Sam Greco & Co News, Aug 2012

Director Penalty Notices and Personal Liability Amendments

On 29 June 2012, new laws were passed in parliament expanding personal director liability for unpaid Australian Tax Office debt and increasing the severity of non-compliance. All company directors (including not for profit organisations) should be aware that the new laws substantially increase the circumstances in which they will personal liable for PAYG and superannuation liabilities of the company.

The law was introduced to counter fraudulent phoenix activities. A phoenix activity is where a company intentionally accumulates debts to improve cash flow or wealth and then liquidates to avoid paying the debt. The business then continues to operate as another corporate entity, controlled by the same person or group but free of the previous debts and liabilities.

While we would not expect this kind of actions from our clients, the new laws will affect all directors.

The effects include:

• The directors’ penalty regime has been extended to superannuation guarantee amounts, making directors personally liable for a company’s failure to pay employee superannuation.

• The ATO also has the right to issue estimates of the PAYG and superannuation for any unreported and unpaid liability exceeding three months. They have been given the power to commence recovery action against directors, without providing a 21 day grace period, for these liabilities.

• Liquidating the company does not liquidate the debt to the director for the PAYG or superannuation liability.

• In certain circumstances directors and associates of directors will be prevented from obtaining personal tax refunds for withheld amounts in their individual tax returns where the company has failed to pay withheld amounts to the ATO.

• Director Penalty Notices can now be served at the director’s tax agent’s address.
What does this mean?

• If PAYG or superannuation is unpaid 21 days after the due date, the directors will be personally liable for the debt without notification. The ATO can seek recovery from the directors or their associates’ (family) personal bank accounts.

• If a company goes into liquidation, the debt for unpaid superannuation and PAYG will be passed to the directors. “I didn’t know or I was ill at the time” will not be a defence.

• If you do not lodge your BAS or Superannuation Guarantee forms, the ATO is able to prepare estimates after three months of what they judge the company would owe and seek recovery of that estimate!

• New directors can be liable after 30 days for liabilities incurred prior to their becoming a directors.

• The ATO can take directors and their associates personally refunds in satisfaction of company PAYG and superannuation liability.

BEWARE: If resigning as a director and endeavouring to settle a directors’ penalty notice, please seek advice prior to payment.

Document can be downloaded here

#Press Highlighted (Here) above to get further details.

#Please let us know if you would be interested in attending an information evening.

Copy of letter email sent to clients below

From the 1st July 2012 the government brought in additional reporting requirements for businesses in the building and construction industry. It requires the completion of a “taxable payments annual report.” The reporting requirements cover numerous occupations in building and construction and occupations boarding on it, such as engineers, pipeline workers, cleaners, earthwork plant operators, architects, and decorators. In essence the requirement is to complete a form similar to a PAYG Summary (group certificate) for every business who’s invoice has a labour component greater than a delivery fee. It is irrelevant whether the contractor/subcontractor is running their business as an individual sole-trader, a partnership, a trust or as a company. It is also irrelevant if that business has or does not have employees/contractors.

Sam Greco & Co has posted information and pro-forma worksheets to help you collate the information on our webpage www.taxonline.com.au. It is important that you keep these sheets up to date. The lodgement date for the “Taxable payments annual report” will need to be lodged with the ATO by 21 July 2013. The ATO has advised that no extensions will be given. Please be aware that the ATO has stated that BAS providers (external bookkeepers) are not allowed to prepare these forms. Accountants, business owners and employees are allowed.

The ATO will be using these forms for data matching and if you fail to obtain the necessary information to complete the form, penalties maybe imposed.

We are aware that many clients will have questions on this topic and as such we are considering having an information evening within the next couple of weeks, should sufficient clients be interested in attending. If you are interested in attending this information evening please let us know by 17 August 2012.

Sam Greco & Co Chartered Accountant