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Are directors personally liable for their company’s tax and superannuation debts?
Answer:  Yes they are! 

In April 2020 the ATO added GST, Luxury Car Tax and Wine Equalisation Tax to the list of debts for which a director can be held personally liable.  There is also a 200% penalty that can be imposed if employees Superannuation Guarantee Charge (‘SGC’) is not lodged on time.  With Jobkeeper now ended, it is imported to review the Company tax debts and understand the potential personal liability.

Below is a short summary of immediate and potential personal liability that could occur.

  1. PAYG and GST
    If a company fails to report within 3 months from due date of lodgement for PAYG and/or GST then the directors will be held personally liable for the outstanding debt.

  2. Superannuation
    Directors will be held personally liable if not reported by the due date.

  3. Who is liable?
    1. Current directors will be liable. 
    2. New directors will become personally liable for any unpaid PAYG, GST and/or Superannuation prior to their appointment unless the company does one of the following within 30 days of their appointment.
      1. Pays the debt, or
      2. Appoints a Voluntary Administrator, or
      3. Begins to be wound up (in accordance with the Corporations Act 2001).
    3. Retiring directors will continue to be personally liable for any unpaid debt prior to appointment, even if not due at the date of their retirement. 
  1. How to avoid personal liability
    The ATO can serve a Director Penalty Notice (‘DPN’) on directors once reporting deadlines have expired. This personal liability cannot be avoided by appointing a Voluntary Administrator or placing the company into liquidation.  It can only be avoided by paying the debt.

  2. Potential personal liability
    The ATO can also serve a DPN on directors where PAYG, GST and/or Superannuation are reported within the due date but the associated debt has not been paid by the due date. This DPN can make the directors personally liable unless the following happens within 21 days from the date of the DPN.
    1. Pays the debt,
    2. Appoints a Voluntary Administrator, or
    3. Begins to be wound up (in accordance with the Corporations Act 2001)

  3. Late lodgement of Superannuation
    With the SGC Amnesty finishing in September 2020, employers will be now be liable for a penalty of up to 200% of the SGC if the statement is lodged late.

A DPN can have a serious effect on the director, their business, family home and relationships. 

If you have received a DPN and are unable to pay the debt you should contact What is Liquidation as soon as possible and seek advice from a qualified professional advisor.  This allows you to properly understand your position and make an informed decision on your course of action.