Under the ATO’s Director Penalty regime company Directors can be personally liable for company obligations.
The Director Penalty regime applies to unpaid “PAYG” withholding amounts, Superannuation Guarantee Charge “SGC” obligations and, from 1 April 2020, GST liabilities
The effect of the Director Penalty regime is that if a company of which a person is a Director fails to ensure that the company pays its PAYG withholding, SGC and/or GST liability obligations by the due dates, the Director becomes personally liable for a penalty equal to the unpaid PAYG withholding, GST or SGC amounts. These penalties are known as “Director Penalties”.
Director Penalty Notices
The Commissioner of Taxation may not, however, commence any proceedings against a Director to recover a Director Penalty until the expiration of 21 days after the Commissioner has given a Director Penalty Notice under Section 269-25(1) of Schedule 1 of the Taxation Administration Act 1953.
Remitting a Director Penalty
Except in the circumstances where the company has failed to report a relevant amount of PAYG withholding or a GST liability within three (3) months of the due date, or a SGC liability amount by the due date, a Director Penalty for failure to pay PAYG withholding, GST liability or SGC liability will be remitted and personal liability avoided where, within 21 days of the Director receiving the Director Penalty Notice, the company:
- pays the relevant debt,
- appoints an Administrator under Sections 436A, 436B or 436C of the Corporations Act, or
- appoints a Liquidator to wind up the company.
Lock Down Director Penalty Notices
Where the company has not reported PAYG withholding or a GST liability within three (3) months of the due date, or a SGC liability amount by the due date, a Director Penalty will only be remitted if the company pays the debt. That is, the appointment of an Administrator or a Liquidator following receipt of a Director Penalty Notice in these circumstances will not absolve the Director from personal liability for the Lock Down Director Penalty amount.