A Bill passed by the Senate yesterday will mean directors can be personally liable for unpaid company Goods and Services Tax (“GST”).
Currently directors are personally liable for unpaid superannuation and withholding tax. The personal liability for directors is now heightened with the long anticipated Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (“the Bill”) being passed by the Senate yesterday (awaiting assent).
From the first day of the quarter following Royal Assent of the Bill, directors will become personally liable for unpaid GST, Luxury Car Tax and Wine Equalisation Tax liabilities in certain circumstances.
Directors and their management teams should be reviewing their systems and procedures to reduce and limit their risk. The systems and procedures need to be calculating the debts correctly to ensure that the debts are known and paid on time (including lodgement of any relevant forms).
Early action will be essential to limit exposure to unpaid superannuation, withholding tax, GST, Luxury Car Tax and Wine Equalisation Tax.
Now is the time to correct any inadvertent errors or known outstanding debts. If these are not corrected promptly, directors will become personally liable. Directors should also be considering asset protection strategies.
What does the Bill mean for ordinary business?
- Director Penalty Notices now extend to GST, Luxury Car Tax and Wine Equalisation Tax liabilities in certain circumstances. This will mean that directors can become personally liable for these taxes.
- The Australian Taxation Office can retain refunds where a taxpayer has failed to lodge a return or provide other information that may impact the amount of a refund.
Other important takeaways for unscrupulous directors
- The Bill prevents directors from improperly backdating resignations or ceasing to be a director when this would leave a company with no directors.
- The Bill provides further powers to Liquidators and the Australian Securities and Investments Commission to prevent the unlawful transfer of assets during illegal phoenix operations.