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Recent amendments to the Taxation Administration Act mean company directors will be personally liable for unpaid Pay As You Go (PAYG) obligations and the Superannuation Guarantee Charge (SGC) payments. This amends previous provisions that allowed directors to avoid personal liability if they paid the outstanding sums in full, placed the company into voluntary administration or appointed a liquidator over the company within 21 days of being served with a Director Penalty Notice. However, the new regime prevents a director from evading personal liability where either of the above debts exist and are older than 3 months and were not lodged with the Australian Taxation Office within 3 months of the relevant lodgement date. The Tax Office will then need to serve a Director Penalty Notice on the directors before commencing proceedings but the personal liability attached to the debt will not be avoided. However, if the debt had been reported by the relevant date the previous regime will apply and a director will not be liable if they pay the debt, if they appoint a liquidator or put the company in voluntary administration.
The amendments apply to all existing unpaid PAYG obligations, regardless of age, and Superannuation Guarantee Charge payments from the 30 June 2012 quarter. This may be avoided under the statutory defences but only where a director can show, for reason of illness or other good reason, that he or she did not take part in the management of the company at the relevant time, of the director took all reasonable steps to ensure that requirements were complied with, the company was placed into voluntary administration or liquidation, or there were no reasonable steps the director could take to ensure compliance, place the company in voluntary administration of liquidation.
The effect of the amendments is that directors, 30 days after their appointment, will become personally liable for all of the mentioned debts. This places a significant risk on new directors and emphasises the importance of due diligence in relation to outstanding PAYG and SGC debts and that governance of the company needs to be maintained to ensure payment and reporting obligations are met.