Directors Penalty Regime “Expanded”  to GST – Please read carefully

5th March, 2020

In 2012 the laws were changed allowing the ATO to hold directors of companies personally liable for unpaid PAYG withholding and superannuation.

Effective 1^st April 2020, this has now been expanded to include GST, which more often than not is the largest component of an entity’s Business Activity Statement (BAS).

Essentially it means that if the BAS is lodged 3 months after its due and remains unpaid, the directors will become personally liable as soon as the ATO issues a Directors’ Penalty Notice, known as a DPN.

In effect what this means is that:

“Where three months have lapsed after the due date for the Company’s liability and the liability remains unpaid and unreported, the director is personally liable and can no longer achieve remission of the penalty against them, even if they were to appoint a liquidator or an administrator subsequent to that date”

What you should do to minimise the risk

In order to avoid personal liability for unpaid GST, directors will need to ensure prior to 1 April 2020 they have done one of the following:

• Have the company pay the debt; or
• Have the company enter into a repayment arrangement with the ATO to repay the debt in full;
  or
• Consider the appointment of a liquidator or administrator to the company.

So if you have unpaid GST liabilities (along with PAYG and superannuation), then you are at immediate risk of personal liability.

Doing nothing will have significant consequences, as  come 1 April, for GST debts which are three months past their lodgement date, will see directors automatically liable for the amount unpaid.

Moving forward, Director’s, should attend to accurately lodging & paying Activity Statements on time. This is the only way a director can avoid personal exposure. At the very least, you should lodge the activity statements on time. That way, you can at least place the company into liquidation and avoid personal exposure.

Please note that if our office prepares and lodges the BAS on behalf of your Company, you must provide our office all the necessary documentation at least two (2) weeks prior to the ATO due date for lodgement. If the documentation is received at a later stage, we may not be able to complete and submit your Business Activity Statement(s) on time.

If you or a bookkeeper prepares & lodges the BAS’s, then the message is the same – prepare and lodge the BAS by the due date.

These changes are a clear sign that the ATO now have extensive powers to recover outstanding GST as well as PAYG and superannuation. We cannot stress enough the severe financial ramifications of these changes to company directors.

If you are aware of any outstanding lodgements of BAS’s, we urge you to attend to lodgement and payment of same as a matter of urgency.

As always we urge any client to contact our office if they need further information on the above.