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ATO - Tougher Conditions and Personal Liability

Directors of SME’s need to continue to be vigilant in meeting obligations for employees PAYG and superannuation, as economic conditions worsen.

And there is no doubt credit will be tighter and the Australian Taxation Office will be taking stronger debt recovery action. The Australian Taxation Report Annual Report released in March 2013 shows collectible debt has grown to $16.6billion – and this would nearly clear 2014 Federal Budget deficit if it were that simple!

Whilst there may be reluctance to tell the tax office of a PAYG obligation, because of an inability to pay, that action can trigger automatic personal liability.

If the obligations are advised to the Australian Taxation Office on time (by Business Activity Statement lodgements), there is a small window of opportunity for deflecting the personal liability. Before the Australian Taxation Office can make a director personally liable for the company’s debts, they are required to issue a Director Penalty Notice, giving the director 21 days, but only if the returns have all been lodged on time.

It is often that the 21 days is much less than that, because of delays in the mail, etc.

Advisers can help and specialists in insolvency can also assist, but not if the directors are slow in responding or have failed to lodge returns on time.

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