1-Year on from the Director Penalty Notice Regime changes, we review how they have impacted Directors and how Agilis CA can help.
Here, we will break down how the Director Penalty Regime works and the changes made, the importance of lodging on time and how Agilis CA can assist you with these lodgments to avoid penalties.
As always, if you need help or have any questions, please contact us.
What Were the Director Penalty Notice Regime Changes?
As of April 1, 2020, important changes were made to expand the potential liability of the Directors Penalty Notice Regime. Prior to this date, Directors were only obligated to be personally liable for two types of company tax debts; Pay as You Go (PAYG) and Superannuation Guarantee Charge (SGC).
In 2020, Goods and Services Tax (GST) was added.
These changes mean that as a company Director, you can easily become solely liable for the majority of overdue company taxes.
How Does the Directors Penalty Regime Work?
If a company has outstanding debt regarding PAYG Withholding (PAYGW), Employer Superannuation (SCG) or GST the ATO can issue out a Director Penalty Notice to the company’s Director to retrieve this debt from the director personally. This notice can come in two different forms: Non-Lockdown and Lockdown.
Non-Lockdown Director Penalty Notice
A Non-Lockdown Director Penalty Notice is given to a company Director when they have lodged their Business Activity Statement (BAS) or Instalment Activity Statement (IAS) within 3 months of the due date, but they are yet to pay their PAYGW, SGC and now GST debts.
From here, the Director must do one of the following within 21-days:
- Pay any outstanding debt in full to the ATO.
- Have the company elect a Voluntary Administrator.
- Place the company into liquidation.
Beyond the 21-days, if nothing has been actioned the options provided above are no longer valid, and the company Director or company are required to pay the owed amount to the ATO.
Lockdown Director Penalty Notice
A lockdown Director Penalty Notice is given to a company Director when they have failed to lodge and pay their BAS and IAS, as well as their SGC more than 3 months after the due date. From here, the Director becomes solely liable, and the penalty is “locked down” on them, with the options of appointing a Liquidator or Voluntary Administrator no longer available to them.
The company Director must now pay off the debt, either by:
- Paying the debt in full.
- Entering into personal insolvency (bankruptcy).
- Be dependent on a Director Penalty Defence
Importance of Lodging On-Time.
To avoid these Non-Lockdown and Lockdown Director Penalty Notices, it is therefore important that company Directors lodge their BAS and IAS, and pay their PAYGW, SGC and GST on time.
Late lodgments and payments can create unavoidable personal liabilities for Directors, and the ATO is able to consistently chase a company Director that has been issued a Lockdown Director Penalty Notice, and has not paid beyond 3-months of the due date until they are bankrupt; reinforcing the importance of lodging and paying on time, or if they are late then adhering to the administered overdue payment timeframes to avoid this severity happening.
How Can Agilis CA Help?
To prevent lodging your BAS and IAS statements late, and/or paying PAYGW, SGC and/or GST payments late, Agilis CA specialize in a variety of services that will help avert this.
- Business Planning
- Cash Flow Forecasting
- Treasury Function & Services
- Financial Accounting (Bookkeeping) Services:
- BAS & IAS Lodgements
- ATO Payment Arrangements
If you require assistance with making your PAYGW, SGC and/or GST payments and/or lodging your BAS and IAS statements, OR you have been issued a Directors Penalty Notice, contact Agilis CA today so we can help you pay/lodge on time, and avoid serious penalties.