If you’re a company Director, there are a number of obligations and risks you have taken on in that role that you need to be aware of. Here, Geoff Steer explains what you need to know.
The potential liabilities that Directors can be exposed to have progressively increased in recent years. From workplace safety to environmental laws, governments have increasingly been looking to lift the corporate veil and ensure that Directors cannot hide behind the limited liability that companies generally provide.
Changes to tax laws in 2012 extended the potential liability of Directors for company tax debts, where those debts are not or cannot be met by the company itself.
The debts which are encompassed by this new director penalty regime are unpaid pay as you go withholding amounts (i.e. tax withheld on employees salaries) and unpaid superannuation guarantee charge amounts. Where the company has not reported these amounts, Taxation Office estimates of the unpaid amounts can become personal liabilities of the directors.
The extended Taxation Office powers mean they can make the company and its Directors jointly and severally liable for the debts. Where the company tax debts referred to above are outstanding for three months or more, the Taxation Office may issue a Director Penalty Notice (DPN).
21 days after the serving of the DPN to all Directors of the company, the Taxation Office may initiate proceedings to recover those debts. The company has the opportunity to pay the outstanding debts within this 21 day period.
The recent changes strengthen the Taxation Office position as the Directors cannot extinguish personal liability by placing the company in administration or commencing its wind up prior to the issuing of the DPN or within the 21 day notice period if:
- Three months have lapsed since the due date for reporting of the liability; or
- The liability is estimated and three months have lapsed since the due date for payment.
Directors of companies take on some serious obligations, and one to take particular notice of is the company’s compliance with its tax obligations.
Geoff Steer is a Founding Partner of Matthews Steer Chartered Accountants.
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