Directors Personally Liable for unpaid GST

directors personally liable

For many years now, the Australian Tax Office (ATO) has had the power to make directors personally liable for certain unpaid debts of the company by issuing Directors Penalty Notices.

This has been a significant shift from the concept of limited liability of individuals associated with companies.

Director’s Penalty Notices have, until recently, been restricted to debts relating to:

  • Money withheld by companies from employee’s wages to be paid to the ATO on account of the employee’s income tax (PAYG obligations), and
  • Money that companies with employees are required to pay into Superannuation funds on behalf of their employees, the Superannuation Guarantee Charge (SGC).

Now, as recently as February 2020, the Senate has passed a bill which, when Royal Assent is given, will allow Director’s Penalty Notices to be issued by the ATO against directors making them personally liable for their company’s obligations to pay GST, Luxury Car Tax and Wine Equalisation Tax.

Personal liability means that individual directors face the possibility of bankruptcy and the loss of their personal assets, including their homes in the event of their company failing to meet its obligations in these key areas.

Everyone who acts as a director of a company or is contemplating taking on such a role needs to be aware of the increasing risks now posed by these developments.

We encourage you to contact us immediately should you receive a Director’s Penalty Notice or would like specific advice in taking up a directorship or setting up a company.

John Devlin

John Devlin DBL Solicitors