The director penalty regime enables the ATO to recover amounts owed by a company for unpaid PAYG withholding amounts and superannuation guarantee liabilities from the directors or former directors.
From 1 April 2020, the existing director penalty regime was expanded to include:
- luxury car tax, and
- wine equalisation tax liabilities.
The expansion of this regime means that company directors, regardless of whether they are passively or actively involved, are at risk of being held personally liable for a large portion of a company’s estimated liabilities.
Directors are under a general obligation to ensure the company either satisfies its tax liabilities, or recognising the company may be insolvent, goes into administration or is wound up. Resigning as a director after the event has no impact as the obligation attaches to the individual directors equally. If the Commissioner issues a penalty notice, the director becomes personally liable at that point. There is a grace period for new directors, but they can become liable for obligations that arose before they became a director.
Strict timeframes are in place for the issuing of notices by the Commissioner and the required responses from the individual. If you receive a director penalty notice, or if you are concerned that you are at risk of receiving a notice, please contact us immediately.