The ATO has sent out letters to directors who are potentially in breach of their obligations to ensure that the companies they represent have met obligations for PAYG withholding, superannuation guarantee charge, or GST obligations.

The director penalty scheme puts directors personally liable for certain types of debts of the company if those debts are not actively managed and applies to both current and former directors.

How is the ATO responding to potential debt risks?

To recover any company debts,  the ATO will issue a director penalty notice to the individual directors. The ATO can then take action to recover the unpaid amount, including:

·      By issuing garnishee notices,

·      By offsetting tax credits owed to the director against the penalty, or

·      By initiating legal recovery proceedings against the director.

In some cases it is possible for the penalty to be remitted but this depends on when the PAYGW, GST or SGC amounts are reported to the ATO.

For example, in some cases the penalty can be remitted if an administrator or small business restructuring practitioner is appointed to the company, or the company begins to be wound up. However, this is normally only possible for PAYGW and GST amounts if they are reported to the ATO within 3 months of the due date. For SGC amounts this is only possible if the unpaid amount is reported by the due date of the SGC statement.

If the unpaid amounts are not reported to the ATO by the relevant deadline then the only way for the penalty to be remitted is for the debt to be paid in full. Winding up the company at this stage will not make the liability of the directors go away.

Received a warning letter or director penalty notice?

If you have received a warning letter from the ATO or a director penalty notice then please contact us immediately on 02 9957 4033.