Director Penalty Notices (DPN’s) for GST (similar to those for PAYG and Super Guarantee (SGC) are set to come in from 1 October 2019.
The new legislation is aimed at reducing phoenixing activity and gives the ATO substantial powers to make Directors personally liable for unpaid GST. If an entity fails to lodge a GST return the ATO can collect GST based on their own estimates.
Where a company has a GST liability (including a GST instalment) every Director has a personal obligation to ensure that it is paid and if it is not, then determine if the company is insolvent and put the company into administration.
DPN’s can be issued where an amount of GST is not paid on the due date. New Directors can also become liable 30 days after their appointment where they are appointed after the due date and the amount is still outstanding.
There are 2 types of DPN’s and the timing of when GST amounts are notified to the ATO will determine what actions are available in order to be able to remit the penalty:
If the unpaid GST is reported through the lodgement of a monthly or quarterly BAS within 3 months of the original due date (or with the case of new directors within 3 months of the date of their appointment) the penalty can be remitted by:
- The company or the director paying the DPN
- An administrator is appointed or the company is put into liquidation
If the unpaid GST is reported more than 3 months after the due date then the only way to remit the penalty is to pay the debt within 21 days of the date of the DPN.
It is therefore critical with the introduction of this legislation that all directors are aware of the GST liabilities of Companies of which they are a director. Directors must also ensure that GST is paid on time and all BAS lodgements are up to date.
Before consenting to become a director of any company part of the due diligence process must include a review of the GST payment and lodgement history of the company (in addition to super and PAYG Withholding) in order to ensure that you do not become liable for GST prior to the date of your appointment.
If any Directors are concerned as to whether you are appropriately complying with your GST liabilities, a GST Health Check is recommended. Please contact us if you would like to discuss the benefits of a GST Health Check for your business.
Directors should also be undertaking a structure review to ensure that any current and future assets are protected if the ATO makes a claim against them personally.
Finally, the Bill also allows the ATO to retain tax refunds where taxpayer has failed to lodge or provide other information that may be outstanding with the ATO.
Still have questions?
Please contact our office on 07 3831 1055 to discuss how we can assist you further.
DISCLAIMER: The information on this website and the links provided are for general information only and should not be taken as constituting professional advice from Hall Browns Accountants. You should consider seeking the appropriate legal, financial, or taxation advice to check how the website information relates to your unique circumstances.