaid GST from directors of the company.

The proposed extension of DPNs to unpaid GST of a company follows recent legislative changes to the DPN regime which have already passed and which extend the amount of DPNs that the ATO is able to issue that are classified as “lockdown” DPNs (i.e. DPNs that a director cannot avoid by placing the company into liquidation within 21 days of receiving the DPN).

The above changes are a very important reminder that directors need to constantly monitor the tax liabilities of the company to identify the ability of the company to pay its tax debts as and when they fall due or otherwise to enter into payment arrangements with the ATO.

When a company fails to pay its tax debts and fails to enter an agreed payment arrangement with the ATO, the ATO have various measures at their disposal to seek recovery of that tax debt including the issue of a DPN to the directors of the company which make the directors personally liable for the unpaid superannuation, PAYG withholding and GST of the company.

If you have any further questions relating to the above, please do not hesitate to contact Tim Olynyk on (03) 9810 0700 or t.olynyk@banksgroup.com.au.

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