Penalties are becoming a lot more common with the ATO as most of the individuals and business taxpayers are found guilty of one or the other liabilities. If you are a company director, you need to stay more in sync with the Australian Taxation Office announcements and obligations to avoid penalties.
Coming to director penalties, a company director is responsible for meeting a company’s tax and super obligations and paying them on time, including:
- pay as you go withholding (PAYGW)
- goods and services tax (GST)
- super guarantee charge (SGC)
If not paid on time, the ATO can recover the amount personally from you. The amounts you are personally liable for are called director penalties and are recovered after the issuance of a penalty notice.
For A New Company Director
If you are becoming a new director to an existing company, make sure the firm doesn’t have any unpaid or unreported PAYGW, GST and SGC liabilities before you get your Director ID. To avoid becoming liable for the director penalties due before your appointment, make sure the company does the following within 30 days of your appointment:
- Pays the debt in full for PAYGW, net GST and SGC
- Appoints an administrator under sections 436A, 436B or 436C of the Corporations Act 2001
- Appoints a business restructuring practitioner under section 453B of the Corporations Act 2001
In case, you don’t complete your term and resign within 30 days of your appointment, you’ll still be liable for the company’s unpaid liabilities that were due before your appointment.
A Director Penalty Is A Parallel Liability
In case, a company has more than one director, the amount unpaid is owed the same for all the directors. The reason being the company liability and director penalty are parallel in nature. When the ATO goes for the recovery of director penalties, it recovers equally from all the directors.
If you are no longer a director or resign as a director of the company, you remain liable for director penalties that:
- were due before the date of your resignation
- fell due after your resignation
For more information about company director penalties in Australia, feel free to schedule a consultation appointment with our tax accountants in Dandenong.