The responsibilities and liabilities of directors have increased generally in recent times and now even more so with the provisions of the Pay As You Go Withholding Non-Compliance Tax Act 2012. This Act will impact on all directors and their associates. Essentially the changes under the new law are that:
1. Penalties against directors are extended to unpaid superannuation guarantees, as well as for unpaid PAYG amounts.
2. Directors are no longer able to discharge or extinguish a director penalty by placing a company into administration or liquidation when a PAYG or superannuation guarantee remains unpaid and unreported 3 months after the due date.
3. In some cases directors and their associates will be liable to a PAYG withholding non-compliance tax (which will reduce their credit entitlements) where the company has failed to remit amounts withheld. In effect, the directors and associates will not be able to access PAYG credits in their own tax returns where a company has not paid the ATO.
4. Associates (and this includes spouses) can be held personally liable for unpaid PAYG and superannuation on their own personal tax accounts if they do not:-
(i) Influence the director to report and pay outstanding tax to the ATO, appoint a liquidator or administrator, or
(ii) Inform or report the director for the non-payment of tax to the ATO, ASIC, the Police or the Minister.
5. Directors will be personally liable for their company’s unpaid superannuation guarantee charge including for superannuation relating to the quarter ended 30 June 2012 which has a superannuation guarantee statement lodgment date of 28 August 2012.
6. And most importantly, the amendments are retrospective to the extent that any unpaid and unreported (for more than 3 months) PAYG liability which is outstanding as at 29 June 2012 will result in a director penalty that cannot be remitted by placing the company into administration or liquidation. In effect, this will be a personal debt for the director.
It is therefore essential that all directors take an active role in ensuring that superannuation and PAYG obligations of the companies of which they are directors are up to date and correct. This obviously impacts greatly on the roles of directors and the responsibility may be sufficient for directors who have very little involvement with companies to cease acting as directors. This may be possible since many companies no longer require two directors to operate effectively, or may be able to amend their constitution so that only one director is required. If you require any assistance in regard to director’s roles and the possible amendment of a Constitution, please contact a member of the Atkinson Vinden commercial team.