Director Penalty Notices - What You Need to Know
On 1 March 2019, Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 received Royal Assent. Who cares? Well, the answer to that question is every company director who has an Australian employee.
Just over two years ago we reported on the taxation implications of paying employee superannuation after the required date; see the article here. The purpose of this article was to point out the financial folly of paying super late. Nothing much has changed in respect of tax treatment of late super, but this act changes a lot in respect of the timing of Director's liability.
What is a Director's Penalty Notice?
It is a bit too complex to go into great detail in this article, but suffice to say it makes every company director jointly and severally liable for the company’s Pay As You Go Withholding and employee superannuation under certain conditions of reporting and payment delay.
DPN’s come in two types – lockdown and non-lockdown. A non-lockdown DPN provides a 21-day window for Directors to do one of the following:
- Pay the debt
- Liquidate the company via a creditor’s voluntary liquidation
- Appoint an administrator
A lockdown DPN means that the debt is automatically owed by both company and Directors. No if’s, but’s or maybes. For the potentially disastrous circumstances that can occur from a lockdown DPN see our article “The Contractors Who Inadvertently Bankrupted Their Boss”.
What Has Changed?
Up until 1 March 2019, the regime allowed 90 days for both PAYGW and superannuation to be reported or paid. Now the delay period for super has been reduced to 28 days for payment or reporting, in line with the normal timeline to pay employee superannuation.
What is the Upshot of This?
- Do not delay lodgement of your BAS beyond 90 days of the due date.
- Either pay your super or report via the SGC system within 28 days of the end of the quarter.
If you don’t do both of these things, be prepared to own the debt personally.
The above article is a simplification and overview of what is a really complex set of rules. If you have a problem or need specific advice call Warren Maris on 07 3483 0100. Do not think that you can safely ride the edges of the thresholds – there are plenty of places to trip up.